Labor Fakes GDP By 4.5%

*This post follows on from my recent article, “Labor: Hide The Increase”.  There, I showed that the Rudd Government has fiddled the books to hide their massive increase in borrowing and spending. Please read the article for background to this new article.

In the fine print on the Rudd Government’s Budget 2009-10 MYEFO website, we learned that Rudd Labor made a change in the accounting method that was previously used to calculate Gross Domestic Product (GDP).  This change resulted in a “substantial increase” to the official GDP figures:

* The 2008-09 Annual National Accounts show a substantial increase in the level of GDP over history due to the ABS adopting the new System of National Accounts 2008. Given the degree of increase in the level of nominal GDP, the Government has released updated tables of fiscal aggregates contained within Appendix D of the 2009-10 MYEFO.

So just how much is that “substantial increase”?

4.5%. Or $47bn. In just one year.

Here’s a chart I’ve put together from the official Australian Government Budget data. It shows my reverse calculation* of the value (in $millions) of Rudd Labor’s “revisions” to historic GDP.

That is, it shows just how much the Rudd government has simply tacked on to the previously-reported official GDP figures (click to enlarge):

Rudd Labor "revisions" to past GDP figures

This chart only goes up to 2006-07.  The last year of a Coalition government Budget report.

That is because the Rudd government has gone back and “revised” the figures in the Rudd Labor 2007-08 and 2008-09 Final Budget Outcome documents too.  So I could not find the original reported figures for those years in order to calculate the GDP, and compare to their newly “revised” figures.

Even so, you can easily see that Rudd Labor’s “revisions” to past GDP are indeed, a “substantial increase”.  For the 2006-07 year – the last year that I am able to compare original vs “revised” figures – it appears that they have adjusted GDP upwards by $47 billion (4.49%) over the original figures reported by the Howard Government.

Of course, we can easily perceive just why Rudd Labor would wish to do this.

By making “revisions” to the historical data – revisions that all very conveniently result in a “substantial increase” in reported GDP – their spending (as a percentage of GDP) looks lower.

Their annual spending growth (as a percentage of GDP) looks lower.

Their debt as a percentage of GDP looks lower.

And their Interest-on-debt as a percentage of GDP looks lower too.

It would be very interesting to know exactly how much they’ve faked the GDP figures for their own term in government so far. But we can take an educated guess.

For the 2006-07 year, Rudd Labor appears to have increased the originally-reported figures for GDP by $47bn (4.5%). So, let us assume they only applied the same 4.5% per year “revision” to their own years in government so far.

For 2007-08, I calculate that a continued 4.5% upward “revision” would result in an extra $53bn having been added on to the GDP figure.

For 2008-09, it would result in an extra $56.5bn having been added on to the GDP figure.

Of course, Rudd Labor may well have revised their own 2007-08 through 2009-10 GDP figures upwards by more than 4.5%.  We just don’t know.

What we can see clearly, is that they have cooked the books to try and hide the increase in their borrowing and spending.

And that is why Rudd Labor politicians always love to quote everything in percentages. “As a percentage of GDP”.  And not give the actual, exact numbers.

Because it is very easy to make your mad borrowing and spending look lower than it really is.  Simply make upward “revisions” to the GDP numbers, and then quote everything to the media “as a percentage of GDP”.

A final thought.

How do we know if we really did avoid a “technical” recession in 2008-09?

If the government is simply tacking on 4.5% GDP growth per annum – literally tens of billions – then it is very easy to claim that the economy has grown. You’ve simply added the GDP growth yourself!

*If you’d like to double-check my reverse calculations of the Government data, please download my spreadsheet by clicking this link – True_GDP

UPDATE:

It has been suggested by some that these changes in methodology made by the Rudd government are all quite innocent. That (according to the government), “these changes improve the accuracy and comparability of the data through time”.

Oh. It’s all about improving the accuracy, is it?

Funny then, that ALL the changes just happen to help the Rudd government’s figures look better.

By faking the GDP numbers higher – including all previous years too – the Rudd Government’s current borrowing and spending “as a percentage of GDP” looks lower. And can be claimed as “the lowest in the developed world”.

Advertisements

9 Responses to “Labor Fakes GDP By 4.5%”

  1. hamlock March 18, 2010 at 9:51 am #

    Rudd must be learning his maths from the scientist who fudge the figures on temprature.Seems to be a bit of a pattern here .If you don’t like the facts just change them to suit your agenda.

    • Lachlan Wallace January 2, 2012 at 1:21 pm #

      Only someone as deliberately uninformed as Barnaby Joyce would assume improved accuracy in statistics are partisan.

      The significant changes to the GDP numbers were caused by a change in the method of calculating GDP spearheaded by the UN, with developments in progress from 2003.
      http://unstats.un.org/unsd/nationalaccount/sna2008.asp

      This development were introduced by the Australian Statistician, and the ABS. There could be some political implications with that, but Brian Pink, the current australian statastician, was appointed in March 2007. I wonder who was in government then.

      So this is just another souffle beat up by those who’d rather dispute the toss than deal with realitiy.

      • The Blissful Ignoramus January 2, 2012 at 5:23 pm #

        Only someone as (wilfully?) blind as Lachlan Wallace would:

        1. Overlook the fact that this blog is not written by Barnaby Joyce;
        2. Assume that a government claim of “improved accuracy” is a statement of the truth – espec. where said “improved accuracy” just happens to serve as sole justification for accounting methodology changes that conveniently rewrite history and thus act as cover/support for their narrative/propaganda;
        3. Overlook the post-career admissions of former Finance Minister Lindsay Tanner to having engaged in “dark arts” and “standard tricks” – including “switching between different forms of accounting” – in order to “maximise political appearances”;
        4. Assume that an action “spearheaded by the UN” is (a) automatically positive, and/or (b) implemented with accuracy, honesty, and integrity by our own government;
        5. Assume that the appointment of the current ABS statistician in March 2007 automatically negates any possibility of malfeasance … whether Labor or Liberal (to wit, such a change to reported GDP quite obviously benefits whomever is in government at the time).

        • Lachlan Wallace January 2, 2012 at 7:10 pm #

          Good afternoon Blissful,

          I’m quite aware that you aren’t barnaby Joyce, (but you take the bait so greedily.)
          Well, ensuring that the reality of Australia’s financial situation is presented in a consistent manner with other countries is important.
          You seem to be making a simple translation problem, by confusing the map with the terrain. Reported GDP figures, whether those created pre or post 2007, only represent numbers not the tangible reality of the economy. The revisions only allow us to see clearer what the reality was then. If something closer to the immutable reality is “propaganda” to “conveniently rewrite history”, then i’m sure that any facts or figures that someone on the internet gives will be ignored. But if you have any evidence of systematic fraud or conspiracy relating to the Australian Statistician, or the ABS, please publish it and try to get Barnaby to table it in the Senate.
          3-4 % of GDP would be easy enough for alternative economic modelers to pick up as an error in the accounts, or it would show up in the auditors reports. You should have some evidence to make such accusations and if you can’t demonstrate the fraud or conspiricy, then is it really there?
          Otherwise, you’ll just have to deal with the reality that the economy was larger than the Liberal/National government was told due to their use of the existing system of accounts.

          The most egregious person to change the accounting goalposts was Peter Costello with his cash “budget surplus” rather than the accrual deficit in 2001-02. Can you please let me know if you agree that that represented as you claim “different forms of accounting” – in order to “maximise political appearances”? Or that an organization that deliberately misleads the electorate about the “audit” of election promises should gain from that fraud?

          Yours,

          Lachlan

          • The Blissful Ignoramus January 2, 2012 at 8:41 pm #

            “Reported GDP figures, whether those created pre or post 2007, only represent numbers not the tangible reality of the economy. The revisions only allow us to see clearer what the reality was then.”

            So, the reported GDP figures do not represent “the tangible reality”, but the revisions allow us to see “the reality” more clearly. Hmmmmm.

            You asked for evidence – this near 2 year old post provides a spreadsheet of reverse calculations showing the revision of previously reported GDP up to 2006-07, per the chart shown. I have been perfectly happy for readers to download, cross-reference the various budget docs and show that I’ve made an error.

            Lachlan, you are very much in the wrong place if you are (again) assuming that this blogger defends either “side” of government in Australia. This should have been evident from my previous response to you, specifically, my comment about a Labor or Liberal sitting government benefiting from such revisionist “adjustments” to GDP. This blog’s fundamental “a pox on both their houses” position would be even more evident to you, had you taken the time to peruse other posts wherein I have criticised and exposed the Coalition viz. numerous (in)actions and policies, including most recently, mechanisms tending to government theft of superannuation … since adopted and implemented by the Labor party.

            EDIT: I note your failure to directly respond to any of my points 2-5 (and especially 3) … aside from the dismissive “Well, ensuring that the reality of Australia’s financial situation is presented in a consistent manner with other countries is important”. A very weak justification, and one which you essentially contradict in your subsequent paragraph.

            • Lachlan Wallace January 2, 2012 at 10:13 pm #

              Good afternoon Blissful,

              Yes, I was going for a Ronin reference. Robert De Nero, you know.

              The generally exponential graph you include would be consistent with a miss-classification in the national system of accounts, gradually growing over time before being recognized in the 2008 system of accounts. It’s likely that most of the difference relates to improved recognition of financial intermediaries GDP contribution.

              Thanks for bringing to my attention your errors in the Linsey Tanner posts that you linked to. The historical budget information that you quote in them, and the pretty graphs, do seem to be false given that budget historical figures do show the whitlam governments surpluses occurred and net federal government debt was negative. (The federal government was lending money to state governments back then, so that’s how it could be negative.
              check the 72-73, 73-74 figures (at http://www.budget.gov.au/2005-06/bp1/html/bst13-01.htm ) As that link is to a budget before the 2008 ABS “faking”, you should accept them if you are being consistent. Oh and as a word of advice, realizing that negatives are surpluses, and then reversing the signs of the figures would give a less misleading graph.

              But those are irrelevant to your comments. I do agree that figures can be subject to selective quoting, especially when included in a press release.

              Oh, I wish Labour would let my super be stolen, the accounts girl at work has to go through hell trying to sort out the various forms to get the super paid on time.
              And the AOFM investing in 6% mortgages using 3.75% 10 year fixed bonds is a profitable adventure. Mortgage losses would have to go from the record high of 1.8% you quote to about 15-25% AND have the houses melt into a Chrischurch earthquake sized total write-off. Maybe as much as 40% depending on the amount of subordination. If a near total collapse of the housing market happened, the $4 billion in RMBS is the least of Australia’s concern. And if housing doesn’t drop off a cliff, the federal government makes $100-150 million a year, while boosting banking competition. I thought Barnaby would like that.

            • The Blissful Ignoramus January 3, 2012 at 8:14 am #

              I note that you have once again failed to directly respond to the original counterpoints 2-5 directed to you, via the following dishonest strategies:

              1. You have (again) obfuscated on the issue of the data underpinning this post;
              2. You have sought to misdirect via the major substance of your response now focussing on a self-conceded (“do seem to be false”) Straw Man allegation pertaining to a different post;
              3. You have conceded the irrelevance of the bulk of your response (“But those are irrelevant to your comments.”) and then, despite recognising this, failed to remediate;
              4. You have (again) sought to misdirect via (presumably) sarcastic remarks viz. a desire to have your super stolen by the government;
              5. You have (again) sought to misdirect in closing comment, via barracking for the government’s position on a separate and irrelevant topic (RMBS) … and indeed, have made numerous fundamental errors in that attempt to further misdirect (eg, “the $4 billion in RMBS is the least of Australia’s concern”; ignoring of the relevance/importance of low doc arrears rate as cited, and more).

              Given your now very obvious predilection for repeated misdirection, obfuscation, self-contradiction, and (apparent) partisan barracking laced with sarcasm, I can only conclude that you are insincere, intellectually dishonest, and/or a troll. I’ll not waste further time on same.

              Goodbye.

  2. vk March 19, 2010 at 4:42 pm #

    Any similarity with the book 1984 – where the Ministry of Truth kept revising old encyclopedias and newspapers in the libraries – is purely coincidental.

Trackbacks/Pingbacks

  1. Rudd lowers debt and spending. GDP increases « James Board - March 17, 2010

    […] guess what? Voila! Just like that, our GDP figures were “revised” upwards by 4.5% per cent, or about $50 billion. By making “revisions” to the historical data – revisions that all very […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: