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National accounts no joy for labor

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Senator ¬ęTim Short. Shadow M inister for Finance and Shadow Minister Assisting the Leader on Commonwealth/State Relations

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SMF 31/92


It is premature, and incorrect, to claim that the National Accounts released today show that we are coming out of recession.

Although the average of the various measures for national output shows a slight increase of 0.3 per cent in the December quarter of 1991, it does not allow for the deterioration in our terms of trade and hence gives a false impression.

When account is taken of the deterioration in the terms of trade, the real purchasing power of income generated by domestic production diminishes. The National Accounts show that, unadjusted, the income-based measure of national output - GDP(I) - in the December quarter 1991 rose by 0.4 per cent but, when is is adjusted

for a deterioration in the terms of trade, GDP(I) fell by 0.2 per cent. For the year, it fell by 2.0 per cent.

This decline in the real value of Australia's output shows that living standards have fallen for the sixth successive quarter and th at the economy remains in recession.

The downward trend is consistent with the fall of 3.3 per cent in private capital expenditure for the December quarter, the tenth successive quarterly fall. For the year December 1990 to December 1991, the drop in private capital expenditure was 14.2 per cent. That, in a nutshell, is why employment has collapsed.

A rapid recovery is unlikely because of the severe rundown in plant and equipment. Private investment in equipment has fallen in all but one quarter over the past three years, and fell a further 8 per cent in the December quarter. It is now 31 per cent below the level of March 1989 - a stark reminder of the link between investor

confidence and jobs. ·

Investors clearly have no confidence in Labor. No amount of phoney assumptions about high growth rates in Australia, regardless of what happens in the rest of the world, will convince investors that Labor is not about to embark on a public spending binge in a vain attempt to hang on to power at the expense of a stable currency, low interest rates, a competitive economic climate and, of course, jobs.

Sydney 17 March 1992 C O M M O N W E A L T H