National accounts likely to show economy still growing - just
By Garry Shilson-Josling, AAP Economist27 Feb 2009 4:52 PM
SYDNEY, Feb 27 AAP - By the end of next week we will know whether the standard definition of recession had already been met last year.
We will also know if the Reserve Bank of Australia (RBA) has chosen to cut interest rates again.
And we will have some more timely data on the Australian economy as well as a key measure of just how much the US labour market has deteriorated.
Most likely the picture will look pretty much as miserable as it does now, if not even worse.
But those claiming we are already in a recession will probably have to fall back on the argument that "if it feels like a recession, it must be one", because firm evidence that the economy is contracting looks likely to remain elusive.
The December quarter gross domestic product (GDP) figures are due in the national accounts to be released on Wednesday.
The September quarter numbers showed growth of 0.1 per cent in real, seasonally adjusted GDP.
The consensus among economists, based on partial economic data like retail trade and capital spending, is that the Australian Bureau of Statistics (ABS) will announce another small rise, about 0.2 per cent, in the December quarter.
Economists trying to forecast the GDP outcome will be guided by quarterly company profits and business inventories data from the ABS on Monday and government spending figures on Tuesday.
There is a chance that the December quarter will be negative and the September will be revised down, meaning the conventional (and very arbitrary) rule of thumb for a recession - two negative quarters in a row - would have been met.
More likely, the figures will show marginally positive growth.
Either way it would mean the economy is stagnating, with a near-zero growth rate consistent with the number of unemployed almost certainly rising at a rate of more than 200,000 per year.
The ABS will also release January retail trade figures on Tuesday and building approvals data on Thursday.
But those numbers will not change the big picture.
By the end of the week the Australian economy is likely to look about as weak as it does know, albeit most likely with an extra dose of monetary medicine to ease the pain.
The RBA's board is due to hold its monthly monetary policy meeting on Tuesday.
Most economists expect a cut in the overnight cash rate, with the futures market undecided between a quarter of a percentage point cut to 3.0 per cent or a bigger move to 2.75 per cent.
The timing of the national accounts will not rob the RBA of vital information - the central bank looks forward rather than backward.
Apart from its impact on confidence, whether the economy is in recession or not quite there yet would make no real difference to the RBA's decision.
The economy is sick enough to warrant a further rate cut, and the argument that the central bank should save some of its ammunition for later is flawed - it amounts to saving your bullets until after the enemy has stormed the ramparts when some more timely shooting might have kept them at bay.
One thing that will make the local economy look healthier is the comparison with the US.
The February US employment report is due on Friday.
Non-farm payrolls, the key measure watched by economists, have contracted by 3.5 million (2.5 per cent) over the year.
More than half the job losses were suffered in the last three months, including 598,000 in January.
An even bigger fall is expected for February, after news that new claims for unemployment insurance payments hit 667,000 last week, the highest level since 1982.
While that would make Australia look fairly healthy by comparison, it would also be a reminder that the international environment that has a major bearing on Australia's fortunes is unusually hostile.
