Lies, damned lies and statistics – Wednesday’s national accounts give you the choice of believing Australia is booming or Australians are going backwards. The correct answer is a bit of both, but that’s too subtle for most headline writers.
For Treasurer Scott Morrison, the better-than-expected gross domestic product growth was all about you-beaut utes. He seized upon utes as the prime example of a welcome lift in business investment.
“Why am I talking about utes so much?” the Treasurer asked himself.
“One of the signs of a strong economy was always cranes on the skyline. Every time an Australian sees a ute driving around a suburb of one of our metro areas or regional towns with a phone number on the side, that’s the sign of a stronger economy.
“We are seeing this played out with all of our trades. We are seeing it played out across the economy. And the fact that people are building up their inventories to sell more utes, that businesses are out there buying more utes, they can do that because they’re working in sectors that are providing their businesses with the future. It’s a good sign.”
But ScoMo has come late to the great Aussie ute muster, or, more correctly, the Aussie dual-cab boom. The Treasurer is jumping aboard the tray just as the Australian Tax Office is launching a crackdown on light commercials being used to avoid fringe benefits tax.
The Toyota Hilux has been our top-selling new vehicle for the past two years and looks like taking the title again this year. May sales figures from the Federal Chamber of Automotive Industries showed the Hilux retaining the No.1 spot with the Ford Ranger in second. So popular are the light commercials, some months Thailand has been our top source of imported vehicles.
But where Mr Morrison sees evidence of a tradie-driven boom, the ATO suspects rorting. Utes and other light commercials are exempt from Fringe Benefits Tax (FBT), as long as their private use is “minor, infrequent and irregular”. The ATO has been warning tax agents it will be keeping a very close eye on motor vehicle claims this year.
“Dual cabs qualify for the work-related-use exemption only if they are not designed for the principal purpose of carrying passengers,” the tax man warns. They are not to have child restraints fitted and private use is limited to just 750 kilometres a year.
So the annual holiday can’t be far from home and the kids will have to ride under a net in the back.
And ScoMo’s ute-led boom doesn’t hold up under investigation – light commercial sales in the first five months of this year are pretty much in line with the same period last year.
Similarly, the more optimistic headlines about the March quarter’s 1 per cent GDP gain also deserve scrutiny.
“Exports revive wage hope” was the AFR’s front-page lead. “GDP is so good, we mightn’t need to cut company tax” declared The Sydney Morning Herald a little tongue in cheek. But The Guardian’s Greg Jericho was closer to the pin with “Growth with a grain of salt: it’s the same old story as households miss out”.
The headline figure was indeed good, representing the fastest quarterly growth in six years and adding to expectations our record run of recession avoidance will continue.
And there was nothing especially wrong with most of the growth coming from resources exports and public spending on health. (There has sometimes been a tendency in the commentariat to say things like “excluding mining, we’d be in a recession”, which is like saying “excluding sunlight, the Earth would be quite dark” – mining is a fundamental part of our diverse economy wherein different sectors take turns to lead or lag.)
Furthermore, the spending that made Morrison ute-phoric is most welcome, an indication the long-hoped-for pickup in non-resources private investment is under way, a better look than obtained from the Australian Bureau of Statistics’ deficient capital expenditure survey.
But there was nothing much in the figures to give average households cheer. Nothing to suggest our biggest current economic problem – low wages growth – was about to be solved.
Indeed, “average compensation per employee” was up only 1.6 per cent over the year – below the 1.9 per cent consumer price index movement and considerably worse than the weak wages index we normally hear about. The strong 5.1 per cent rise in “compensation of employees” reflected growth in the number of jobs, not what the jobs earned.
But as Jericho noted, real average compensation per employee fell again to $19,266. It peaked six years ago at $20,019.
Human beings that we are, we’ve mostly forgotten the great ride we had from $17,122 over the previous resources-fuelled decade to reach that peak.
Given falling real wages, soft consumption growth of 0.3 per cent in the quarter is no surprise – and most of that little rise came from non-discretionary items such as insurance, utilities and food.
Also no surprise is our means of financing that consumption – running down our savings ratio to just 2.1 per cent. We’ve lost nearly all the appreciation of thrift the GFC gave us.
The thing about GDP is that it’s all about growth. We’ve had a great run with resources exports, but the growth is levelling off. Sustainable annual growth of around 3 per cent will require consumption to pick up, which in turn requires bigger wage rises – of which there’s very little sign.
Does anyone think the rich profits flowing from resources exports will suddenly start flowing throughout the economy as wage rises? You’d have to believe trimming company tax suddenly boosts wages to go along with that.
Significant wage increases occurred during the employment-rich mine-building phase of the resources boom. The upward pressure in mining-related wages now lacks the necessary scale to be felt more widely.
So we had good GDP growth in the March quarter, very good growth, but its composition isn’t enough to make the average worker feel like ordering luxury options for his or her next ute.