Australia’s Economic Growth Index hits a record low
Amidst the noise of politicians talking about their plans for economic growth this week, the announcement that Australia’s Leading Economic Index has hit an all time low has gone largely unreported.
The Westpac Leading Economic Index – which has been running since 1985 – is widely considered to be one of the best predictors of Australia’s economic growth. It is released monthly, and put simply, combines nine different economic measures which are often used to judge growth (such as stock market performance and the number of dwelling approvals) into a single number. According to Westpac, the Index provides a broad indicator of how Australia’s “growth in general is tracking relative to trend and likely turning points in the economic cycle.”
As the graph below shows, the Index last took a dip during the Global Financial Crisis in 2008, but then recovered shortly thereafter. However, despite the LNP’s claims to be economic masters, since they took office in September 2013, the Index has been steadily trending downwards to its current record low.
Which is more important – fact or fiction?
Westpac’s press release announcing this month’s Index focused primarily on the relative change in the Index value from last month – a drop of 1.53% – and didn’t mention the absolute Index number until the second last paragraph. Further, it was quick to state that the main drivers behind the recent downward trend in the Index were ‘external factors’ like commodity prices.
The few media outlets who have reported on this Index seem to have taken their lead from Westpac and talked primarily about relative changes to the overall number rather than commenting on the fact that the absolute number is heading south quicker than a polar bear fleeing the melting polar icecaps.
Meanwhile, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison’s promotion of the Liberal National Party as the party best placed to deliver growth to the Australian economy continues to get significant airplay, despite little evidence to back up their claim.
This prioritisation of political noise over real information by much of the mainstream media is almost as troubling as Australia’s economic growth. The fact that we have heard almost nothing in the main news cycle about this disturbing trend is more than a little concerning. Even if the downward slide in our growth does turn out to be transitory, Australians deserve to hear facts about what’s going on rather than just political spin.