There’s a more important figure than GDP which we should be focusing on

GDP figures don’t tell the real story of the Australian economy.

Countries get richer through per capita growth, more to be shared among the same number of people. And that in turn is built on productivity growth – producing more with the same number of worker. Picture: Mark Stewart

One figure in the GDP numbers really should be at the absolute centre of the ‘future of Australia policy debate’.

It precisely poses the question: do we want to be actually better off or do we just want to be bigger?

Over the 2021-22 year the overall economy – GDP – grew by 3.6 per cent.

GDP per capita – that’s to say, for each Australian – grew by almost as much, by 2.7 per cent.

This is easily the highest growth in any (semi) normal year since the mid-1990s. And was due to one thing and one thing alone – very few migrants with our borders closed.

The only population growth in 2021-22 – and indeed in 2020-21 also – was homegrown.

In that previous year, to June 2021, per capita GDP had leapt by a mind-blowing 9.4 per cent, when overall GDP had leapt by 9.6 per cent.

That though was a statistical distortion, from measuring against the June 2020 quarter low-point when the entire national economy was in lockdown.

Even so, almost the entire 9.6 per cent growth leap flowed through to the 9.4 per cent per capita leap. Because the 2020-21 year was the first of two years of virtually zero migration.

Countries get richer through per capita growth, more to be shared among the same number of people. And that in turn is built on productivity growth – producing more with the same number of workers.

All that is the basis of higher wages and higher living standards. You grow a bigger cake to be shared among the same number of people.

The exact opposite is what we had embraced for two decades pre-Covid. Getting bigger and bigger but not wealthier.

In the last pre-Covid year, to December 2019, GDP growth was 2.2 per cent, but growth per capita only 0.7 per cent.

That, broadly, had been the reality every year this century. But with increasingly sluggish overall GDP growth, because we were chasing bigger over smarter and so productivity was virtually zero.

The last two years of closed borders should have ‘encouraged’ us to think about the ‘ever bigger and bigger Australia’ growth model.

At the first opportunity to do so – the Albo Summit – we went right back to not only embracing it but doubling down on it.

What came out of the summit? Not simply going back to the pre-Covid figure of 160k so-called skilled – actually largely unskilled – migrants.

But to add 35k for good measure.

ACTU secretary Sally McManus had – half – a point, when she complained about the way the ‘wages share’ of the national (GDP) pie had fallen below 50 per cent in the latest figures.

But after signing off on lifting the migration number – which will work directly to put downward pressure on the wages of precisely those workers she represents, she’s probably not the most appropriate person to make it..

It’s only ‘half-a-point’ – with that half, unknowingly, being the impact of high migration suppressing wages growth, and suppressing underlying GDP per capita growth to fund higher wages.

But we also had the massive distortion – as the ABS noted – from those surging commodity prices feeding into the profits of BHP, Rio, Fortescue, and all the rest.

In what might be termed the real, natural economy in which 97 per cent of us live and work the profit share was much lower and with a more reasonable spread between profits and wages.

There is a very legitimate question about those super-profits. There are also even more legitimate sub-questions about the pricing and even the supply of energy into our domestic market.

But the biggest question of all is really about our migration program and our race back to the profitless growth of an ever bigger, still dumb, Australia.

Originally published as There’s a more important figure than GDP which we should be focusing on