By Alex Joiner, chief economist at IFM Investors
For most of the last decade, Australians have been told a reassuring story: the economy is growing, unemployment is low, and we navigated the GFC, a pandemic, and a once-in-a-generation terms-of-trade shock better than almost anyone else. All true. But strip population growth out of the picture and look at real private demand per capita — essentially, what’s happening to the average Australian’s slice of the economy — and a very different story emerges. It’s a story that helps explain why inflation has been so persistent, and why the RBA has been focussed on capacity constraints.
Through the 1990s, Australia and the United States grew in lockstep on this measure. Then came the first resources boom. Through the 2000s and into the GFC, mining investment and the income windfall that came with it propelled Australia’s private sector forward even as the US faltered. We weathered the global financial crisis better than almost any advanced economy, and it was tempting to read that as proof of superior policy or structural resilience.
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