In 2017, Australia’s annual GDP will top $1.8 trillion.
This is $1.8 trillion of goods and services consumed, exported, invested in or otherwise spent in the economy in a 12 month period.
This is an impressive figure for a country of around 24.5 million people, which means annual per capita GDP is approximately $73,500.
When converted into US dollar terms, Australia’s GDP is bigger than Spain (over 46 million people), Mexico (129 million people) and Indonesia (261 million). Australia’s GDP will be little below Russia (144 million people), South Korea (51 million) and then there is a bit of a gap up to Canada (36 million). Of course, after that are the mega-economies that dominate world trade and markets.
But the data goes to show that in per capita terms, Australians are on average, very well off. Rich, in other words.
Curiously, many Australians do not feel all that well off. Measures of consumer sentiment have, in recent times, been mired at a level that is consistent with general pessimism. Australians are also disaffected with politics and politicians, despite their wealth and well being at high levels in absolute terms, but also compared with most of the rest of the world.
The issue, it appears, is that the growth in living standards and incomes has stalled in recent times. Through much of the 1990s, 2000s and even through to the global financial crisis around 2008, Australians got used to a steady rise in incomes, wealth and general well-being. It happened year in and year out as the reforms of the 1980s and 1990s kicked in and then China started buying lots of resources and they paid a high price for those goods.
Over the past few years, this growth has stalled to the point where wages growth is not only at a record low, but wages growth is now below the rate of inflation. This fall in real wages means that purchasing power is falling which means for a given income, purchasing power has fallen.
What’s more, the combined rates of underemployment and unemployment are near historical highs meaning that overall household incomes growth is further weakening. After all, the less hours people work, the less money they take home.
For many Australians, even though incomes and living standards are high when compared to many other countries, the previous improvement in Australia is reversing. There are no signs in the key macroeconomic data that this trend is about to change with the economy muddling along and income growth set to remain near historical lows. There are few lights at the end of the tunnel.
Which gets back to the original point. The level of wealth, incomes and well-being for Australians is still high. And unless things go horribly wrong, by 2020, Australia’s annual GDP will top $2 trillion which will leave it well up the league table in terms of economic clout.
The issue for policy makers will be to ensure that growth is stronger than currently projected and importantly, there is a fair distribution of any new income and wealth so that more and more Australians can share in what is a big and growing economy.