Enhancing living standards in Australia have progressed over the last decade
Indicator: Real net national disposable income per capita
Why is this theme important?
Australians told us that sustaining economic performance over the long term was important. During the consultation, people said they wanted an economy that meets the needs of Australians today without compromising the needs of future generations. This means sustaining resources, services and infrastructure that underpin social functioning, and protecting, managing and using these sustainably. Australians thought innovation was important to the economy to improve productivity and to find solutions to economic, social and environmental challenges.
How have we decided there has been progress?
We have decided that living standards in Australia have progressed over the last decade because real net national disposable income per capita (our headline progress indicator for enhancing living standards) has increased.
During the decade 2001-02 to 2011-12, Australia's real net national disposable income grew from $40,600 per person to $51,800 per person in 2010-11 dollars. Year-on-year growth of around 2-3% was consistent for most of the decade, with only the 2009-10 financial year recording a decline in real net national disposable income per capita (-2%), this represents a sustained improvement in the living standards of Australians.
The recent strong growth in Australia's real net national disposable income per capita highlights a significant divergence which has taken place between Australian real income and domestic production growth rates over recent years. On an annual basis between 2001-02 and 2011-12, gross domestic product (GDP) per capita increased by 1.5% on average while real net national disposable income per capita increased by 2.5% on average. This divergence is significant as the real income growth generally tracks GDP growth over the long term. However, Australia's terms of trade have nearly doubled between 2001-02 and 2011-12 and the resulting trading gain has driven tremendous growth in real domestic income relative to domestic production of goods and services.
National income is an important part of the aspiration for enhancing living standards.
Real net national disposable income per capita is considered a good measure of progress for enhancing living standards, because it is an indicator of Australians' capacity to consume goods and services. Real net national disposable income is a key measure of Australia's economic wellbeing. Increasing real income allows Australian residents to purchase a greater quantity of food, clothing, housing, utilities, health care, education and other good and services. An increase in the measure indicates not only a greater capacity for current consumption, but also an increased capacity to accumulate wealth (e.g. houses, machinery, financial assets) which may be used to generate income to support future consumption. While this indicator provides insight into how sustainable living standards have been over the recent period, the indicator cannot tell us how sustainable the economy will be into the future.
This indicator is a partial measure of the concept of enhancing living standards as described above (based on Aspirations for our Nation).
The data source is of high quality.
But that is not the whole story...
There is more to enhancing living standards than real net national disposable income per capita. Look through the other tabs on this page to see if the other elements of enhancing living standards have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
Buying power in Australia has progressed over the last decade
Indicator: Real net national disposable income per capita
Why is this element important?
Buying power is an important aspect of progress as it determines the ability of people to consume a greater quantity of goods and services from a given level of income. Increased buying power provides the means to secure a higher level of wellbeing through the consumption of goods and services, such as food, clothing, education and health care. Decreased buying power reduces the capacity to consume goods and services and will increase the likelihood that people may be unable to afford basic necessities. In the context of enhancing living standards, increased buying power supports future generations through the greater capacity to invest in assets, including infrastructure and research and development, to secure future benefits.
We have decided buying power in Australia has progressed over the last decade because real net national disposable income per capita (our progress indicator for buying power) has increased.
During the decade 2001-02 to 2011-12, Australia's real net national disposable income grew from $40,600 per person to $51,800 per person in 2010-11 dollars. Year-on-year growth of around 2-3% was consistent for most of the decade, with only the2010-11 financial year recording a decline in real net national disposable income per capita (-2%) during the global financial crisis. Overall, Australian buying power has been lifted over the past decade due to growth in domestic production as well as strong gains in the economy's terms of trade.
The recent strong growth in Australia's real net national disposable income per capita highlights a significant divergence which has taken place between Australian real income and domestic production growth rates over recent years. On an annual basis between 2001-02 and 2011-12, gross domestic product (GDP) per capita increased by 1.5% on average while real net national disposable income per capita increased by 2.5%. This divergence is significant as the real income growth generally tracks GDP growth over the long term. However, Australia's terms of trade have nearly doubled between 2001-02 and 2011-12 and the resulting trading gain has driven tremendous growth in real domestic income relative to domestic production of goods and services.
Real net national disposable income per capita tells us about buying power as part of the aspiration for enhancing living standards.
Real net national disposable income per capita is considered a good measure of progress for buying power because it measures the real purchasing power of domestic income. This measure is one of a series of real incomes which go beyond GDP to provide a more comprehensive picture of economic welfare and living standards. Increasing real income allows Australian residents to purchase a greater quantity of food, clothing, housing, utilities, health care, education and other goods and services. Moreover, growth in real income not only has benefits for current consumption, but can also be used to generate future income and support future consumption as well. This is because income can also be used to accumulate wealth and assets which can offer people benefits both now and in the future.
This indicator is a partial measure of buying power.
The data source is of high quality.
But that is not the whole story...
There is more to enhancing living standards than buying power. Look through the other tabs on this page to see if the other elements of enhancing living standards have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
Government finances in Australia have regressed over the last decade
Indicator: General government saving ratio
Why is this element important?
Australians told us that sustaining government finances into the future is a central part of enhancing living standards. Therefore ensuring that current economic performance and prosperity are not at the expense of the economic welfare of future generations is critical. As government is the key provider of non–market services, regulator of economic and social conditions, and functions to redistribute income between sectors of the community, it is important that these vital activities continue to be funded on a sustainable basis.
For government finances to remain sustainable, government revenue must cover current government expenditure relative to economic activity over the long term. General government net saving is the difference between government revenue, mainly sourced from taxation revenue, and government expenditure. Although the government will at times operate at a deficit, whereby general government net saving is negative, ongoing dissaving (the action of spending more than one has earned in a given period) will indicate that government finances are not sustainable.
We have decided that government finances in Australia have regressed over the last decade because the general government saving ratio (our progress indicator for government finances) has decreased.
Between 2001-02 and 2011-12, the general government net saving to net domestic product ratio decreased from 0.7% in 2001-02 to -2.1% in 2011-12. From 2001-02 to 2007-08, general government net saving was positive each year, peaking at 3.5% of net domestic product in 2006-07. Government net saving became negative in 2008-09 and has remained so since government expenditure consistently exceeded revenue. The beginning of this period of dissaving coincided with the global financial crisis. During this period, the general government net saving to net domestic product ratio also reached a low of -3.6% in 2009-10.
Why this progress indicator?
The general government net saving to net domestic product ratio is an important part of the aspiration for enhancing living standards.
The general government net savings ratio is considered a good measure of progress for government finances because it shows whether the government is saving or dissaving and how large this is relative to the value of the Australian economy. This measure provides a good picture of the potential sustainability of government spending. In the long term, ongoing dissaving by general government is not sustainable but ongoing saving by general government may also be unsustainable as this may create significant distortions within the economy. However, government saving can be used to fund public or private investment which may generate future economic benefits.
This indicator is a partial measure of government finances.
The data source is of high quality.
Let's break it down!
From the mid-1980s to the early 1990s, the general government net saving to net domestic product ratio increased steadily from -4.0% in 1985-86 to 0.1% in 1988-89. It then proceeded to decrease over the next few years, reaching a low of -6.0% in 1992-93 as government expenditure exceeded revenue in response to difficult economic conditions. The general government net saving to net domestic product ratio increased over most of the next decade and became positive in 1997-98 for the first time since 1988-89. From 1997-98 to 2007-08, it remained positive. However, it decreased sharply over the next two years and has remained negative as government finances have again been affected by global economic turbulence.
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 enhancing living standards than government finances. Look through the other tabs on this page to see if the other elements of enhancing living standards have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
The generation of economic resources in Australia has progressed over the last decade
Indicator: Non-financial assets per capita
Why is this element important?
Economic resources were seen as integral to enhancing living standards. Human welfare is intimately connected with the generation of wealth that economic activity allows. Without sufficient economic resources, the wellbeing of communities and individuals is not sustainable. This is why Australians told us they aspired to an economy that was able to generate economic resources for communities to meet the needs of today, and of the future. In particular, sustaining resources, services and infrastructure that are fundamental for economic prosperity and social cohesion are essential.
We have decided that economic resources in Australia have progressed over the decade because non-financial assets per capita (our progress indicator for economic resources) have increased.
Despite some fluctuation in the measure over time, change in non-financial assets per capita displayed a clear upwards trend between 2001-02 and 2011-12. In 2001-02, the figure was $218,000 compared with $406,000 in 2011-12. In the ten years from 1997-98 to 2007-08, the value of Australia's non-financial assets increased at an average of 8.3% per year. However, from 2008-09 to 2011-12 this growth has slowed to an average of 2.9% per year.
Why this progress indicator?
Non-financial assets per capita tells us about economic resources as part of the aspiration for enhancing living standards.
Non-financial assets per capita is considered a good measure of progress for economic resources as it measures the accumulated value of an economy's productive capital relative to its population. Non-financial assets are produced and non-produced assets which are usable in economic activity but also act as stores of value over time. These assets are either produced, e.g. machinery and buildings, or non-produced, land and subsoil assets.
The change in non-financial assets per capita shows the progress of an economy's accumulation of productive resources relative to its population during a particular period. A large positive figure indicates an increase in the economy's productive capacity through the acquisition of produced or non-produced assets, asset price growth or population decline. Conversely, a negative figure may indicate that there is a lack of investment in the economy, asset prices are falling or that its population growth is outstripping the rate of capital stock growth.
This indicator is a partial measure of economic resources.
The data source is of high quality.
Let's break it down!
The value of Australia's non-financial assets per capita has grown significantly over the last 20 years. There has been a clear upwards trend in the value of non-financial assets per capita over this period but its growth has recently slowed. Nevertheless, the value of Australia's non-financial assets per capita have more than tripled over the last two decades from $120,000 in 1988-89 to $406,000 in 2011-12.
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 enhancing living standards than economic resources. Look through the other tabs on this page to see if the other elements of enhancing living standards 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 environmental 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 environmental resources but no single measure was considered sufficiently comprehensive. A suitable measure should provide an indication of the total level of environmental resources in Australia including those not classified as economic assets. Although a large range of data are available about these resources, coverage is generally limited to economic assets including land, subsoil and cultivated biological assets. What distinguishes economic assets from other environmental resources is that ownership rights over them have been clearly established and effectively enforced. The absence of these ownership rights makes it very difficult to value other environmental resources. In order to capture the spirit of this idea in a measure, further development would need to be undertaken.
But that is not the whole story...
There is more to enhancing living standards than environmental resources. Look through the other tabs on this page to see if the other elements of enhancing living standards have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
The presence and availability of human resources in Australia have not changed greatly over the last decade
Indicator: Labour force participation rate
Why is this element important?
Human resources are an integral part of enhancing living standards. An economy's labour force is composed of a diverse range of individuals who each possess particular skills and knowledge. These human resources are developed over time and represent years of accumulated education, training and experience across a wide range of occupations and jobs. A sustainable economy depends on the presence and availability of these resources to ensure continued economic progress and development. As the economy continues to advance, the importance of human resources increases in step with the pace of technological progress and innovation. An economy's human resources represent the skills and knowledge of its labour force which are vital for ensuring labour force participation and economic sustainability into the future.
How have we decided things haven't changed greatly?
We have decided the presence and availability of human resources in Australia has not changed greatly over the last decade because the labour force participation rate (our progress indicator for human resources) hasn't moved much.
For there to be improvement in the presence and availability of human resources in Australia, we would expect to see discernible growth in the labour force participation rate.
In 2002, 63% of the population were engaged in the labour force and this rate has only increased to 65% in 2012.
Why this progress indicator?
The labour force participation rate tells us about the presence and availability of human resources as part of the aspiration for enhancing living standards.
The labour force participation rate is considered a good measure of progress for the presence and availability of human resources because it indicates the relative size of the labour force to the population. This measure is defined as the total number of people in Australia who employed or actively looking for work and available to work, expressed as a percentage of the population. Most people in Australia participate in the labour force at some stage in their lives, and paid employment is financially and personally important to people. Labour force participation changes as people join or leave the labour force, and may be affected by other decisions such as combining employment with study or family responsibilities and the underlying population structure. There is considerable interest in labour force participation from both a social and economic perspective.
The labour force participation rate shows the extent to which Australians are engaged (or potentially engaged) in employment. An increase in this rate would indicate that a higher proportion of people who are not currently in the labour force were able to secure employment or make their labour available to the labour market. Conversely, a decline in the labour force participation rate would indicate that a lower proportion of people were not actively looking for work or were not engaged in paid employment. The measure therefore shows the proportion of people whose human resources are being used or available for use in the labour force.
However, the labour force participation rate does not distinguish whether those who are employed would prefer to work additional hours than they currently do.It therefore does not provide an indication of underemployment within the labour force. A more detailed discussion about labour force measures can be found in 'Understanding the Labour Force' in ABS Labour Force, Australia, Feb 2013 (cat. no. 6202.0).
This indicator is a indirect measure of the presence and availability of human resources.
The data source is of high quality.
Let's break it down!
Although the rate has not dramatically changed over the previous decade, if we consider a longer period there has been a discernible increase. The main factor behind the long-term increase in the labour force participation rate has been an increase in female participation, which has risen from 44% in 1979 to 59% in 2012. In contrast, male participation fell from 78% to 72% over the same period. The overall labour force participation rate has therefore increased from 61% in 1979 to 65% in 2012.
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 enhancing living standards than the presence and availability of human resources. Look through the other tabs on this page to see if the other elements of enhancing living standards have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
Footnote(s): (a) Businesses with range of goods or services offered increased since last year relative to Total Business Count.
Source(s): ABS data available on request, Selected Characteristics of Australian Business
Innovation for change in Australia has regressed over the last decade
Indicator: Product expansion by innovative businesses rate
Why is this element important?
Innovation is an important part of enhancing living standards. Through innovation, improvements to productivity and problems of economic, social and environmental nature can be further understood and solved. Innovation for change is important for all of society as it faces future challenges and creates opportunities. Innovation was considered to be important to private enterprise but its benefits also flow on to affect the community more generally. An innovative business environment sees new or improved products brought to the market and available to potential consumers.
We have decided innovation for change in Australia has regressed over the last decade because the product expansion by innovative businesses rate (our progress indicator for innovation for change) has decreased.
Between 2005-06 and 2010-11, the ratio of the number of businesses who are both innovation-active and have increased their range of goods and services offered in the last year to the total number of businesses decreased almost by a third, from 17.9% to 12.0%.
Why this progress indicator?
Innovation-active businesses are an important part of the aspiration for enhancing living standards.
Product expansion by innovative businesses is considered a good measure of progress for innovation for change because this measure shows the relative extent to which businesses have actively innovated and also increased or decreased their range of goods and services offered.
One of the key drivers of change in the economy, to improve productivity and find solutions to economic, social and environmental challenges, is innovation. Expansion in the range of goods and services offered by businesses provides an indication of the effectiveness of innovative activity to meet consumer, business, economic, social and environmental needs. An increase in this indicator would suggest progress in innovation by businesses to meet these needs and a decrease would suggest businesses are regressing in this regard.
This indicator is only a partial measure of innovation as it excludes outcomes of innovation (besides new products and services). Although product expansion is a key outcome of innovation, businesses also innovate to make improvements and find solutions in other areas including operational, organisational and managerial processes and marketing methods. Many of these other aspects of innovation are captured under a separate aspiration, innovation for efficiency.
This indicator is a partial measure of innovation for change.
The data source is of high quality.
But that is not the whole story...
There is more to enhancing living standards than innovation for change. Look through the other tabs on this page to see if the other elements of enhancing living standards have progressed.
Check out our further info page for useful links, a glossary and references relating to this chapter.
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