The Australian economy has been a global standout since the 1990s, but the numbers are starting to paint a worsening picture.
Though Australia has experienced 27 years of economic growth without a recession, the data underpinning that feat is replete with contradictions and the economy is not performing as well as government would have most believe.
Profits are kicking along around 10 per cent annually, the stockmarket is high, there’s a major infrastructure boom visible in our big cities but wage growth is at record lows.
If you look at Australia’s performance among its OECD peers, it looks fairly robust.
We’re performing better than everyone except China, the US and New Zealand, and our growth is double the inflation rate.
But viewed another way, the figures are not nearly as healthy.
On the basis of GDP per head – which measures the output for each person – Australia is the laggard in the same bunch of countries.
Over the year to 2019 Australia has come in last among the same list of countries, which means that while the whole economy grew very nicely, the output per head of population has lagged.
[The GDP per capita figure is bigger for 2018-19 than the current level of GDP growth because last year was a better one for the Australian economy than 2019 has been]
To make sense of the difference in overall growth and per capita growth you need to look at one other factor: The rate of population growth.
What the next chart shows is that since the Liberals took power in 2013, Australia has experienced a far quicker rate of population growth than its major economy peers [except for New Zealand, which is also on a low per capital growth trajectory].
“If you increase the population by 1.5 per cent, then you increase the rate of consumption by that amount and that adds to the GDP without increasing real income per head,” said Nicki Hutley, partner with Deloitte Access Economics.
So if the only thing growing is your population, the growth figures you present to the world are misleading.
“People laugh at Japan because its population has been declining [making the GDP figures look weak],” said Peter Brain, executive director of the National Institute of Economic and Industry Research.
“But if you compare it to Australia, even when we were growing quite strongly, Japan was growing more on a per capita basis than we were.”
All this shows that Australia has been using a “lazy” economic model that relies on immigration to boost the economy rather than using business investment to increase productivity.
“Our strategy over the last decade has been very short term,” said Stephen Anthony, chief economist with Industry Super Australia.
“We’ve got population growth twice the average of most OECD economies and then some.
“It has been a real estate-driven strategy, especially in the major cities.”
That means population growth has spurred property development as an employer but there has been no real emphasis on non-mining investment and skills development.
Rather than training Australians through the TAFE system there has been a reliance on bringing in skilled workers who often get sub-par qualifications aimed at only delivering an Australian visa, Dr Anthony said.
“It’s a tragedy for them and for us.”
Because of a lack of non-mining sector capital investment, there is no way to drive sustainable economic growth.
“Productivity is going backwards,” Ms Hutley said.
“Australia has been through a resource-driven boom in national income without anyone having to do anything and we got a bit slack.
“Mining does bring in a lot of national income, but the money is not going to households.”
That’s because the industry doesn’t employ many people and is heavily foreign owned, she said.
Despite our history of strong population growth, Australia has been underinvesting in the infrastructure necessary to underpin it.
“From 1985 to around 2007 we saved on infrastructure relative to population growth and we’re now paying the price for that,” Dr Brain said.
“While there is a lot of infrastructure investment at the moment, we are just playing catch up and it’s not catering to the current population.”
That lack of infrastructure investment is partly what is undermining productivity improvement and GDP per head.
If you combine a run up in household debt, flatlining wages, falling productivity and investment rates, the end picture is not pleasant.
“We are setting the precedents for a really significant slowdown,” Dr Anthony said.
The New Daily is owned by Industry Super Australia