This document was added or updated on 05/02/2010.

ECONOMIC GROWTH

The performance of the economy is represented in the national accounts by measures such as gross domestic product (GDP). GDP is a measure of the overall value of economic production in Australia in a given period. Growth in the economy is a key determinant of employment and, therefore, economic wellbeing of households. The chain volume measure of GDP is an indicator of real growth in Australian production. Between 1959–60 and 2008–09, Australia’s chain volume GDP increased by a factor of 4.6 (or $979,962 million, based on 2007–08 monetary value). In 2008–09, Australia’s total chain volume GDP was $1,194,496 million.

GDP per capita (person) is another measure of the performance of the economy, which takes population growth into account. Between 1959–60 and 2008–09, Australia’s GDP per capita grew by 161% in chain volume terms. Based on the value of money in 2007–08, Australia’s chain volume GDP per capita in 2008–09 was $55,195.

Economic activity is often associated with depletion and/or degradation of natural resources. For example, the degradation of water quality, due to land clearing for agricultural production or urban development, can adversely affect native plants and animals in freshwater ecosystems.

Similarly, air quality can be adversely affected by economic activity, particularly by the more energy-intensive manufacturing industries and transport, which rely on fossil fuels. The air pollution created can damage human health and the environment.

Decoupling indicators have emerged as a way to measure whether economic growth is occurring without corresponding pressures on the environment. Decoupling has been described as breaking the link between economic growth and environmental degradation. An example of decoupling is when a developed nation experiences economic growth without an equivalent increase in its greenhouse gas emissions. Decoupling indicators are one way to make an assessment of whether levels of growth are sustainable in the longer term. Appendix A contains more information about decoupling indicators.

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	2002-03	2003-04	2004-05	2005-06	2006-07	2007-08
	$ million	$ million	$ million	$ million	$ million	$ million
GDP	804 361	864 955	925 864	1 000 787	1 091 327	1 181 750
Depletion-adjusted GDP (b)	800 474	860 556	921 510	996 144	1 086 647	1 177 321
Subsoil depletion	3 567	4 068	4 008	4 281	4 302	4 034
plus Land degradation	320	331	346	362	378	395
equals Net depletion	3 887	4 399	4 354	4 643	4 680	4 429

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(a) Estimates based on current prices.
(b) Estimates are experimental, therefore use with caution.

While gross domestic product (GDP) reflects the value added arising from the use of environmental assets, it does not reflect the associated depletion and degradion of those assets.

Degradation of environmental assets occurs when the value of the stock is reduced through a decline in quality. For example, land degradation can result from land clearance and deforestation, agricultural depletion of soil nutrients, poor irrigation practices and pollution.

Depletion of environmental assets occurs when the value of the stock is reduced through use in a productive activity. For example, the extraction and use of subsoil assets through mining activity depletes the total stock of these assets available for future use.

A depletion-adjusted GDP attempts to incorporate the environmental damage and depletion associated with economic activity. This is achieved by deducting depletion and degradation from the conventional GDP measure.

It must be noted that the table above only includes estimates for subsoil depletion and land degradation. There are many other forms of depletion and degradation that occur as a result of economic activity, however limitations on data and valuation methods prevent a more comprehensive account at this stage.

The estimates shown are experimental and should therefore be regarded as indicative only.

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	1985-86		2008-09
	$ millions	% of total HFCE	$ millions	% of total HFCE
Rent and other dwelling services	56 978	17.0	115 786	17.5
Recreation and culture	26 062	7.8	74 753	11.3
Transport	42 014	12.5	74 388	11.3
Food	47 069	14.0	70 898	10.7
Finance and insurance services	34 872	10.4	68 772	10.4
Hotels, cafes and restaurants	25 127	7.5	44 829	6.8
Furnishings and household equipment	13 024	3.9	34 248	5.2
Health	15 728	4.7	35 450	5.4
Alcoholic beverages and tobacco	22 911	6.8	23 462	3.6
Clothing and footwear	13 689	4.1	22 830	3.5
Education services	10 149	3.0	22 079	3.3
Communication	3 030	0.9	18 685	2.8
Electricity, gas and other fuel	6 680	2.0	13 427	2.0
Personal car	4 746	1.4	11 297	1.7
Miscellaneous goods and services	14 006	4.2	29 333	4.4

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Note: Chain volume measure; reference year 2007-08.
Source: ABS, 2009, Australian System of National Accounts 2008-09 (cat. no. 5204.0).


Per capita household consumption expenditure, expressed in chain volume (real) terms, rose 54% between 1985–86 and 2008–09, equivalent to 1.9% compound growth per year.

In both 1985–86 and 2008–09, rent and other dwelling services consumed the highest percentage of total household expenditure, about 17%. The proportion of total expenditure spent on food decreased substantially (14.0 to 10.7%) between 1985–86 and 2008–09 and the proportion spent on recreation and culture increased by a large percentage (from 7.8% to 11.3%) during that period. The share of expenditure on transport decreased slightly (12.5% to 11.3%).

Generally, an increase in the quantity or quality of goods and services consumed by people is regarded as progress. However, increased consumption of certain goods and services can indicate movement away from social and environmental goals such as improved health and cleaner air. For example, the increase in mobile phone usage and turnover since the mid-1990s may cause an issue for waste disposal.

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