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When measuring progress for the economy and economic resources, we consider five headline dimensions (although indicators are only available for four) - National income; Financial hardship; National wealth; Housing; and Productivity. The headline indicators available suggest some progress for these dimensions over the past decade.
National income reflects Australia's capacity to purchase goods and services. It influences material living standards and is also important for other aspects of progress. There are many different ways of measuring income. The headline measure - real net national disposable income per capita - has a variety of features that make it an informative indicator of national progress.
Australia experienced significant real income growth during the past decade. Between 1993-94 and 2003-04, real net national disposable income per capita grew by an average annual rate of 3.1% a year.
Society generally accepts that people should have access to some minimum standard of consumption of goods and services. People in financial hardship do not have the economic resources to enjoy such an opportunity, and are likely to have relatively low income and low wealth. The headline indicator focuses on changes in the average disposable (after tax) income of people close to the bottom of the income distribution (Endnote 5). Although it provides no information about the number of people living in financial hardship, it does indicate whether the income of low income groups is rising or falling.
From 1994-95 to 2002-03 the real income of low income Australians rose by 12%. For those people who were in this income grouping for the entire period, their rising incomes would on average have provided a capacity to increase their real standard of living, other things being equal. While some would interpret this increase in the real income of the low income group as progress, others would consider that it also needs to be weighed against changes in community standards. Although there is no direct measure of these, one approach is to compare changes with those of 'middle' Australians. And so the graph also shows changes in the real income of the middle income group, which grew by 14%.
The headline indicator considers low income which is commonly associated with financial hardship. However, financial hardship is a multidimensional issue and is also often associated with problems such as lack of participation in work, substance abuse, poor health, poor education, poor housing, crime, social exclusion and a lack of opportunity for children. It can also be associated with changes in life fortunes.
National wealth and national income are very closely related. Along with the skills of the work force, a nation's wealth has a major effect on its capacity to generate income. Produced assets (such as machinery and equipment) are used in income-generating economic activity. Income, in turn, provides for saving that enables the accumulation of new wealth. 'Real national net worth per capita' exhibits features that make it an informative indicator of national progress.
Between June 1994 and June 2004, Australia’s real net worth per capita rose at an average annual rate of 0.8%. However, the headline indicator does not take account of everything that might be regarded as valuable. For example, it doesn't include - native forests and other natural assets not used for economic production; or human capital (e.g. knowledge and skills); or social capital (e.g. social networks and trust).
Housing provides people with shelter, security and privacy. Having a suitable place to live is fundamental to people's identity and wellbeing, and there are many aspects to housing that affect the quality of people's lives. Dwelling attributes, such as their size, number of bedrooms, physical condition, location relative to amenities and services, and their affordability, are all important in this regard but there is currently no single indicator that succinctly captures whether people's many needs and desires for suitable housing are being met.
Housing in Australia is generally good, and Australians are continuing to invest significantly in the homes that they own. In the decade to 2004, the value of land and dwellings owned by the household sector increased by 150% (in current price terms) and in 2004 represented more than half of the value of all assets owned by the sector.
Australians are tending to live in smaller household groups, with the average household size shrinking by 14% over the 20 years to 2001. While 4% of private dwellings across Australia in 2001 required an extra bedroom to accommodate the residents of those dwellings, 75% of private dwellings had one or more bedrooms spare. But poor or inadequate housing is currently a problem for some groups, especially for Aboriginal and Torres Strait Islander peoples living in remote areas.
A nation's productivity is the volume of goods and services it produces (its output) for a given volume of inputs (such as labour and capital). A nation that achieves productivity growth produces more goods and services from its labour, capital, land, energy and other resources. Much, but not all of Australia's output growth can be accounted for by increases in the inputs to production. The amount by which output growth exceeds input growth is the productivity improvement. Productivity growth can generate higher incomes. Benefits might also accrue in the form of lower output prices.
Productivity can be measured in a variety of ways. The most comprehensive Australian measure available at present is multifactor productivity for the market sector. Multifactor productivity represents that part of the growth in output that cannot be explained by growth in labour and capital inputs. During the decade 1993-94 to 2003-04, Australia experienced improved rates of productivity growth and multifactor productivity rose 1.5% per year on average.
During the past few decades, successive Australian governments have enacted reforms that have sought to create an economic environment favourable to increased competition, better allocation of resources and more innovation. Key policy influences have included reduction of tariffs and other barriers to international trade, relaxation of barriers to international investment, changes to the structure and rates of taxation, domestic competition policy and reforms to financial, labour and other markets. Economists continue to investigate the links each of these varied influences has on productivity growth, and many are not yet well understood.