Australia’s 26-year run of recession-free growth continued on Wednesday, with the Bureau of Statistics reporting 2.4 per cent growth in gross domestic product over the 12 months to the end of December.
The GDP figures came with a heartening uptick in household consumption spending – up 2.9 per cent over 2017 – which is exactly what economists hope will lift the economy out of the doldrums.
But who will be celebrating those numbers? Anecdotally we hear every day from readers, community members and via chance conversations that the ambition to be “comfortable and relaxed”, as John Howard once put it, seems as elusive as ever.
It’s hard to interpret the GDP numbers as a sign of real buoyancy when households are stuck so firmly between flat wage growth and the rising costs of mortgages, power bills and healthcare costs.
Put another way, we seem to be getting richer in all the wrong ways.
The house that debt built
At the heart of that paradox is housing affordability, which has declined through most of those 26 years of growth.
Interest payments on loans are not accounted for in the GDP figures, but the transactions made by a huge army of real estate agents and financiers are – and the harder they have worked, the more unaffordable homes have become.
So while wages have mostly exceeded the consumer price index over that period, meaning nearly everything is ‘cheaper’, the Australian dream of owning a home has been slipping away.
And for those who do buy a home, the stock of debt held against it is sickeningly large – especially when economists warn of “catastrophic” results if interest rates rise.
Gradually, a larger proportion of Australians are becoming renters, and not feeling “comfortable and relaxed” at all.
As economist Janine Dixon puts it, a great proportion of renters means “the stock of housing is becoming concentrated into fewer hands”.
That is not the only reason that ‘growth’ is not producing a widespread glow of content.
Between March 2012 and December 2015, ‘gross domestic product’ growth became less relevant to Australian lives than another metric – the rather sexily named ‘real net national disposable income per capita’.
‘Gross domestic product’ (GDP) estimates the value of everything produced by the Australian economy, but ‘gross national income’ (GNI) measures how much of that product belongs to Australians.
Some of the income produced in Australia flows to overseas investors and, likewise, the overseas investments owned by Australian residents send income flowing back into the country.
These flows often balance out, meaning GDP is often pretty close to GNI.
But Dr Dixon points out that for 16 straight quarters, the falling prices of Australia’s exports and the rising prices of imports, made those two figures diverge.
Between March 2012 and December 2015, GDP growth looked fine, but national income, adjusted for inflation, went backwards in per-capita terms – hence the fall in ‘real net national disposable income per capita’, also know as the ‘income recession’.
It doesn’t end there. Young Australians joining the workforce during that period suffered not only a real income recession, but also found themselves in one of the most insecure workplaces seen for decades thanks to casualisation and the expanding ‘gig economy’.
These are the kinds of details that get lost when headline growth figures are bandied about.
Economists often cop a pasting in the media for producing ‘wrong’ numbers when in fact their figures are usually pretty solid, give or take a bit of statistical error.
What’s often missing is recognition by our political leaders that all that ‘growth’, while welcome, is divvied up very differently between the haves and have-nots.
Often it’s the things not included in the measures – such as home ownership – that are more important to voters than ‘growing the pie’.
Big pies are wonderful, but most people instinctively know if they’re not getting their fair slice.