A year in retrospect, a decade in prospect
Dr Martin Parkinson PSM
Secretary to the Treasury
13 December 2011
MYEFO 2010-11
The Australian economy is in a strong position … real
GDP is now growing at around its trend rate … The
global economy has recovered from recession faster
than expected, but at different speeds across regions
… Financial market conditions have improved since
the sharp increase in market volatility and stress
experienced in mid-2010 when the European
sovereign debt crisis reached its peak.
Source: Part 1, 2010-11 Mid-Year Economic and Fiscal Outlook.
MYEFO 2011-12
International growth prospects have weakened
markedly since Budget and the risks to global
stability from the European sovereign debt crisis
have intensified … The deterioration in global
conditions has contributed to a weaker near-term
outlook for the Australian economy than at Budget,
with forecast gross domestic product (GDP) and
employment growth both revised lower. Conditions
are also expected to remain uneven, with the weaker
global economy, the high Australian dollar and
cautious household spending behaviour creating
significant challenges for some sectors.
Source: Part 1, 2011-12 Mid-Year Economic and Fiscal Outlook.
Chart 1:Euro area sovereign debt spreads
(10-year sovereign spreads to German bunds)
Note: The data series for 10-year Irish government bonds was discontinued by Thomson Reuters on 23 November 2011, with Thomson Reuters
stating that there are no eligible 10-year government bonds that can be used to underlie the 10-year point on the Irish benchmark curve.
Source: Thomson Reuters.
Chart 2:Greek GDP and fiscal adjustment
GDP growth over 2011 and 2012
0
Per cent
Per cent
Consolidation measures 2010-2012
Per cent of GDP
Per cent of GDP
0
25
-2
-2
20
20
-4
-4
15
15
-6
-6
10
10
-8
-8
5
5
-10
-10
0
0
Dec-10
Feb-11
Jul-11
Nov-11
Source: European Commission, Reserve Bank of Australia and Treasury.
Dec-10
Feb-11
Jul-11
Nov-11
25
Chart 3: US recessions
100
Index
Index
100
1990-91
98
98
1980-82 'double-dip'
1974-75
2008-09
96
96
94
94
92
92
0
1
2
3
4
5
6
7
8
9
Quarters since recession commenced
Source: US Bureau of Economic Analysis and Thomson Reuters.
10
11
12
13
Chart 4: US labour market
100
Index
Index
March 1980
July 1974
100
June 1990
99
99
February 2001
98
98
July 1981
97
97
96
96
95
95
January 2008
(current)
94
94
93
93
0
4
8
12
32
28
24
20
16
Months since peak in payroll employment
Source: US Bureau of Labor Statistics and Thomson Reuters.
36
40
44
48
Chart 5: US house prices
110
Index (April 2006=100)
Index (April 2006=100)
110
Miami
100
100
90
90
Detroit
80
80
20-city average
70
70
San Francisco
60
60
50
50
Phoenix
40
40
Las Vegas
30
Apr-06
May-07
Jun-08
Source: S&P Case – Shiller and Thomson Reuters.
Jul-09
Aug-10
30
Sep-11
Chart 6: Tax receipt estimates
Source: Treasury
Chart 7: Government spending and revenue
30
Per cent of GDP
Per cent of GDP
25
12
9
Spending
Total receipts
20
6
15
3
10
0
Underlying cash balance (RHS)
5
-3
0
-6
2000-01
2002-03
Source: Treasury
2004-05
2006-07
2008-09
2010-11
2012-13
2014-15
Chart 8: Regional distribution of
unemployment
0.25
Share of Regions
Share of Regions
0.25
Sep-08
0.20
0.20
Sep-11
0.15
0.15
0.10
0.10
Sep-02
Sep-98
Dispersion
0.05
0.05
Unemployment rate (per cent)
0.00
0
5
Average
0.00
10
15
20
25
30
Note: Statistical Local Areas (SLAs) are standard small geographic regions in Australia. There are around 1,400 SLAs under the 2006 classifications. As the size of the labour force for SLAs
varies from less than 100 to around 100,000, figures in the chart use employment outcomes weighted by labour force size. Regional distributions are smoothed using Gaussian kernel density
estimation. For presentational clarity, distributions are over-smoothed with windows of 1, 1, ½ and 3/4 selected for Sep-1998, Sep-2002, Sep-2008 and Sep-2011.
Source: DEEWR Small Area Labour Market database and Treasury.
Chart 9: Unemployment across the
economy
4
Dispersion
Sep-98
Sep-03 (start of
mining boom)
3
Jun-11
Mar-08
Average unemployment rate
2
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Note: Each point on the scatter plot represents the weighted average and weighted standard deviation of regional unemployment for a particular
quarter between Sep-1998 and Jun-2011. The weighted average unemployment rates for all SLAs differ slightly from those estimated in ABS 6202.0.
Source: DEEWR Small Area Labour Market database and Treasury.
Chart 10: Projections of the global
middle class by region
3.5
Billions (persons)
North America
Billions (persons)
Europe
Asia Pacific
Central and South America
3.5
Africa and Middle East
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
2009
2020
2030
Source: Kharas, H and Gertz G, 2010, ‘The New Global Middle Class: A Cross-Over from West to East’ in C Li (ed), China’s Emerging
Middle Class: Beyond Economic Transformation, Washington, DC, Brookings Institution Press.
13
A year in retrospect, a decade in prospect
Dr Martin Parkinson PSM
Secretary to the Treasury
13 December 2011