Nation feels pinch of emerging post-boom era
FOR the first time this century, Australia is actually getting poorer. The country overall is getting poorer and so is the average Aussie.
The statistics that tell us what is happening in the overall economy came out last Wednesday. They showed the economy grew at a sluggish but – compared to most other developed countries – reasonable 2.5 per cent over 2014.
That’s what we produce. What we earn was a different matter. That went negative.
There are a number of measures of what the economy earns, our “national income”. They all showed that it was either flatlining or falling and, given our rising population, that meant income per Aussie was back to the levels of 2012.
True, the loss was pretty marginal, less than 1 per cent. But apart from a brief plunge during the GFC, it’s essentially the first time this has happened since the 1990s.
We have now moved from boom into a new, somewhat bleaker era.
Exactly how bleak it proves to be is up to us. We can’t change the global environ- ment in which we have to operate but we can change how we deal with it.
One part of that challenge was on display in Joe Hockey’s Intergenerational Report.
We are getting older and that will mean more money will have to be spent on health and social welfare.
With the average life expectancy headed well into the 90s for both men and women, most Australians will be on the pension for 30 years and more, and accessing the health system, even if just for diagnostics, as never before. That’s against the all-but zero who lived long enough when the pension was introduced more than 100 years ago.
Apart from lifting the pension age, which is already happening, but will only knock a couple of years off, the only really effective way of getting people off the pension is if they are funding their old age from superannuation.
That runs smack into calls for the Government to cut the incentives for super to help get the Budget back to surplus.
Australia has been on a prosperity roll for nearly a quarter of a century, since we came out of the recession of 1990-91.
First, we boosted what we produced, riding the productivity gained from the Hawke-Keating reform era.
Then from around 1998 our national income, what we got from that production, started increasing at a higher pace than our output. We were getting richer.
It really took off as we got into the new century, as the China boom gathered pace.
Then it all got crunched in the GFC but only very briefly, as China went on the mother of all spending binges, with much of that directed towards us.
That money flowed into Australia via the BHP Billitons and Rio Tintos and then on and into Peter Costello’s budgets. He in turn redirected some of it back to us via his yearly tax cuts.
Now we’re in the post- boom hangover stage. Growth is sluggish and income is static or falling.
We are all waiting to see some spark on the non-resources side of the economy.
This reality is sinking in faster in some parts of Australia more than others. Queensland and even more, WA, which rode the boom escalator up, have been sliding the most.
NSW and Sydney in particular, and to a lesser extent Melbourne, have been riding a property market boom which has disguised that broader income trend
While 2014 can be seen as a sort of transition year, this year we really will be into the postboom era.