Here is this month’s regular Q&A column contributed by Greg McKenna, the Markets & Economics Correspondent for Business Insider Australia.
For some years now I have continued to stress the “glass half full” nature of the Australian economy. That has never been to decry the real issues facing some sectors of the economy, especially those reeling from the end of the mining boom. But it simply reflected the changing nature and structure of the economy as monetary policy and a weaker dollar combined to rebuild the construction, tourism, educational and other services sectors of the economy.
My point was that while the economy was far from strong, businesses who had been able to weather the tough times of the GFC should be able to continue to survive, and in many cases prosper as the domestic economy strengthened.
That is exactly what the most recent Australian economic growth numbers showed. With a print of 0.6% growth in the fourth quarter of 2015 GDP was much stronger than expected. That took the growth rate for the 12 months to an astonishing 3% with growth in the fourth quarter driven largely by household consumption which contributed 0.4% of the 0.6% growth rate.
Key to the positivity though, besides the strength in the domestic economy, is that the nominal growth rate in the economy is back at its long run average for the non-mining economy. So while mining is still a drag on overall economic growth, and some businesses and sectors in our region will feel pressured, the overall consumption and services based economy – the biggest part of the Australian economy – is doing much better than many give it credit for.
How else could Australia have created more than 300,000 jobs in 2015 when all the leading indicators were for much weaker job creation. Of course many decry the reality that a chunk of those jobs are in lower paid positions in the health and aged care sector. But the point is that more Australian than ever before are working and that means more people are earning an income and spending that income within the Hunter and Australian economy more broadly. Locally we have a way to go to get back to peak employment. But unemployment in the region has fallen from 9% in January 2015 to 6.9% at the start of this year.
Australian growth continues to defy expectations as the economic transition continues. The growth in services and consumption is an important insulator for the overall economy as mining remains a continued drag. But growth will remain fragile and subdued because of the global growth backdrop.
Greg McKenna is an economist, trader and adviser. He runs his own consultancy and writes for Business Insider Australia. You can find him on Twitter @gregorymckenna or at www.gregmckenna.com.au