New nightmare adds to Scott Morrison’s sleepless nights

Treasurer Scott Morrison. Picture: ABC

Scott Morrison, has been looking very tired of late. No doubt, the Treasurer has been losing sleep over the prospect of Australia relinquishing its AAA credit rating.

Now he has something else to worry about: the possibility that we are about to encounter a recession after 25 years of avoiding one.

While most commentators took the view the September quarter national accounts figures released yesterday would show no growth or negative growth, the decline of 0.5 per cent in GDP was a shock. On an annual basis, GDP rose by only 1.8 per cent over the year ending in the September quarter. Note that in the May budget, the economy was expected to grow by 2.5 per cent over the course of this financial year, rising to 3 per cent next financial year.

If we look at the explanations for this lousy result, we note in particular the negative contribution of private and public investment, although the latter fell after a sharp rise in the previous quarter.

The ongoing weakness of private investment after the mining investment boom has been a key feature of the economy over the past several years, notwithstanding record low interest rates. Net exports were also a drag on economic growth, but this may be reversed in coming quarters.

While not reading too much into one quarter’s figures, what seems to have happened is that the economic transition from mining boom to more broadly based economic activity has hit a pothole.

Private investment in new buildings detracted 0.3 percentage points from GDP growth. New engineering and new and used dwellings also detracted. It would seem the housing activity that filled the gap left by declining mining ­investment is running out of puff.

While household consumption is chugging along, it is not growing at a sufficient pace to take up the slack of the factors that are ­detracting from GDP growth.

Morrison’s take on the national accounts figures is that senators need to get with the program and pass the government’s reform measures. I’m not sure what he has in mind; the cuts to the company tax rate, perhaps.

The reality is the government’s reform program is thin, with or without Senate co-operation. Mucking around with superannuation, implementing a toothless construction industry watchdog and allowing energy costs to surge: none of these policies will lead to higher economic growth.

Apart from counting sheep, the best that the Treasurer can hope for is that this quarter’s figures were, to an extent, an aberration and that the figures for next quarter bounce back. Being in charge of the ship in the event of a technical recession (two consecutive quarters of negative growth) is never a good look for a money man.