AUSTRALIA is in the midst of a wellbeing boom, thanks to a surge in the value of the population’s collective know-how.
The Herald-Lateral Economics Index of Australia’s wellbeing, which measures improvements in welfare on a range of indicators – not only economic output – rose nearly four times more quickly than gross domestic product during the past year. This wellbeing boom has been driven by a marked increase in human capital, or collective know-how, which is a key component of the index. This more than offset sluggish growth in another key component – national disposable income – which has been crimped by falling commodity prices.
The estimated value of the nation’s wellbeing reached $343 billion in the June quarter, a rise of 3.9 per cent or $13 billion. It was the index’s fastest quarterly increase since it was first published last year.
The annual growth rate of the index, which takes account of income, know-how, the environment, health, inequality and job satisfaction, accelerated to 14.3 per cent.
Gross domestic product figures, released by the Bureau of Statistics this week, revealed annual growth of 3.7 per cent.
The wellbeing index has been growing at more than twice the rate of GDP growth for six years, thanks mainly to the improvement in the value of the nation’s combined knowledge – its human capital. Nicholas Gruen, the chief executive of Lateral Economics and lead author of the index, said the strong growth in the value of human capital augured well.
“The index shows that our ability to invest in ourselves is not only paying dividends but at this stage, it’s outweighing some of the bad news that’s arriving via the declining terms of trade and problems in the global economy,” he said.
A jump in the total amount of adult formal education underpinned the improvement in human capital. Lateral Economics estimates the rise in formal adult qualifications in the labour force grew by $19 billion last financial year. There was also strong growth in children’s participation in early schooling and continued growth in secondary schooling which lifted the nation’s know-how. “The
development of know-how through early childhood development, schooling and training is building up human capital at a faster rate than our purchasing power has been increasing,” the quarterly report on the index said.
One of the biggest surprises since the release of the index in December is the rise in the value of the population’s know-how.
National disposable income grew by a fairly subdued 0.7 per cent in the quarter and 2.6 per cent in the year. This made a positive contribution to wellbeing but because it was not evenly distributed, inequality was a small drag on wellbeing. The health component of the index also took away from national wellbeing, mainly because of the growing costs of obesity.
Inequality and health have been a small but consistent drag on wellbeing over the past year. The index components that assess natural capital and job satisfaction have had little impact on wellbeing over the past year.
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