Population ponzi in spotlight as Budget to report per capita GDP

By Leith van Onselen

Senator Leyonhjelm scored Australians a win by securing a deal with the Turnbull Government to report the Budget numbers in per capita terms. From The Conversation:

The government’s horse trading over legislation with the senate will have a profound effect on the way the government reports economic data.

Part of the government’s agreement with Senator Leyonhjelm to support the reinstatement of the Australian Building and Construction Commission was that many government budget numbers be reported in per capita (i.e. per person) terms.

So rather than reporting economic growth as one monolithic number, the government will take that number and divide it by the total population. Doing so will enable us to better see how much an average Australian has gained or lost.

This change to Budget reporting is actually very important as it will shine a light (albeit indirectly) on the population ponzi run by the federal government. No longer will it be able to focus attention solely on aggregate growth, but will also show how that growth is being divided among Australia’s rapidly growing population.

Indeed, while the federal government often claims credit for Australia’s quarter century of uninterrupted growth, the situation is far less flattering when the economy is considered on a per capita basis, with the economy actually sliding backwards in two of those years (see next chart).

ScreenHunter_16457 Dec. 05 10.03

Worse, since immigration was initially ramped-up in the early-2000s, Australia’s per capita GDP growth has plummeted to levels not seen since the early-1980s and early-1990s recessions:

ScreenHunter_16458 Dec. 05 10.05

What has been happening in Australia’s is that mass immigration has given the economy the ‘illusion of growth’. All the added people have raised output on an aggregate level (more inputs equals more outputs), but everyone’s share of the growing pie has been reducing.

Therefore, reporting growth on a per capita basis will help to shed a light on the subterfuge.

Hopefully, the change to reporting will also prompt the Australian Treasury to junk its “three P’s” framework, which has long been spruiked to boost Australia’s living standards.

According to this framework, we have been told that Australia must: 1) boost productivity; 2) raise workforce participation; and 3) increase the population via skilled migration, if the nation was to continue to enjoy rising living standards.

Of the three Ps, only the first two – boosting productivity and raising workforce participation has any merit. The third – boosting population via skilled migration – does not boost material living standards of the incumbent population. In fact, when factors like added congestion, reduced housing affordability, reduced environmental amenity, the dilution of Australia’s fixed mineral endowment, and rising inequality are considered – which are not captured in GDP – incumbent living standards are made worse-off via mass immigration.

For these reasons, the National Reform Summit’s final statement, released in August 2015, included an entire section on the need to boost productivity and participation, but excluded any mention of the need for population growth (via immigration) in order to improving living standards.

In a similar vein, the Productivity Commission’s 30-page “Increasing Australia’s future prosperity” discussion paper, released in October, contained lots of discussion on the need to boost productivity and participation, yet omitted to mention any role for immigration to boost prosperity.

Clearly Australia’s august policy institutions do not support the lie that mass immigration is required to raise Australian prosperity and living standards. The shift in Budget reporting to per capita measures is a small but important step in the right direction.

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Leith van Onselen
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Comments

  1. This paper was released on 7 November 2016 to assist participants in preparing a submission. It outlines a range of issues about which the Commission is seeking information.

    This paper outlines:

    the context in which this inquiry is taking place
    the scope of the inquiry
    a framework for generating new ideas for microeconomic reform in Australia over the coming years.
    Submissions are due by Friday 9 December 2016.

  2. Good news. I don’t agree with everything he does but Leyonhjelm has highlighted some important issues. I hope the per-capita numbers will be shown historically so we can see what a terrible job the major parties have done over the last two decades.

  3. Excellent move.
    Now how about replacing the ABS with an independent organisation that is concerned about the truth and ethical standards (and does not answer to politicians)

  4. Strange Economics

    If they are going to produce these type of statistics that will expose the results of the implicit govt policy, with published evidence –
    well its nearly time for some cost cutting at the ABS to help balance the budget.
    Unfortunately then the statistics can’t be produced due to limited resources.Won’t be anyone left to press GDP/Population on the calculator.

  5. Second graph is another hint as to why, despite superficially good headline numbers on GDP growth, employment etc. a large percentage of the population feel dissatisfied.

  6. This will expose the myths of high immigration and population growth and demonstrate that only a few benefit while the rest battle the congestion and loss of amenity despite having to pay for the required extra infrastructure

  7. Cheating on exams is not a skill nor is bribing immigration officials.

    So AUS has been having unskilled immigration for years.

  8. Would it be at all meaningful to see GDP as per capita of FTE?
    Isn’t it the growth of earners we’re measuring at an individual level, not children and retirees necessarily being the driver of productivity in the economy? Sorry if it’s a stupid question, it just seems that if productive effort is reinforced by working age immigrants, then the workforce size can increase, but be out of step with/below GDP growth.

  9. one more index has to be added here…. GDP per cap in USD ….Printing out more AUD doesn’t mean growth …i.e Actual GDP or GDP Per cap crashed in the past two years in spite of so called growth in Govt or RBA…