Australia is sliding down the ranks of purchasing power and in US dollar terms we can’t nearly buy as much as we could at the peak of the commodities boom.
As recently as last year, gross domestic product per person in Australia (in USD terms) was the fifth highest in the world. Only Luxembourg, Norway, Qatar and Switzerland outranked Australia in 2014, Deutsche Bank points out.
For 2015, however, the International Monetary Fund estimates Australia’s ranking will drop from fifth, to ninth.
Deutsche chief economist Adam Boyton expects the country to fall further down the rankings due to a continuing plunge in the dollar and lower nominal GDP growth over the next years.
“If we apply our 2015 and 2016 forecasts for nominal GDP growth in Australia (and assume 5 per cent nominal growth in 2017) as well as our forex forecasts – a decline in the AUD to 65 US cents by end-2016 and 60 US cents by the end of 2017 – then Australia’s ‘ranking’ falls from ninth in 2015, to 11th in 2016 and then 17th in 2017, Mr Boyton wrote in a note to clients.
A further decline in the dollar was a necessary element of the economy’s transition to non-mining led growth.
Mr Boyton said that the strong Australian dollar during the boom years had also led to a surge in online shopping from offshore retailers and overseas tourism, which allowed a large number of Australians to benefit from the mining boom.
“As the Australian economy and the Australian dollar adjust to the end of that boom, one of the unfortunate ‘side-effects’ will be a decline in the global purchasing power of Australians,” Mr Boyton added.