Andrew Leigh

LAUNCH OF THE AUSTRALIAN SOCIAL PROGRESS INDEX

PARLIAMENTARY FRIENDS OF SOCIAL SCIENCE

PARLIAMENT HOUSE

WEDNESDAY, 26 FEBRUARY 2020

My name is Andrew Leigh, one of the three convenors of the Parliamentary Friends of Social Science, along with Dave Sharma and Adam Bandt. Thanks to my colleagues Pat Conroy and Matt Keogh for attending. I acknowledge the Ngunnawal people, and thank Kristy Muir and Megan Weir for their fascinating presentations.

As you well know, the conversation we're having around better measurement of wellbeing is one that's been occurring around the globe - the OECD's Better Life Index, the Millennium Development Goals, the Sustainable Development Goals, the Stiglitz-Sen-Fitoussi Commission, the Australian Bureau of Statistics Measures of Australia's Progress publication (which came out from 2002 to 2014). There’s also New Zealand's move to wellbeing budgeting, which my colleague Jim Chalmers said last week he would pursue were he to become Treasurer, looking at a broader range of indices alongside GDP, such as environmental performance, suicide and homelessness.

As my friend John Quiggin likes to say, there's three big problems with GDP - it's gross, it's domestic, and it's a product. By which John means it's gross - it doesn't net out the depreciation of physical and environmental assets. It's domestic, so it doesn't net out income paid overseas. And it's a product, so it doesn't account for labour inputs. There is a fairly straightforward tweak we can do here, which is to focus on real net national disposable income per capita. Certainly, that's the measure that I focus on at when I look at the national accounts, because it gives me a metric that is much closer to household wellbeing.

The presentation you've just seen is one that puts the ACT number one, so it would be tempting for me as a proud ACT representative simply to say this is terrific and sit back down. But as a professor-turned-politician, I can't resist making a couple of observations that flow from work that my economic colleagues and I have done around these issues. The first is a research paper by Betsey Stevenson and Justin Wolfers, which debunks the Easterlin paradox - demonstrating that the so-called Easterlin paradox was really just a function of having too little data. Once we were able to measure - through Gallup's world happiness survey – results for a large number of countries, we see there's an extremely close relationship between self reported life satisfaction and log GDP. For those who think in correlations, the correlation is 0.82, which is remarkably high.

There's also the work that Paul Frijters did when he was at the Australian National University and now the London School of Economics, looking at measures of wellbeing to look at things that economic metrics don't capture particularly well, such as the effect of life shocks, including marriage, divorce and job loss on wellbeing. If we just look at income, we can miss some of the largest impacts. Job loss has a significant and ongoing impact on wellbeing, a finding that really matters from a policy standpoint. It reminds us that work brings us much more in terms of wellbeing than simply a pay cheque.

Finally I want to mention work done by my late co-author Sir Tony Atkinson. A book of his has just been published posthumously, Measuring Poverty Around the World. It looks very carefully at the questions as to when measuring poverty we want to use an index approach or a dashboard approach. It led me to support a  dashboard approach. That’s partly because it is much more difficult to communicate indices than dashboards, and the interpretability of that allows us to have a broader debate around wellbeing. As I say, I make this point only reluctantly given that the index approach does put the ACT on top of the pack!

The challenges that Australia faces over coming decades include addressing climate change, social disconnection and inequality. These are not well measured by GDP, or even my preferred measure of real net national disposable income per capita. So a broader conversation about wellbeing is critical. Thank you for being a vital part of that discussion.

ENDS

Authorised by  Paul Erickson, ALP, Canberra.