Average Australian households have seen their incomes rise by at least $5000 more than their expenses every year since 1988, according to a report released on Saturday.
Combined, this means disposable incomes for the average household have increased a whopping 65% since 1988. More than 15% of this growth has come since the global financial crisis.
This picture of a nation in rude financial health comes from a report by the National Centre for Social and Economic Modelling at the University of Canberra.
The inaugural report found that though incomes hadn’t risen as fast since 2008 as they had in the earlier part of that decade, cost of living pressures had slowed, meaning households saw their incomes rise while their expenses stayed about the same.
While expenses like utilities, health and education rose strongly over the period, lower interest rates meant mortgage pressure decreased markedly, as did many other aspects of household expenditure.
This is a surprising outcome, given cost of living has been much discussed in this election campaign. Policies like the carbon tax, which contributed to former Prime Minister Julia Gillard losing the support of her party room, were feared to have a detrimental effect on what were perceived to be already high cost-of-living pressures.
In fact, the amount of disposal income left over to households after subtracting the cost of living increases grew at 2.6% a year since 2007, which is the exact amount it had grown under the Howard government. Between 2007 and 2010, household expenses grew by 3.3% a year while incomes rose close to 6% a year, while from 2010 to June 2013, cost of living rose 1.6% a year while incomes rose 4.2%.
Increases in the cost of living have been “benign”, according to the report, but they have disproportionately hit renters and those on low incomes. Those on high incomes have generally seen their costs of living stay the same.
The report’s author, Ben Phillips, told SmartCompany cost of living has been an election issue for decades, and the influence of the narrative often has little to do with reality.
“Politicians have been talking about it for a long time. I suppose it really hits the buttons of voters.
“But the problem is that the discussion usually complete ignores the prices of things outside electricity, petrol and food, and completely ignores things like rising incomes.
“We all notice when prices go up. It annoys people. Income growth, however, isn’t as visible.”
It’s the first time the National Centre for Social and Economic Modelling has released what is to be a quarterly report. Phillips says that it follows on from similar research the centre did in May 2012.
“We had an unprecedented level of interest in that data,” he says. “I had government departments and journalists calling me almost on a daily basis asking about it. Many wanted updated figures, so it became pretty clear there was a need for this sort of thing to be done regularly.”
The Household Budget Report combines Australian Bureau of Statistics data on household expenditure for different types of households with separate ABS data on income growth across different categories. It uses these two data sets to see how different types of households have seen their income grow relative to their expenditure.
The ABS currently has a similar, but far more limited measure intended to help governments assess income support measures. The National Centre for Social and Economic Modelling’s report differs in that it applies the same methodology to all types of households, and not just those on government assistance.