Maria Irene
Australia has long been the poster child for economic resilience, boasting three decades of recession-free growth. But as the saying goes, all that glitters is not gold. Recent data on the nation’s Gross Domestic Product (GDP) suggest that while the overall economy continues its upward trajectory, not all Australians are riding the wave. Amidst seemingly robust headline numbers, a different story unfolds when one digs into the nitty-gritty.
Australia’s latest GDP figures are a mixed bag, to say the least. On the surface, the economy is holding up, with a quarter-on-quarter (QoQ) growth of 0.4% in Q2 2023 and a year-on-year (YoY) growth of 2.1%. But what’s lost in these figures is the darker story of per-capita GDP, which actually declined by 0.3% both quarterly and annually. This suggests that despite the numbers being in the black, the benefits of this growth aren’t reaching everyone; effectively, the average Aussie is worse off than the data might imply.
Adding another layer to this economic conundrum are households, which seem to be stuck between a rock and a hard place. The household savings ratio is a meagre 3.2%, and household consumption has increased by just a hair at 0.1% QoQ. These slender figures reflect an environment where the Reserve Bank of Australia (RBA) has hiked interest rates 12 times between May 2022 and June 2023. Monetary tightening and a “painful squeeze” are not just words but a lived reality for many.
It’s also hard to ignore the elephant—or perhaps the dragon—in the room: China. Australia’s major trading partner has seen its economic recovery falter, especially with the deflating property bubble causing ripples of uncertainty. This, in turn, casts a shadow over Australia’s economic prospects, bringing a host of new challenges and unpredictability to the mix.
But what does all this mean in the grand scheme of things? Are these indicators just blips on the radar, the after-effects of a post-pandemic world trying to find its feet, or are they symptoms of deeper, more systemic issues? Indeed, the RBA has kept its key interest rate unchanged at 4.1%, signalling a belief that the economy is relatively stable, at least in terms of inflation and employment. However, this stability comes at odds with a per-capita GDP figure that suggests not all is well in the land Down Under.
Given that Australia last experienced per-capita recessions in 2018, the 2012-13 financial year, and as far back as early 2006, one could argue that these are not just random events but markers of unaddressed weaknesses in the economy. This patchwork of positive GDP growth and declining per-capita figures could well be pointing to a cycle that Australia has yet to fully comprehend or manage.
So as the nation grapples with these complex issues, the conversation needs to shift from just looking at the headline figures. For a country that’s been riding high on economic prosperity for so long, it may be time to go back to the drawing board and look beyond the glitter to find the gold that benefits everyone.
