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Vital Signs: why everyone seems a bit worse off

Richard Holden writes in The Conversation (3.6.16) about the latest release of Australia’s GDP figures, which show higher than expected economic growth. The author suggests that, despite a welcome reception from the government and some commentators, other indicators show that the national economy is actually more fragile than it appears.

‘At first blush, first quarter GDP figures for Australia, released Wednesday, seemed very positive. Growth for the quarter was 1.1%, pushing the annual rate to 3.1% – up from 2.9% as at December and ahead of market expectations of 2.8%.

‘On closer inspection the news wasn’t so good. Growth came largely from exports – accounting for fully 1 percentage point of the 1.1% growth. What’s wrong with exports? Well, nothing, except that a quirk of national accounting means that it is volume, not prices, that matter for the GDP figure. And prices of exports fell. A lot.

‘ … Overall: unclear news from overseas, strong domestic construction growth that might well reverse in coming months, GDP growth that doesn’t translate into income, and more signs of deflationary pressures.

‘Sorry, but the glass is half empty.’

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