TED O’BRIEN MP
DEPUTY LEADER OF THE OPPOSITION
SHADOW TREASURER
MEMBER FOR FAIRFAX
MEDIA RELEASE
On the ABC’s Insiders program on Sunday morning, the Treasurer revealed a disturbing lack of understanding of basic statistics in the National Accounts.
If the Treasurer does not understand the difference between the size of a sector and its rate of growth, Australians have every reason to be concerned about who is running their economy.
And they should not be at all surprised about our disastrous economic performance under his stewardship.
When host David Speers asked the Treasurer a simple, factual question, “Which was growing faster, public demand or private demand, in the second half of last year?”, the Treasurer answered “private”.
This is categorically false. The September-quarter National Accounts confirm that private demand grew at 1.1% while public demand grew even faster at 1.2%.
This is because both public consumption and public investment grew faster than their private-sector counterparts during the quarter. The second half of last year is the period the RBA Governor has identified in which aggregate demand, of which public demand is a component, grew faster than expected, leading to last week’s interest rate rise.
When asked to confirm a second time, the Treasurer then pivoted to an alternative definition – the “contribution to growth”. When Speers tried to pull the Treasurer back to his original question – which component, in and of itself, grew faster – the Treasurer again pivoted to that alternative.
“Contribution to growth” takes the growth rate of each component of GDP and weights it by its share. Larger shares, mathematically, make a “bigger contribution to growth”, as they should, even if they are not growing faster.
Their contribution is larger because they are a larger component, not because they are growing faster.
The “contribution to growth” tells us nothing at all about whether private or public demand is having a disproportionate impact on inflation and interest rates.
If all components grow at the same rate, all make a proportionate contribution, and their “contribution to growth” will simply be their share in GDP.
Because public demand grew faster than private demand in the September quarter, that is the very definition of “disproportionately impacted demand”.
This is basic statistics and economics. The Treasurer should know this.
The fact he appears not to know it should disturb every Australian.
If the Treasurer does not understand the problem, then he cannot be relied upon to fix it.
The bottom line is that, at a time when families are struggling with higher mortgage repayments and the cost of living, the Government should be helping take pressure off the economy, not adding to it.
Jim Chalmers can spin the numbers, but he can’t spin away the consequences.
When spending stays high, inflation stays higher for longer. And when inflation stays higher for longer, Australians pay the price through higher interest rates.
When Labor spends, Australians pay.
ENDS