Article by Simon Benson, courtesy of The Australian
Whatever budget magic Jim Chalmers is looking to conjure, there is one undeniable economic fact that continues to undermine the Albanese government’s central message.
No other developed nation in the world has suffered a decline in living standards anywhere near the magnitude of Australia.
And that didn’t change with the release of the national accounts last week. No amount of boasting that the household recession had finally come to an end can alter the reality.
Fresh OECD data, in the form of updated data sets on household income, shows that even after the marginally better but still grim economic news, Australia’s living standards continue to be the worst in the world. And there is no bounce-back coming soon, at least not within this decade.
Australia remains the outlier by a large margin compared to its peers.
Yet you wouldn’t know it considering the buoyant consumer confidence numbers on the back of the rate rise.
Households appear reactive to any indicators that things are improving.
This is certainly the narrative that will underpin the budget in two weeks’ time.
Treasurer Chalmers last week welcomed what was being hailed as an apparent end to the per capita GDP recession that households have been forced to endure for the past two years.
It was based on the rule of thumb that subtracts population growth from GDP growth over a given period
The Australian Contributing Economics Editor Judith Sloan says Treasurer Jim Chalmers’ budgets has burnt a hole in his pockets as the federal government spending spirals.
It is the measure oppositions prefer – when the numbers are bad – rather than economists.
They are usually ignored by governments unless they have a plus in front of them.
This was the case on Wednesday with the release of the national accounts showing the economy grew by 0.6 per cent in the December 2024 quarter against population growth of 0.5 per cent.
Using the preferred measure, living standards as measured by real disposable household income increased by 0.1 per cent, the first non-negative number in more than eight quarters. But only just.
Another number in the accounts showed why this might be a false hope. The number of average hours worked rose by 0.2 per cent, meaning people were working longer hours to try to break even.
Subtracting this from the total gives a negative number – minus 0.1 per cent – which would suggest the household recession continues.
Politicians can argue the toss over the numbers and their interpretation, and the selective inclusion of the third metric, but the reality is that it is what households feel that matters during an election campaign.
And how they are feeling may not necessarily fit with what the Albanese government is telling them about how they should feel.
This is the danger for Chalmers and Anthony Albanese as the election looms. A conflict of competing storylines on how the economy is working or not working for households.
The updated OEC data released in the past two weeks gives expression to this. The average gains in living standards by OECD nations was 5.5 per cent since March 2022.
Yet Australia remains in decline. Before this week’s national accounts, the cumulative fall in living standards was negative 8.3 per cent.
Australia is the only country so far to have produced the December quarter data. But it hardly makes a difference.
Taking in this week’s numbers, this falls slightly to 7.9 per cent.
By way of comparison, Denmark was the second-worst in decline of living standards due to inflation. But at 2.8 per cent it hardly came close to Australia.
Sweden, the Czech Republic and Finland were the only other countries in negative territory.
It wasn’t that long ago that Greece was regarded as the basket case economy of Europe.
Yet it has experienced a rise in living standards of close to 10 per cent over the same period, according to the OECD.
Of all the indicators Chalmers and Albanese will point to as the election draws near – chiefly unemployment and inflation – it is the standard-of-living index that undermines all of the plucky rhetoric.
