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Flat GDP shows folly of free trade, rapid population growth agenda - Kelvin Thomson

"Australia's GDP per capita went backwards in the June quarter, sliding by 0.2 per cent. Reports that it increased depend on the use of "population creep". GDP increased by 0.2 per cent, but that was only due to population growth, and GDP per capita, which is a far more accurate guide to living standards than GDP, declined.

Not surprisingly, then, real net national disposable income per head, which is the best measure of living standards, slid by 1.2 per cent in the three months to June. The Fairfax economist Peter Martin says this is the fifth consecutive slide in real net disposable income per head, which is now 5 per cent below its peak in 2011." (The Hon. Kelvin Thomson, Federal Member for Wills, 3rd September 2015).

Our economic growth rate is lower than the US, the European Union, Britain and Greece.

But the geniuses who have dug us into this hole want us to keep digging. They say that flat growth means we should ratify the China Free Trade Agreement. The fact is that we have recently entered into the Korea and Japan Free Trade Agreements, and yet our real income per capita is declining. The fact is that in the past decade we have entered into Free Trade Agreements with the US, Thailand, Singapore, Malaysia, New Zealand, Chile, Japan and Korea. If Free Trade Agreements are good for us, why are we going backwards?

For the past thirty years Australia has been undergoing an experiment. Free market liberalism. Its hallmarks have been globalisation, privatisation, deregulation, free movement of goods and free movement of people. Its advocates said it would strengthen the Australian economy, and make us resilient to external shocks.

But far from making our economy more diverse and resilient, we have become narrow and vulnerable. The economist Saul Eslake has expressly described our economy as vulnerable to external shocks.

We have much higher levels of unemployment than we did thirty years ago. We have much higher levels of youth unemployment, much worse long-term unemployment, and serious problems of underemployment. We have much larger foreign debt and much larger budget deficits. The distribution of wealth between rich and poor is becoming less equal. And the social problems generated by frustrated ambition - drugs, crime, mental health problems, homelessness - are on the rise too.

If Bilateral Trade Agreements were the way to go, this would not be happening. But it is. Much of our manufacturing has disappeared offshore, and much of our research and development with it. The hi-tech industries have largely passed Australia by. We put our eggs in the mining basket, and are now paying the price.

The flat GDP also shows the folly of rapid population growth. In the past decade we have trebled our net annual migration and claimed that this would drive economic growth, but it is a con job. "Population creep" is used to make the figures look better, but GDP per capita doesn't improve at all. In fact we have higher unemployment, skills shortages and infrastructure backlogs. Population growth reduces productivity per person, the very thing that economists claim to be desperate to increase.

And the third thing the flat GDP does is show what nonsense Joe Hockey has been talking about the economy for the last two years. When they were in Opposition the Liberal Party said there would be no excuses. Now there is a list of excuses as long as your arm. Then at the G20 Conference in Australia last year he trumpeted that there would be an extra 2 per cent global growth! And this year he ridiculed as "clowns" commentators who expressed concern about the direction of Australia's GDP.

Who is wearing the red nose now?

Source of article: Press Release from Kelvin Thomson, Federal MP for Wills


"But the geniuses who have dug us into this hole want us to keep digging." Governments listen to the economists' theory of Capitalistic addiction to "growth", and now we are in the hole of economic stagnation, instead of admitting limits to growth, or that they have taken the wrong track. Thus, they keep on digging the hole deeper, with "business as usual". If our economic growth is linked only to what we've gained from raw population growth, then where's the net benefit? Considering the costs of population growth, in infrastructure spending, managing the human/environmental impacts, they see opening our borders is the way of gaining jobs, and income, is sheer desperation. If the jobs go to the investors, the Chinese, then we will have a flatlining effect of a welfare blowout.

If our "economic growth" is going flat, on a national and individual level, then surely we've hit the metaphorical brick-wall of limits to growth!
"Limits of growth" was modeled back in the early 1970s, by the think-tank the Club of Rome, and confirmed more recently, but our powers that be ignore it, and drag along the voting public, with their incomes burgeoning costs of living, and trapped into cities constricted by congestion, unaffordable housing, crime, and a whole dystopia of deprivation.

Even if GDP was to grow as a result of population growth, this would not imply any real improvement to the state of the economy - much less any increase in the standard of living or quality of life of most Australians. Bigger is not the same as better.

The fact that GDP is flat 1  despite mass immigration says that the economy is really in deep trouble. But this should come as no surprise.

The Coalition (and Labor to a large extent) have yet to come to terms with the fact that low wage conditions represent a useful phase in the development of an economy, but that Australia is well past that stage. Most of the Western world is past that stage. Japan is past it and within a decade or so, China will probably be past it.

In the event that free trade remains the dominant paradigm for international business in coming years, the only way that advanced Western nations can maintain their wealth is by using technology to boost productivity. Expecting employees to work for longer or for less money is short sighted and will not deliver the required increases in productivity. Furthermore, it robs consumers of the purchasing power necessary to stimulate demand. Nevertheless, this is still the preferred approach of most Australian business lobby groups, including the Liberal Party.

Thirty years ago, a great Australian by the name of Allan Richard Jones (not to be confused with the corporate sock puppet on Sydney radio) founded the National Technocrat Party, which argued for appropriate technological development and radical reform of our money system. Had the policies of the NTP been adopted at that time, Australia would be riding a wave of sustainable productivity now that would be the envy of the world.

It's not too late to look at such policy ideas again.


1. ↑  Of course, claims, that productivity, in a population with rapidly growing population, is increasing, are ludicrous. But, in my opinion, even those measures of economic performance which show per capita GDB to be flat as a result of population growth and immigration, are wrong. Given all the chaos and disruption caused by high immigration, I would expect an accurate measure of the productivity of the real economy to show not just a flat line, but a significant loss of overall productivity. - Ed

Thanks for the footnote, ed.

The attraction of a growing population to our business class is simply growing domestic demand. More consumers, more workers, bigger bottom lines. Obviously this grows GDP, but it does nothing to enrich the lives of the existing population. When social and environmental factors are figured in, mass immigration results in a decline in living standards for most technologically advanced Western countries.

GDP per person is, I agree, a better (though still far from perfect) measure of economic performance. To my mind, GDP per person is only loosely related to population. In theory, you could have a huge population with low productivity that would have lower material standards of living. Or a very small population with high levels of productivity that enjoys a high material standard of living. In this latter case, the nations GDP would be quite small, but GDP per person would be high.

Your point about the disruption created by mass immigration is relevant and may explain why countries that continue to develop better technology have flat GDP per capita. It could be that the efficiencies gained by automation are being eroded by inefficiencies caused by the arrival of new migrants who are ill prepared to work in their host countries. The diversion of investment capital to housing instead of more innovative / productive ventures is also certainly contributing.

The US author Mark Krikkorian has written some interesting pieces on the productivity lowering effects of a cheap labour force. He argues that cheap labour acts as a disincentive to investment in labour saving technology, effectively holding back potentially big increases in productivity for the sake of quicker, easier, but potentially smaller gains achieved by forcing down wages.

Good call nine'o'clubs! As I see it we're living the neoliberal dream as opposed to the real world. Unfortunately, the former doesn't exist, only the latter prevails. Worse still all of our mainstream political parties are beholden to the neoliberal dream as are big business, the mainstream media, local councils, educational institutions, etc. The all believe the illusion that never ending growth is the panacea to all and everything.

I take on board what Kelvin and anonymous are saying, but how do we unhinge ourselves from those who espouse ourselves with this growth fetish? Everything we touch and do is tainted by their influence. An example is that I prefer to use the Roy Morgan unemployment/underemployment figures to those of the ABS. The contrast couldn't be more stark: for the quarter ending in June the ABS had unemployment at 6.1% whereas Roy Morgan's figures were 10% for those unemployed and an additional 8.7% underemployed.

Currently Australia is a leaderless rabble! Most investors are advised not put all their eggs in one basket, shop around for the best deals, etc. Since our current crop of neoliberal crazed leaders have been in power, 1983 and beyond, we have strangled, castrated and handicapped all forms of industry except mining, finance, housing and the service industries. What a pack of losers!! The mining industry boom has expired, the finance industry is one giant ponzi scheme, the housing industry has been totally corrupted and the service industry was only ever going to be a secondary industry.

Australia is now a leaderless nation with no vision, no dream and no endeavour! Like the driverless train heading down the tracks at million miles and hour towards a dead end and all we do is throw more coal on the fire!! We need leaders, we need political parties, we need the people to have a vision, to have ideas, to have aspirations, to have hope and some confidence in the future. To that end we need industries that are going offer employment in the industries of the 21st century - renewables, IT industries, science and technological research, agriculture, environmental management, eco-tourism, etc.

We need and education system that caters for all of the requirements of all students. We need to invest in our youth and provide for them what our parents provided for us. In our vision we need to be able provide for the future at all times. Currently, we are not doing this; from the Prime Minister down all we are currently thinking about is ourselves! Our greed knows no bounds!!