The Reserve Bank of Australia was under a lot of pressure to make rate cuts due to a slow economy, but they held back. Australia is doing great in its export earnings but the economy still looks weak, it is more of a statistical quirk than an actual result as thousands of dollars are missed from the growth measurement. That has resulted in the GDP of only 2.3% being reported instead of the actual 5.5% in the quarter ending December. Moreover, those dollars that are missing is also overlooked by the markets which create a lot of pressure as a lack of economic growth.
The Australian exports have reported profits, and that can be seen in the tax receipts, the dividends provided and the share prices. But the cash that is available in the country is being written off by the statisticians as ‘inflation,’ and that is removed from the GDP reports. Normally, that is standard practice across the world, but in Australia, the case is different as the foreign players pay a higher price for their wares than the locals. All the prices of products that Australia is exporting is on the rise with a 15% increase in prices and also has a trade surplus which is the largest the country has seen but despite that to make the GDP ‘real’ it is called as inflation.
The exports recorded 438 billion Australian dollars last year and the real exports reported were $397 billion, and the difference was a 2.1% nominal GDP. Adding to it the inflation was also low and was at 1.8%, and hence the rise in export prices is not due to inflation as it is widely believed.
There was a trade surplus too of $14.7 billion, and most of it will be lost in nominal GDP calculation. The dividends are on the rise, and so are the share prices. The miners also had a profit of 27% last year proving the point that they have a lot of cash in hand. Many companies are paying a dividend of $29 billion for this quarter.
More profits have resulted in better tax collections, and that has helped the parties heading for general elections offer tax cuts as an election mandate. The world is paying more for Australian exports, and that has helped increase spending and also help the households have more money in hand. Moreover, it offers the government to have the flexibility to offer better tax rebates.