I wrote about modern economics is such junk and then went out and picked up the AFR only to find across its front page that living standards in Australia are falling. The story opens:

The national income generated by each Australian has fallen for a second straight year, the first such slump since the early 1990s recession as the economy wears a sharp pay cut from the rest of the world.

Does anyone any longer base policy on the understanding that growth only occurs if what is poduced is greater than the value of the resources that are used up? The ALP set about killing off our most value adding industry through the mining tax and promoted such imbicilities as the NBN which will always be a drain on national productivity, now and forever as far into the future as you care to look. The only thing that is strange to relate is that the national accounts are even able to pick up that living standards actually are falling given what a faulty measure GDP intrinsically is. My son is astounded, as he hunts around for a place to buy, at the difference between the ratio of house prices to income in my day compared with his. The national accounts imputes the rising value of the houses we live in as a real increase in GDP so that we home owners are contributing to GDP by simply living in the places we bought years ago whose value has now gone up. That most of us could not afford our own homes today is neither here nor there.

Yet for all of the obstacles put in the way of the government by the Senate and Labor’s legacy, we are actually making progress. That the Government has been able to reverse the increases in compulsory superannuation is all to the good. These are very difficult times, but how difficult they will be when the US Fed finally does begin to raise rates is still to be seen.