Population growth masking Australia’s economic weakness: CommBank report

Population growth masking Australia’s economic weakness: CommBank report, by Michael Janda.

Australians continue to go backwards on many measures of income and wellbeing as high immigration rates see the nation’s weak economic growth split between more people.

A report by Commonwealth Bank senior economist Gareth Aird has found that Australia’s high immigration intake is papering over economic weakness in headline figures, but when you break down those numbers per person a bleaker picture is revealed.

“Per capita measures of the economy suggest that growth in living standards has stagnated and for some sections of the resident population, in particular younger people, it has gone backwards,” he wrote.

This weakness is reflected in many aspects of living standards: from stubbornly high underemployment and weak wages growth to surging home prices and debt, as well as an increase in urban congestion.

Mr Aird pointed out that Australia has one of the highest population growth rates among developed economies, more than half of which is due to net immigration. …

On a per capita basis GDP growth has been trending downward since the recovery from Australia’s last recession in the early 1990s.

This in turn has seen the Bureau of Statistics’ key measure of household living standards – real net national income per capita – essentially flatline since the global financial crisis.

Mr Aird said the typical Australian worker is now seeing their pay packet go backwards when adjusted for the rising cost of living. …

Young people hit especially hard:

Things are even worse for young people, because the ABS consumer price index (CPI) does not include home purchase prices. …

So, while rising home prices have been a boon for the wealth of existing owners, they have massively increased the cost of housing for prospective buyers.

Younger people, who are less likely to have purchased a dwelling but have been saving to do so, have faced a greater deterioration in real wages than is implied by deflating nominal wages by the CPI,” Mr Aird argued.

“This is because the single biggest purchase they are yet to make is not included in the CPI. And it has, of course, been rising much, much quicker than the CPI itself.”