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National accounts.

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The Hon Simon Crean MP

Deputy Leader of the Opposition and Shadow Treasurer


3 March 1999






Today’s national accounts figures are welcome, but should not serve to continue the government’s long summer slumber on econom ic management.


The 4.7 per cent through-the-year GDP figure is a positive one, but beneath the surface there are matters for real concern.


Household and government consumption expenditure contributed 3.9 percentage points to the 4.7 per cent figure.


As such it masks an alarming fall in private investment and in the terms of trade.


·  Private investment in machinery and equipment fell by 15.9 per cent in the December quarter and 12.3 per cent over 1998; private dwelling investment is down 1.3 per cent for the quarter and total private gross fixed capital formation is down 7.6 per cent for the quarter.


·  Exports were flat for the quarter while imports were up 1.6 per cent. This follows the recent news on the worst ever goods and services trade balance and current account deficit. Net exports detracted 0.3 percentage points from growth in the quarter and 0.5 percentage points in the year.


Much of the higher household spending appears to have been ‘on the bankcard’. The trend household savings ratio has fall en every quarter from December 1996 to December 1998. Two years ago, households saved 6 per cent of their income. Today they save only 1.3 per cent. While these figures should be treated with caution, the trend is nonetheless unambiguous, particularly in light of recent data showing an increase in personal credit.


Strong household expenditure is a positive feature of any economy.


But it must be balanced with strength in other elements of the economy, particularly in that area that drives long-run growth - investment.


An environment in which investment is slowing, the terms of trade are slipping and household savings are eroding does not lend itself to the sort of balance that is needed.



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