Aussies no better-off after 30-year recession free run

Economist Jason Murphy has questioned whether Australia’s near 30-year recession-free run has made us better-off:

Well that’s it. Australia’s much-heralded three decades of growth are over.

What have we got to show for it? How has Australia changed since a recession last racked our economy back in 1991-92?

According to the World Bank we’ve climbed two rungs up the global GDP charts, from 15th to 13th. That’s not too bad.

The country as a whole is richer. But of course we know the population has risen enormously — up about 8.5 million people since the last recession. Are we richer in per capita terms?

The answer is yes. This next table shows Australian per capita GDP (normalised for purchasing power) jumping up the league tables in the past three decades. As you can see, there are a lot of small, rich countries ahead of us that didn’t show up in the last table.

So where is the money going? How are we using this burgeoning wealth? The answer is as familiar as it is disappointing.

When we look at Australian household expenditures, the top two are always food and housing. Food used to be the biggest single expense for the average Aussie family, but no longer. Shopping is now only the second biggest part of the household budget.

Instead housing was the top expenditure category in the 2015-16 household expenditure survey (2015-16 is the most recent iteration of that survey)…

Housing costs (rents and mortgages) accounted for 19.6% of all household spending on goods and services, up from 14.2% in 1993-94. That’s a substantial jump — in dollar terms average weekly expenditure on housing rose from $85 to $227 a week…

If we are ploughing our increased wealth back into scarce assets and simply bidding up their price then we are wasting a decent part of the great increase in income these three decades have granted us…

As the next graph shows, Australians self-reported life satisfaction has faded away since 2005. Briefly, in 2018, even the Brits were happier than us!…

There’s a few points to note about this analysis.

First, Australia’s rise up the GDP per capita table occurred over the first half of our economic run when immigration (population growth) was relatively low:

As net overseas migration was ramped-up from the mid-2000s, per capita GDP growth has collapsed, as has the growth in household disposable income:

Second, GDP is a terrible measure of wellbeing. It ignores vital issues like the decline in Australian’s quality of life (e.g. traffic congestion and having to live in smaller and more expensive housing), rising inequality, the degradation of the natural environment, and the depreciation of natural resources.

Even the Productivity Commission agrees that GDP is a useless measure of wellbeing, noting the following in its Migrant Intake Australia report:

While the economywide modelling suggests that the Australian economy will benefit from immigration in terms of higher output per person, GDP per person is a weak measure of the overall wellbeing of the Australian community and does not capture how gains would be distributed among the community. Whether a particular rate of immigration will deliver an overall benefit to the existing Australian community will crucially depend on the distribution of the gains and the interrelated social and environmental impacts.

Any sane regular Australian would conclude that Australia’s quality of life has been eroded during its so-called dream economic run, made worse by crush-loading levels of immigration.