It’s the per capita economy, stupid!

It’s very, very simple. Australia now has an economy that serves a very few elites and rorts everybody else. This is most obvious in income:

Corrupted by politics or blinded by economic ideology, the doyens in our institutions simply don’t get it. They are focused and happy with GDP as the only measure of progress while the per capita economy burns. This is the fatal schism that is now wrecking another government.

This is not new:

  • it destroyed the Gillard Government as it sought to apply carbon pricing to a nation struggling to pay the bills;
  • it destroyed the Abbott Government as it sought to apply Budget repair to a nation struggling to pay the bills;
  • it destroyed the Turnbull Government as it did nothing to a nation struggling to pay the bills.

This is the reality of the mass immigration economy. It can boost headline growth, and create jobs, but it goes nowhere. It is a rat wheel economy on which everybody runs full tilt only to spin pointlessly backwards with lower wages, higher housing costs and crush-loaded lived experience.

Sadly for the political class this comes with a terrible temptation. Because the headline numbers are good they talk it up. But the per capita lived experience is terrible and so that opens a fatal schism between leaders and the people. The more pissed off the polity gets, the more leaders double-down on the rhetoric, fatally widening the divide.

This is made all the worse by the executive in Treasury and RBA that have a vested interest in not seeing the economy crash on their watch. And by media cheerleaders that echo the headline numbers back to pollies, whether in support of their chosen team or because the media models are a part of the rentier class winners from mass immigration or because they are well-meaning but have no idea what they are doing.

In essence, we have created an economy that is completely contrary to Australian values and the political class cannot cope with it. Can the looming Shorten Government survive this economic grinder?

I doubt it. Why? A few reasons:

  • Labor does have many of the policies to reform it. What is required is to go deeper into the adjustment to repair the real exchange rate and boost external demand. That means lower house prices and wages for another extended period to dump the currency plus growing income through productivity reform.
  • Explaining that will take rhetorical power beyond the capability of shifty Bill. It must be explained to the polity that they are in a long term adjustment requiring mutual sacrifice from all, yet they’ve been abused for so long one wonders if they’ll even be able to hear it.
  • Moreover, behind our Bill is the one man who probably can pull it off in Chris Bowen. How long before Shorten’s polls crater and Bowen is thrust forward as the next meat for the leadership mincer?

Finally, and perhaps most importantly, Labor is chock full of mass immigration nutters. Chris Bowen, Andrew Leigh even Bill himself are all for a Big Australia. As they face the house price crash the temptation will be to raise immigration numbers even further to support that market. That means the pressure on wages will be even worse and more enduring than otherwise.

Barring a significant economic shock that forcibly curtails mass immigration, I fear what we now face is an endless grind lower in living standards for all Australians as the clapped-out economic model is forced forwards to the ends of the earth. That will ensure that what should have been one lost decade post-China boom turns into an endless class war on 99% of Australians with the political chaos to match.

It’s the per capita economy, stupid!

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. Is that as depressing as it can get? We’ve got ScoMo et al, then Shortson, then Bowen, then might as well be CFMEU or whoever, then what? Presumably after 8 years of that we go back to LibNuts! Who will they have?
    How do you get a foreign passport & how do I extract wealth from Oz? (Financial Planners of Oz need not apply!). Sensible recommendations please, & I don’t need a Statement of Advice………clip,clip,clip!

      • Not if you have to go through any inspections to get on your mode of transport! They’re gonna grab ’em!!!
        Note I have my own stash but eventually we will be portrayed as criminal hoarders denying ‘the people’ the right to the wealth of said Gold!
        (You want to feel really pessimistic and down – just talk to me a while 🙂 )

      • You want to feel really pessimistic and down – just talk to me a while

        We’ve all noticed that already. Also makes me lose faith in mankind

      • interested party

        Flawse…’s the perception or definition of wealth that is doing the damage. For many, they are so far down the path of ‘financial wealth hypnosis’ they may never recover…..

  2. “This is the reality of the mass immigration economy. It can boost headline growth, and create jobs, but it goes nowhere.”

    To consider the long-term effects of the mass immigration economic model on a country’s middle class, it’s worth considering the fortunes of another European-derived country in the southern hemisphere: Argentina.

    In his book, The Case Against Immigration, American writer Roy Beck notes:

    “One need only look to Argentina this century to see the possible perils of waiting too long to scale back immigration. During the late twentieth century, most observers have tended to lump Argentina with other Latin American countries, their economies characterized by small economic elites, a vast class of impoverished citizens, and a weak middle class. The economist Carlos Diaz-Alejandro wrote that some modern commentators have even classified Argentina with less developed nations such as India and Nigeria. Such comparisons would have been thought ludicrous just eighty years ago, he said: “most economists writing during the first three decades of this century would have placed Argentina among the most advanced countries-with Western Europe, the United States, Canada, and Australia…. Not only was per capita income high, but its growth was one of the highest in the world.”

    How did Argentina cease to be one of the world’s richest countries? That puzzle was the challenge for Allan M. Taylor, the Mellon Fellow at the Harvard Academy for International and Area Studies and the Department of Economics at Harvard. “More compelling and mysterious examples of failure than the ruination of Argentina are hard to imagine,” Taylor said in a 1992 paper published in the journal of Economic History. He concluded that a key factor for Argentina’s economic disintegration was the continuation of high European immigration to Argentina after the United States, Canada, and Australia began ending their eras of mass immigration early this century.

    No single explanation could account for such a sustained and deep economic demise, Taylor said. But a crucial factor surely was the country’s remarkably low savings rate, as compared to Australia, for example. Taylor linked the low savings rate to the high rate of immigration and the high fertility rate of the immigrants. Both immigration and fertility were higher than in Australia and contributed to Argentina having higher consumption and lower savings, Taylor found. The country made up the shortfall of capital for a while by heavier reliance on foreign capital. The differences in Argentina’s circumstances-with their roots in the difference in immigration rates-left the country much more vulnerable than the other advanced nations to international events. Argentina’s rich, middle-class economy was not able to survive.”

    Beck’s book is a bit dated now but still well worth a read. Link:–%20Roy%20Beck.pdf

    • Thanks for that link, Roy Beck is a wise man. His video presentation on “Immigration, World Poverty and Gumballs” is basically remedial education for the infantile do-gooders who infest this issue on the fake left. But even using Beck’s approach which should make things clear to a 5 year old, these people will refuse to get it.

    • Sirdab
      Thank you for the Link and the post – I hope I’ll get time to peruse the book.
      Note I’m not trying to pick an argument but I note this

      The definition of ‘savings rate’ seems very unclear to me. The personal or private sector savings rate might look really good but if it is being stimulated by large government deficits then the NATION is not saving. So I go to the Current Account to really look at savings. I know CA’s can be distorted by periods of high investment but if the CAD is chronic then it tells us that, even if there is ‘investment’ it is largely mal-investment.

      So just looking at the two charts of Argentina and Australia the savings rate for Australia looks far worse than Argentina. Absent other factors this will tend to make our ultimate crash much more severe.

      (Again – not trying to pick an argument but interested in your take on this)

      • Hi flawse,

        The study cited by Beck draws a historical comparison between Argentina and Australia in the early 20th century. It is argued that Argentina subsequently suffered from its reliance on foreign capital to support mass immigration and went into steep economic decline. My point was that Argentina should have served as a cautionary tale for Australian policymakers. Sadly, Australia now appears to be in a similar situation to early 20th century Argentina (sustained high immigration, low domestic savings rate, heavy reliance on foreign capital and ballooning foreign liabilities) and has likely passed the point of no return.

        The study itself can be found here:


        “Once one of the richest countries in the world, Argentina has been in relative economic decline for most of the twentieth century. The quantitative records of income growth and accumulation date the onset of the retardation to around the time of the Great War, and patterns of aggregate saving and foreign borrowing show that scarcity of investable resources significantly frustrated interwar development. A demographic model of national saving demonstrates that the burdens of rapid population growth and substantial immigration depressed Argentine saving, contributing significantly to the demise of the Belle Époque following the wartime collapse of international financial markets.”

        I do find it interesting that nobody really talks about the link between high immigration and the CAD any more.

    • HadronCollisionMEMBER

      Does the book consider the destruction of the country through Chicago School Shock Doctrine economics?

      • Was the country not already destroyed before anyone from the Chicago School got anywhere near it? It is “the utopia fallacy” that constantly blames the fixers after an impossible situation has been allowed to develop. What would you have recommended? By the way, I fully accept that just going into sovereign default and letting international lenders be more wary of you in future, is a valid option. If this is what you say, I don’t disagree.

  3. it destroyed the Turnbull Government as it did nothing to a nation struggling to pay the bills.

    You mean as it cut Sunday penalty rates and froze the 457 visa salary at $53k/year.

    Gillard said she will cut immigration, not put in a carbon tax, and emphatically denied that she wants to be PM!

    Abbott said “no cuts to healthcare, education, ABC, SBS” and then tried to put in a GP tax!

    Gillard refused to touch negative gearing and before the 2016 election, it suddenly became a great idea to phase it out.

    The Greens refused to put in a mild UBI and at the start of 2018, it suddenly became a great idea to put one in.

    Fuel taxes make the plebs very angry – just look at the riots in France. Why not put in a mansion tax instead:

    Evanston passes ‘mansion tax’

    The measure passed yesterday with the support of just over 52 percent of voters.

      • Yep. Every now and then we get a politician who does what he said he will do:

        Quebec’s provincial government is following through on promises to cut immigration

        Seems like a miracle to us in Australia!

  4. A really really hard landing will short circuit what you have described, that’s why it’s popular here I believe.

    • H&H’s point was that immigration will forever be sought as “the solution” to falling house prices. What difference would a hard landing make? The elite class is so vested in this fraud that even a hard landing would have them scrambling for immigrant property-buyers to restore “the norm”.

      Spain is illustrative. They learned nothing from having the worst economic damage of any 21st century property bubble. A decade after the crash, youth unemployment is still close to 50% (but if you are anti immigration in Spain you are still a racist) but the de facto house price median multiple in the major cities is back up around 8 again. Happy days! Australians are different to Spaniards in many ways, but….

      • Bowen loves HAM. When I look at all the knockdown/rebuilds which are left empty in my leafy burb, I wonder how it is that we’ve come to the point that this guy is looking like a shoe-in.

        Two generations now with record low household formation and thus fertility, thanks!

        This kind of shenanigans is precisely what has re-inflated the situation in Spain and it’s going to happen here, despite the protestations of the permabears.

      • kiwikarynMEMBER

        Spain was giving away permanent residency if you bought a house there. Maybe that is what the Australian Govt will offer?

      • @Kiwikaryn that would precipitate a youth riot. Suddenly and violently. They’d look around and realise they had literally been sold out by their own government to foreign interests.

      • @Aaron,
        they’ve been sold out for decades, not seeing any rioting yet.
        Currently you can buy residency for $5 million significant investment visa, a house in Sydney isn’t that much less.

  5. GDP is poor measure because it includes even the most meaningless stuff into it (high crime rate, an earthquake, war and debt used to buy existing assets are all extremely good for GDP)
    per capita is poor measure because it averages by mean (me and Gina Rinehart) have 8.35b on average per capita

    what poor measure of GDP per capita is showing is that we cannot even make more useless things on average

    BTW> labor is neoliberal party and they will not change anything

    • Yup!!!
      On its own GDP is meaningless drivel. Per capita or not it is still drivel!
      It’s adoption was controversial in the fist place but now all ‘Economic Schools’ are slaves to it. (Maybe except the Austrians and the few ‘Common Sense Economics’ thinkers.)

  6. “Barring a significant economic shock that forcibly curtails mass immigration, I fear what we now face is an endless grind”

    Yes yes, you see it now. An ordinary recessionwill not end immigration. A bunk bed in outer western Sydney (with electricity, running water, aircon, hospitals) is still better than a dirt floor in Southern Ghana (with a drop sunny, flies and witch doctors).

    Not only are immigrants not leaving, they will keep coming, for as long as they are allowed to.

    It will take a *yuuuuuge* economic depression to get them to decide not to come voluntarily.

  7. Inteesting to see the MB narrative now seeing Bowen as the real threat to Shorten internally. In the general public it is widely seen as Albo.

    I will agree that I foresee more problems for Shorten going forward. It is all a bit too much like 2013 where the Opposition Leader is just riding a wave into the PM job based on dissatisfaction with the incumbent govt. A different matter entirely once they are in the job.

  8. It’s the per capita economy, stupid!
    I see your point but I frankly I find any statistic that’s derived from GDP to be stupid, making how you exactly slice and dice stupid (GDP) an evener stupider question.
    What matters in tomorrows world is the value that Labour creates for itself, the ways it (our labour force) find / develop that results in us willingly spending hard earned money on each others work-product and more importantly foreigners (those outside of our economy) joining in the game and buying Aussie made….every other measure is meh!

    The real problem is that Aussie GDP is something that just sort of happens to workers it’s not a measure of their effectiveness, it’s definitely not a measure of our labour force’s ability to fulfill our emerging collective needs.
    As a boss of mine used to say about such trailing measures:
    Looking at these numbers is like trying to win the Indi500 but looking only at the rear view mirror…. if you want to win stop looking backwards

    • “I see your point but I frankly I find any statistic that’s derived from GDP to be stupid, making how you exactly slice and dice stupid (GDP) an evener stupider question.”
      Beautifully put!

    • I understand your sentiment, but I somewhat disagree.

      GDP is not stupid. Rather, it’s about it is used and (in particular) marketed. The data from this article’s graph is straight out of the ABS National Accounts (using the income measure of GDP, rather than the standard expenditure measure) – and it paints a very different and useful narrative to how GDP is usually discussed. We cannot make assertions about our futures without understanding (or at least measuring) our history.

      However, where you are correct is that GDP is partial and inadequate for building a future. That’s plain to see. I highly recommend to everyone here to take a look at the work that the New Zealand Treasury is currently undertaking – building a Living Standards Framework into their public discourse. They are looking to move beyond the focus on financial/physical capital (i.e. GDP) to also include social, environmental and human aspects. It’s real, and already happening. If they succeed, expect it to filter across the ditch.

      • Ken
        I’ve read a little on that. They still totally ignore debt, especially foreign debt, and the necessity to sell the country off to foreigners to maintain the said ‘lifestyle’. This then also ignores the redistributional aspects of current policies and that, to me, is a major flaw.

      • Yep, I agree that the framework needs MUCH more focus on debt. The next iteration of their work should include personal debt, its distribution, its change over time, and how it’s financed.

        However, there’s plenty of other distributional analysis (some of it going back 20 years) about income/consumption and even things like health and social connection. Not perfect, but it’s their first crack at it (and they havent really got anyone else’s lead to follow). Fingers crossed that NZ gets 5-10 years to perfect their craft.

      • Yes. I hope I didn’t seem in disagreement with you. At least some open minds are applying themselves to the issues! Better than the dribble that has come out of the RBA since forever.

      • kiwikarynMEMBER

        That’s just another bogus “standard” that can be twisted to say whatever the Govt of the day wants it to say. “yay, everything is fine, the liveability standards index says so”. Never mind the fact that wages keep falling, rents keep rising, the crime rate is increasing while nobody gets sent to jail any more, and you wait so long for hospital treatment you die before you get it. But hey, the rivers are cleaner and we planted a bunch of trees.

      • Karyn, please click on the link i pasted earlier. It has pretty much all of those measures you point out. Nor is it a political document (i.e. there’s nothing in there about planting trees).
        I do struggle to understand your point about how locking more people up creates a better society, especially when (aggregate) crime has been on a downward trend for decades. Our societies are much nicer places than they used to be.

      • Fair comment about needing some measurement of what’s happened to keep us from going completely off-track BUT GDP just ain’t a good measure of Human Capital. Human Capital is by far our most important develop-able form of capital and it just gets ignored while we chase these bigger money numbers.
        You don’t need to ponder the fact that 15% of Sydneysiders are employed in the Finance sector to understand that it’s our focus on numbers like GDP that is misdirecting / misaligning our labour force. In the end all that really counts is that people outside the bubble value what made inside the bubble (and are willing and able to purchase it) This is precisely where we are failing while curiously congratulating ourselves for doing so well.

  9. If we start thinking outside the GDP box then most of the nation is in for a world of pain. Nobody will hear any politician talking about mutual sacrifice. There are two reasons. Firstly the pain will be so great. Secondly everybody votes for ‘what’s in it for me’ We have individually become extremely self-indulgent and consumption is our God. The belief in any God that means ‘a better life later is long gone.
    Over arching all this is that, as a result of insane immigration policies and monumental stupidity (GDP inanity) we are now a nation so socially torn apart that even the slightest pressure on the structure will collapse the whole edifice.
    The answers lie back in time.

  10. Re Chris Bowen
    He’s already been got at!!!! Quite a few years ago he wrote a very good article on Foreign Debt and the CAD. He could have used it to punch holes through the Liberal Economic insanity as typified by Howard and Costello. However, immediately on publishing it, he followed the Barnaby Joyce example and backed off faster than a Frenchman defending Paris.
    Maybe they realise that real reform is impossible or they are told that it is and told to shut the hell up by someone or some group that are so powerful that they stand over both Parties.

    • Backed off faster than a Frenchman defending Paris? We just had the 100th anniversary of Armistice Day, the two battles of the Marne in 1914 and 1918 where the French Army stopped the Germans reaching Paris twice. Silly remark.

    • “some group that are so powerful that they stand over both Parties.”
      That would be the people/corporations funding the parties via “donations”.

      • bjw – I worry that I get myself into the loony bin applicants with this but I can’t help but look at the gross stupidity, from both sides, and I think that they just couldn’t do this to our country voluntarily on their own. I’ve watched a number of politicians over a long time, on raising the issues involved, immediately afterwards go totally silent. Donors? Maybe. It just looks more powerful and organised than that. (As I say – maybe just have seen too much of I and been driven nuts!!!)

      • Jumping jack flash

        Its sll of this. The way the system is now has come about gradually and through gentle nudging by all the vested interests. The banks, the oligarchs, the business lobby, the people themselves, etc. It probably wasn’t a conspiracy it was just the natural path things took when autopilot was switched on and pollies decided they’d had enough of actually governing stuff and being responsible and accountable. Who wants that? Bleeeergh. Just give me the money and the perks and a nice monthly report from he private companies who actually govern it.

        There has been a leadership vacuum. Our leaders were and still are mostly asleep at the helm.
        To correct it now though is very difficult which is why i guess it has denigrated to “bubble management”. They can’t simply correct it, the whole thing would capsize.

      • It’s only gross stupidity from your point of view, based on misconceptions you have been told about how the world works. Remove your preconceptions, accept that you don’t matter to the ruling classes in the least, elections are window dressing that don’t effect the real power structures, and the elites are running things for their own benefit and it all makes sense.

  11. reusachtigeMEMBER

    As a human being the greatest measure of success isn’t your GDP, it is how much and how varied your relations are!

    • Never a truer word spoken, and although you RE investor types do OK, the true champions seek fame for varied relations. Reality TV stars are truly the most successful of us all!!!

    • Bulltish, he who dies with the most properties wins. The relations are simply a part of the ongoing maintenance program.

  12. Jumping jack flash

    And of course the main reason why the government cant help “a nation struggling to pay the bills;” is because they have no power to be able to in the current economic paradigm of free market capitalism when all the bills that everyone pays are to private companies.

    They lost their power after they sold it off.
    The time has come for people to do without or provide for themselves if they can’t pay the bills. The government cannot do anything to help except fiddle around the edges of tax, and regulations, and talk about it.
    Look to the mining tax to see how good the government are at negotiation.

    They’re expert talkers. You won’t find any better.

    The only reason the system has been working so far is because it has been flooded with as much debt that is required to sustain it.

  13. “… the doyens in our institutions simply don’t get it”.

    Yeah nah, they do ‘get’ it. They just dont care, because their wealth depends on not ‘getting’ it.

    However, time is against them. Many of Australia institutions (thinking specifically about state and federal Treasury’s) are mostly full of below-average age, above-average intelligent, pissedoff GenY/Millenials. They’re mostly not in charge yet, but they soon will be (within the next 5 years).

    • But raising everyone’s living standards doesn’t keep you at the top of the tree. Expect all the genY/millennial with enough ambition to make it to the top to continue the status quo as it will benefit them as much as the previous generation of leaders.

  14. +1 People think the young will vote differently but ironically as they gain influence they usually change their opinion. As they adapt to the status quo by the time they get influence they will be older and more entrenched in the current system. I argue they will have a greater interest in the ponzi economy than the old as they have been encouraged to pursue careers in these sectors via economic forces; the older cohort grew up and skilled up in a simpler economy and are usually more able to deal with a white collar job shock. Especially in Sydney/Melbourne where the anger to the current status quo (house prices) is directed; even though many inner city types work for and have based their skills on organizations that profit from this (banks, construction/tradies, etc).

  15. Possible partial solution: A high carbon tax that is redistributed in a fortnightly payment to all but the top 15% households on a per-capita basis.
    Implement it a little like the GST and offer some concessions to non-urban dwellers.
    Easy to implement and probably a vote winner everywhere but rural Qld.