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Is Gross Domestic Product a Fair Comparison?

New publication explores how global demands have changed the way we think and measure national progress, and what the results really mean.

The Australian Bureau of Statistics Measures of Australia’s Progress project looked into what was important for Australians in terms of national progress; many contributors identified health, safety, environmental protection and effective governance as important.

The latest thought leadership publication from future[inc] takes that thinking to the next stage and looks at additional measures to better understand national progress. Is policy making measuring up: Rethinking how we measure the success of a nation explores how global demands have changed the way we think and measure success and what the results really mean.

Head of Leadership and Advocacy, Rob Ward FCA, said that the paper questions the way success is currently being measured and argues that GDP is insensitive to much of what a nation truly values.

“The greatest risk is not addressing the things that matter, including social and environmental factors, when painting a picture of progress. GDP is not a welfare measure, but rather a measure of economic activity.

“In a globally competitive market it has become hard to avoid comparing nations when measuring success. Success is typically measured by GDP; this measure is narrow and if we continue to tie our success to this measurement we will miss the impact of policies,” Mr Ward said.

Alternative indices are examined that compare Australia and New Zealand with vastly different results.

“Countries have different strengths and weaknesses and these will be reflected in the indices used to alternatively measure and benchmark growth.”

Is policy making measuring up: Rethinking how we measure the success of a nation is part of the future[inc] series and ensures that the way we look at society, government and business captures the future that we are already shaping.

“The measure of productivity and our GDP is important and will continue to be. But it would be remiss to just stop there. We call on policy makers, government and statistical agencies to identify alternative measures which can be reported alongside GDP to provide greater insight into the progress of a nation,” Mr Ward said.

For more information about future[inc], visit charteredaccountants.com.au/futureinc.

This article was contributed by Chartered Accountants Australia and New Zealand.