Economics

Gross Domestic Product (GDP): Is all that it’s cracked up to be?

What is GDP? 

GDP is treated as the holy grail of economic management.  Its status is like a deified being – ethereal, airy, and untouchable.  You may be able to photograph it, but you may not benefit from it that much.

  • A lot of GDP growth comes from the resources industry;
  • Most GDP growth in generated in Sydney and Melbourne – between them they generate around 70% of the economic growth. In Sydney three key-regions deliver around 24 % of economic growth – the inner northern suburbs, the Ryde area and the Sydney CBD.

What do most people think GDP is?

If you asked many people what GDP is, their explanation they may say: It’s to do with economics or economic growth. However, what it is specifically and what it does, well that response may draw a blank.

GDP is seen as a measure of a government’s economic competence, yet it ignores critical factors.  Loudmouth politicians and commentators megaphone their belief in GDP.  It’s rather like bodybuilders comparing muscle size.

However, what does it tell us about economic performance and progress?  It tells you a lot if you’re a banker or business person but relatively little if you’re an ordinary person.

So what does GDP count and fail to count?

  • It’s a useful tool for central bankers.  It helps them to know whether to hit the interest-rate brakes or press the accelerator;
  • It impacts on interest rates and the cost of borrowing;

Women’s work

It ignores women’s work in the home and leisure;

  • It counts remediation work from natural disasters as a positive;
  • GDP looks backward and not to the future, so it’s not entirely useful for financial markets;

Says nothing about the quality of government services;

  • GDP is tone-deaf to the reality of people’s lives.  For example, it doesn’t consider the costs of withholding education, nor does it consider the quality of government services.
  • Credit Suisse report emphasises that GDP says there’s no value in capturing economic issues faced by the government.  Health, environment, and inequality, issues that would probably be regarded by many as an integral part of the economy, are absent.

So how do I benefit from this economic growth that they talk about?

The answer to this question varies greatly.  It varies depending on your economic circumstances.  Do you run a company that performs remediation work in the event of a natural disaster?  If so, disasters are a financial boon for you.  Moreover, they make economic growth look better!

However, if you are like an increasing number of Australians who have not had a wage rise, you’re not alone.  Many people, on individual contracts, struggle to secure a wage rise for a simple reason: You can’t negotiate with your boss.

Sure, some employees successfully, albeit rarely, negotiate with their employers.  They tend to have extraordinary skills that consequently attract better pay.

However, the reality for many Australians is that income growth is way below GDP growth.  Thus, although the governments spruik it, the reality is the GDP figures sit uncomfortably with the reality of many people’s lives.  Some people are doing very well from the GDP as an economic measure.

What other measures of economic progress exist?

Unfortunately, there is no one replacement measure for GDP.  However, it could be used in conjunction with one of the following alternative measures.

The limited utility of gross domestic product has long been recognised.  Robert Kennedy once said of it: “It measures everything except that which makes life worthwhile.”

So, if its usefulness is so limited, why do we still use it?  We can only change the economic indicators when policymakers prioritise genuine measures of economic performance.

One way to do this is to use different economic indicators.  One of these alternatives is the genuine progress indicator (GPI).  It looks at, rather than ignores, critical aspects missing from Australia’s current economic progress indicator.  Therefore, unlike GDP, it considers the negative effect of income inequality on welfare.  It also considers household work, a gaping hole in the current arrangements.

A GPI would look at the environment, as well as the costs of crime and pollution.  Also, it looks at the contribution of volunteers.

Sadly, GDP concentrates on a bunch of things that of no use to ordinary people.   And like some of Australia’s economic indicators, for example the unemployment rate, GDP gives a partial snapshot.

It’s arguable that to restore confidence in the Australian political process we need to address our us of dated economic indicators.  Otherwise negative feelings with continue to ferment among those who feel as though they’ve been left behind by the economic fast lane.

It’s also not enough to point the finger at the losers.  Blaming others for problems  not of their making, may feel satisfying, but not only does solve any problems, it also dodges the central role of politicians in the political process.  That is, that under the system  of representative democracy – they’re supposed to be there for you.   If something is not working, if something going right – it’s in all our interests to find out what and fix it.

And one of the most important things politicians need to consider fixing first are our economic indicators.  No not just the unemployment that fails to detail the high number of people who’ve given up looking for work.  We also need to find another broader range of indicators, like the Genuine Progress Indicator (GPI) that will give us a clearer vision of how the Australian economy is really performing. This would be more preferable than the massaged picture on offer at the moment.

Politics

Why Australia needs automatic voter registration.

If Australia has compulsory voting, why are over 628,000 people missing from the electoral roll?

An often- stated fact about Australia is that we have compulsory voting. Sure it’s thanks to compulsory voting that Australia boasts a voter registration of 96.3% of the eligible voting population. Compared to other countries, this figure sounds impressive, until you consider one rarely stated fact – the 628, 547 voters missing from the electoral roll.

So why are so many people missing from the voting rolls?

  • Some voters have never registered;
  • Non-voters who have fallen off the electoral roll due to homelessness or renting;
  • Some people are registered to vote at state but not federal level;
  • Many indigenous Australian’s aren’t registered to vote.

While the Australian Electoral Commission requires all eligible voters to register and vote- there is no automatic process for updating voter details. And  for this reason there is a large hole in Australia’s electoral roll. When people move house, or become homeless they often fall off the electoral roll.

Admittedly, there is some provision in the electoral act for allowing people with no fixed address to vote. But you have to ask: How many homeless people ensure they vote while homeless?

Why does Australia have compulsory voting?
Australia is one a relatively small club of nations that makes voting compulsory. Other countries with compulsory voting are: Brazil, Argentina, Luxembourg, Belgium and others.

We made voting compulsory in 1924 after the disastrously low voter turn out in the 1922 election. The vote at this election was so low that the result had to be called into question.

And although our rate of electoral enrolment and voting is much higher than many other countries, I would argue that Australia doesn’t really have compulsory voting, and that what we have is compulsory attendance at the polling booth if you’re registered to vote.
Younger voters

So let’s look at the three groups of people who, due to their circumstances often aren’t registered and so, don’t vote. First, many young people are still missing from our electoral roll and so don’t vote. While some may assume young people are apathetic, they are in fact the opposite.
There’s a large cohort of young people are agitated on issues of importance. It’s just that many from this age group don’t see their concerns reflected in the national debate. Discussion about house prices, negative gearing, and other topics generally caters to an older demographic. Further, when politicians tour electorates they often don’t talk to the concerns of young people.

And because politicians don’t speak to their concerns young people feel ignored and so don’t register to vote.  And young people prefer direct participation campaigns via social media and the internet.

But ultimately, only young people and the political parties ensure more young people are enrolled to vote. Young people would be a  potent electoral force in a way that Generation X never was because there are so many more Gen Y’s.

But also the onus should be on political parties to speak to the concerns of all Australians, not just older Australians whose life circumstances have been blessed by economic sunshine.

Indeed, many voters (of all ages) often don’t understand what a potent force they really are. Do you want to understand the importance of political engagement?  To understand this, look at the boomers. In the ‘80s the election of the Hawke Government was partly due to changing demographic trends. A driving force behind the electoral change was the then youthful boomers.

Long after the ’80s became fodder for the history books, the boomers have remained a potent electoral force. This potency can be seen from government spending patterns. Of all the age groups, people over 65 command a much higher level of government spending. By contrast, the group with the thinnest slice of government spending is Generation X (1966-1980).

Voters registered at the state level

A second, but even more obscure voting block is the voters registered at state level. These voters are eligible to vote at their state and local government elections, but not at federal elections. There are around 100,000 missing voters in this category.

Thus, for every one of these hundred of thousands of voters, they miss out on getting their say at the federal level. This is a real shame because there are so many decisions made at the national level where the ramifications reverberate for decades.

Renters who have fallen off the electoral roll

A third group who is also a largely invisible group of non-voters: renters. Renters receive little notification from landlords before being asked to move. In NSW, the regular period is 21-days. And amid the busy lifestyles, competing priorities – it’s not hard to see why they often forget to get back on the electoral roll.

Moreover, some people still return their forms in the post, so it takes time for the electoral commission to update their details. And by the time the election is announced it is only a matter of days until the rolls are closed and people are barred from updating their details.  The fastest way to register or get registered is by changing or updating your details online.

Indigenous Australian’s

Although Indigenous Australian’s have had the right to vote for many decades, they continue to have a low voter participation rate.  Figures from the 2016 Federal election suggest that as few as 58% of indigenous Australian’s vote.  Though some sources suggest this figure is overly generous and that the real number is closer to 50% voter registration for indigenous people.

To increase this and to make politicians more responsive to the needs of Indigenous people requires a mass voter recruitment drive.  The best way to do this is via a process of automatic registration. Otherwise, Australian politician’s, mining companies and other interest groups will continue to pay lip service or ride roughshod over Indigenous rights.

Homeless people who have fallen off the electoral roll

Continue reading “Why Australia needs automatic voter registration.”