Measuring what matters: wellbeing and our economy

The Global Financial Crisis (GFC) of 2007–08 was the most severe economic disaster to rock the world since the Great Depression of 1929. Worldwide, millions lost their jobs, while many banks needed urgent government bailouts to avoid collapsing into bankruptcy.

 

While the financial world teetered on the brink, in global terms, Australia fared well during the GFC, despite slowed economic growth, higher unemployment rates and a period of heightened uncertainty.

 

It therefore speaks volumes about our current situation that Australians right now are significantly less satisfied with the economy than they were during those difficult GFC days. In fact, our satisfaction levels have plummeted to a 22-year low in the Wellbeing Index.

 

 

Increasing financial and economic pressure—and its impact on our wellbeing

 

“Australians are feeling worried about the economy and financially stressed,” admits lead researcher Dr Kate Lycett. “In February 2023, a national survey from the Melbourne Institute showed that just over half of people surveyed reported that they were struggling to make ends meet.”

 

The Australian Unity Wellbeing Index (AUWI) is a 22-year study into the wellbeing of Australians, conducted in partnership with Deakin University. This year, the research shows that many of us are feeling the pinch and worried about the economy. Every age group recorded lower satisfaction levels with the economic situation in Australia compared to 2022. Amid rising inflation and cost-of-living pressures, younger adults aged 18 to 45 were notably less satisfied with the economic situation than those aged 76 and over.

 

“There were rises in living costs across the board, but obviously they were particularly hard for people who had mortgages, because of the interest-rate rises, and also for young people with rent prices going up,” says Kate.

 

“If you are trying to get into the housing market, for instance, the economic situation is particularly challenging.”

 

How much does this financial unease impact on our national wellbeing? The research shows there’s an unavoidable link. “Satisfaction with the economic situation in Australia dropped sharply and people's satisfaction with life in Australia overall remained at a record low,” says Kate. “So, I think it's a very big factor.”

 

Despite our collective concern over the state of the economy, satisfaction with our overall standard of living—or financial wellbeing—remains steady. The 2023 score remains around the middle of the average range. This doesn’t constitute a decline from last year’s results, although it still represents a significant drop from the all-time high of 81.2 in 2020. There is, however, a clear generational divide, with standard-of-living satisfaction conspicuously lower for those aged 55 and under compared to those aged 56 and over.

 

Yet the overall stability of these standard-of-living results should offer no meaningful consolation, explains Esther Kerr, Australian Unity’s CEO of Wealth and Capital Markets.

 

“We should not be taking any comfort from standard of living holding steady. In fact, if the economy was improving and growing in a productive way, our standard of living should be rising.”

 

The connection between economic policy and wellbeing

 

On a more encouraging note, the Australian Government released its Measuring What Matters Statement in July, which aims to align Australia's economic and social goals. Essentially, this "wellbeing framework" looks to broaden Australia’s metrics of national success beyond the traditional measures of gross domestic product (GDP), inflation and unemployment to consider the societal and wellbeing impact of policy decisions.

 

“This idea of the wellbeing economy is about measuring the ultimate outcomes of all policy initiatives and ensuring that dollars are spent in service of wellbeing outcomes,” says Esther. “If we only have a fiscal budget, we are only measuring intermediate outcomes—not whether they've worked or not.

 

“To understand whether it's effective and achieving what we want for a healthy, happy and resilient economy and society, we need to know what's happening in wellbeing. They both are necessary and they should be complementary.”

 

Shaping our financial wellbeing

What this year’s AUWI results unequivocally show is that the Measuring What Matters Statement is a big step in the right direction. But, they also highlight new lows in satisfaction with the economic situation in Australia and people’s standard of living (financial wellbeing), particularly for those aged 55 years and under.

Each of us has an important role to play in our own financial wellbeing, but it is also undeniably shaped by broader environmental factors—such as affordability of childcare, education, aged care and housing—and the policy decisions that drive them. Esther points to that stark generational divide in satisfaction with standard of living as an example of this.

"Pre- and post-retirement, there is a substantial difference in how people feel about their standard of living," she says. “I'm not saying we shouldn't be supporting people to have a great retirement and old age. But it’s no coincidence that retired cohorts with healthy super balances and no mortgage have higher wellbeing.

 

“Given the disparity, we need more attention on the prospects and the standard of living and the wellbeing—pre-retirement—for people in their 20s, 30s and 40s."

The Australian Government’s new emphasis on wellbeing is a positive development. But the very composition of the phrase “wellbeing economy” emphasises the importance of the financial elements that underpin Australians' wellbeing. This year's Wellbeing Index results only serve to further highlight the connection between our economy and our wellbeing.

“If we are going to boost Australian’s wellbeing,” says Kate, “we have to see a change in the economic situation of the country, and one that prioritises wellbeing of younger Australians.”