Australian Living Standards Are Falling (GDP per capita Heading for Recession)

Channel: Daily Rant Australia

that to generation rent.

According to the ABS Census 2016, outright. home ownership is falling, mortgaged home-owners

are increasing, and the proportion of renters. is also increasing.

GDP per capita officially fell in the third. quarter of 2018.

This basically means that the average Australian’s. living standards has gone backwards.

Some forecasts predict that it will fall again. in the fourth quarter.

This would send Australia into a technical. recession (of sorts).

Australian population growth is one of the. biggest contributors to these figures at around

1.6% per year — one of the highest rates. in the Western world.

This equates to 0.4% per quarter.

Working out quarterly GDP growth per capita. is quite simple.

If Australia’s population grows at 0.4%. per quarter, then a GDP growth of 0.4% would

result in no growth on a per capita basis.

The average Australian experiences no benefit. from a growing GDP if the population is also

growing at the same rate.

Basically, the impact of GDP growth is diluted. by the impact of more people.

According to the ABS, 60.6% of population. growth comes from Net Overseas Migration.

Only 39.4% was from natural increase (that. is, the effect of the ratio of births and

deaths).

Market economists are predicting a GDP growth. of 0.4% in the fourth quarter — which would

result in a zero per capita growth — but. due to a spate of soft economic data in recent

weeks, many say it will probably be worse.

If the worst does come to fruition, then Australians. will be facing a per capita recession.

Although the headline aggregate GDP number. is increasing, at the individual household

level, Australians will be worse off.

Increased population growth means less money,. on average, for each Australian household.

This is not scaremongering — this is just. facts.

Construction has been very weak of late due. to the fall in the property market.

In the last three months of 2018, it has been. falling.

Construction work accounts for about 15% of. the economy, so if it goes down, it has a

real impact on overall GDP figures.

Consumer spending is the big one, though.

It’s the biggest contributor to the economy. at 60% of GDP.

It has pretty much stalled of late as Australians. are tightening their belts as they have too

much debt to pay off and wage growth has pretty. much flat-lined.

Consumer spending is now outpacing disposable. income — clearly, not a very sustainable

trend.

Anyway, a result of less than 0.4% GDP growth. over the fourth quarter will mean that living

standards of average Australian households. have gone backwards for the past six months.

I don’t think it’s a trend that’s likely. to change anytime soon given house prices

are still falling, consumer demand remains. weak, and residential construction seems to

have peaked.

All of this may result in people losing their. jobs, consequently increasing the unemployment

rate.

And that might just be the start of something. much, much bigger.