There’s been a bit of fuss over the announcement by Queensland Treasurer Curtis Pitt that Gross State Product contracted during the last two quarters of 2014, which were also the last two full quarters under the Newman LNP government. Two quarters of negative growth is a common criterion for declaring a recession, and much of the controversy concerns Pitt’s use of this term. Is it justified. Obviously, the LNP and their allies would like to prove that it is not, and have made vociferous attempts to do so.
Some can be dismissed pretty easily as bluster. Joe Hockey, demonstrating the grasp of quantitative analysis for which he has become famous, declared Pitt’s claim “complete rubbish”. His supporting arguments were a mixture of irrelevance “There’s certainly no evidence of that at a national level” and wishful thinking “the bottom line is, we want Queensland to grow”.
Similarly, the claim I’ve seen quoted by Opposition spokesman Langbroek that the numbers exclude net exports appears to be just plain wrong.
A more serious objection, at least potentially, is that these figures are derived from preliminary Queensland Treasury figures, rather than the ABS numbers due in June. June isn’t far away, and will either confirm the preliminary numbers or not. It will be interesting to see if anyone is willing to eat humble pie.
A more interesting question, to my mind, is whether two quarters of negative growth is a good definition of recession. This article (in the Murdoch Courier-Mail, but authored in part by the excellent Paul Syvret, suggests not.
According to the data released yesterday, Queensland was by strict definition in recession in the latter months of 2014, but it was not one accompanied by waves of retrenchments (outside sections of the resources sector), business failures and plunging consumer sentiment.
Part of the problem here is that the only recession most Australians can remember is that of the early 1990s, long and deep and followed by a jobless recovery. Before that, the recessions of the 1970s and 1980s were also severe. The last time we had a mild recession, of the kind for which the two-quarter rule was proposed, was back in the 1960s.
This is fairly accurately summed up in the same article
in the second half of last year we had gradually rising unemployment, and a more marked slowing in business investment as major resource sector projects tapered off. At the same time public sector investment was dragging on growth as the government concentrated on fiscal consolidation ahead of its planned privatisation and asset recycling program.
To sum up, the numbers are bad enough to demolish any idea that, to the extent that governments have any influence on the economy, the LNP government and its federal counterpart were doing a good job for Queensland in 2014. But we already knew that the economy was slowing down with the end of the mining boom.
John Quiggin 
Ahem…
http://www.donotlink.com/
PS: The link doesn’t work in any case.
If you are protected against New Corp all you get is a direction to “enable cookies”, and if you are foolish enough to directly click the link (and therefore give Rupert direct access to your computer) you still don’t get the intended column – all you get is a bunch of rubbish, a computer full of Rupert’s cookies and a command to give him money and even more access to your computer and personal information.
As I’ve said before, including a link (even if were a functioning link) is an endorsement of News Ltd.
They never approvingly link to anything. They only ever provide links when they are sending a flock of flying monkeys out to do hate, disruption and propaganda.
I would follow their own “no link” policy. If anyone is reckless enough to want to find the article they can search it easily from the provided information.
But…..back on topic: If it isn’t very meaningful, why have the “two quarters” benchmark in the first place? Why not three, or four etc? Or even a definition that might start at two quarters but only if that also includes some set level of ‘badness’ in the figures.
One gains the impression from the media that the sole criterion for a having good economy is having a real estate bubble.
It’s a strange economy if you think about. Real estate is booming while just about everything else is flat or in recession. I am not sure how this is healthy, balanced or sustainable. Maybe someone can tell me how we can run an entire economy based on buying each others’ houses for more and more debt financed dollars?
This is a clear case of idiot economics where politicians try to win the sort of arguments that just might be understandable in twelve year old schoolboys. The idea that an economically marginal entity like a state government can flip their state in and out of recession is magical thinking.
An even more interesting question is why the Queensland Treasury duplicates the work of the ABS in estimating Queensland GSP and its components.
The two-quarters rule has some historical precedent, to the point that the federal government in 2009 was desperate to avoid two consecutive quarters of negative growth, and built their stimulus strategy in part around that aim. (No, really, Andrew Charlton drew it for me on a pad at one point.) Their strategy worked, too.
Without knowing more, though, I’d be wary of relying on state-level estimates of growth. The ABS had a paper on this in the ’90s; I don’t know what their view is now.
Uncle Milton’s question seems a good one.