February 2008 - so far so good for the Australian economy

I am conscious that I still have to finish More economics 101 - the economics of Malcolm Turnbull. I will do so. However, I wanted to make a comment on the latest economic statistics.

As I write, the Rudd Government's economic stimulus package has been voted down in the Senate through the vote of independent Senator Nick Xenophon. He wanted more Murray Darling water for South Australia and the Government would not budge sufficiently. And a bloody good thing too, although this goes to some of my own biases. I will deal with this later in a separate post.

The latest ABS data that has been released supports my view about the performance of the Australian economy.

On 10 February, the ABS released data on the Value of Principal Agricultural Commodities Produced, Australia, Preliminary, 2007-2008. This suggested the value of agricultural production was up 24% on the previous year.

Yes, this is 2007-2008. Further, the previous year was badly affected by drought. Yet this better performance does feed into our trade stats.

The following day, 11 February, the ABS released housing finance figures for December 2008.

In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions increased 5.9%. Owner occupied housing commitments increased 7.1%, while investment housing commitments increased 2.9%.

This is not a bad result and shows the effect of the Rudd Government stimulus measures.

If you look at the attached ABS graph, you can see the sharp decline from December 2007 and then the recovery.

The Rudd Government measures are not all good. Home prices at the lower end of the market have started to move up, as have rents.

This is what happened before with this type of measure. Lower income renters were disadvantaged as a consequence.

Now turning to the unemployment numbers released to day.

Employment in January increased by 1,200 to 10,742,100. Full-time employment increased by 33,700 to 7,670,700 and part-time employment decreased by 32,600 to 3,071,400.

The drop in part time employment did not come as a surprise. The rise in full time employment did.

The participation rate, the proportion of the working age population wanting to work, increased. This increased the unemployment rate by 0.3 percentage points to 4.8%.

The attached graph from ABS shows how unemployment has risen. You can see the steady increase since the start of 2008.

Coming on top of the retail sales statistics, none of these statistics show an economy entering serious recession. However, the numbers are lagged and a little misleading.

I have no doubt that the economy is in downturn. My point has always been that the economic fundamentals are pretty good.

I support some variant of the Rudd stimulus package because I see it as important in getting us through to the second half of 2009. By then, some of the longer term measures will be starting to feed through.

As someone who has been watching the economic entrails for quite a long while, I am struck by the apparent disconnect between Australia and apparent global trends.