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Hope for clever nation

2012
07.06

A SURGE in the value of the nations human capital – the knowledge and expertise of its people – has helped offset flagging national income growth from falling commodity prices, boosting Australias wellbeing at an even faster rate than suggested by this weeks national accounts.

The Herald/Lateral Economics index of wellbeing, which measures improvements in human welfare across a range of indicators, not just economic output, grew 2 per cent in the March quarter, compared to growth in gross domestic product of 1.3 per cent.

The biggest contributors to the human capital surge were a rise in the number of adults with formal qualifications, an increase in children in early schooling – thanks mostly to a baby boomlet – and increasing retention rates at high schools. However, rising income inequality continues to detract from wellbeing, as did a slight rise in long-term unemployment.

Its interesting – and laudable – that weve been able to increase the retention rate while unemployment has been relatively low as its easier for kids to get a job rather than go on if there are lots of jobs around, said Nicholas Gruen, chief executive of Lateral Economics and lead author of the index.

Dr Gruen said the growth in human capital was Australias best long-term defence against declining economic growth.

These things are invisible in the national accounts but are the foundation of the productivity dividends of the future. Theyre money in the bank – and one hopes a happier, more intelligent society as well.

A fall in commodity prices meant national disposable income – the biggest contributor to wellbeing – remained flat for the quarter at $285 billion, in contrast to robust growth in GDP. This is because foreigners were paying us less for the increased production. However, offsetting this weak performance, the value of the nations accumulation of human capital is estimated to have grown 7.6 per cent in the March quarter to $102 billion.

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