Wry & Dry

GDP growth slows to an Australian crawl, retail sales fall, savings rate drops

The fact that the share market is now at a level not seen since February 2013 was not helped by very soggy GDP growth figures released this week.

GDP rose a paltry 0.2% in the June quarter, making it 2% for the full fiscal year.  To a certain extent, the figure was sort-of expected, in view of the commodity price collapse.  And readers will know that that other commodity-based country, Canada, is now in recession.

The GDP data was soon followed by shocking retail turnover figures: a fall of 0.1% in July - the worst result in three years.

W&D is also concerned by the little noticed trend that Australia's household savings' rate is once again declining.  This can be complex.  But simply put, the savings rate fell from the highs of the mid-1970s, when households were no longer fearful as they were in the early 1970s (a blend of the world economic downturn, the oil shock and an economically illiterate (albeit socially reforming) Australian government).  A stronger economy and the introduction of mandatory superannuation (a form of forced saving) also drove the savings rate lower.  But this went too far in the period up to the GFC, when households began borrowing significant amounts.  The GFC caused a sharp rethink by households and the savings' rate edged up.

But after peaking in March 2012, the sense of the good times returned and, also with very low interest rates, the rate has since resumed a lowering trend.  Perhaps a small canary in the coal mine?

Savings rate

Reverting to the GDP data, W&D sees that Treasurer Hockey is in a daze about what to do.  Sort-of like a wombat in the headlights.  Which fairly represents the approach of the Abbott government.  Just do nothing, and, well, it will be okay, because, well, we are Australia, and, well, we always muddle through, and the weak Australian dollar will boost tourism and exports, and in a few months Christmas will be here and, etc, etc.

And the most recent exemplar of the do-nothing approach is...