By what measure is Australia’s economy leading the world? We went searching

Politics

By what measure is Australia’s economy leading the world? We went searching

May 7, 2022

Australia’s GDP per person was just under US$50,000, which ranked 11th. Image: Wikimedia Commons

The Coalition’s repeated claims that Australia’s economy is one of the world’s strongest can be refuted by simply looking at the numbers.

At every opportunity, Scott Morrison and Josh Frydenberg declare that “our economy today is one of the strongest in the advanced world”, as the PM did at the 22-second mark in the recent televised leaders’ debate, then again several times later. This is not just false but the diametric opposite of the truth, and is extremely easy to disprove.

Economic outcomes are measurable. We have tables already assembled for most important variables. We don’t need complex formulae, or even a calculator. We just need to read numbers off a screen.

Income per person

The International Monetary Fund (IMF) lists for 197 countries the value of gross domestic product (GDP) per person in both domestic currency and in US dollars. If we take the latter and focus just on the 38 developed members of the OECD, we can easily compare rankings over time.

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In 2007 and 2008, as Labor started its last term, Australia’s GDP per person was just under US$50,000, which ranked 11th among the 38 wealthy OECD member countries. That is, the citizens of 10 countries earned more money than Australians did. From 2011 to 2013, Australia ranked fourth on this measure, with only small, rich nations Norway, Switzerland and Luxembourg earning more.

Australia’s ranking then slumped through the Coalition period since 2013. It is now eighth, having been overtaken by Ireland, Iceland, Denmark and the USA.

Economic growth

Advanced countries release GDP figures quarterly, showing by how much they have increased or decreased. The open website tradingeconomics.com keeps track, going back decades.

We now have annual GDP growth for the December quarter 2021 for all 38 OECD members. Australia’s 4.2% currently ranks 27th.

Jobless rates

The IMF also has global jobs data from 1980 onwards. In 2008, Australia’s unemployment rate was 4.26%, which ranked tenth in the OECD. By 2012, towards the end of the global financial crisis (GFC),Australia’s rate had expanded to 5.23%, but ranking had improved to sixth. Only Switzerland, South Korea, Norway, Japan and Mexico had lower jobless rates.

During the boom years between the GFC and the COVID recession, Australia’s rate fluctuated but ranking tumbled badly. By 2019, the rate was 5.16%, ranking 21st. Through the pandemic, both the rate and ranking improved slightly. At the end of 2021, Australia ranked 16th.

Government spending

Morrison frequently accuses Labor of knowing how to start spending but not how to stop. The data refutes this.

The IMF shows Australia’s spending to GDP ranked 14th in the OECD through most of the last seven years of John Howard’s Coalition government. That is, 13 governments spent less of their nation’s total income than Australia’s government did. These included the poorer members — Costa Rica, Colombia, Mexico and Turkey — and the lean administrations newly emerged from Communism — Latvia, Estonia and Lithuania.

Under Labor, despite extensive stimulus spending through the GFC, Australia’s OECD ranking on this variable actually improved substantially. By 2008, Australia had risen to ninth in the OECD on low spending to GDP, then fluctuated between seventh and 10th through the rest of Labor’s term.

Soon after the Coalition took office, government spending blew out again. By 2015, Australia ranked 13th, then slipped to 14th over the next two years. In 2019, before the pandemic, Australia had tumbled to 16th, the lowest on record. The latest ranking, for 2021, is 15th. The only country with a substantially worse spending record since 2013 is Chile.

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Government debt

The IMF shows Australia’s gross debt in 2008 was 11.7% of GDP and ranked third in the OECD, just behind Estonia and Chile. By 2012, after extensive borrowing to combat the GFC, debt to GDP had expanded
to 27.5%, with ranking at fourth, having been overtaken only by Luxembourg.

Then came the long boom period from 2014 to 2019, when the majority of the OECD economies reduced their debt to GDP, many of them substantially. Only three poorly-managed economies stacked on more than 12% over those five years — Chile, Costa Rica and Australia. By 2019, Australia ranked 15th.

The COVID pandemic then required more borrowing by most OECD countries, although not all. At the end of 2021, Australia’s debt had blown out to 59.8% of GDP, and OECD ranking had tumbled to 18th.

Value of the Aussie dollar

The Australian dollar soared through the Labor years as the economy was rated by most peak economic bodies as the world’s best performed. These included the World Bank and the IMF. The Aussie dollar was US87.7 cents when Labor took office in late 2007. This rose impressively through the GFC, enriching all Australians enormously. It peaked at US$1.10 in mid 2011 and settled at US94 cents when Labor lost office. The dollar has tumbled disastrously since then, reducing the wealth of all citizens — the latest value is about US72 cents.

We can also look at wage rises, productivity and other variables to see the same trends. Clearly, Australia’s economy is not leading the advanced world. It is barely leading Costa Rica and Chile.