The 2011 Mar Qtr National Accounts …

June 2, 2011
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Title: “The 2011 Mar Qtr National Accounts …”
Thought of the Day …
… 1.7% reduction in the Australian economy – but who’s worried … largest contraction since early 1990’s …

The Opposition spokes person on Treasury matters rose to ask the first question during Jun 1’s Parliamentary session. Mr Hockey – the spokesperson – demonstrated his complete lack of understanding of the National Accounts figures released that morning.

His Question to the Treasurer read:

Mr HOCKEY (North Sydney) (14:16):

My question is to the Treasurer. I refer the Treasurer to the fact that the economy went backwards in the first three months of this year. Treasurer, why is the government hitting Australian households and businesses with a carbon tax, a mining tax and a flood levy when we now know that a mining boom cough can lead to economic pneumonia?

Mr Swan – the Treasurer rose to respond and the following text is as copied from the Hansard script of the HOR session:

Mr SWAN (Lilley—Deputy Prime Minister and Treasurer) (14:16):

I am simply stunned by that question from the shadow Treasurer. He refers to the contraction in the March quarter as a ‘mining boom cough’, when in fact we have had a contraction in the March quarter of 1.7 percentage points because of the impact of the biggest natural disaster in Australia’s history. They do not accept that on that side of the House. I am completely stunned as to how out of touch they have become. There was a contraction in the March quarter of 1.2 per cent, but minus 1.7 per cent came from the natural disasters—from the floods in Queensland, from Cyclone Yasi, from the floods in northern New South Wales, from the floods in the north-west of Western Australia. And they come into this House and describe that as a mining boom cough. This is just extraordinary.
I think I can understand why they are so out of touch. We had a clue to this a few weeks ago. The Leader of the Opposition came into this House and gave a speech for 30 minutes and did not once mention the impact of the floods, Cyclone Yasi or the weather events in the north-west of Western Australia—not once in a 30-minute speech. Then we had the shadow Treasurer go to the Press Club, supposedly to deliver some alternative to the budget, and not once, in a 30-minute speech, did he mention the impact of the floods, Cyclone Yasi and other weather events. This just shows how out of touch, how incompetent, they are and how they do not understand the challenges facing the Australian economy.
The fact is that the fundamentals of our economy are strong. If you have a look at the figures today, you will see that consumption, dwelling investment and business investment are all making positive contributions to growth, but the big negative in the figures today is the impact of those cyclones and those floods. Those opposite want to stick their heads in the sand and pretend that they never happened. This is incredible.
I do not think there has been an opposition this incompetent, this out of touch, in the history of this country. They want to ignore too the very strong pipeline of business investment that we have. They want to ignore the fact that, if we are going to cope with that in the years ahead, we have got to bring our budget back to surplus. But they are intent on wrecking that surplus. They come into the House and complain about deficits. They have never seen a deficit that they did not want to make bigger, as they come into this House and oppose saves. They are opposing vital savings measures in this House. They are trying to wreck the government surplus. It has got so bad, and they have got so negative, that they are now opposing their own policies. Can you believe that? They are opposing a policy of the Howard government that goes back to 2004 because they are so negative.

I turn Mr Swan’s comments back on himself – for someone not to mention the A$ appreciation as the greatest impact on Government revenues and inflows to the Australian economy – puts him in the ‘dunce’ category as well.

As Mr Swan continued slugging away at the Opposition – we then had the usual interjection from Manager of Opposition House Business Mr Pyne – (REGGIE boy) – and the Speaker’s response:

Mr Pyne:

Mr Speaker, I rise on a point of order. The Treasurer could not be being more irrelevant to the question he was asked. He is required to be directly relevant, and he is straining over every subject other than the question he was asked—and ‘straining’ is the word.


As I have reflected in the past, less debate would be helpful, but I think that the Treasurer should keep in mind that he needs to relate his material directly to the question.

… and the Mr Swan finished his response …


They pretend that the global financial crisis is a hiccup and that the natural disasters, the floods and cyclones, did not happen. That is how incompetent they are, how negative they have become and how unqualified they are for high office.

When one looks at Mr Swan’s response and Mr Hockey’s question – neither seemed matched to one another. The surprising thing that the EYE-BALL GURU picked up on as he watched the debate – neither side of the House thought to mention the value of the A$ and its impact on the National Account figures.

There has been many posts by the ‘GURU’ in recent months about the value of the A$ and its impact on Australia’s economy. The latest was over the $8 billion in reduced revenues mentioned in Mr Swan’s budget speech. That GURU story can be read here: Parliamentary Question Time … the day after the 2011 BUDGET

In that story the relevance was made to the impact the A$’s 40%+ appreciation since 2008 has had on Australian Export revenues – yet in Mr Swan’s Budget speech – no blame or cause was attached to the A$ appreciation being the cause for the unexpected reduction in Government tax revenues.

It is now the same story with the ‘National Accounts Debate’ – and for both sides of the House to be so flat-footed when it comes to identifying the crucial economic factors within the Australian economy that influence and impact on Australia’s National interests – to that the GURU states that the rise in the A$ is the most significant.

To prove a point – attached is a table that shows the numerical stats relating to the A$ during this period and for the previous quarter and the current quarter:

QTR: A$ Value  End QTR QTR $A v $US Range A$ v US$ Peak  Level % Increase TWI – Range for QTR
TWI Peak Level % Increase
Dec 2010 Qtr A$1.0255 A$.891/$A1.0255 15.10% 69.6 – 76.0 9.20%
Mar 2011 Qtr A$1.0372 A$0.9692/A$1.0372 1.14% 72.5 – 76.4 0.53%
Jun 2011 Qtr – 31/5
A$1.0765 A$1.0285/A$1.1011 6.16% 76.3 – 79.2 3.66%

The Table shows a 15% increase in the Dec 2010 value of the $A – the range of the A$ and the value of goods exported in the March Quarter – would also reflect the diminished receipts cause by this A$ appreciation in US$ terms. The TWI (Traded Weighted Index) – also shows an increase in A$ currency appreciation during the Dec ’10 Qtr of 9.2%.

This translates to a reasoning that the A$ value appreciated against all major trading partners during the Dec ’10 QTR.  This also confirms that export revenues received during the Mar ’11 QTR would have been reduced by 15.1% if export volumes remained constant in A$ v US$ terms and by 9.2% in TWI terms.

How both the ABS (Australian Bureau of Statistics) – The Australian Treasurer and his Treasury Dept – the Opposition spokesperson on Treasury Matters – and all the economic advisors to the Government and the Opposition have not made this observation is of great concern. 

The GURU is often on the other side of major financial debates – he is sure of his facts.  This Currency appreciation has had a bigger impact on the cause of the negative 1.2% growth (-1.7% reversal from Dec ’10) – for the Mar ’11 Quarter.  The Treasurer has claimed that is it solely the natural disaster that are responsible. 

This contrast in observations must demonstrated and undermine any confidence and logic to the credentials and qualifications that any of these boofhead’s have in running this Country.

This is a deplorable oversight – and must be further qualified and resolved.

Mr Swan stood in Parliament yeaterday and gave a political answer to the reasons for the downturn in economic activity in the Mar QTR – that being the QLD floods, Cyclone Yasi – cyclone activity in WA – and some Northern NSW and Victorian flooding during the quarter.

I concur that each of these events did have had some impact on the March quarter numbers – but if you take the value of the A$ at the beginning of the Dec ’10 quarter and accept that all exports revenues in that quarter were against a then appreciating currency – at the end of the Dec QTR the $A was at A$1.0255 – from a start of just under $A.90c- then that 15%+ appreciation impacted on all export revenues doe the Dec QTR – and more greatly on the Mar QTR numbers.

All unhedged export revenues in the Mar ’11 QTR would have been transacted at the higher A$ – (ranged A$.9682 – $A1.0372) – levels thus resulting in significantly reduced revenue streams. From the Table above – it can also be drawn that the forecast revenues from current Jun ’11 QTR will also be impacted by the hight A$ value year on year – save for volume differentials.

For the Treasurer and his Treasury Department to not make the currency connection in his Budget speech a few weeks ago – and again now when deliver an explanation for the negative 1.2% growth in the National Accounts – where is the media economist’s counter – where are the Government’s economic advisors helping the Government understand the forces at play?

A high A$ is not good for exporters or our economy – talk on interest rate rises only heighten speculation in forcing the A$ higher – reduction in interest rates will take some heat out of the currency – why would that not be a priority for the Government? That brings the big ‘inflation’ factor into the equation from Mr Swans perspective – The GURU does not agree – all we are doing is shipping our rare resources to China and other trading partners – all at 40-50% reduced revenues to what was being received 2-3 years ago. We’re talking 100’s Billions of dollars in lost income – surely these boofhead’s understand this.

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