Apparently Australia went through a short, but very nasty recession in 2000, while Peter Costello was Treasurer.
At least it did by the yardstick that’s currently being used to claim Western Australia is in recession.
Of course, it’s the wrong yardstick.
The conventional gauge is two quarters in a row of falling gross domestic product (GDP).
It’s reasonably certain that Western Australia isn’t in recession, right? But we’ll never know for sure.
That’s because no-one – not the Australian Bureau of Statistics nor anyone else – produces quarterly estimates of GDP at the state and territory level, what’s known as gross state product (GSP).
GDP and its state equivalent are important because they measure how much is produced.
That includes both goods, from coal to kitchen cabinets, and services from restaurants to rubbish collection.
And, because people are needed to produce all this stuff, it shows us how employment is likely to be growing in the near future.
So what’s the basis of the claims that WA is in recession?
It’s what’s called “state final demand”, which adds up all the spending by governments, households and businesses in the state.
The national equivalent, domestic final demand, fell two quarters in a row in 2000, but GDP didn’t, so there was no recession for Mr Costello.
The latest figures were published earlier this week by the Australian Bureau of Statistics.
State final demand in WA has just fallen for two quarters in a row, the basis for the talk about recession in the sate, and is unchanged from a year ago.
And that does suggest, at least on the surface, that WA is stagnating.
If you squint while you’re looking at the figures, then quickly look away, you can kid yourself that state final demand, a measure of spending, is a good-enough substitute for GSP, a measure of production.
But it isn’t.
Spending and production aren’t the same thing, not by a long shot.
And if you take state final demand then add WA’s exports, which are produced in WA, then take off imports, which are made overseas, you end up with a measure which is a lot more useful.
It’s not exactly gross state product, but it’s a heck of a lot closer to it that state final demand on its own.
And while state final demand is currently unchanged from a year ago, the adjusted measure has grown nearly eight per cent over the year.
That’s not just strong – it’s very strong.
And a fall in the latest quarter, caused by a one-off dip in exports, is not out of the ordinary – there have been two much larger quarterly falls in the past couple of years, but the trend remains strong.
So claims that WA is in recession are probably much like reports of Mark Twain’s death – “greatly exaggerated”, as Mr Twain himself put it when he heard the sad news.
And that’s because – let’s face it – deciding whether or not the mining boom state of WA is in recession using a gauge that doesn’t include exports is just plain silly.
