Sarah Hunter, head of Australia macroeconomics at BIS Oxford Economics, has hosed concerns about the Australian economy slipping into recession, arguing Australia will continue to outperform other economies. From The AFR:
Australia is likely to lag the current global economic uplift, but strong population growth and a fundamentally resilient economy should see the country outperform other developed economies over the longer term, BIS Oxford Economics head of Australian economics Sarah Hunter says…
“I do still think the fundamentals here are better than pretty much any other developed country,” she said.
“Largely that is a population story, because the demographics here are just so good,” she said, pointing to the combination of strong inward skilled migration and the relatively high birth rate.
“Because of that the supply side is getting bigger and at a much faster pace than the US and certainly Japan. And so from an absolute GDP growth rate I think Australia will outperform when we look over the next 10 years…
Ms Hunter lauded Australia’s 26-year recession-free run as “impressive”. But rather than a never-to-be repeated anomaly, she believes it is a reflection of fundamental factors within the local economy.
“The structure of the economy here almost lends itself to that as an outcome,” she said…
While recognising that a recession is always possible, she emphasised that “the economy does very well at moving resources to where they are most needed and moving them comparatively quickly, and that’s the fundamental reason why there hasn’t been a recession here [in so long].
The above highlights everything that is wrong with contemporary economics: the obsession with aggregate growth without regard to individual living standards.
Let’s be abundantly clear: the Australian economy has ‘outperformed’ other nations primarily because it has since the early-2000s run a mass immigration program that has wildly inflated the nation’s population, in turn inflating the economy’s size (and growth rate):
However, when measuring the Australian economy on a per capita basis, so that it accounts for population growth, it becomes clear that Australia’s economy hasn’t outperformed spectacularly after all, barely beating the OECD average despite experiencing the biggest mining boom in the nation’s history and an epic (unsustainable) housing boom:
Moreover, when economic growth is measured on a per capita basis, so that it accounts for population growth, Australia has experienced two recessions during this so-called record economic expansion:
Australia’s per capita GDP growth rate has also fallen spectacularly since the immigration flood gates were thrown open in the early-2000s, leading to the surge in population growth:
So what has essentially been happening is that Australia’s aggregate economy has grown strongly due to rapid population growth, but everyone’s share of the growing economic pie has been falling. How is this something to be “lauded”?
Of course, GDP per capita also doesn’t take into account broader measures of living standards. You know, basic stuff like how long you spend stuck in traffic, whether you can find a seat on a train, or whether you can afford a decent home within a reasonable commute. These broader measures of living standards have unambiguously gotten worse as our cities have become increasingly crush-loaded from all of the extra people.
Contemporary economics has become a sad joke, completely detached from people’s lived experience.
