Per capita income, or GDP per capita, is a measure of the total output of a country that takes the population size into account. It is calculated by dividing a country’s total GDP by its total population and is expressed in dollars per person per year. Per capita income is often used as a measure of a country’s standard of living. A higher per capita income generally indicates a higher standard of living in a country.
In this article, we will compare Australia’s per capita income to other major economies to understand where Australia stands in terms of economic prosperity. Some key questions we will explore include:
- What is Australia’s GDP per capita?
- How does Australia’s per capita income rank among OECD countries?
- Which countries have higher per capita GDP than Australia?
- Has Australia’s per capita income grown over the past decades?
- What factors drive Australia’s per capita income growth?
By analyzing these questions, we will develop a perspective on Australia’s relative economic performance and standard of living. Understanding how Australia compares on per capita income can provide insights into the country’s economic strengths, weaknesses, and future growth potential.
Australia’s GDP Per Capita
According to the World Bank, Australia’s GDP per capita was $53,799 in 2020. This measures the country’s total economic output divided across its population of 25 million people.
Australia has one of the highest GDP per capita figures among major advanced economies. The high income indicates a prosperous economy and a relatively high standard of living for Australians.
However, Australia’s GDP per capita is lower than regional peers like Singapore ($58,843) and Hong Kong ($46,194). Among the world’s largest economies, Australia trails the United States ($63,544) but is ahead of countries like Japan, Germany, France and the United Kingdom.
GDP Per Capita Growth over Time
Australia’s GDP per capita has increased substantially over the past decades:
| Year | GDP per capita |
|---|---|
| 1980 | $12,023 |
| 1990 | $20,844 |
| 2000 | $26,992 |
| 2010 | $42,832 |
| 2020 | $53,799 |
In 1980, Australia’s GDP per capita stood at just over $12,000. By 2020, it had grown over 4 times to surpass $53,000. This reflects a long-run trend of solid economic growth and rising prosperity in the country.
Much of the growth came between 2000-2020, when Australia benefitted from a resources boom driven by Chinese demand. The mining sector generated large profits and tax revenues that were reinvested into the economy.
Australia’s Ranking Among OECD Countries
The Organisation for Economic Cooperation and Development (OECD) is a group of over 30 democratic countries with advanced, market-based economies. How does Australia’s economic prosperity compare within this group?
Among OECD member countries, Australia ranked:
- 6th highest in GDP per capita in 2020
- 11th highest in GDP per capita in 2000
So Australia has moved up the rankings table over the past 20 years as its economy expanded rapidly.
The countries with higher GDP per capita than Australia among OECD members are:
| Rank | Country | GDP per capita 2020 |
|---|---|---|
| 1 | Luxembourg | $104,655 |
| 2 | Switzerland | $81,867 |
| 3 | United States | $63,544 |
| 4 | Norway | $61,466 |
| 5 | Ireland | $59,660 |
The leading OECD economies with higher per capita output than Australia are generally small, advanced European nations along with the large United States market. Australia comes close to matching the per capita income of these developed peers.
Per Capita Income Growth Rates
Looking at growth rates, Australia’s per capita income has increased at roughly 2-3% per year over the past two decades:
| Period | Average annual GDP per capita growth |
|---|---|
| 2000-2010 | 2.7% |
| 2010-2020 | 2.2% |
This is a slower pace of growth than developing economies in Asia and elsewhere. But among advanced economies, it represents a solid growth trajectory for Australia’s standard of living.
The OECD average annual growth rate was only 1.3% over the past decade. So Australia has outpaced most of its developed country peers in per capita income expansion since the year 2000.
Comparison to Major Economies
Now let’s see how Australia specifically compares to some other major economies on a GDP per capita basis:
United States
– 2020 GDP per capita: $63,544
– Australia rank vs. US: 2nd
The United States has the world’s largest economy, with a GDP per capita of over $63,000. This is around 18% higher than Australia’s.
The US has benefitted from industries like technology and financial services. It also has a very large domestic consumer market.
However, the US also has higher income inequality than Australia. So the country’s overall prosperity is not shared equally across the population.
Japan
– 2020 GDP per capita: $40,246
– Australia rank vs. Japan: 2nd
Australia overtook Japan in terms of GDP per capita in the early 2000s and has remained higher since.
Japan is a significant industrial and technological power. But it has experienced stagnant growth and deflationary pressures over the past two decades. Its aging, shrinking population is weighing on economic expansion.
Germany
– 2020 GDP per capita: $45,466
– Australia rank vs. Germany: 2nd
Germany is Europe’s largest economy and has strong manufacturing and industrial sectors. Australia surpassed Germany in GDP per capita in the 2010s as its mining boom accelerated growth.
Germany has a larger population of over 80 million, so its total GDP remains higher than Australia’s. But Australia’s smaller population means higher output per person.
United Kingdom
– 2020 GDP per capita: $41,159
– Australia rank vs. UK: 2nd
Australia overtook the UK in per capita income in the early 2000s during an extended period of robust Australian growth.
The UK economy has faced challenges in recent decades as the once-dominant British manufacturing sector declined. However, London remains a major global financial hub.
France
– 2020 GDP per capita: $40,494
– Australia rank vs. France: 2nd
Australia has historically had a GDP per capita similar to France, but pulled ahead over the past decade.
France has a diverse, advanced economy and is among the world’s most visited countries. But its economic growth has lagged other European nations in recent years.
China
– 2020 GDP per capita: $10,500
– Australia rank vs. China: 1st
Australia’s per capita income is currently over 5 times higher than China’s. This reflects the still-developing status of China’s economy.
However, China’s GDP per capita has grown at nearly 9% annually over the past 20 years. If it maintains strong growth, China could catch up to Australian standards of living over the next 1-2 decades.
Drivers of Australia’s Economic Growth
What factors explain Australia’s relatively high GDP per capita ranking and growth rates?
Resources Boom
Australia’s extensive natural resources including coal, iron ore and gas have driven strong export revenues, especially to fast-growing Asian markets like China.
Services Sector
Although mining played a huge role, Australia also has a vibrant services economy including finance, tourism, education and professional services. Services generate around 70% of national output.
Skilled Workforce
Australia has a highly educated, skilled workforce to power advanced services and technology industries. Nearly 45% of Australians aged 25-64 hold a tertiary education qualification.
Immigration
Australia maintains positive net immigration of over 200,000 people per year on average. Immigration expands the workforce and drives economic growth. Over 28% of Australians are foreign-born.
Trade Partnerships
Australia has pursued extensive trade agreements with nations worldwide, helping drive exports. Key partners include China, Japan, South Korea, the US and ASEAN.
Economic Reforms
Pro-market reforms since the 1980s like floating the Australian dollar and reducing trade barriers have boosted efficiency and resilience.
Conclusion
Australia’s GDP per capita has grown rapidly over the past 40 years, reaching over $53,000 in 2020. This places Australia among the top ten highest income countries in the OECD and 6th overall within the group.
Key drivers like mining exports, skilled immigration and an efficient services sector have allowed Australia to overtake the per capita incomes of similar sized developed economies like the UK, Japan and Germany.
Looking ahead, Australia faces challenges to sustain its growth. An aging population, high household debt levels, and potential global instability require prudent economic policies to maintain Australia’s high standard of living. But with strong fundamentals, Australia is well positioned to remain a leading advanced economy.