Scott Morrison, Chris Bowen dance around talk of a recession risk

The Treasurer and Chris Bowen have engaged in a curious verbal dance around our worst economic news since the GFC.

In an unintentional show of bipartisanship, neither Scott Morrison or Chris Bowen want to speculate about the risk of a recession after the economy put in its worst position since the 2008-2009 global financial crisis, AAP writes.

Instead the Treasurer and his Labor counterpart stuck to their usual political point scoring after the national accounts showed the economy contracted by 0.5 per cent in the September quarter, weaker than even economists’ pessimistic expectations.

It was the first decline in growth since March 2011 and the weakest since the GFC when the economy shrunk by 0.7 per cent in one quarter.

However, it was still only the fourth separate quarter of contraction in the past 25 years of expansion.

The September quarter results dragged the annual growth rate down to 1.8 per cent and after a revised 3.1 per cent as of June.

“The economy may have completed 25 years of continuous economic growth in 2015/16, but it started 2016/17 with a whimper rather than a bang,” Commonwealth Bank chief economist Michael Blythe said.

Mr Morrison was quick to point out that Australia was still growing faster than six of the world’s G7 economies and was higher than the OECD average. He also used the result to demand support from parliament for the government’s 10-year enterprise tax plan to promote jobs and growth, a proposal Labor rejects.

“We’re looking for partners in this parliament who want to go on that journey with us so we can set up the next 25 years of growth,” the treasurer told reporters in Canberra.

Mr Bowen said the national accounts were disappointing and highlight the fact the coalition government doesn’t have a plan, just a “jobs and growth” slogan.

“It is true that quarterly figures do bounce around and we would hope and trust that next quarter’s figures are much stronger after this very low base, but the fact of the matter is that this is a deeply concerning result,” Mr Bowen told reporters in Sydney.

The quarter’s weakness was broadbased, although household consumption was a rare bright spot, contributing 0.3 per cent points to growth. However, housing investment detracted from GDP due to of temporary weather- related events during the quarter, but business investment continued to unwind from the mining investment boom, posting its 12th consecutive quarter of decline.

Australian Chamber of Commerce and Industry boss James Pearson said the figures show it is not a time for complacency and businesses must be encouraged to invest and grow.

“That includes by cutting the burden of company tax to stimulate investment, making it easier to hire people through sensible changes to workplace relations and helping our young people to get an apprenticeship,” Mr Pearson said. At this stage economists are optimist the economy will avoid two consecutive quarters of growth contraction, which would constitute a technical recession. In leaving the cash rate unchanged at a record low 1.5 per cent at the final Reserve Bank board meeting of the year on Tuesday, central bank governor Philip Lowe had anticipated some slowing in economic growth by year-end “before it picks up again”.

He pointed to a future pick-up in exports as completed resource projects come on line.

GDP figures a wake-up call

Treasurer Scott Morrison is using the release of data showing the economy shrank in the September quarter to demand support for the government’s economic plans.

Treasurer Scott Morrison said the 0.5 per cent fall in economic growth in the September quarter, dragging the annual growth rate down to 1.8 per cent, was “not just a reminder and wake up call” but a “demand in the national interest” for the Parliament to support the government’s economic policies.

“We can never take our growth for granted in this country, ever,” Mr Morrison said.

He said Australia’s real annual growth was still higher than six of the world’s G7 economies — the US, Canada, Japan, Germany and the OECD average and second only to the UK.

“Today’s National Accounts data demands the support in the national interest for the Government’s national economic plan for jobs and growth that we outlined this year,’ he said at a press conference in Canberra.

“We’re looking for partners in this parliament who want to go on that journey with us so we can set up the next 25 years of growth, and today’s data says it’s time to join the national economic plan for jobs and growth.”

While today’s figures were a bigger decline in growth than expected, Mr Morrison said the government had already been taking a conservative approach to the budget update due to be handed down on December 19.

He said growth was not being held back by public final demand, which was up 4.8 per cent through the year.

He said the missing ingredient was private investment.

“The bit in the picture which needs to be there and isn’t there is that private investment,” he said.

Chris Bowen: National accounts “deeply disappointing”.

‘Morrison must take responsibility’

Shadow Treasurer Chris Bowen said the national accounts were “deeply disappointing” and the government had “no excuse, no alibi” for the second worst economic growth figure in 25 years.

Mr Bowen said the government did not have a plan and should take responsibility and not blame others.

“This is just the fourth negative quarter in 101 quarters in Australia. Just the fourth negative quarter since 1991,” Mr Bowen said.

He said the only other occasions of negative growth in the past 25 years had “very good and clear reasons” such as dealing with Cyclone Yasi in 2011, the global financial crisis in 2009 and the aftermath of the 2000 Sydney Olympics.

“This is the second worst economic growth figure in 25 years and it’s on Malcolm Turnbull and Scott Morrison’s watch.”

“Scott Morrison is the Treasurer. Scott Morrison must take responsibility.”

Mr Bowen said if there is not a bounce back next quarter, there will be cause for even deeper concern.

“I am not going to utter the R word lightly. We hope and trust, and indeed many of us pray, that is not the case,” he said.

Economy hit by a ‘perfect storm’

CommSec chief economist Craig James said the economy was hit by a “perfect storm” in the September quarter.

“This will turn out to be just a blip on the radar screen, but a very important blip. Many Australians have become complacent. And that includes businesses and politicians,” he said.

“The only way the economy can grow is by Australians spending, investing and employing. Australians didn’t do this in the September quarter. The Reserve Bank has been intimating for some time, monetary policy is reaching its limits. Infrastructure spending may prove useful in coming quarters in providing fresh momentum to the economy.”

“In the September quarter the economy was hit by a perfect storm. Not only was there the reaction to the UK ‘Brexit’ vote, there was also the Federal election and then there was the uncertainty about the US elections. And clearly, when there is a lot of uncertainty around, consumers and businesses tend to delay decisions to spend, invest and employ. A big fall in public investment also accounted for the bulk of the contraction of activity in the quarter.”

Additional reporting: Phillip Hudson