One of the more sober assessments of the European situation came this week from the New Zealand Prime Minister, John Key, speaking from Berlin. Key is a smart and very experienced operator and worth listening to. He commented that Greece is such a small economy that is it not likely to cause the collapse of the euro. Nor is it likely that Greeks will vote to leave the Eurozone. This contrasts with much of the hype in the Australian media.
That hype went into overdrive this week on the release of the Australian economic data. What it misses, but has been picked up a little by Alan Kohler, also an experienced operator, is that you must look behind the aggregate GDP data. If you do, you see a much different picture. As Peter Switzer commented in the Weekend Australian, if the economy is so good, why don’t we have inflation?
By far the bulk of the reported GDP gains were in resources extraction and from a relatively small group of people. Hence the per capita productivity data reported this week. Take out resources (and i suspect some of the GDP growth should be reported as GSP growth since whilst it may be Australian companies that are reporting, there is a huge amount of imported capital equipment which you can see affecting the current account data), and you see a very different economy.
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