Economic progress over 40 years: Malaysia vs Australia — Dr Ong Hean Teik

NOVEMBER 28 — At a medical dinner recently, a young colleague just back from Australia asked what I thought the future in Malaysia would be, likely wondering if he should raise his new born child here or return to Australia.

As anecdotal stories and personal experience can never be comprehensive, this question has lead me to seek out facts and figures on the economic progress of Malaysia compared to Australia over the last 40 years from 1975-2014/15.

I have used data from Global Economy which is an open educational resource on the world economy using information from official sources such as the World Bank, the United Nations, UNESCO, and the World Economic Forum.

Their website is reportedly used by students and faculty from over 500 universities worldwide. For a good overview of economy total GDP (in constant US$), GDP per capita (in constant US$), foreign reserves, household debt as percentage of GDP and unemployment rate will be considered.

Total GDP and GDP per capita

In constant 2010 US$, Australia’s GDP in 1975 was US$265.8 billion (RM1.183 trillion), growing to US$888.8 billion in 2014. For Malaysia, in 1975 GDP was US$21.36 billion which grew to US$220.2 billion in 2014. Thus over the 40 year period Australia’s GDP grew 3.3 times while Malaysia’s grew 10.3 times.

Again using constant 2010 US$, in 1975 Australia’s per capita GDP was US$27,392 growing to reach US$54,717 in 2015. In 1975, Malaysia’s per capita GDP was US$2,468 which grew to US$10,876 in 2015. Over the 40-year period Australia’s per capita GDP doubled, but Malaysia’s grew 4.4 times.

If correction is made for purchasing power parity, using the PPP US$, in 2015 Australia’s per capita GDP is $43,654 while Malaysia at $25,308 is now almost 58 per cent the level of Australia. It is thus clear that over the last 40 years Malaysia’s economic growth has far exceeded the pace of Australia.

Foreign reserve holdings

In 1975, Australia’s foreign reserves was US$3.86 billion; this rose to US$49.26 billion in 2015. Contrast this to Malaysia’s 1975 foreign reserves of only US$1.69 billion which grew to US$95.28 billion in 2015.

Over the 40 years, Australia’s foreign reserves grew 12.8 times while Malaysia’s increased 56.3 times. Again Malaysia cannot be said to be inferior in foreign reserve accumulation compared to Australia.

Age dependency ratio

The age dependency ration is a measure of how well the workforce can support its commitments to the young and retired being calculated as dependent people divided by the working age population. The lower the number the more likely a society can meet its social commitments and continue economic growth.

In 1975, Australia’s age dependency ratio was 56.8 per cent, falling to 50.9 per cent in 2015. For Malaysia 1975 age dependency ratio was 84.9 per cent which reached a level of 44.7 per cent in 2015.

Over the 40 years Malaysia has again impressively added to its working population suggesting good correct educational and health-care policies.

Unemployment rate and household debt

It is difficult to obtain figures for Malaysia dating back 40 years, but in 2014, Malaysia’s unemployment rate was two per cent and household debt was 68.9 per cent of GDP. In contrast, in 2014 Australian household debt was at 118.3 per cent of GDP, with an unemployment rate of six per cent.

It is obvious that the Australian worker and household should have more to be worried about and their future prospects cannot be better than for those in Malaysia.

Conclusion

As stock pickers say, past performance is no indication of future value. However what is very clear is that four decades ago, Australia was a far far richer and better country than Malaysia. However Malaysia’s rate of economic development over the last four decades has clearly exceeded Australia’s.

Today while Australia is still richer and therefore likely to have better facilities, on some measures such as household debt, unemployment rate and even foreign reserve holdings, Malaysia is better off than Australia.

Today with the drop in ringgit value, street rallies and political controversies, many in Malaysia have become pessimistic and may even impulsively migrate. Hard facts prove that despite facing far more difficult challenges, Malaysians have actually done well over the last 40 years and should hopefully do equally well for the next generation over the forthcoming decades.

* Dr Ong Hean Teik is a Penang consultant cardiologist

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.