IMF: Australian economy developed world’s worst

Inside Story’s Tim Colebatch has penned a ripping article on how Australia’s economy is forecast by the International Monetary Fund (IMF) to lag the world’s 12 largest developed nations on per capita GDP growth:

…the International Monetary Fund is forecasting that in 2020 Australia will have the highest growth rate in GDP (gross domestic product) of any of the world’s twelve largest “advanced economies”: a feat it has achieved only twice in the past decade. The problem is that GDP growth is not the bottom line of economic success.

The real bottom line is GDP per head. That’s what makes Australia a rich country, whereas India — which produces eight times more goods and services than we do — remains a middling poor one. And when you look at the IMF’s forecasts for growth next year in GDP per head, Australia goes from the top of the list to the bottom.

It is not GDP growth that raises living standards, it is growth in GDP per head. The IMF predicts Japan’s output will grow by only 0.45 per cent next year. But the number of Japanese residents is forecast to shrink by 0.34 per cent (more than 400,000 people), so its output per head — not a bad measure of living standards — would grow by 0.81 per cent. On the measure that matters, the Japanese tortoise would outpace the Australian hare.

How could Australia top the GDP forecasts yet be bottom on GDP per head? Because its economic growth, such as it is, is driven by population growth. Next year the IMF forecasts Australia’s population to grow by 1.69 per cent. Of the others in this group of twelve, Canada is a distant second with 0.96 per cent, and Britain a very distant third with population growth forecast at barely a third of ours.

That difference is overwhelmingly due to immigration. Almost two-thirds of Australia’s population growth consists of overseas migrants…

It is worth noting that the IMF data shows that Australia’s experience of high immigration has done anything but lift the economy: since 2013, when the Coalition was elected, Australia has had by far the highest rate of immigration and population growth of the big twelve, yet the third-lowest growth in per capita output.

Last month, MB produced similar analysis showing Australia’s real per capita GDP growth has underperformed all major economies and regions this decade, as illustrated below using OECD data:

The gap underperformance has also worsened materially over the Coalition’s term in government:

Of course, it is not just per capita GDP that is languishing, but household incomes too, with Australia’s real per capita Household Disposable Income growth also the lowest among OECD nations over the five years to 2019:

.

In other words, Australia is running a fake ponzi economy based on turbo-charged immigration that is supporting overall GDP growth at the expense of productivity, amenity, housing affordability, and wage growth.

For Australian businesses and policy makers, it is much easier to import migrants and report headline GDP growth than earning it the hard way through rising productivity and living standards.

Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Comments

    • It’s probably Julia Gillard’s fault. If not Julia, almost certainly Kevin Rudd. Or at least Hawke and Keating. Gough Whitlam probably isn’t off the hook, and neither is Ben Chifley. And if it’s neither of them lot, then I blame Curtin. In fact, I think their trouble may have started with Fisher. Yep, it’s definitely that bloke. It’s his fault, no doubt.

    • The neo liberal new labor illusion has ment labor stopped doing their job of defending the middle class. All that’s left is a gap between wages and GDP that is back filled with debt and migrants.

      Well done Australia. Living the dystopian dream.

      • What makes you think it’s labors job. Back in the day the liberals supported similar policies.
        HIstorically, as today, both major parties had very similar policy platforms. Thay have both moved together to the point we are at now.

        • Josh Frydendork

          Back in the day Commies in the ALP dragged the Party so far to the Left that Menzies had to follow with policies that today would be called Hard left!

          • That is a misread of history, brought on by belief in the difference between team red and team blue.
            The reality is throughout history, lib/lab are always really close to each other, providing the illusion of choice.

  1. Harry Triguboff doesn’t care. Neither does Scummo.
    Fraudberger is an irrelevant stooge, so his views don’t matter.

    • Exactly. Our economy is booming, if only because our population is booming.

      In Economics-speak: “Quantitive Easing + Quantitive Peopling = Growth!”
      In MB Speak: “lower teh rates and open teh gates”

  2. This is why everyone wants to be a part of the property investor class. Everyone knows these truths deep down, though they are largely unspoken, but many feel that all they need to do is get in the property game and they won’t be one of the losers.

    Few recognise the connection between the two, although I think it is slowly starting to change.

  3. SnappedUpSavvyMEMBER

    dumbstraya

    how easy is it being dumb!

    I got a great photo of scummo’s office yesterday, all the lease signs and the Thai Massage joint, so many lease signs I had to do a pano

  4. Australia has spent the last 15 odd years happily importing tens of thousands of Second-World, third-tier human pseudo-slaves to prop up the “miracle economy” and we then wonder why the GDP per head is tanking.

    How good is this country!!!

    STRAYA Mate!

  5. The easy fix is to reduce Population growth especially that resulting from pointless & valueless Immigration
    Unfortunately this quick fix doesn’t, in any way address the more serious problem of low Aussie Labour Productivity.
    I’m all for this quick fix IF reduced immigration gives us the breathing space to implement changes which will increase the low productivity of Aussie labour, however, that said, if we’re not committed to, or more to the point are clueless as to how we can, fix our Labour Productivity issues than I really don’t see the point in reducing immigration.
    Politically and Economically Immigration reductions will need to be sold as the fix that they aren’t , this change will take time and result in disillusionment, this is time that we simply don’t have.
    To be clear Time is not on our side here, Automation is coming and we’re definitely not ready for it, Automation won’t wait around for us to get our house in order, it’ll steam-roller right over us and the jobs that Automation delivers will have already been divvied-up by those who were ready.
    This Automation change is akin to the changes that occurred with the Industrial revolution, some countries prospered but most countries simply got shafted, absolutely shafted.

  6. The point of corporate donations is to fund campaigns to win elections. So if that were the result (lose donations, win election) then no problems.

    • The point of donations is also to fund all the party support services required to keep a party that size running.