Australia among happiest nations in the world

Australia is among the happiest nations outside Europe, far ahead of its GDP ranking. A study now questions the GDP ‘obsession’.

Credit Suisse’s Michael O’Sullivan suggests wealth, which can be measured more accurately, better reflected people’s standard of living than GDP. Picture: Alex Coppel

Australia, New Zealand and Canada are the three happiest nations in the world outside Europe, far ahead of their rank based on GDP, according to a study that questions the ­“obsession” with the 1930s-era statistic that has become a ubiquitous measure for economies.

Australia ranked 10th behind Sweden and The Netherlands, while Finland, Norway and Denmark took out the top three spots in a new Credit Suisse report that suggests GDP (gross domestic product) is increasingly struggling to capture 21st-century economies characterised by digital commerce.

“Despite a startling increase in GDP, Chinese citizens are no happier than they were 25 years ago,” the authors said. Chinese citizens were 86th happiest in the ranking.

“This is why, rather than ignoring GDP growth or obsessing over it, it is best to supplement it with other indicators,” they said.

 

The 2017 rankings were based on six factors: GDP per capita, life expectancy, trust in business and government, social support, perceived independence, and ­generosity.

Based on GDP per capita alone, Australia ranked 18th and New Zealand, a happier country, 28th.

“Very few investors make investment decision on the basis of GDP,” said Michael O’Sullivan, a chief investment officer at Credit Suisse, pointing out that stockmarket returns and GDP growth were unrelated.

GDP emerged in the 1930s to help governments intervene in their economies with greater precision. At first it excluded government spending, legal costs, swaths of banking, advertising and military spending, but now adds the value of all goods and services, ­adjusted for quality.

Diane Coyle, professor of economics at Cambridge University, noted a mismatch between statistics and experience because of ­innovation. “GDP does not distinguish ­between a dollar of investment and a dollar of consumption so it does not provide any guide at all on the trade-off between growth now and in the future,” she said.

GDP, the compilation instructions for which have risen from 48 pages in 1953 to more than 660 today, ignores the stock of material and natural wealth.

Products with “zero price”, such as many apps, are not included in GDP.

Mr O’Sullivan suggested wealth, which can be measured more accurately, better reflected people’s standard of living.

“Most people when confronted with a major spending decision don’t reflect on GDP forecasts but rather their own wealth outlook,” he said.