Letting the good times roll, with Aussie growth

Letting the good times roll, with Aussie growth

Economics of Contentment Part 01 – First published on the Sydney Opera House Ideas website.

We’re continually told that we’re the “lucky country,” and yet public sentiment resembles a nation gripped by depression. Is it that our economy isn’t strong, that it is and we just don’t realise, or is it that we want something more? In his weekly, John Treadgold will be looking at the sources of the discontentment that seem to dominate political debate. In his first installment, John paints a glittering economic backdrop against which our dramedy of contentment plays out.

The Australian economy is the strongest in the developed world; having just notched up its 21st year of uninterrupted economic growth it’s the envy of world leaders. But do we appreciate how fortunate we are?

Most Australians can find a job with unemployment steady at 5.5%, which is half that in Europe. (Spain and Greece are adrift around the 25% mark). The dollar is strong, which is great if you’re travelling overseas or shopping online. We have low crime rates, lush beaches and a long-held aspiration towards egalitarianism.

On paper this looks amazing, you’d think that we’d be reveling in such financial splendor, in a standard of living that is unprecedented in this country; or that at the very least we’d be content. Content that our island’s economy proved strong and resilient, if a little lucky, in the face of adversity. It’s clear, using a whole range of measures, that this is the place to be.

Now sure, we’re not perfect. We have a pretty ugly track-record with the treatment of our indigenous population, we’re shipping record tonnages of coal to be shoveled into polluting furnaces and there are a lot of small businesses who are struggling with a strong dollar induced by a small (in employment terms) but booming mining sector.

And yet according to the UN we have one of the highest standards of living in the world! (Second only to Norway). This measure uses trends in the Human Development Index (HDI) including natural disasters, crime rates, infant mortality, income distribution and longevity. GDP and economic performance play a part but having a functioning democracy, effective health care and a sense of community is also important.

Despite all this people are as restless as ever, we hear constant gripes about price increases, inflation and interest rates. “88% of Australians feel the cost of living pressures are greater today than 5 years ago.” According to McRindle Research.

Sure prices are rising, but so are wages and if we look at the figures the groaning and moaning just doesn’t add up. Household Disposable Income is rising and so is household saving. As GDP grows so do jobs, and it seems this growth is spread throughout the states, not just in the ones digging up iron-ore for China.

So where is this gap coming from? This chasm between people’s perceptions of the costs of living and the wealth that is shown in the data?

Is it a failing of hindsight, have we forgotten how tough it once was? Do we no longer heed the words of our grandparents, of their stories of a time when they trudged to school for so-many kilometers on dirt tracks without shoes? Of depression era rationing? Or as a less severe example; of a time when it took longer than a week to earn enough money for a flight from Sydney to London?

Or have we simply lost sight of what poverty really is? This ACOSS report may be a wake-up call to many as it illustrates how tough it is for the very poorest Australians to get by in a country that has 5 cities in the world’s top 15 most expensive. (Sydney sits at number three in the world).

Perhaps our expectations have grown with our wages? International holidays are now the norm, and there are debilitating social pressures to have the latest phones and ever-bigger TVs. We have access to food and fashion and technology from all over the world. Eating-out, in restaurants and bars, is seen as a social imperative rather than the rare indulgence of our grandparents. And then there’s coffee… Australia has proven itself the home of the modern coffee obsession; this re-interpretation of Maslow’s Hierarchy of Needs is a clear sign of our affluence.

This begs the question of where we draw the line between luxury and necessity? I love good coffee and I fear I take it for granted; although a recent trip to the UK went a long way to curing me of such complacency. We hear suggestions that a family living on $200,000 a year could be struggling as the costs of living of rise, such an assertion relies on a very perverse and shortsighted interpretation of the distinction between luxury and necessity.

But the most glaring sign of people’s dissatisfaction is Julia Gillard’s plunging rating in the polls. Week after week we hear of frustration at her performance, unfortunately we also hear people’s opinions of her clothes, her body image and there is no shortage of commentary on her rare but powerful emotional responses in parliament. People castigate the woman; they fling abuse at the individual and at the same time they rail against economic hardship that seems ridiculous when compared to the poverty and despair befalling the majority of people in our world.

Sure, we are fortunate in our mineral endowments (I may even say lucky) and at China’s insatiable appetite for our iron ore. But we cannot deny the level headedness of our government’s macro-economic management. We must not forget that our big four banks all have AAA credit ratings, that they were able to navigate the stormy seas of the GFC relatively unscathed. We now have indelible trade links with China and forecasts suggest that the Chinese economy will soon grow larger than that of the US. Without wanting to sound complacent, we are in a good position.

The question remains… What is it that Australian’s want?

More jobs? Unemployment rates are some of the lowest in the world.

Higher wages? Won’t that just mean higher prices and higher interest rates…

Contentment is a hard thing to find, but if we are not happy with how things are now… I’d hate to see the chaos when a real crisis hits.

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