We are getting seriously poorer
THE Australian economy limped along barely out of recession in the June quarter.
That’s the good news from the National Accounts yesterday. The bad news is that we actually got poorer, seriously poorer over the three months. And we are going to get poorer still over months if not years to come.
In very simple, brutal and now utterly unavoidable terms, it’s not just the fabulous years of the last decade or so that are now over, but also the average-to-good years stretching back all the way to the recession of the early 1990s.
The only reason we have stayed out of recession over the past year or so – which would have been the first recession Australia would have suffered since back then – is the massive increase in resources exports thanks to China.
But while we have been digging and pumping out much greater volumes, the prices we have been getting have plummeted.
Simply, we have had to produce more. But the income we have got has been growing at a much slower pace. And the really disturbing news is that our national income has actually been falling; and in the latest three months the fall accelerated to an annual rate of nearly 4 per cent.
Just think about that in your own terms. Imagine your income falling 4 per cent last year; and then extrapolate it to the incomes of every single Australian also falling 4 per cent. You got poorer, the country got poorer.
But this doesn’t actually come anywhere near to capturing how much poorer we really got and how things have now flipped so completely from pretty much most of the previous 20 years.
In the good-to-great years running up to the GFC in 2008, our national income tended to rise at a faster pace than our national output.
In very simple terms, as a country we got more each year for what we produced. We got progressively richer and all Australians benefited.
The falling national income guarantees the federal Budget will stay deep in deficit. How will the Government – and politics – respond? Almost certainly badly. And it most certainly does not demand further rate cuts from the Reserve Bank, pretty much the only responsible institution left standing in a world gone crazy.