Canada and Australia march into lost economic decade


Statistics Canada released its GDP estimate for Q1 2024.

The economy expanded at an annualised rate of 1.7%, lower than consensus estimates of a 2.2% increase and more than a full percentage point below the Bank of Canada’s forecast in its April Monetary Policy Report.

Canada’s GDP increase was also well below the 3.0% population growth rate. As a result, GDP per capita continued its downward trend in the March quarter and is now 3.5% below the peak recorded at the beginning of this monetary tightening cycle.

A decline of this magnitude has never been seen outside of a recession. It has also meant that Canada’s per capita GDP is little changed from a decade ago:

Canadian per capita GDP

“Canadians just experienced a lost decade, with all progress made in the first 8 years wiped out within the past two”, noted Better Dwelling.

“A decline in per-capita GDP tends to mean a declining quality of life, as the same economic output is expected to carry more people”.

Similar forces are at play in Australia, which is also experiencing a deep per capita recession and falling living standards.

The past 15 years have delivered Australians the slowest growth in real per capita household disposable income on record:

Real household disposable income per capita

Australian real wages have collapsed to 2010 levels and even the federal budget’s forecasts suggest that real wages will only recover to December 2014 levels by mid-2028:

Real wage forecasts

Australia’s per capita GDP growth is also tracking at its lowest rate in decades outside of the pandemic lockdown:

Per capita GDP growth

The problem is that Canada and Australia have switched to population-led growth models that have starved both nations of capital deepening investment.


Accordingly, Canada’s productivity growth has suffered from capital shallowing as immigration-driven population growth has outrun business, infrastructure, and housing investment:

Canada capital shallowing

The same situation has occurred in Australia, where the real-capital stock per person has collapsed, wrecking productivity:

Capital shallowing

The end result is that the living standards of Canadian and Australian residents are falling at a record rate.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.