Inspect the following graph. See if you can interpret the informaton shown.

https://ajmblogger.com/wp-content/uploads/2026/08/image-3.png

Brief commentary

• Real GDP rose about 21% from 2016–17 to 2025–26, but population rose about 14%. Consequently, the improvement in real GDP per person is much smaller — only around 6% over the decade. The 2025–26 GDP figure is an estimate rather than a completed-year outcome. ABS national accounts confirm the relatively weak recent growth: real GDP grew 1.5% in 2023–24 and 1.3% in 2024–25.
• Government payments per person show a very different pattern. They surged during COVID, reaching an index of about 134 in 2020–21, then fell back as emergency programs ended. Nevertheless, by 2025–26 the spreadsheet has real payments per person around 17½% above 2016–17. The underlying Treasury measure is CPI-adjusted government payments per capita.
• Real tax collected per person has also risen by roughly 17½%. Unlike expenditure, it did not have the same enormous COVID spike; it climbed more steadily, particularly after 2020–21. Tax receipts are estimated at 23.6% of GDP in 2025–26, compared with 21.6% in the spreadsheet’s 2016–17 starting year.
• Productivity is the standout weak series. GDP per hour worked is only about 1% above its 2016–17 level by 2024–25, after briefly improving during the pandemic period. ABS stresses that labour productivity means real output per hour worked and that the trend, rather than individual annual movements, is what matters.

Implications

1. Headline GDP growth considerably overstates the improvement experienced per person. Once roughly 14% population growth is allowed for, the increase in output per person is modest.
2. Government activity has expanded faster than productive capacity. Real payments and real tax receipts per person are around 17–18% higher, while measured labour productivity has barely increased. That does not establish that government spending caused weak productivity, but it highlights a growing mismatch worth investigating.
3. The COVID spike should not be interpreted as a permanent expansion of normal government services. Much of the 2020–21 peak was extraordinary fiscal support; the more interesting finding is that expenditure per person subsequently settled above the pre-COVID trajectory.
4. Productivity looks like the central long-run constraint. Population can increase total GDP, and governments can increase spending and taxation, but sustained gains in wages and living standards ultimately require greater output per hour worked. ABS makes that connection explicitly.

References for the spreadsheet

The source sheet I included identifies: Australian Government Budget 2026–27, Statement 11 for historical payments and receipts; MYEFO 2024–25, Appendix E, Table E.11 for real per-capita payments and taxation; ABS National Accounts for real GDP; ABS National, State and Territory Population for population; and ABS productivity statistics for GDP per hour worked. The latest ABS population release reports 27.80 million people at December 2025 and annual population growth of 1.5%.

A more readable discussion is found next.

Australia is growing, but are Australians better off?

Australia’s economy is considerably larger than it was a decade ago. But that simple statement conceals a much less impressive story.

Since 2016–17, real GDP has increased by about 21 per cent. Population, however, has increased by around 14 per cent. Once population growth is taken into account, the increase in real output per Australian is only about 6 per cent.

Even more striking is productivity. Output per hour worked has barely increased over the period.

Put these measures beside government taxation and expenditure and an interesting picture emerges.

Australian real GDP, population, real GDP per capita, real government payments per capita, real taxation per capita and labour productivity, 2016–17 = 100]

Sources: Australian Bureau of Statistics, Australian National Accounts; ABS National, State and Territory Population; ABS productivity statistics; Australian Government Budget papers and MYEFO. Author’s calculations. All series indexed to 2016–17 = 100.

Growth looks different per person

GDP is useful for measuring the size of an economy, but it is a poor measure of whether the average person’s economic circumstances are improving.

Australia illustrates the distinction particularly well.

Real GDP increased substantially over the decade, but so did the number of people sharing that output. The gap between the GDP and population lines on the graph therefore matters more for living standards than the GDP line by itself.

Real GDP per capita increased only modestly.

This does not mean Australians are only 6 per cent “better off”. GDP per capita is not a complete measure of welfare. It says nothing directly about the distribution of income, housing costs, environmental quality, unpaid work or the quality of public services.

But it does tell us that much of Australia’s headline economic expansion has come from having a larger population rather than producing dramatically more for each Australian.

Government grew faster

The government figures tell another part of the story.

Real Australian Government payments per person rose sharply during COVID as extraordinary support measures were introduced. That spike subsequently unwound, as it should have.

More interesting is where expenditure settled afterwards.

By 2025–26, real government payments per person are roughly 17 per cent above their 2016–17 level.

Real taxation per person has followed a different path but arrives at a remarkably similar result: approximately 17 per cent higher than in 2016–17.

This should not be interpreted as demonstrating that increased government spending caused Australia’s weak productivity performance. The graph establishes no such causal relationship.

It does, however, raise a legitimate public-policy question.

Australians are contributing substantially more tax per person in real terms and governments are spending substantially more per person. What additional economic and social outcomes are we receiving for that increased commitment of resources?

That is a question worth asking regardless of one’s political persuasion.

Productivity is the problem

The most concerning line on the graph is perhaps the least dramatic visually: labour productivity.

Output per hour worked is barely above where it was in 2016–17.

Productivity matters because sustainable increases in real wages and living standards ultimately depend heavily on our ability to produce more value from each hour of work.

Population growth can make GDP larger. Higher commodity prices can increase national income. Governments can tax and redistribute income.

None of these, by themselves, ensures continuing improvement in living standards.

Productivity growth provides something fundamentally different: the capacity to produce more without simply requiring proportionately more labour.

Australia has struggled to achieve that.

The unusual movements during the pandemic should also make us cautious about reading too much into individual years. Changes in the composition of employment and hours worked temporarily affected measured productivity. The longer trend is much more important.

And that trend is weak.

The question we should ask

Political debate frequently focuses on whether GDP is growing, whether government spending should increase or decrease, and whether taxes are too high or too low.

Perhaps these are not the most useful starting questions.

A better question may be:

What additional value are Australians receiving from the additional resources being used?

If population rises substantially but GDP per person barely moves, economic growth alone is not enough.

If taxation and government spending per person rise substantially but productivity barely changes, simply arguing about the size of government misses an important part of the problem.

And if productivity remains stagnant, governments eventually face increasingly difficult choices between taxation, services, deficits and household living standards.

Australia has certainly grown during the past decade.

The more important challenge is ensuring that the next decade produces substantially more growth per Australian and per hour worked, rather than simply a larger economy.