GDP: Australia is waiting for the trickle down to start

As the usual headline stats, GDP growth has been slow at a low 0.3% last quarter due to Australia exporting less, especially from the resources industries, although not a recession, its damn close to one. But although growth has been slow Australia has been seeing some very positive results. The net national disposable income (NNDI) Which measures money flowing to Aussies on a per person basis has been rising steadily to 1.4 in March 2017.

This means that more money is going to actual Australians but although this sounds nice, whats increasing isn’t the rise in income but rather a rise in profits made by firms. While this results in no extra dollar bills in our pockets, we still enjoy the benefits of increased profits by firms,  employment is should steadily rising and for those that work, as businesses do better, their superannuation does better.

In a perfect world, as businesses receive a larger profit, they should expand operations and hire more people causing unemployment to go down and wages to go up and America has been seeing this recently, wages growth is finally rising after unemployment fell, and the whole economy is getting back on track. But as Australia’s economy is different to America’s economy with lower minimum wages and much looser employment laws. Should Australia sit back and wait for this to happen as well or should the government try to make the economy work better for most people?

http://www.news.com.au/finance/economy/australian-economy/gdp-australia-is-waiting-for-the-trickle-down-to-start/news-story/5302f5e596b4b28e38781b7c0d8b5e21

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3 Comments

  1. Excellent article Geoffrey!(not in a patronising way)
    This is a issue at the heart of modern economics- income inequality. For hundreds of years the question has been asked; how do we minimise income inequality? Historically, there has been inequality as long as there has been surplus and it will probably continue for the rest of time. After all, inequality is quite literally what makes the world turn round. Why would you do anything if you would still get the same as if you did nothing. For example, I could go out into the field and work my ass off for an entire year, in that process making enough food for 50 people. However, if there was no inequality that would mean I would have made the same money if I had sat on my hands for that year. Which of those would you rather?
    The problem comes when inequality becomes to great. An example of this is feudal Europe, where the ‘top 1%’ owned up to 99% of the wealth. In this situation the poor peasants had no oppertunity to rise from poverty or be anything else other than dirt poor. These days the ten richest people in the world own half it’s wealth by the way.
    Over the years there have been many proposals on how to reduce this inequality(my personal favourite is a massive inheritance tax) but not many have seen huge success. It is in fact here that the Scandinavian countries put the rest of the world to shame as their very socialist economies reduce inequality but also put these countries very high on HDI scores.
    I agree with you when you say what we need is a real conversation on how we will reduce inequality and increase living standards. Unfortunately, in recent years these types of debates have become super toxic, here and abroad. It may be we first have a debate and then consensus on how to have these types of debates first.
    Uhhhh… What was I talking about again? Oh yeah- good article Joffrey

    Liked by 1 person

  2. The good old trickle down economic theory –
    Low GDP and wage growth has been a problem in this country for the last couple of quarters. Not too sure on what the government can do ( not sure a company tax cut will increase wages overly) they’re not really trying to address income inequality but lots of Australians will start feeling the pinch in their pockets soon enough.

    Liked by 1 person

  3. When firms do grow and see an increase in profits, they don’t always expand (which would lead to more jobs so employment would go up (simplistically)), so the trickle down effect doesnt actually happen.
    (There’s a comic/image that went around a few years, which shows a pyramid of wineglasses, and wine being poured onto the top glass. Instead of the wine being distributed into all of the glasses at the bottom, it just shows the top glass becoming bigger. So it kind of shows that trickle down won’t always happen.)

    Liked by 1 person

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