National

EXCLUSIVE

Falling school standards are taking a toll on Australia's wellbeing

The deterioration in the performance of school students has slashed billions from Australia's economic wellbeing.

The release of data this week showing Australian teenagers are falling behind many of their international peers has cut the value of the Fairfax-Lateral Economics wellbeing index, which puts a dollar figure on our collective welfare. The index uses reading scores from the international Programme for International Student Assessment (PISA) to measure Australia's human capital, or collective knowhow. The latest PISA result, released on Tuesday, showed Australia's reading score dropped from 512 to 503 between 2012 and 2015.

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"This worsening of the PISA reading scores has negatively impacted the level of economic wellbeing," the index report said.

That deterioration has sliced $15.2 billion from Australia's wellbeing since 2012.

Since 2003 Australia's PISA reading score has slumped from 525 to 503. If the score had remained at 2003 levels, Australia's wellbeing would now be $99.5 billion higher, the index shows.

The authors point out that since 2000 the PISA reading score for Australia has fallen much further than for Canada, a country to which we are often compared. If Australia's PISA reading result had converged with Canada's since in that period instead of falling by more than 20 points, our wellbeing would be $89.6 billion higher.

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Since its inception the index has drawn attention to the enormous contribution that human capital, or knowhow, makes to Australia's collective wellbeing.

But the index's author, economist Nicholas Gruen, said the latest PISA results were a worrying sign that showed the quality of our investment in schooling is falling.

"The scores are suggesting that the impact of every dollar we are investing in schools has gone down considerably since 2012," he said.

The wellbeing index uses indicators including income, knowhow, the environment, health, inequality and job satisfaction to measure changes in Australia's collective welfare.

The overall index fell by 0.5 per cent in the September quarter, the index showed. A key factor in the quarterly drop was a decline in the value of our human capital driven by an estimated slowdown in growth of adult formal education.

The index's health component showed the wellbeing cost of obesity and untreated mental illness outweighed positives such as longer life expectancy and preventable hospitalisations in the September quarter.

The cost of obesity to Australia's collective wellbeing was $124 billion in the year to September while the annual wellbeing cost of untreated mental illness reached $206 billion in the year. Inequality is another considerable drag – the wellbeing cost of the unequal distribution of income reached $224 billion in the year to September, the index estimates.

Index components on the environment and work satisfaction also detracted modestly from national wellbeing.

Official economic growth figures released on Wednesday showed Australia's gross domestic product fell by 0.5 per cent in the September quarter, the second largest contraction in 25 years. The drop in GDP was in line with the decline in the wellbeing index in the quarter.

The wellbeing index rose by 4.6 during the year to September 30. That compared with a 1.8 per cent rise through the year in GDP.

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