Do we live in Bizarro World now?

Lower productivity growth not only pulls down aggregate GDP growth and limits the scope for non-inflationary expansion - a particular concern of the Reserve Bank - it means lower growth in real incomes and thus lower living standards.

One apparent bright spot is the still low rate of unemployment. However, this too has a darker side. For one thing, most of the employment growth recorded since the Pandemic has been government funded, including for 'public purpose' activities performed in the private or NFP sectors. Secondly, the 'care economy' component of this is highly labour-intensive with inherently low and stable productivity.

By contrast, on current projections, the next decade will see living standards barely rise, if not decline. Without a change of course, we are set to become a relatively high cost, low productivity economy; one where distributive policies dominate those that enhance growth, and national debt – now reaching $20,000 per person - weighs even more heavily.