Teryy McCrann: $77bn more goods and service sold international marketplace than we bought
On Tuesday we saw a current account surplus number of $36bn for the financial year. The last time we saw a surplus was back in 1973, which makes these numbers extraordinary, writes Terry McCrann.
Terry McCrann
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We live in amazing times, amazing statistical times – amazing statistics that reflect extraordinary, completely unprecedented, things happening to and by real people in real time.
A month ago we saw a trade surplus figure that we’d not only never seen anything close to before, but which in nearly half-a-century of financial commentary I would never in my wildest dreams have ever expected to see — $77bn for the 2019-20 financial year.
That’s to say, we sold $77bn more goods and services into the international marketplace than we bought off them from overseas. In the lingo of mercantilism, we well and truly paid our way and then some.
On Tuesday we saw a similar and arguably even more extraordinary current account surplus number of $36bn for the financial year.
How extraordinary? Well, the last time we saw a surplus was back in 1973 and that one didn’t even make it to $1bn. In the 60 years of these annual figures being published by the ABS, there’ve only been two other surpluses and both of them barely a surplus.
The regular, permanent, and so perfectly abbreviated CAD – current account deficit – was baked into our statistical and economic mindset.
It was as if we actually liked “football, meat pies, kangaroos and Holden cars and CADs.
It’s important to note that both of these extraordinary figures were not all about iron ore and China on the one hand and all about the virus on the other.
Yes, it was mostly about iron ore and China. Total iron ore exports leapt to over $100bn in 2019-20, with around (an amazing) $85bn of that going to China. Boy, is that some sort of – two-way – dependency: they need our iron ore; we need their (US) dollars.
But if we’d only got the previous year’s numbers for iron ore and China, we’d still have got – albeit much smaller – surpluses.
Now these financial year annual numbers are made up of three quarters before-virus (to be exact, eight months through February) and just one post-virus quarter (or, four months).
The virus – and more specifically, in itself an equally extraordinary and totally unprecedented move by governments (state and federal) to order the economy into recession; to order the destruction of businesses and job – will produce today’s, Wednesday’s, mind-blowing number.
The ABS will tell us that the Australian economy shrank by something like 5 to 7 per cent in the June quarter. It’s impossible to ‘guess’ more precisely than that.
Again, we’ve never anything remotely close to that before. The biggest – and only – quarterly GDP fall through the GFC was just 0.5 per cent.
The biggest quarterly fall in the 1991-93 recession was ‘only’ a nevertheless at the time numbing 1.3 per cent.
It was a little worse in the early 1980s – that recession gave us Bob Hawke and Paul Keating; and (very) indirectly, later John Howard and Peter Costello; and even, if you want to stretch it, even more indirectly Kevin Rudd and Julia Gillard, and on to Tony Abbott and Scott Morrison.
And so also in time, Anthony Albanese? Well, that might be stretching it.
I digress.
None of these earlier – in their time, shocking – GDP falls come close to the number we will see Wednesday.
There might have been actual numbers as bad through the 1930s Great Depression, but the ABS wasn’t around back then; the ABS GDP numbers only go back to 1959.
Sometime this month we are going to see a budget deficit we’d never thought we’d ever see – the treasurer Josh Frydenberg said it would be $85.8bn.
While that’s extraordinary enough, but then Treasury estimates it will more than double, to $184.5bn, next year.
That, in part, captures just how extraordinary – crazy – things are; because the budget deficit is the government gunning the accelerator; while at the same slamming on the brake, and causing the huge GDP fall and those soaring jobless numbers.
When I say “soaring jobless numbers”, that’s in its special way an ‘extraordinary’ number, because they haven’t soared anywhere near as much as you’d expect and indeed have actually done in real, if not in official statistical, terms.
The ABS tells us that the official jobless number is 7.5 per cent; the real number is in my calculation more like 18 per cent. The difference is an army of 1.4m ‘phantom workers’.
Now, those extraordinary budget deficits are also only the federal deficit; you have to add on the (thankfully, much smaller) state deficits that we will see for 2019-20 and 2020-21 and who knows how many years after that.
These numbers are also extraordinary because of what we used to call “the twin deficits problem”.
That it we had a budget deficit we would also have a current account deficit.
The government would need to borrow to cover the first; the country would need to borrow to cover the second.
Then first would see the government debt rise; the second our foreign debt.
Instead we are seeing record budget deficits and record current account surpluses.
Gross (federal) government debt is headed up towards $1 trillion. Net foreign debt is still (just) above $1 trillion; but when we add on the investments Australians hold overseas (shares and businesses), which outweigh the opposite, our net foreign liabilities have plummeted well below $1 trillion, to just $850bn.
That’s all about all of this, but also all about record low global interest rates and tens of trillions of hungry money looking for a home.
Does ‘amazing’ capture some of it?
Originally published as Teryy McCrann: $77bn more goods and service sold international marketplace than we bought