Page 5981 - Week 14 - Thursday, 8 December 2011
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by governments, whose only answer to their inability to balance their budgets is to increase the revenue take.
Ever since the signs of the global economic and financial crisis started emerging four or so years ago, consumers have gradually become more conservative about their behaviour of spending and saving. In particular, consumers have been paying down their debt more quickly than had been the case. Well done, consumers, because the lack of national savings had been a big problem for this country. In this way consumers were acting in the same way as were many companies. Companies were described as deleveraging—that is, reducing their debt levels and increasing their capital base.
As the graph of household savings ratio shows in the latest report, there was a very sharp increase in this ratio from 2007 to 2009. The interesting feature of this ratio is that, over the past two years, it has been maintained at about 10 per cent, and it might even be moving slightly higher than 10 per cent now.
This leads me on to the second feature I wish to note from yesterday’s national accounts data. In relation to the ACT, the picture that is emerging is very interesting and, prospectively, quite worrying. It is quite a different picture to the short and limited analysis that the Treasurer offered yesterday. In trend terms—I note again, for the Treasurer’s edification that the bureau prefers the use of trend data rather than seasonally adjusted data, contrary to the position Mr Barr sought to argue yesterday—the economic scenario for the ACT is clearly of one that is slowing.
I will go through the four components of state final demand. General government final consumption fell by 0.8 per cent during the September quarter. This follows a reduction in the June quarter and a flat result in the March quarter. “No growth” is how you can define that. Overall, there is little or no stimulus coming from that area of activity—that being the general government financial consumption.
Household financial consumption spending increased by only 0.1 per cent, and it continues at a steady decline in household spending over eight quarters or two years, from growth of 1.2 per cent in the December quarter 2009-10 to the almost no growth in the latest quarter. Mr Barr forgot to share that little tidbit with us.
Spending on capital projects by the private sector fell by 2.7 per cent in the last quarter, and that follows a decline of 1.4 per cent in the previous quarters and three-quarters of strong growth prior to then. The problem is that the private sector are showing their lack of confidence in this government by their reduction in their investment in capital projects.
The strong area—give governments their due—was spending on capital works by the public sector, which grew by 4.3 per cent during the latest quarter, reinforcing strong growth over recent quarters. But that was because of a number of significant projects that had come to fruition and had been paid off.
The major point to come out of this analysis in the context of today’s debate is that consumers have become very cautious about their spending activities in recent years,
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