Living standards fall as unreliables rise

Today, some 'clean' electricity sources are called 'renewables'. Reflecting their intermittent, weather-dependent nature, I prefer 'unreliables'. As suggested by Matt Ridley and others.

We'll never see the promised 100% dependence on unreliables. They're far too costly, all-up. But living standards will fall as governments push unreliables higher, and cut base-load power.

Most agree promoting higher living standards is a good idea. How can this be done?

More productivity. The only game in town. No extra pie, no extra slices. For anyone. It's not possible to increase all living standards unless more output is produced from less inputs. Redistributing incomes shuffles pie slices. It doesn't add to the pie. It may well shrink it.

Without more pie, announced policies claimed to boost incomes for all will fail. 'Magic puddings' are the fantasies of Bunyip Bluegum and Norman Lindsay. Not the real world.

Such policies drive more inflation, less growth, or both. Paying more cash incomes than real outputs must deliver more inflation, more unemployment, or both, to clear markets. As now.

They are unfair. More inflation and/or unemployment most hurt the economically weak. That's especially the jobless and those on lower incomes. As now. The RBA's inflation concern is right.

Where to start? We must know where we are, and why. The following is based on ABS data.

GDP growth. There's lots of public and political focus on inflation-adjusted (that is, 'real') GDP. Real GDP increased 1.1% in the latest year available.

GDP per capita. For a start, measuring living standards requires dividing real GDP by persons receiving it. Real GDP per capita fell 1.3% in the latest year available.

Real net national disposable income. Even real GDP per capita doesn't tell the full living standards story. It doesn't allow for terms of trade effects, net income from overseas, and other stuff. These are covered in an all-up measure, real net national disposable income per capita. In the latest year available, this measure fell by 2.8%. The terms of trade fell by 7.3%.

Productivity. Capacity to pay overall increases in living standards is determined by productivity. In the latest year available, GDP per hour worked did not increase at all. Real unit labour costs increased by 3.4%.