I was surprised to read in the NAB Australian Markets Weekly that for the past three years real income per person in Australia has been falling and is now back to levels that were evident in late 2008. The graph shows the level of real income per person with the recessionary periods marked in grey. From the last recession in 1991 up to the Global Financial Crisis in 2008 Australians have experienced a continued rise in the level of their real incomes. Nevertheless how can it be that with GDP growing at about 3% a year real levels of income have been falling?
1. Growth in aggregate real GDP has been boosted a great deal by the sharp growth in the population – Australia’s population grew 1.7% in 2013.
2. While Australia are seeing good growth in the “volumes” of GDP, particularly as some of the new mining capacity has been coming on stream, they are receiving lower prices for this output due to falling commodity prices.