Australia learns from China the art of massaging GDP figures

You know it all sounds strange as GDP figures are fudged via government statisticians ( Australian Bureau of Statistics) when they tell the market that a rise of 0.4% (q1) to 0.6% (q2) of GDP occurred. The problem is 2 days before the release of the 'current' GDP figure, the ABS released the Balance of Payments and International Investment Position for Australia and it wasn't rosy.

From the ABS:

Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $8,061m (18%) to $36,394m, with volumes up 4% and prices down 21%. All components contributed to this fall in rural goods, with the largest decreases in:

• coal, coke and briquettes, down $3,295m (26%), with volumes up 17% and prices down 37%
• metal ores and minerals, down $2,768m (21%), with volumes up 6% and prices down 25%
• other mineral fuels, down $883m (18%), with prices down 18%
• transport equipment, down $412m (36%), with volumes down 31% and prices down 8%.

So overall:

The turnaround in the goods surplus resulted from the decrease in goods credits (exports), down $11,156m (19%) exceeding the decrease in goods debits (imports), down $4,873m (9%)

To finish (from the ABS themselves)

In seasonally adjusted chain volume terms there was an increase of $683m (36%) in the deficit on goods and services. This is expected to detract 0.2 percentage points to growth in the June quarter 2009 volume measure of GDP.

Then the market get's this (?):



In reality Australia's growth with it's widening trade deficit is more likely sitting below 0% of GDP. We have to remember that despite imports on the plus side, with exports weakening to the point of a collapse. The nations income decreases, therefore it's debt levels increase. So with government stimulus and cash handouts which over encouraged import consumption (from a stronger AUD). Not only is there now an imbalance in trade mixed with a nonsensical GDP number. Overcapacity from imports may cause deflation markdown on prices, since we won't have the income to purchase (exports credits gone)

A barely functioning economy.

Not to forget that China is famous for fudging their GDP (apart from Argentina playing around their inflation numbers); please look at this great article from the Economist re China's GDP. Click here for article. Then you'll see how capable a main trading partner of China can join the game of making up numbers. It's all politics and bullshit.

The Australian stock market market didn't buy the GDP numbers, market (All Ords) was down -74.7 when GDP was released on September 2nd 2009.