Income growth to halve

The below chart isn’t news to MB readers but the SMH has run it two years late:

There’s a sizable turnout of economists and analysts at the Australian Business Economists’ annual conference in Sydney this morning.

One of the speakers is David Gruen, a senior Treasury official, who talks about forecasts on how the non-mining sectors of the economy could recover.

One of his key points is that the next decade will see the slowest income growth for half a century as the terms of trade falls.

Gruen says in a Q&A session later than while the outlook is less pessimistic than Professor Ross Garnaut’s in his new book Dog Days: Australia after the Boom, living standards growing at half the pace would still be a “substantial shift”.

He says there are grounds for optimism going forward as Australia grapples with a shift away from mining-led growth, but that part of the success is dependent on how looming problems are dealt with.

This is the glass-half-full take on things. If you look at shorter periods over the next decade there will be periods where income falls. Betting on rising asset prices in that environment is very aggressive.