The glory days on our living standards are overChris Richardson
The biggest boom Australia has seen in a century and a half is continuing to ease back.
That’s mostly a good news story. You all know the game plan – with mining-related construction work dropping from stunning peaks, Australia needed other drivers of growth to step up to the plate.
Some of that was set to happen anyway, most notably via a jump in exports as more mines shifted from construction to operation.
But the other elements in the great rebalancing were to come from:
•The Reserve Bank keeping interest rates low enough for long enough to stimulate the largest chunk of spending in the economy (retail) and its most volatile part (housing construction);
•The Australian dollar drifting down as commodity prices fell further and as the US stopped the “money printing” that was artificially holding their currency down (and so ours up).
And if that was the game plan, then to date the report card is pretty good. Mining-related construction work is indeed falling away (with much more to come). But mining exports have been robust. Even better, low interest rates are having their wicked way with retail and housing construction. Both these key parts of the economy are finally lifting after time spent in the doldrums.
So although the $A is refusing to play nice, the nation’s economic growth remains close to trend, with the damage to date on overall output growth from a tricky transition in Australia’s economy proving pretty minimal.
Yet although continued trend growth in our economy is a great outcome – so far so good – it is only half a story at best.
The fact that we are producing more is all well and good, but nations – like families and companies – are much more focused on their incomes.
Going backwards
And the news on that front is less flash.
Wednesday’s national accounts showed that real net national disposable income per head – measure of the living standards of the average Australian, as measured by the Bureau of Statistics – is still going backwards.
In fact, the chart shows that our performance on this measure has just become even worse than it was in the recession of the early 1990s. You now have to go back to Banana Republic days in the mid-1980s to find a period in which our living standards did less well over an extended period.
That’s a big change of pace on what we have been achieving. For decades now Australians have had gains in living standards that have made us the envy of the rich world:
•In the 1980s that was helped along by women moving into the workforce, with that demographic dividend topped up by the tail end of the baby boomers also entering the workforce.
•In the 1990s our living standards jumped again as the hard slog of economic reforms since the early 1980s finally hit their pay-off phase.
•Then last decade it was the turn of China to come to our rescue, with rising coal and iron ore prices keeping living standards on the go.
But Wednesday’s news is a reminder that the glory days are well and truly over.
Read more:
http://www.afr.com/p/opinion/the_glory_days_on_our_living_standards_wiFWNM6tTa2H3Mn3klRG9M