Claims made in the election campaign state that the cost of living in Australia is skyrocketing, but economic modelling suggests we’re actually $5302 per year better off since 2008.
Brain Loughnane, Liberal federal director, recently contacted everyone on the party’s mailing list to launch a Facebook App called ‘the cost of Labor’, which enables you to key in your expenses and “see just how much this Labor Government has cost you”. In his letter, Mr Loughnane asked, “Have you noticed how prices have skyrocketed in the last six years? Thanks to Kevin Rudd and Labor everything from electricity, gas, education and medical services has gone up significantly. And Labor and the Greens made things far worse when they introduced their carbon tax.”
Even Kevin Rudd himself has referred to the cost of living rising. When announcing most help for families paying for childcare he said, “wherever I go across Australia, what I hear is cost of living pressures and the pressures on family life in general.”
However, it seems that this is just a perception, with the National Centre for Social and Economic Modelling (Natsem) claiming that wage increases have outstripped the cost of living increases across the country. Since 2008, Western Australian families are $9776 a year in real terms better off, NSW and Victorian families benefit from having $4225 more each year and Queenslanders have $4230 more to spend. South Australian families aren’t far behind, with $4171 more and Tasmanians have just $874 more in their pockets. The average of these figures being $5302 per year.
With wage increases over the year to June of 2.8 per cent and cost increases only 1.7 per cent over the same period, Australians should not be feeling the pinch quite as much as they are.
While gas and electricity bills featured in the ‘cost of Labor calculator’ rose 13.9 per cent, health costs by 6 per cent and education costs by 5.5 per cent, mortgage payments which actually fell by 14.7 per cent, didn’t feature. The cost of personal care goods, transport and clothes also decreased.
Households relying on government benefits were also better off despite not gaining as much from lower interest rates.
The analysis also shows that Sydney is the most expensive capital city, with a typical basket of goods costing $72,914 over the year. Adelaide is the cheapest, with the same goods costing $4823 less per year. Darwin and Canberra are almost as expensive as Sydney, while in Melbourne it costs slightly $2721 less, over the year.
Yet again we’re treated to economic modelling which claims the ‘average family’ is actually better off, but does anyone actually meet the criteria for ‘average’?
Despite what those with large calculators and an in-depth knowledge of economics try to tell me, I know the cost of living has increased. I know that when I’m at the supermarket the goods in my basket are costing me more. I know that when my electricity and gas bills come through the mail, I’m in for a shock. My electricity company has even started to bill me monthly to help me manage my bills more easily – its choice not mine, but a welcome one. I also know my monthly mortgage payments have gone down, but probably, in reality, the value of my house hasn’t increased much either. And I know exactly where our household earnings sit on the graph of increases.
So it’s interesting to read that NATSEM has run some ‘average’ numbers through its calculator and found that on ‘average’, we’re all better off. Increased wages and lower mortgage costs are credited with saving our household budgets from going under, but what of those who haven’t had a wage increase or have actually had to agree to less to help keep their employers’ companies afloat? Or what of those who are dealing with ever-increasing rents because they can’t save enough for the deposit to buy their own home? And what about those who started from a lower base than everyone else, for instance those on the Age Pension?
I have yet to meet anyone who falls into the average basket when it comes to families, income and expenditure. ‘Average’ is such an inappropriate word to describe people trying to live their lives under immense financial pressure. So while economists can tell you that you’re better off and politicians can spruik how their party will alleviate the cost of living pressures, in reality, you’re unlikely to notice any positive difference. Until those who are trying to manage on a fixed income and do not fall into the definition of ‘average’ actually see some tangible increase in their income, these economic models will be as valuable as the paper they’re written on.
Do you feel better off? Has your income increased more than your cost of living?