NATIONAL WEALTH AND PROGRESS

A nation's wealth, along with the skills of the workforce, has a major effect on its capacity to generate income. Produced assets (such as machinery and equipment) are used in income-generating economic activity. Some natural assets (such as minerals and native timber) generate income at the time of their extraction or harvest. Holdings of financial assets with the rest of the world (such as foreign shares, deposits and loans) return income flows to Australia. Other assets, such as owner-occupied dwellings, provide consumption services direct to their owners.

Income that is saved rather than spent on current consumption allows the accumulation of wealth that may generate income and support higher levels of consumption in the future.

While it is not possible for a single measure to account for everything of importance, the headline indicator - real national net worth per capita - has a number of features that make it an informative indicator of whether life in Australia is getting better.

• It is a net measure – it shows the amount by which Australia's assets exceed its liabilities to the rest of the world.
• It is a per capita measure – total wealth could rise if the population grew, even though there may have been no improvement in Australians' average wealth.
• It is a real measure – it is adjusted to remove the effects of price change.

However, national wealth measures do not take into account everything that might be regarded as valuable. For example, real national net worth per capita excludes the following:

• consumer durables (such as refrigerators and motor vehicles)
• native forests and other natural assets not used for economic production
• valuables held as stores of wealth, such as precious metals and stones, antiques and works of art
• human capital (e.g. knowledge and skills) and social capital (e.g. social networks and trust).

Although these items are not built into the headline wealth measure, other sections (such as those for Education and training, and the Land and Biodiversity dimensions of progress) provide information about them. In addition, the Productivity section provides information on growth in the nation's productivity.

Other measures that provide information about whether Australia's national wealth is increasing include real national assets and liabilities per capita and real net foreign debt. These are included in the discussion in this section.

Further information is also provided about the types of assets that Australia holds and how this has changed over time e.g. shares, machinery and equipment or computer software.

Throughout this section the terms net worth and wealth are used interchangeably.

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