WE’VE ticked over 24 million people in Australia. This rapid and unexpected boom has conveniently hidden something we should be paying much more attention to.
Sure, Australia’s total GDP is rising. You hear the Treasurer crowing about that every time the government releases the national accounts.
But this is like the boss announcing: “Combined earnings of staff have risen 2 per cent! So you all got a payrise!” You look round and realise they hired four new people last year. The earnings of the group might have gone up, but that doesn’t mean much for your own pay-packet.
What we should look at is per person GDP. That is not going so well, according to the latest data. After years of growth upon growth, GDP per capita has turned pretty much flat in the last few years.
We barely noticed, because the population was booming, making the aggregate statistics look bright and bubbly.
In fact, GDP is not even the best measure of individual welfare. If you want to adjust for inflation and look at people’s disposable income, things are even worse.
This graph probably makes a lot more sense to a lot of people — it says times have not been easy recently, despite what the raw GDP numbers say.
It is important to note that population growth and falling income are not cause and effect. Let’s not go all Pauline Hanson here. Without the population growth — extra people buying things — the economy would probably have looked even more grim.
Japan has the reverse problem. Their population is shrinking, so that their national GDP figures keep falling. But on a per capita basis, things are not so bad.
So when boffins tell us to celebrate because of Australia’s amazing run of economic growth, it is fair to be sceptical. Since around 2011, that growth has been not enough to actually lift per capita disposable income.
It is not the GFC that we mucked up. We bounced back from 2009 just fine. It’s afterwards that things went pear-shaped.
Part of the problem was the aura of doom around the Gillard government, and part of the problem was the first Tony Abbott/Joe Hockey Budget, which never got through parliament and failed to do the right things to keep unemployment down.
Both of those were bad for confidence. But the great news is that the Australian public could see that. And 24 million of us have kept trying new things, hoping for better results. We weren’t afraid to boot out the leadership team a few times and try something else.
We have a new Treasurer and PM now, and we will give them a go for a while at least. What they need to do is focus on getting income growth going again.
They have some big advantages — including a lower dollar and booming Chinese demand for milk powder and tourism. It should be possible to turn the ship around.
The Treasurer has publicly said he wants to make the government smaller to make the economy bigger. “Lower expenditure for lower taxes is the best way to support jobs and growth,” he has said. Theory suggests that is true, although history has other ideas — cutting spending sharply can hurt confidence.
We will see whether the government is guided by theory or history in May, at Budget time.
The next Budget is going to be extremely important. If it is not up to scratch, the government will have 24 million unhappy customers.
Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine.
Follow Jason on Twitter @Jasemurphy