Wednesday, 3 June 2015

The National Accounts

The National Accounts were released yesterday for the March quarter.
Bill Mitchell does a fair attempt of explaining what is in them. As does Greg Jericho
However he both of them miss the most important point.

Nominal GDP increased by a mere 0.4% for the quarter and 1.2% at an annual rate. The annualised rate is slightly higher for March.  The average increase since 1998 has been 6%.

We all live in the nominal economy not the real economy. The budget is affected by the nominal economy not the real economy. The nominal economy has been weak since Wayne Swan's time when he disastrously had an austerity budget which reduced GDP by 0.7 percentage points. ( They usually add around 0.5 percentage points.) We should also remember this was the budget Sinclair Davidson told us was expansionary.

Until a government has a plan to raise the nominal economy we will be stuck in this mire UNLESS the currency takes a dive.