Solid increase in GDP good, but lack of investment

Solid increase in GDP good – but lack of investment means continued concerns for unemployment

The 0.8 percent increase in GDP for the three months to December 2009 is the first solid increase since contraction of the economy ceased in the June quarter. It follows increases of 0.2 percent and 0.3 percent increases in the June and September quarters. Growth has been across the economy, the main exceptions being in construction which contracted by 0.6 percent in the quarter, and personal, health, and community services, which fell 1.1 percent. Construction has contracted in every quarter except one since December 2007.

However investment continues to fall. It contracted by 0.9 percent in the quarter, and 12.2 percent for the year. Although this was largely due to falls in investment in intangible assets (software and exploration), it does not bode well for future employment growth.

The strong rise in manufacturing output (4.5 percent for the quarter) is very welcome, but follows seven quarters (almost two years) of contraction. Manufacturing has not had two consecutive quarters of growth since September 2005, and its output in December was 17 percent below the level in that quarter. It will be a considerable time before manufacturing returns even to that peak, adding to employment concerns.

“Our concerns that high unemployment will continue for at least the next two to three years remain,” said CTU Economist and Policy Director Bill Rosenberg. “If the economy is growing, and corporate profits are increasing as indicated by yesterday’s balance of payments report, the Government should have sufficient revenue to support the unemployed and to continue to support activity in the economy. We do not want to see jobless growth.”

ENDS

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