Australian Economy – PR, Spin and Bluster

It seems our politicians can’t resist the urge to spin and claim great success even in a pandemic/recession.

Read these news headlines and ask – is this really true?

'You wouldn't want to be in any other country': Treasurer

“World-Leading” COVID Recovery Gives Hope To Retail

'Australia has experienced a ‘remarkable’ turnaround when compared with the rest of the world, the latest national accounts show.'

The press statements included these statements – 

“Josh Frydenberg celebrated Australia’s economic performance during the pandemic, as the economy only contracted by 2.5 per cent; this is in contrast to other advanced economies such as the US (down 3.3 per cent) and the UK (down 9.9 per cent).”

“Treasurer…… has celebrated the national accounts released today – saying the figures indicate Australia’s “performance on the health and economic front is world-leading”.

“GDP figures for 2020 showed a decrease of 1.1 per cent, down from federal budget projections of five per cent”

Comparisons with the USA and UK may seem fair enough, however their Covid-19 issues are far worse than many other countries -- bench-marking is about comparing yourself with the best not the worst.

A quick search shows a number of countries doing much better than Australia and more importantly these countries have all borrowed much less, meaning less government debt to pay off and less economic over hang.

Australia  GDP 2020       - 1.1%      Govt 2020 borrowings 100%

Taiwan    GDP                 +2.9%      Govt 2020 borrowings 33% of Australia

Korea      GDP                 +2.1%      Govt 2020 borrowings 47% of Australia

New Zealand GDP           +1.8%*     Govt 2020 borrowings 52% of Australia

*estimate only

If you include ‘developing economies’ the picture is similar – Vietnam GDP +2.4%, China GDP +1.8% with significantly less government borrowings with 10% and 18% respectively.

The important point in this comparison is the gap between Australia and these other countries - the weighted average of over 3.6% in GDP is a very significant gap indeed let alone catching up as this GDP chart shows - you have go back to 1990 to see over 6.5% growth.

With government stimulus winding down including $85 billion JobSeeker ( The UK just extended its program until September) which only leaves the RBA to carry the can. Consumers are still holding savings at levels seen in 2008/9. So, is the Australian economy on a firm track to recovery?

Meanwhile in the real world, things are nothing like as good as the political spin and bluster.

SME exits up, payments flows down

04 March 2021 BANKING DAY  Ian Rogers

Lousy payments volumes in February and January may put a dampener around relief at the 3.1 per cent rise in GDP in Australia over the December 2020 quarter, which dangled the prospect of achieving the hoped for ‘V-shape recovery’.

While housing prices and consumer and business confidence echo the recovery story, research into the SME sector from Judo Bank finds more than a third of businesses may be ready to throw in the towel.

The daily average value of all interbank Real-time Gross Settlement (RTGS) payments in February 2021, at A$184 billion, was seven per cent lower than the daily average in payments values over the final quarter of 2020, RBA data released on Tuesday shows.

February 2021 volumes were also only 80 per cent of values in February 2020, the month prior to the economic onslaught of the Covid pandemic in this country.

Consultant Grant Halverson wrote of the RTGS data; "Eleven months since the pandemic started in March 2020, value is down 5.9 per cent, while transactions are down 11.5 per cent.

"Basically transactions crashed in April and have not recovered – despite all the spin."

Judo Bank's research found 31 per cent of SMEs are in an 'exiting phase'.

Then another 11 per cent are in a 'contracting business phase', while around the same number "cannot accurately determine what business phase they are currently in".

One in four SMEs do not know what they plan to focus their business strategy on post-crisis (25.9 percent). One in three will consolidate and take stock (33.0 percent).

One in ten are bringing forward succession plans (12.3 percent) while 7.5 percent are exiting the market altogether - registering twice as high in the A$1-10m segment relative to the A$10-50m segment at 9.3 percent and 4.7 percent respectively.

A much higher proportion of $1-10m enterprises are facing the possibility of insolvency after an extended period of depressed revenues, relative to the more insulated $10-50m segment.

East & Partners conducted the research for Judo, a sample of 1,753 SMEs with turnover of $1 million to $50 million. SMEs had average debt facilities in place of $3.2 million ranging from $200,000 to $12.2 million.

Just under one in two enterprises sought funding in the last 12 months, with three quarters of all loan applications successful.

For more detail on the down beat RTGS payment numbers -

Why the RBA is so Worried | LinkedIn