IMF: Australian economy developed world’s worst

Inside Story’s Tim Colebatch has penned a ripping article on how Australia’s economy is forecast by the International Monetary Fund (IMF) to lag the world’s 12 largest developed nations on per capita GDP growth:

…the International Monetary Fund is forecasting that in 2020 Australia will have the highest growth rate in GDP (gross domestic product) of any of the world’s twelve largest “advanced economies”: a feat it has achieved only twice in the past decade. The problem is that GDP growth is not the bottom line of economic success.

The real bottom line is GDP per head. That’s what makes Australia a rich country, whereas India — which produces eight times more goods and services than we do — remains a middling poor one. And when you look at the IMF’s forecasts for growth next year in GDP per head, Australia goes from the top of the list to the bottom.

It is not GDP growth that raises living standards, it is growth in GDP per head. The IMF predicts Japan’s output will grow by only 0.45 per cent next year. But the number of Japanese residents is forecast to shrink by 0.34 per cent (more than 400,000 people), so its output per head — not a bad measure of living standards — would grow by 0.81 per cent. On the measure that matters, the Japanese tortoise would outpace the Australian hare.

How could Australia top the GDP forecasts yet be bottom on GDP per head? Because its economic growth, such as it is, is driven by population growth. Next year the IMF forecasts Australia’s population to grow by 1.69 per cent. Of the others in this group of twelve, Canada is a distant second with 0.96 per cent, and Britain a very distant third with population growth forecast at barely a third of ours.

That difference is overwhelmingly due to immigration. Almost two-thirds of Australia’s population growth consists of overseas migrants…

It is worth noting that the IMF data shows that Australia’s experience of high immigration has done anything but lift the economy: since 2013, when the Coalition was elected, Australia has had by far the highest rate of immigration and population growth of the big twelve, yet the third-lowest growth in per capita output.

Last month, MB produced similar analysis showing Australia’s real per capita GDP growth has underperformed all major economies and regions this decade, as illustrated below using OECD data:

The gap underperformance has also worsened materially over the Coalition’s term in government:

Of course, it is not just per capita GDP that is languishing, but household incomes too, with Australia’s real per capita Household Disposable Income growth also the lowest among OECD nations over the five years to 2019:

.

In other words, Australia is running a fake ponzi economy based on turbo-charged immigration that is supporting overall GDP growth at the expense of productivity, amenity, housing affordability, and wage growth.

For Australian businesses and policy makers, it is much easier to import migrants and report headline GDP growth than earning it the hard way through rising productivity and living standards.