In the GDP debate, I would also like to pose an observation.

Wages and salaries have kept going up, as generally has the face value/cost of equities and their resultant dividends (excepting in recession/ depression/GFC).
(And even in our GFC-recession wages did not go down; people were laid-off instead.)

Along with increasing wages, prices have also generally increased.
But has any resultant increase in GDP actually represented any real 'increase' in average productivity/output?

Along with increasing wages and prices, welfare and social support costs have also kept pace, as have other government expenditures - for education, health, roads, infrastructure, policing, soldiering, armaments, patrol vessels and government jets.

GDP may supposedly be calculated on a total revenue or total expenditure basis - but is viewed as reflecting an actual increase or decrease in overall productivity or production output.
But, is this real, or a reflection of inflation/deflation?

Increasing population may contribute to an increase in notional (face-value) GDP. But, as the impact of any change in GDP value is spread over the larger population, the per-capita GDP value may even fall - particularly if many of the population additions occupy low paid jobs or are on welfare, and therefore contributing less than 'average' productivity.

Changes in foreign exchange rates may also impact on measured GDP, but will anything really have changed in consequence?

It seems that, in the absence of recession/depression, GDP will just keep going up, due purely to market forces.
But, the 'real' impact of any increase in GDP may only actually be measured by a genuine increase in cost-adjusted average productivity.
Therefore one is drawn to a view that an increase in GDP, of itself, is not necessarily an accurate representation of an inflation-adjusted increase in average annual output.

Naturally, each year's net output is added to pre-existing savings/wealth and infrastructure, so, in the absence of force majeure (or plague, pestilence or national disaster), conditions will generally be seen to improve - particularly if money/means is/are used wisely.
However, the rate of GDP 'increase' will appear not necessarily to correlate precisely with any observed 'rate' of general 'improvement'.

Same old, same old, Ludwig.

>>Bottom line – what GDP has been telling us for many years is at STARK odds with what is happening in our society in terms of what continuous high economic growth is supposed to provide. You can’t deny that.<<

But I can, and do, deny that. All my observations - admittedly being predominantly Sydney/Melbourne centric - support the view that Australia is becoming more prosperous as a country, and its citizens are individually better off than they were 10, 20, 30, 40 50 years ago and beyond.

Right now, from my office window, I can see the massive investment taking place in Barangaroo, turning what was previously dockside territory into a semi-public harbourside space. We already have invested in a desalination plant, ready for the next drought, and a new airport is finally on the drawing board. Not to mention a heap of improvements planned for public transport around Australia's premier city.

The fact that these observations are themselves underscored by the GDP numbers is relevant, since they would not be possible otherwise.

There's a tiny smidgeon of local illustration. Where's your evidence that this would have happened without the increased prosperity that has been measured by GDP?

>>Our economy is not crumbling around us…..yet.<<

I'm really glad that you have finally come around to that position. And my guess is that it won't crumble until the GDP numbers start to trend downwards. They will be the canary in the coal mine, if you don't object to a birding analogy.

<< …the rate of GDP 'increase' will appear not necessarily to correlate precisely with any observed 'rate' of general 'improvement'. >>

That’s for sure Salty, especially while we have very high immigration basically driving economic growth and thus the increase in GDP.

And even if there is an overall general improvement, most ordinary folk may see very little of it and may indeed see things worsening overall. Improvements are very unevenly distributed, and tend to go more to the ‘haves’ than the ‘have-nots’.

Then, when we factor in all the things that contribute to GDP that just damn well shouldn’t, we’ve got a hooter of a shockingly misleading economic indicator!

<< Same old, same old, Ludwig. >>

Yep.

Until you address the very basic discrepancy between constantly growing GDP and seriously lacking real improvements, all I can do is to basically keep on emphasising the fundamental flaw in your argument.

I wrote:

>> Bottom line – what GDP has been telling us for many years is at STARK odds with what is happening in our society in terms of what continuous high economic growth is supposed to provide. You can’t deny that. <<

You replied:

<< But I can, and do, deny that. >>

Well that is just extraordinary and amazing, Pericles!

Again, how do you explain the general opinion that we are very badly in need of a major catch-up with all manner of infrastructure and services, after having had very ‘good’ economic growth for many years?

You can’t explain that.

You can’t can you. I challenge you to explain this.

Crikey, even from a Sydney/Melbourne-centric point of view, you still couldn’t deny that this is the case.

Bear a thought for all those people living in Sydney’s western suburbs.

<< Not to mention a heap of improvements planned for public transport around Australia's premier city. >>

Well there you go! Why should a heap of improvements be needed at this point in time, after 20 or 30 years of high economic growth?? Especially given that transport infrastructure has always been near the top of the agenda!

See, you’ve just shot your argument in the foot…. again!

continued

<< Where's your evidence that this would have happened without the increased prosperity that has been measured by GDP? >>

Wrong question. It basically wouldn’t have needed to happen if we hadn’t been burdened with very high immigration! The increase in economic turnover that has been accompanied by an almost equal increase in the demand for everything that this economic growth should be providing, has simply NOT led to real increases in prosperity.

As usual Pericles, you are only seeing one side of the picture. Think about the massive increase in the DEMAND for services, infrastructure and everything else that has accompanied the increase in GDP over the last 2 or 3 decades.

I wrote:

>> Our economy is not crumbling around us…..yet. <<

You replied:

<< I'm really glad that you have finally come around to that position. >>

Hahaha. That’s always been my position, and you know it. You should have just admitted that. But of course, that was never going to happen. ( :> /

The underlying problem of your assessment, Ludwig, is that you cannot see the bigger picture. Everything comes down to whether you personally feel better off or not, and not whether actual measurements tell a different story.

You haven't ever run a business, but let's see if you can follow the logic here..

Let's consider the "GDP" of Joe.

Joe finds a way to make widgets in his garage. He makes a profit, enough to keep himself and his family, with a bit left over. His "GDP" is measured in tens of thousands of dollars.

He borrows some money to build a widget factory that employs a handful of people. He makes enough to keep himself and his family, to pay the interest on the debt, with a bit left over. His "GDP" is now measured in millions of dollars.

He goes back to the bank, and gets enough credit to open new production lines in his factory, and is now able to employ thousands of people. He makes enough to keep himself and his family, to pay the interest on the debt, with a bit left over. His "GDP" is now measured in hundreds of millions of dollars.

Every one of those employees buys groceries at the local market, provides employment for doctors, dentists, car salesmen, real estate agents etc. Their taxes pay for roads, transport, schools and teachers, plus the odd foray of a pollie to the local brothel.

That's called an economy. Thousands of elements combining to form financial relationships between people, business and government.

But under Ludwignomics, Joe would not have moved from his garage, as you neatly summarize it here:

>>The increase in economic turnover that has been accompanied by an almost equal increase in the demand for everything that this economic growth should be providing, has simply NOT led to real increases in prosperity.<<

But without the increase in the "GDP" of Joe, there would be less work for a whole lot of people, not to mention a shortfall in taxes to employ loads of public servants.

Is it starting to make more sense now?