The performance of the economy is represented in the national accounts by such measures as growth in gross domestic product (GDP). GDP is a measure of the overall value of economic production in Australia in a given period.
Between 1994–95 and 2004–05, Australia’s real GDP grew by about 44%, with an average growth of 3.7% a year.
Growth in the economy is a key determinant of employment and, therefore, of the economic wellbeing of households. But economic activity can come at a cost. While national income provides the material basis for better living standards, it may also be associated with environmental depletion or degradation.
For example, economic production, in particular agriculture, is a major user of water resources. Water quality is a major environmental issue and is strongly linked to practices such as land clearance and soil degradation and reduced flows from dams and reservoirs. These practices can affect native plants and animals in freshwater ecosystems.
Air quality can be linked to the generation of income. Economic activity, especially among the more energy-intensive industries, creates pollution which affects the health of humans and the environment.
On the other hand, increased GDP can also provide the income necessary to deal with environmental problems, such as pollution.
Decoupling indicators have emerged as a way to measure whether economic growth is occurring without corresponding pressures on the environment. An example of decoupling is when a developed nation experiences economic growth without an equivalent increase in its greenhouse emissions. This sort of assessment is relatively straightforward in some cases, such as the sustainability of fish stocks. In other cases, such as resource use, further research is needed before either limits or targets can be established. Decoupling indicators are one way to make an assessment of whether levels of growth are sustainable in the longer term. Appendix A contains more information about decoupling indicators.
GROSS DOMESTIC PRODUCT PER CAPITA
Note: Chain volume measure; reference year 2003–04.
Source: ABS, Australian System of National Accounts, 2004–05 (cat. no. 5204.0).