An Assessment of the Importance of GDP in Measuring Australia’s Economic Wellbeing

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Outline

Introduction

(Draft)

Is the GDP the best economic indicator for Australia’s wellbeing?

2014, alternative indicators referred to as Australia’s Progress Measures were withdrawn by the Australian Bureau of Statistics (ABS).

Huge budget reductions leading to the ABS to terminate the program that gathered and released data to supplement gross domestic product

Even with the increase of global usage of GDP, the reductions have been made

Sustainable Development Goals (SDGs) program of the United Nations also highlights the requirement for further steps forward.

The GDP is not the best economic indicator for Australia’s wellbeing because it excludes a lot of important measures and should be complemented with other realistic indicators that are indicative of overall progress and wellbeing of society

Body 1

Topic Although growth in GDP is compared to expansion, it does not fully capture an acceleration of public wellbeing

Explanation Since the Second World War, when it was accepted as a macroeconomic indicator at the global and national level, Gross Domestic Product has functioned as a proxy indicator of national economic growth (Kenny et al., 2019).

Evidence GDP has little relevance as a measure of social welfare, and its expansion may even lead to adverse social results (Kenny et al., 2019).

Its old accounting systems overlook the social and environmental elements underlying successful societies and fail to understand that commercialized economic activity is a means to society’s well-being and growth and not the goal (Joseph, 2020).

Link GDP is thus a faulty measure of Australian economic well-being and is supplemented by other genuine metrics that indicate general advancement and well-being in societies.

Body 2

Strategies Topic Standard of living is a significant indication covering numerous elements, some not purchased and sold on the market.

Explanation Standard of living is a better indicator of the wellbeing of a society

Evidence The per-capita GDP level, for example, reflects a little of what we imply by living standards, as shown by the fact that the majority of population movement in the globe includes individuals migrating from relatively low GDP per capita to relative high GDP per capita nations (Aitken, 2019).

GDP is indeed a rough marker of a society’s living standards since it doesn’t effectively take account of recreational time, environmental stewardship, levels of health and education, external market activities, income inequality changes, increases in a variety of income, technological increases or societal values placed on certain types of output (positive or negative) (Joseph, 2020).

Link So GDP is a limited tool for evaluating standards of living since it is not possible to buy and sell many elements which contribute to the achievement of individuals.

Body 3 T The objective of macroeconomic policies and other public agendas should not be confined to attaining high outputs on the one hand and completely neglecting other measures on the other such as the case with GDP.

E GDP should be supplemented by other genuine metrics that indicate general advancement and well-being in societies.

E Nevertheless, while GDP may not measure the wider living standards accurately, it measures output effectively.

It shows when a country in terms of employment and incomes is much better or worse.

In most nations, GDP per capita is substantially greater along with other daily gains in many ways such as education, health and environmental protection.

L Therefore, comparisons between two nations show how the GDP is incomplete in determining the overall economic wellbeing of a nation.

Body 4

T GDP covers the protection of the environment as well as education and healthcare expenditures yet excludes real sanitation standards, wellness or learning Environment

E GDP covers the costs of purchasing pollution control technology yet does not cover the question of air and water being cleaner or dirtier

E GDP does include medical care expenditure, yet it does not deal with the rising or falling life expectancy or child mortality

L GDP also includes education expenditure, but it does not directly address the extent to which fundamental mathematics can be read, written or made by the people.

Conclusion

(Draft)

Fluctuations in a country’s gross domestic product were the most commonly acknowledged metric of economic development.

The worth of all the final products and services produced and exchanged for cash within a specific period is estimated on market performance.

This generally involves a combination of expenses of personal consumption in a country such as settlement for products and services by individuals; state spending such as products and services spending by the public, infrastructure, and loan repayment.

Others include net exports; export value minus import value and net wealth creation such as growth in state’s total assets value.

On the other hand, economists have frequently warned that GDP is not and should not be a welfare metric.

Notably, it is extremely skeptical that long-term changes in the welfare rate can even be measured by changes in the rate of development of production.

Despite these cautions, the public, policymakers and economists commonly utilize it as a welfare representative.

Draft Essay

Is the GDP the best economic indicator for Australia’s wellbeing? This question has been debated for years and there seems to be no right or wrong answer for it. For some nations, the GDP has been one of the most effective measures to determine overall economic progress. For others, it is not very effective because it lacks other elements such as leisure and social happiness as a part of its composition. In 2014, alternative indicators called Australia’s Progress Measures were withdrawn by the Australian Bureau of Statistics (ABS). Huge budget cuts led the ABS to end the program that was used to gather and release data to support the GDP. Some of the alternative measures touched on the environment, public health, the standard of education, and community well-being. Internationally, the GDP continues to be used to indicate wellbeing. This happens despite The UN’s Sustainable Development Goals (SDGs) highlighting a need to increase indicators of wellbeing for countries. The GDP is not the best economic indicator for Australia’s wellbeing because it excludes a lot of important measures and should be complemented with other realistic indicators that are indicative of overall progress and wellbeing of society.

Although growth in GDP is compared to expansion, it does not fully capture an acceleration of public wellbeing. Since the Second World War, when it was accepted as a macroeconomic indicator at the global and national level, GDP has functioned as an indicator of national economic growth (Kenny et al., 2019). This means that growth in GDP is comparable to progress and betterment of a society. Further, GDP is now the norm for economic health, hence societal well-being, based on the idea that more economic growth is connected to improvements in well-being. However, research shows that GDP has little relevance as a measure of social welfare, and its expansion may even lead to adverse social results (Kenny et al., 2019). Its old accounting systems overlook the social and environmental elements underlying successful societies and fail to understand that commercialized economic activity is a means to society’s well-being and growth and not the goal (Joseph, 2020). GDP is thus a faulty measure of Australian economic well-being and is supplemented by other genuine metrics that indicate general advancement and well-being in societies.

Standard of living is a significant indication covering numerous elements, some not purchased and sold on the market. The per-capita GDP level, for example, reflects a little of what is implied by the term living standards, as shown by the fact that the majority of population movement in the globe includes individuals migrating from relatively low GDP per capita to relative high GDP per capita nations (Aitken, 2019). GDP is indeed a rough marker of a society’s living standards since it doesn’t effectively take account of recreational time, environmental stewardship, levels of health and education, external market activities, income inequality changes, increases in a variety of income, technological increases or societal values placed on certain types of output (positive or negative) (Joseph, 2020). Therefore, GDP is a limited tool for evaluating standards of living since it is not possible to buy and sell many elements which contribute to the achievement of individuals.

The objective of macroeconomic policies and other public agendas should not be confined to attaining high outputs on the one hand and completely neglecting other measures on the other such as the case with GDP. GDP should be supplemented by other genuine metrics that indicate general advancement and well-being in societies. However, although GDP may not measure the wider living standards accurately, it measures output effectively. It shows when a country in terms of employment and incomes is much better or worse. In most nations, GDP per capita is substantially greater along with other daily gains in many ways such as education, health and environmental protection. Leisure time is not taken into consideration in GDP.  For instance, the US per capita GDP is bigger than Germany’s GDP per capita, but does this show that the living standards of the US are significantly greater? Not necessarily since it is also true that the average American worker has more than average German employees working several hundred hours per year. The GDP figure does not include German employees having additional weeks of holidays. Therefore, comparisons between two nations show how the GDP is incomplete in determining the overall economic wellbeing of a nation.

GDP covers the protection of the environment as well as education and healthcare expenditures yet excludes real sanitation standards, wellness or learning Environment (Aitken, 2019). In addition, GDP covers the costs of purchasing pollution control technology yet does not cover the question of air and water being cleaner or dirtier (Joseph, 2020). Moreover, GDP does include medical care expenditure, yet it does not deal with the rising or falling life expectancy or child mortality (Trewin, 2001). On the other hand, GDP covers goods traded on the marketplace yet does not encompass output which does not trade. For instance, it’s GDP that hires a labourer to mow or clean your house, but it is not GDP to do these activities yourself. In addition, it has nothing to tell regarding the extent of social disparity (Joseph, 2020). GDP is the average per capita. If GDP per capita increases by 5 per cent, it might indicate GDP is rising by 5 per cent for everybody in society or that certain groups are growing by more GDP while other groups are increasing by less or even declining GDP. In contrast, GDP has little to tell concerning accessible diversity. If a household purchases a total of 200 loaves of bread per year, the GDP is not concerned about whether they all eat brown bread or if the family is able to pick many other items, including pumpernickel, wheat, or rye (Joseph, 2020). GDP also has little to communicate about the technologies and products it offers. For instance, in 1900 or 1950, the level of life was not just impacted by what money individuals had but also by what they could purchase (Aitken, 2019). It was impossible to purchase an iPhone or desktop computer regardless of how much money they had in 1950. GDP also includes education expenditure, but it does not directly address the extent to which fundamental mathematics can be read, written or made by the people.

In conclusion, for over a half-century, fluctuations in a country’s gross domestic product were the most commonly acknowledged metric of economic development. The worth of all the final products and services produced and exchanged for cash within a specific period is estimated on market performance. This generally involves a combination of expenses of personal consumption in a country such as settlement for products and services by individuals; state spending such as products and services spending by the public, infrastructure, and loan repayment. Others include net exports; export value minus import value and net wealth creation such as growth in state’s total assets value. On the other hand, economists have frequently warned that GDP is not and should not be a welfare metric. Notably, it is extremely skeptical that long-term changes in the welfare rate can even be measured by changes in the rate of development of production. Despite these cautions, the public, policymakers and economists commonly utilize it as a welfare representative.

References

Aitken, A. (2019). Measuring welfare beyond GDP. National Institute economic review, 249, R3-R16. https://doi.org/10.1177/002795011924900110Joseph E. Stiglitz. (2020，August 1). GDP Is the Wrong Tool for Measuring What Matters. https://www.scientificamerican.com/article/gdp-is-the-wrong-tool-for-measuring-what-matters/

Kenny, D. C., Costanza, R., Dowsley, T., Jackson, N., Josol, J., Kubiszewski, I., … & Thompson, J. (2019). Australia’s genuine progress indicator revisited (1962–2013). Ecological Economics, 158, 1-10 https://doi.org/10.1016/j.ecolecon.2018.11.025 Trewin, D. (2001). Measuring wellbeing. Australian Bureau of Statistics.