It’s nice to be back in purple!
By the standards of the developed world, Australia’s economic performance over the past few years has been exceptional. It’s worth reminding ourselves that the unemployment rate in the United States and the United Kingdom – those two nations from which political conservatives, particularly, draw so much inspiration – is 7.8% in both cases. Across large parts of Europe, it is higher still. But in a country that seems to have largely forgotten that mass unemployment is possible, the government receives no credit for merely containing unemployment.
But why is there a perception round the traps that, more than just so-so, the economy is poor under the Gillard government?
Polls suggest the biggest issue of concern is that the cost of living is increasing. As Bernard Keane and others have pointed out, the public are out of step with the empirical evidence on that score. If you’re on Newstart, renting, and spending most of your outrageously meager income on food, rent, and utilities (the latter two have increased well beyond the general rate of inflation) you might have a point; for the majority of Australians it’s simply not supported by the evidence.
But there is another thing that might help to explain why, despite the steady if unspectacular GDP growth over the recent past, Australians might not be all that thrilled about the current economic conditions.
The graph above shows two time series from the Australian Bureau of Statistics – real (inflation-adjusted) GDP per capita, and Real Net National Disposable Income, which is a more accurate measure of the money available for Australians to spend. To simplify undersstanding, I have presented the data points relative to where they where in December 2007. As can be seen, both have grown over the life of the Rudd-Gillard government. In fact, disposable income has grown faster than GDP. But, since the last quarter of 2011, there’s been a divergence. Per-capita GDP continues to rise, but disposable income has actually fallen. Not a lot, and compared to 2007 we’re still very much in front of where we were but, nevertheless, it has declined recently.
To be clear, I don’t think the government should be blamed for month-to-month fluctuations in economic data. Nor is it the only factor. But, given the extraordinarily high expectations Australians now seem to have for the economy, perhaps it helps to explain part of the present dissatisfaction.
UPDATE: Handy to have a real economist around. Matt Cowgill has added a comment explaining an an alternative measure more accurately reflecting household incomes, and redone the graph. According to his calculations, incomes are still rising, but the rate of growth has tailed off quite considerably in the past year.