Talk of tough times just hot air

POLITICIANS like to remind us how tough things are, but a report by the British trade union movement suggests otherwise.

After listening to our pollies going on about cost-of-living pressures and how hard it is to make ends meet, you walk away feeling that much poorer, whether or not you are down on your luck.

It's little wonder that we have apparently turned into a nation of savers, fearing what dreadful event might be around the next corner.

But a report by Britain's Trades Union Congress suggests we should get a grip.

It found that Australia's real wages growth, after taking inflation into account, was 6.9 per cent between 2007 and 2011, right through the monstrous upheaval of the 2008-09 global financial crisis.

That compares favourably with 5.4 per cent growth in Canada, while pay actually fell in the UK during the same period, shrinking by 4.5 per cent.

Now that really is tough.

And let's not forget our most recent official inflation figures from the Australian Bureau of Statistics: an annual consumer price index rise of a tame 2.2 per cent and a cost-of-living index for employees rising a mere 1.1 per cent in 2012.

But perhaps consumers are looking at the facts rather than listening to our political representatives.

Retail spending figures show shoppers had a spring in their step at the start of the year, spending $21.6 billion in January.

This was a 0.9 per cent increase compared with December and the biggest monthly rise since last June.

Such exuberance coincides with more buoyant consumer confidence, which now stands at its highest level in more than two years.

Meanwhile, there was more positive news on the broader economy, with the national accounts showing a respectable 3.1 per cent expansion during 2012, close to its long-term trend.

While the resources sector remains a key driver of growth for now, with still only glimmers of hope from the non-mining fraternity, at least the economy overall continues to expand, which is always good for the employment outlook.

The economy has now been recession-free for 21 continuous calendar years, unheard of among other major advanced economies.

Treasurer Wayne Swan did his bit talking up the economy during his national accounts media conference, pointing out that Australia is growing more than four times the average of member countries of the Organisation for Economic Co-operation and Development.

"This is a pretty impressive outcome," Mr Swan said. "Over a 30-year period, governments have put in place the sort of policies which have supported our economy, put in place the reforms which have built the prosperity for the future."

But he also spent a lot of the 30-minute conference discussing the comparison of real gross domestic product (GDP) - the usual focus of growth - and nominal GDP, as did shadow treasurer Joe Hockey in his rebuttal.

In a rare turn of affairs, nominal GDP at an annual rate of just 2 per cent has now undershot real GDP for the past three quarters, something that has not occurred in 50 years.

The long-term trend for nominal GDP is 6 to 6.5 per cent.

It explains why company profits are down, because the value of our goods and services (nominal) are below that of output (real), which Mr Swan blamed on a strong dollar and declining terms of trade.

Mr Hockey, unsurprisingly, just blamed it on government mismanagement.