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By InvestSMART · 7 Sep 2013

By InvestSMART ·
7 Sep 2013

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Everyone knows there's more to national success than gross domestic product and cold economic numbers. But deeper measures of Australia's collective wellbeing have been largely overlooked during the election campaign.

When it comes to wellbeing, Australia's statistics rival the supercharged growth rates of the Asian tigers. Fairfax Media-Lateral Economics wellbeing index rose 7 per cent last financial year, a figure comparable to China's economic growth rate.

Economists are getting much better at measuring wellbeing. Political leaders in nations comparable to Australia, including Canada, France and Britain, say wellbeing should be considered alongside GDP, which only measures economic activity.

"GDP is a bit like the KWERTY keyboard - it's the standard, and people keep returning to it," says Nicholas Gruen, the respected economist who created the index. "But in many other countries there is a conversation going on at the highest level saying these numbers are too narrow and we're committed to broadening our vista as to how we measure how successfully we're going. Politicians of the left and right around the world have made commitments to do this kind of stuff. There is a political hankering for it."

Dr Gruen is flabbergasted the Labor government hasn't drawn more attention to measures of wellbeing, especially during this election campaign.

"If there's a symbol of the ALP government's inability to communicate its achievements, the wellbeing index is it," he says. "It's a gift they've ignored because it was slightly different from the standard boiler plate story like prices in western Sydney or whatever."

The index puts a dollar figure on wellbeing using five broad components - income, know-how, environmental change, inequality, health and job satisfaction. It shows the annual value of Australia's collective wellbeing has surged by more than $250 billion since the last election. That's about twice the increase in GDP in that period. Gruen describes this as "growth of Asian Tiger proportions".

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Frequently Asked Questions about this Article…

What is the Fairfax Media–Lateral Economics wellbeing index and why does it matter to everyday investors?

The Fairfax Media–Lateral Economics wellbeing index puts a dollar figure on Australia’s collective wellbeing by combining five broad components (income, know‑how, environmental change, inequality, and health and job satisfaction). For investors it matters because it offers a broader read on national prosperity than GDP alone — the article notes the index has shown strong growth that could complement traditional economic indicators when assessing the macro backdrop.

How much did Australia’s wellbeing index grow recently?

According to the article, the index rose 7% in the last financial year and the annual value of Australia’s collective wellbeing has surged by more than $250 billion since the last election — roughly twice the increase in GDP over the same period.

What five components make up the wellbeing index?

The index is built from five broad components: income, know‑how, environmental change, inequality, and health and job satisfaction.

How is wellbeing measured differently from GDP, and why is that important?

GDP measures economic activity, while the wellbeing index aggregates monetary values for income, skills (know‑how), environmental change, inequality and health/job satisfaction to capture a broader view of national success. The article highlights that policymakers in countries like Canada, France and Britain are increasingly treating wellbeing as a complement to GDP.

Who is Nicholas Gruen and what role did he play in the wellbeing index?

Nicholas Gruen is the economist who created the Fairfax Media–Lateral Economics wellbeing index. In the article he argues that GDP is the familiar standard but too narrow, and he criticises the Australian Labor government for not publicising the index more during the election campaign.

Did the federal government use the wellbeing index in the election campaign?

The article says Dr Gruen was 'flabbergasted' the Labor government didn’t draw more attention to the wellbeing measures during the election campaign, calling the index 'a gift they’ve ignored' because it didn’t fit the usual boilerplate stories.

Are other countries adopting wellbeing measures like Australia’s index?

Yes. The article notes that political leaders in comparable nations such as Canada, France and Britain are talking about considering wellbeing alongside GDP, and making commitments to broaden how national success is measured.

What practical takeaway should everyday investors get from the rise in Australia’s wellbeing index?

The article suggests the strong rise in the wellbeing index—7% in one year and a $250 billion gain since the last election—signals improvements across multiple areas of the economy beyond GDP. For everyday investors, that means wellbeing data can be a useful complementary indicator of national resilience and longer‑term social and economic trends, alongside traditional metrics like GDP.