In last year’s Christmas Special Report, we argued that Australia was “sowing the seeds of another ‘lost decade'”, because “Australia appears committed to repeat the same policy mistakes and poor outcomes that were experienced over the 2010s “lost decade” whereby the economy and living standards stagnated in per capita terms”.
We argued that “Australian households are further in debt, less globally competitive, and Australia is a less attractive investment destination – featuring amongst the world’s most expensive land and houses, energy, and internet”.
We also argued that the federal government would once again rely on mass immigration to be the “solitary driver of the Australian economy over the 2020s, which will mean per capita outcomes will once again flounder”.
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Now Alex Joiner – chief economist at IFM Investors – has confirmed our view, showing that “the RBA’s GDP forecasts combined with Treasury’s population growth forecasts (as in the Budget) suggest per-capita growth rate will be below the mediocre performance that defined the period between the GFC and Pandemic”:
The RBA has upped its inflation forecast in line with Treasury but downgraded economic growth for 2022 and beyond. Growth is at 1.75% yoy in 2023 and 2024 and based on population the Bank uses of a climb back to 1.3% yoy over the period this is very ordinary per capita growth.
Interestingly, Treasurer Jim Chalmers has slashed forecast gains in national productivity by one fifth, from 1.5% per annum to 1.2%, claiming the former Coalition government based the projections on unrealistic predictions.
“They never got near it but budget after budget, they pretended they would and hoped no one would notice,” Chalmers said.
It comes after the Productivity Commission on Wednesday released its interim report on Australia’s productivity, which showed that Australia’s productivity growth had plunged over the last two decades and is now rising at its lowest rate in 60 years:
Part of this productivity decline is due to the fact that Australia’s economy is now 90% service-based, which traditionally experiences sluggish productivity growth.
I will add that much of this is ‘people-servicing’, facilitated by Australia’s mass immigration policy, which funnels migrants into (mostly) Sydney and Melbourne to work in low productivity ‘people servicing’ industries.
In short, the return of the ‘Big Australia’ mass immigration model will very likely achieve exactly the same result as last decade: sluggish productivity and per capita GDP growth, low wage/income growth, and overall falling livability as both housing and infrastructure are crush-loaded.
It is a recipe to enrich those that have already hoarded assets and capital, namely the already entrenched, wealthy and corporate interests such as Big Business, Big Property, and the education-migration lobby.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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