Thursday, May 24

Nominal GDP v Fed Govt Total Revenue

The following chart is a comparison of through-the-year growth in nominal GDP (original series from the ABS National Accounts) with through-the-year growth in federal government total revenue (from the RBA table E1). Both sets of growth figures compare the flow in a quarter with the same quarter in the previous year.

Because of the noise/volatility in the total revenue series, I applied a 9-term Henderson moving average to the revenue series simply to get a better look at what is going on.

Another way of looking behind the noise is to compare the through-the-year growth in the rolling total for four quarters.

A few things look interesting: First, there appears to be a broad relationship between the two lines.

Second, with most of the downturns, it looks like nominal GDP fell before tax revenues (1977, 83, 91). The only case where GDP was not the lead indicator was the recent global financial crisis (aka Great Recession).

Third, growth in nominal GDP appears to be slowing at the moment. Dating back to Q3 2010, it is over too long a period to reflect the recent decline in headline inflation. Anyway, I would expect inflation changes to have a similar impact on both series. And it begs a question on whether this slowing in the nominal GDP growth rate is about to foreshadow another slowdown in the growth of tax revenues.

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