NATIONAL INCOME AND PROGRESS

National income is an indicator of Australians' capacity to purchase goods and services for consumption. It is a determinant of material living standards and is also important for other aspects of progress.

There are many ways to measure income and it is not possible for a single measure to account for everything of importance. However, the headline indicator - real net national disposable income per capita - has a variety of features that make it an informative indicator.

• It is a per capita measure. Total income could rise during periods of population growth, even though there may have been no improvement in Australians' average incomes.
• It is a real measure - it is adjusted to remove the effects of price change. Nominal or current price income could rise during periods of inflation, even though there may have been no increase in Australians' real capacity to buy goods and services.
• It takes account of income flows between Australia and overseas, and reflects changes in the relative prices of our exports and imports (our 'terms of trade'). These international influences on Australia's income can increase or decrease Australians' capacity to buy goods and services.
• It is a net measure - it takes account of the depreciation of machinery, buildings and other produced capital used in the production process. Hence, it reflects the income Australia can derive today while keeping intact the fixed capital needed to generate future income.

One drawback of real net national disposable income is that it is only available as a single national indicator and cannot be broken down for states or industries.

National income does not take account of some non-market activities such as unpaid household work that contribute to material living standards. Also, some analysts would prefer an income measure that is adjusted to take account of the true costs of natural assets used and negative externalities such as pollution emitted in the production process. These aspects are not built into the headline income measure.

Income may be spent on the consumption of goods and services or be set aside as savings for future consumption or investment. Supplementary progress indicators are therefore presented for final consumption expenditure per capita and national net savings as a proportion of GDP.

As GDP is a major influence on national income, further information is presented for GDP per capita. The industry, state and territory contributions to GDP are also presented in the form of industry gross value added and real gross state income per capita.

For a full list of definitions, please see the National Income glossary.