Standards of living have stagnated but no major party is willing to propose reforms to make the coming decade better than the lastInteractive guide to electorates in the Australian electionListen to the first episode of our new narrative podcast series: GinaSee all our Australian election 2025 coverageGet our breaking news email, free app or daily news podcast“Ask yourself: are you better off than you were three years ago? The answer is no.”That was the shadow minister, Angus Taylor, straight after last week’s budget.Sign up for Guardian Australia’s breaking news email Continue reading…Standards of living have stagnated but no major party is willing to propose reforms to make the coming decade better than the lastInteractive guide to electorates in the Australian electionListen to the first episode of our new narrative podcast series: GinaSee all our Australian election 2025 coverageGet our breaking news email, free app or daily news podcast“Ask yourself: are you better off than you were three years ago? The answer is no.”That was the shadow minister, Angus Taylor, straight after last week’s budget.Sign up for Guardian Australia’s breaking news email Continue reading…
“Ask yourself: are you better off than you were three years ago? The answer is no.”
That was the shadow minister, Angus Taylor, straight after last week’s budget.
It is a question and answer that sank a series of incumbent governments in 2024 – a “super year” for elections where more than half the globe’s population voted across about 60 countries.
Around the world, populist parties on the right and left capitalised on this communal sense of economic malaise and anger at elites. In the US election, voters cited the economy as their top concern, particularly those who voted for Donald Trump.
No wonder, then, that Peter Dutton and the Coalition are keen to remind Australians of the tough time they have endured since Labor came to power – whether the Albanese government is to blame or not.
So how bad is bad?
Probably the best single measure of living standards can be derived from the national accounts. It’s called real household disposable income per capita.
The household disposable income (HDI) figure is the entire national pool of household income, minus what we pay on taxes, mortgage interest payments (a measure of rents is in there as well), and non-life insurance premiums. Then it’s adjusted for the GDP measure of consumer inflation, and divided by our total population.
As you can see from the chart, it has been a wild ride.
Between the end of 2019 and September 2021, Australians enjoyed a huge 10% lift in living standards, thanks in no small part to $144bn in federal Covid support payments.
Since then it’s been downhill.
Runaway inflation sparked the most aggressive series of RBA rate hikes in a generation, real wages slumped, and extra working hours were eaten up by higher average tax rates.
Living standards, as measured by the real HDI per capita, have slumped nearly 10% since that peak.
It’s not all bad news.
Anthony Albanese on the hustings has a good story to tell of better times to come: wages growth is finally outpacing inflation, which has largely been tamed.
Australia’s mortgage belt received a long-awaited interest rate cut in February, even if the Reserve Bank didn’t immediately follow up with a second on Tuesday.
Even more importantly, we have an unemployment rate that’s 1 percentage point lower than pre-Covid.
As the independent economist, Saul Eslake, says: “This is the only time in postwar history that we have managed to get inflation down from intolerably high to tolerably low without a recession and a significant increase in unemployment”.
“In the early 80s and late 80s we got inflation down from 10%, but at the cost of a rise in unemployment of 5 percentage points or more,” he says.
This time? Inflation has dropped from a peak of nearly 9% to below 3%, while the jobless rate has only shifted 0.7ppts higher from its near 50-year low of 3.4% in late 2022.
Granted, the independent Reserve Bank should be given most of the credit, but that has never stopped governments from trying to claim it.
Still, it’s undeniable households are feeling the pinch of much higher prices for the essentials, and we are cranky.
Returning to our measure of living standards, the decline has been so bad that we are back to where we were five years ago.
But it’s worse than that. These figures show households’ standard of living has made virtually zero progress in a decade.
Ten years of stagnant living standards has coincided with a collapse in productivity growth. As the latest Productivity Commission’s quarterly bulletin laid bare: we are all running harder to stay still.
It’s clear something has to change.
But this election campaign is missing the bold reform ideas to give Australians hope that the next decade will be better than the last.
So when they ask, “Are you better off now than three years ago”, we should be asking this right back:
“Will we be better off 10 years from now?”
That’s the question that should scare politicians of all stripes.
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