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Economic prosperity in Australia has progressed over the last decade
Indicator: Net saving plus other changes in real net wealth per capita
Why is this theme important?
Australians told us that they wanted an economy that thrived and functioned well. This included having an economy that uses both labour and other resources efficiently, that provides access to resources needed for production, that fosters improved productivity of work processes (for example by harnessing new technology) and can compete in an increasingly globalised marketplace. Many thought that economic efficiency relied on well-constructed regulation that helps rather than hinders this functioning.
How have we decided there has been progress?
We have decided that economic prosperity in Australia has progressed over the last decade because net saving plus other changes in real net wealth per capita (our headline progress indicator for economic prosperity) grew year-on-year for the majority of the decade.
Despite fluctuating over time, since 2001-02, net saving plus other changes in real net wealth per capita experienced year-on-year growth each year, with very slight negative growth only seen in the most recent financial year.
Comparing year-on-year growth indicates a trend towards more moderate annual growth. This trend reflects amongst other factors, losses in the value of Australian non-financial assets (non-financial assets are comprised of produced assets, such as buildings and equipment, and non-produced assets, such as natural resources). In particular, losses in the value of Australian land have had a particularly significant impact on Australian wealth since 2008-09.
Why this headline progress indicator?
Wealth is an important part of the aspiration for economic prosperity.
Net saving plus other changes in real net wealth per capita is considered a good measure of progress for economic prosperity because it shows how an economy's wealth is changing on a per capita basis. This measure shows how real wealth within the economy is being accumulated after allowing for changes in the general price level. A positive figure shows that real per capita wealth is increasing relative to population change due to influences such as investment or asset price growth. A negative figure indicates that the growth in real net wealth is not keeping pace with population growth due to influences such as asset price deflation or lack of investment.
This indicator is a partial measure of the concept of economic prosperity as described above (based on Aspirations for our Nation)
The data source is of high quality.
Let's break it down!
Growth in the net saving plus other changes in real net wealth per capita seen in the past decade continues the trend that began in the early 1990s. Since 1992-93, growth in net saving plus other changes in real net wealth per capita has consistently been positive, with the exception being the most recent financial year.
Use the drop down menu on the graph to look at other breakdowns of the indicator (graphs are also available on the further info page).
But that is not the whole story...
There is more to economic prosperity than change in net saving plus other changes in real net wealth per capita. Look through the other tabs on this page to see if the other elements of economic prosperity have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
The efficiency of the Australian workforce has progressed over the last decade
Indicator: Labour force underutilisation rate
Why is this element important?
An efficient workforce is an important aspect of economic prosperity due to the substantial contribution workers play in supporting the economy. In a prosperous economy, the skills, talents and labour of the population is efficiently harnessed to produce the goods and services that benefit everyone in the community. Moreover, an efficient workforce contributes towards maximising economic growth, which can bring about improvements in living standards.
We have decided that there has been progress in the efficiency of the Australian workforce because the labour force underutilisation rate (our progress indicator for efficient workforce) has decreased.
In 2002, Australia's labour force underutilisation rate was 13.4%. This declined steadily year-on-year to a low of 10.3% in 2008 after which the rate increased coinciding with the global financial crisis. Since 2009 however, the rate returned to its declining trend before recording a small increase in the most recent year (to 12.5% in 2012).
Why this progress indicator?
Labour force utilisation tells us about the efficiency of the workforce as part of the aspiration for economic prosperity.
The labour underutilisation rate is considered a good measure of progress for efficient workforce because it measures whether the economy is providing sufficient employment opportunities for those in the labour force. When there is underutilisation in the labour market, this indicates that there are people in the community whose aspirations for work are not being fully met, either because they are unemployed or working fewer hours than they would like (the underemployed). The underutilisation rate is an important indicator of progress as a high rate suggests an economy that is insufficiently harnessing the full potential of people to contribute towards improved economic outcomes.
This indicator is a direct measure of an efficient workforce.
The data source is of high quality.
Let's break it down!
While trends over time in labour force underutilisation are generally consistent for men and women, there is a notable disparity in the rate between the two, with underutilisation higher for women. For the decade 2002 to 2012, the average underutilisation rate for men was 10.3%, while for women the average was more than a third higher at 14.5%.
Use the drop down menu on the graph to look at other breakdowns of the indicator (graphs are also available on the further info page).
But that is not the whole story...
There is more to economic prosperity than an efficient workforce. Look through the other tabs on this page to see if the other elements of economic prosperity have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
Footnote(s): (a) Reference year for index is 2010-11 = 100.0.;(a) Reference year for index is 2010-11 = 100.0.
The efficient use of resources in Australia has regressed over the last decade.
Indicator: Multifactor productivity
Why is this element important?
The way resources are used in economic production plays an important role in determining how economic growth and wealth are generated. When resources are used efficiently, economic production is maximised based on the resources available. This ensures the greatest possible benefits to the community as the quantity of all resources is limited and some, such as natural resources, are non-renewable.
We have decided the efficient use of resources in Australia has regressed over the decade because multifactor productivity (our progress indicator for the efficient use of resources) has decreased.
Between 2001-02 and 2011-12, multifactor productivity in Australia declined 2.1%. This may indicate that the economy has become less efficient at transforming inputs (i.e. capital and labour) into outputs (i.e. goods and services).
Why this Progress Indicator?
Productivity tells us about the efficient use of resources as part of the aspiration for economic prosperity.
Multifactor productivity is considered a good measure of progress for the efficient use of resources because it measures the efficiency with which an economy transforms inputs (i.e. capital and labour) into outputs (i.e. goods and services). An increasingly productive nation is able to produce more goods and services from the same quantity of inputs. In the long-term, multifactor productivity can measure how much the nation has improved in terms of the way it produces good and services (technical progress). In the short term however, the measure can also reflect unexplained factors such as cyclical variations in labour and capital utilisation, economies of scale, and measurement error. In particular, it may be influenced by not measuring certain natural resource inputs, such as subsoil assets, which can greatly influence production in certain industries including agriculture, forestry and fishing, mining and electricity, gas, water and waste services.
This indicator is a indirect measure of the efficient use of resources.
The data source is of high quality.
Let's break it down!
The decline in multifactor productivity during the most recent decade lies in contrast to the decade before when productivity in Australia generally increased. During the late-90s and early-2000s, multifactor productivity generally grew year-on-year until it reached its peak in the 2003-04 financial year.
Use the drop down menu on the graph to look at other breakdowns of the indicator (graphs are also available on the further info page).
But that is not the whole story...
There is more to economic prosperity than the efficient use of resources. Look through the other tabs on this page to see if the other elements of economic prosperity have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
A data gap currently exists for access to resources
In MAP there are several types of data gaps where:
1. the concept is not yet developed enough to measure;
2. the concept is important for progress but may not lend itself to meaningful measurement;
3. there is no data of sufficient quality to inform on progress; or
4. there is only one data point, so a progress assessment cannot be made.
A range of possible indicators have been considered for access to resources but no single measure was considered suitable for this multidimensional indicator. A suitable measure should provide an indication of the ease with which economic resources can be accessed, when required, without impediment. Although a large range of data are available about labour and capital within the Australian economy, including both produced and non-produced assets, there is little information about their availability nor any which can be interpreted as such. For example, the stock of Australian subsoil assets may increase but the new discoveries might be less accessible than previously known deposits. Furthermore, the accessibility of different resources is affected by a diverse range of constraints, such as regulatory, geographic and market-based factors, which cannot presently be captured by a single measure. In order to capture the spirit of this idea in a measure, further development will need to be undertaken.
But that is not the whole story...
There is more to economic prosperity than access to resources. Look through the other tabs on this page to see if the other elements of economic prosperity have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
A data gap currently exists for innovation for efficiency
In MAP there are several types of data gaps where:
1. the concept is not yet developed enough to measure;
2. the concept is important for progress but may not lend itself to meaningful measurement;
3. there is no data of sufficient quality to inform on progress; or
4. there is only one data point, so a progress assessment cannot be made.
A range of possible indicators have been considered for innovation for efficiency but no single measure was considered suitable for this indicator. A suitable measure should provide an indication of the role innovation plays in increasing efficiency within the Australian economy. Unfortunately, no measure establishes a causal link between the two to show how innovation is fostering increased levels of efficiency. Furthermore, the concept of efficiency entails different things at the microeconomic and macroeconomic levels. For instance, an individual business may improve its own technical efficiency through the adoption of best practice but the economy may become more efficient if its resources are allocated to other activities. This tension between technical and allocative efficiency poses a fundamental problem when selecting an appropriate measure as innovation may increase one form of efficiency at the expense of the other. In order to capture the spirit of this idea in a measure, further development will need to be undertaken.
But that is not the whole story...
There is more to economic prosperity than innovation for efficiency. Look through the other tabs on this page to see if the other elements of economic prosperity have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
Footnote(s): (a) Reference year for index is 2010-11 = 100.0.;(a) Reference year for index is 2010-11 = 100.0.
Competition in Australia has progressed over the last decade
Indicator: Real unit labour costs
Why is this element important?
Competition is an important component of a prosperous economy because of its wide ranging consequences for both domestic and international markets. At a local level, competition impacts the prices consumers pay for goods and services, as well as their availability and quality. Internationally, competition can impact the ability of Australia to sell products in the global marketplace. Australia's international competitiveness therefore, can also indicate the long-term sustainability of local industries and employment.
We have decided that competition in Australia has progressed over the last decade because real unit labour costs (our progress indicator for competition) have decreased.
Between 2001-02 and 2011-12, real unit labour costs in Australia decreased by 4.4%. This means that growth in real wage rises has been outpaced by productivity improvement over the past decade.
Why this progress indicator?
The cost of labour tells us about economic competition as part of the aspiration for economic prosperity.
Real unit labour costs is considered a good measure of progress for competition because it measures whether the real cost of labour, per unit of output in the economy, is increasing or decreasing. The international competitiveness of an economy's goods and services is influenced by this relative growth rate. An increase in an economy's real unit labour costs means that labour costs are rising faster than productivity, which is likely to have a negative impact on its international competitiveness. A decrease in an economy's real unit labour costs means that productivity is rising faster than labour costs, which would have a positive impact on its international competitiveness, as we can see from the current indicator.
This indicator is a partial measure of competition.
The data source is of high quality.
Let's break it down!
The decline in real unit labour costs seen in the most recent decade represents a continuation of a larger trend beginning in the mid to late-90s.
Use the drop down menu on the graph to look at other breakdowns of the indicator (graphs are also available on the further info page).
But that is not the whole story...
There is more to economic prosperity than competition. Look through the other tabs on this page to see if the other elements of economic prosperity have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
A data gap currently exists for effective regulation
In MAP there are several types of data gaps where:
1. the concept is not yet developed enough to measure;
2. the concept is important for progress but may not lend itself to meaningful measurement;
3. there is no data of sufficient quality to inform on progress; or
4. there is only one data point, so a progress assessment cannot be made.
A range of possible indicators have been considered for effective regulation, but no single measure was considered suitable for this indicator. A suitable measure should provide an indication of the level of regulation present within the economy and its effectiveness relative to the burden placed on business. Unfortunately, there are difficulties involved with the measurement of the level of regulation present, let alone its effectiveness. For example, measures of new and repealed legislation may be considered indicative of change in the regulatory burden on business. However, it is not clear that changes in volume measures derived from such an exercise can be interpreted as progress in effective regulation. Indeed, the absence of legislation may increase the burden upon businesses as simplicity can create ambiguity whereas extensive legislation can provide greater certainty. A fully comprehensive indicator should capture a range of influences on the effectiveness of regulation and provide an unequivocal indication of progress in this regard. In order to capture the spirit of this idea in a measure, further development will need to be undertaken.
But that is not the whole story...
There is more to economic prosperity than effective regulation. Look through the other tabs on this page to see if the other elements of economic prosperity have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
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