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.