The government has run the economy into the ground | Greg Jericho

The biggest lie during the election campaign was that the economy was strong. Now we know how bad things really are

The latest GDP figures released yesterday put beyond doubt that the Turnbull-Morrison government’s management of the economy has been completely incompetent. The economy is barely growing, and for the first time in 36 years GDP per capita has gone backwards in three consecutive quarters.

The big message from the GDP figures is that the biggest lie during the election campaign was not the death tax but that the LNP has managed a strong economy. In reality they have run it into the ground.

In seasonally adjusted terms the economy grew just 1.8% in the past 12 months, and it was a mere 1.7% in the less erratic trend terms. Either way it is the slowest growth since 2009.

The quarterly trend growth of 0.26% is the slowest quarter of growth since March 2003, and the annual growth of GDP per capita of just 0.09% is the worst for a decade:

In seasonally adjusted terms GDP per capita fell 0.03% which after falls in December and September quarters last year marks the first time that has happened since June 1983. Now sure quarterly growth figures can bounce around, but it is hard to spin that as being a sign of strength in the economy.

What growth there was came from government spending both in infrastructure and areas such as the NDIS.

If we took away government consumption and investment in the March quarter, GDP would have fallen 0.05% in trend terms.

The construction sector also remains very weak. Dwelling construction fell in the March quarter and both it and non-dwelling construction fell over the past year:

Over the past year government consumption and investment contributed 1.4% points towards total GDP growth of 1.7%. That effectively means government spending accounted of 79% of GDP growth in the past year – a level only marginally below what happened during the massive stimulus years of the GFC:

It points to an incredibly weak private sector - despite the fact that company profit grew 9.8% in the past year – the strongest growth for nearly two years.

But of course the disconnect between company profits and household incomes continues. Over the past three years, company profits have grown on average by 10.1%, well above the 4.3% growth in compensation of employees – a level that is actually falling:

The lack of household disposable income is brought into very sharp relief when looking at the growth of household consumption. The annual growth of 1.7% is the worst for six years and is more than half the long-term average of 3.5%:

It is no surprise to anyone that this is happening. Living in the real world unpopulated by political spin, we know that the economy is faltering and that employee wages are barely keeping up with inflation.

In the past year the average compensation of employees grew just 1.5%:

Because inflation in that period grew by a pathetic 1.3% it means that average compensation grew in real term, but even with the slight increase it still sees real compensation per employee 1.6% below the level it was when the LNP took office in 2013:

A similar story occurs for household living standards, where despite a slight increase, households still have less disposable income in real terms than they did at the end of 2010:

The story is even worse when we look at productivity – which over the past three years has average lower growth than any time since the 1990s recession. It seemed almost impossible to get productivity growth lower than what occurred during the miserable WorkChoices years, but that has now occurred:

And the final big picture scenario reveals just how terrible things are now. Given the average GDP growth target is between 2.75% and 3.25%, that combined with the RBA’s inflation growth target of 2% to 3% gives us an economic sweet spot of 4.75% and 6.25% in what I call “adjusted nominal GDP”.

Right now the level is the lowest it has been since the 1990s recession – equal with a point reached during the GFC:

This is a shocking state of affairs. And it makes an absolute mockery of the government’s claims of economic management expertise. It also renders absurd desires to get back to a surplus in order to build a buffer, should bad times come. Bad times are here already.

• Greg Jericho is a Guardian Australia columnist


Greg Jericho

The GuardianTramp

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