Australian economic and social overview - wealth, income, distribution, growth and human development.
Dec 8, 2011
Australian economic and social overview - wealth, income, distribution, growth and human development.
“Australian Exceptionalism”…. let that phrase roll off your tongue.
Now stop laughing for a moment if you can!
There’s something about that phrase that just doesn’t sit right with us. We’re not only unaccustomed to thinking about ourselves that way, but for many it’s a concept that is one part distasteful to three parts utterly ridiculous – try mentioning it in polite company sometime. Bring a helmet.
We’ll often laugh at the cognitive dissonance displayed by our American cousins when they start banging on about American Exceptionalism – waxing lyrical about the assumed ascendancy of their national exploits while they’re forced to take out a second mortgage to pay for a run of the mill medical procedure. That talk of exceptionalism has become little more than an exceptional disregard for the truth of their own comparative circumstances.
But in truth, we both share that common ignorance – we share a common state of denial about the hard realities of our own accomplishments compared to those of the rest of the world. While the Americans so often manifest it as a belief that they and they alone are the global benchmark for all human achievement, we simply refuse to acknowledge our own affluence and privilege – denialists of own hard won triumphs, often hysterically so.
Never before has there been a nation so completely oblivious to not just their own successes, but the sheer enormity of them, than Australia today.
In some respects, we have a long standing cultural disposition towards playing down any national accomplishment not achieved on a sporting field – one of the more bizarre national psychopathologies in the global pantheon of odd cultural behaviours – but to such an extreme have we taken this, we are no longer capable of seeing an honest reflection of ourselves in the mirror.
We see instead a distorted, self absorbed cliché of ourselves bordering on parody – struggling victims of tough social and economic circumstances that are not just entirely fictional, but comically separated from the reality of the world around us.
So preoccupied have we become with our own imagined hardships, so oblivious are we to the reality of our privileged circumstances, that when households earning over $150,000 a year complain about having government welfare payments scaled back, many of us treat it as a legitimate grievance.
Somewhere along the highway to prosperity – and an eight lane highway it has been – far too many of us somehow managed to confuse Cost Of Lifestyle with Cost Of Living. We managed to confuse government assistance as a means to enable the less well off to achieve a better standard of living and greater opportunity, with government assistance being a god given right to fund the self indulgences of an aspirational lifestyle choice beyond our income means. Too many of us have demanded our dreams be handed to us on a plate, and if our income couldn’t provide for them, we demanded that government should give us handouts to make up the difference.
So let us take a hard look at our economic reality.
Over the medium term, our broader economic performance has been nothing short of astonishing. Before the resources boom was even a twinkle in the eye of Chinese poverty alleviation, our performance was world beating – that is worth keeping in your thought orbit. Big Dirt has a bad habit of propagandising about their own contributions and the Australian public has a bad habit of believing them when it comes to our own national development of late.
Imagine if, in 1985, all OECD economies had exactly 100 units of GDP each. If we then tracked the growth of that GDP (using OECD data) over time with the actual growth rates achieved during that period (creating a basic index) – this is how economies changed (click to expand the charts)
Only Turkey, Israel, Ireland and Korea have experienced more growth – with Turkey and Korea pursuing the change from developing to developed status, Israel partially so as well and Ireland recovering from the economic lethargy of civil war, we are the highest growing country that can be remotely called a developed country with no unusual circumstances. Putting this into context, let’s trace that growth over the last 25 odd years with some of the countries we are often compared to.
It’s kind of mind blowing – we grew faster, significantly faster, than all of the countries we are usually compared to, including over the period before the resources boom. But you ain’t seen nothing yet.
“What about the distribution of that growth”, I hear you ask. “The poor missed out” you might also be tempted to add.
Using data from the freshly minted OECD report on international comparisons of income distribution and inequality, where the average income growth per year was measured among countries between the mid 1980’s and the late 2000’s, what we find is that Australia left just about everyone else for dead. Not just at the average, or total household income level, but also with the size of the income growth among the poorest 10% of our households *and* the richest 10% of our households.
First up, total population income growth in blue, bottom decile income growth (the poorest 10% of households) in red and the top decile income growth (the wealthiest 10%) in green for all OECD countries.
It’s interesting to note that the only countries where the poorest 10% of households experienced faster income growth than Australia was 4 of the five PIIGS countries – the current basket cases of Europe. Something might be said there about false growth and swings and roundabouts.
Looking at how our growth here compared to the usual suspects:
And for direct comparison:
It is true that the income of the wealthiest 10% of households in Australia grew faster than the income of the poorest 10% of households – the income of Australia’s wealthiest 10% of households grew faster than any other cohort in the OECD. But it’s also true that our poorest 10% of households experienced faster income growth than any country other than Spain and Ireland (who are now quickly reversing that growth with their economic woes) , and faster income growth than the top 10% of wealthiest households in *every other country*.
The income of our poor grew faster than the income of everyone else’s rich. Just chew on that reality for a bit. Let it roll around in your head.
While you’re chewing on that, let’s take a quick squiz at minimum wages. Again, using OECD data, if we turn hourly minimum wages into US dollar equivalents using purchasing power parity adjustments (so we can compare like with like), we can see how the real hourly minimum wage has operated in Australia compared to the nations we’re usually put in the same bucket with.
We have the highest minimum wages in the OECD. Worth noting too that despite the incessant whinging from the usual business lobbies in Australia, it hasn’t done our economic activity any harm. Now if we compare the ratio of these minimum wages to the average wage for each country, giving us a simple glance at the distribution of wages for each country (which the OECD also fortuitously provides, saving us time), what we find is that Australia, again, sits on top.
Our minimum wage is a lot closer to our average wage than comparable nations.
So our economy has grown faster than nearly all others, our household income has grown faster than nearly all others (including our poor having income growth higher than everyone else’s rich) and we have the highest minimum wages in the world. But wait, there’s more!
“It’s unsustainable” I hear the skeptics say – “it’s fuelled by debt!”
Well, let’s have a quick look at government debt as a percentage of GDP. Here’s all OECD countries – I’ve thoughtfully pointed out Australia in the chart because it’s easy to miss:
OK – So our economy has grown faster than nearly all others (certainly faster than all developed countries), our household income has grown faster than nearly all others (including our poor having income growth higher than everyone else’s rich), we have the highest minimum wages in the world and the third lowest debt in the OECD.
But “what about the taxes” I hear the skeptics say. “We have great big new taxes on everything!”
So our economy has grown faster than nearly all others (certainly faster than all developed countries), our household income has grown faster than nearly all others (including our poor having income growth higher than everyone else’s rich), we have the highest minimum wages in the world, the third lowest debt and the 6th lowest taxes in the OECD.
Now let’s talk about wealth – not income, which we’ve mostly looked at so far, but wealth – the value of our accumulated assets – housing, super, savings etc etc. Here, we’re going to use the The Credit Suisse 2011 Global Wealth Report.
Not only did this find that Australia has the second highest average wealth in the world at $397,000 US dollars per adult (with Switzerland ranked first), but we have the highest median wealth in the world – the wealth of the middleth adult in Australia – coming in at $222,000 US dollars.
The report also gives a number of stats among selected countries which is worth taking a good, long look at.
First up, mean and median wealth per adult:
Next up, GDP per adult in US dollars:
Now let’s look at the proportion of the adult population worth over $100,000 US dollars:
And to throw a cherry on top in terms of just how our enormous economic growth, income growth and wealth accumulation has flowed through to our human development in a low taxing, low debt country – here’s the latest United Nations Human Development Index for the usual suspects:
We’re second, behind Norway, who knocked us off from our number 1 spot at the beginning of the 21st Century.
So this is our economic reality – we are the wealthiest nation in the world with 75.5% of our adult population making it into the global top 10%, our economy has grown faster than nearly all others (certainly faster than all other developed countries), our household income growth has been one of the fastest in the world (including our poor having income growth larger than everyone else’s rich!), we have the highest minimum wages in the world, the third lowest debt and the 6th lowest taxes in the OECD and are ranked 2nd on the United Nations Human Development Index.
And this didn’t happen by accident.
This happened by design.
This happened because of 30 years of hard, tedious, extraordinarily difficult policy work that far, far too many of us now either take completely for granted, or have simply forgotten about. We have, without even realising it, created the most successful and unique economic and policy arrangement of the late 20th and early 21st century – the proof is in the pudding. A low tax nation with high quality, public funded institutions. A low debt nation with world leading human development and infrastructure. The wealthiest nation in the world where even though our rich get richer, our poor have income growth so extraordinary that it increases at a faster rate than the rich expect to experience anywhere else in the world but Australia. A nation where we enjoy the highest minimum wages in the world.
But so many of us simply deny it – the conservatives deny it because it’s more convenient to whip up hysteria about their political enemies. Filling the heads of Australians with complete lies for partisan advantage and not giving a pinch of the proverbial about the human damage that would be wrought if they ever succeeded in getting us to talk ourselves into a recession of our own making . That’s not to mention many of their ideologues – denial is an absolute must when any acknowledgement of our actual economic and social reality would be to admit that their extreme policy fetishes are just pissing in the wind.
The broad left in Australia deny it, because to admit our economic and social reality is to admit that we’ve actually solved most of the big problems that other nations are still grappling with, and they had little to do with it. The problems we have left in Australia are difficult and sophisticated, requiring a level of thoughtful engagement far beyond the scope of occupying Fuck Knows Where in tents. If the US government responded to the Occupy Wall Street movement by implementing a large policy program that Australia already has – Occupy Wall Street would declare victory and go to the pub!
Then we have the ordinary Australian – who appears to be getting more ordinary with every passing day.
It might be time that Australia grew its reality based community – perhaps acknowledging maybe not Australian Exceptionalism, but certainly our exceptional results and what has actually caused them. Maybe a little pride in our achievements, a recognition of our triumphs, a grasp of where we indeed sit in a global context – if for no other reason than to crystalise out exactly what it is that we need to solve next, free from the noise of the drum bangers and their oxygen thieving ways when it comes to what passes for our national public debate.
Maybe just a little less unhinging.