Remember 1984? John McEnroe won Wimbledon, Bob Hawke was Prime Minister and the shoulder pads of Dynasty reigned. Whatever the memories, it may surprise you to learn that the average household is now $224 better off each week.
Australian household income is outpacing the cost of living over the longer term, with disposable incomes increasing 20 per cent since 1984, according to the latest AMP.NATSEM Income and Wealth Report Prices these days! The cost of living in Australia . However, with our rising expectations and busier lives, it may not always feel like it.
The report explores how living costs have changed since 1984. It finds that average income growth for Australian households across all income and socio-economic groups more than covered the cost of living over this period.
Australians earning income from investments – typically self-funded retirees – did particularly well, with income growth of $547 per week above their living costs over the period. This was largely due to strong dividend growth from shares, property and superannuation income.
But cost of living pressures continued with strong price growth since 1984 across everyday essentials, including electricity by 253 per cent, rent prices by 223 per cent, mortgages by 256 per cent, petrol by 208 per cent and public transport costs by 287 per cent.
This price growth was partially offset by dramatic drops in audio visual and computing equipment, which now cost one tenth what they did in 1984, while average prices for clothing, footwear and major household appliances have changed little, and are often lower today.
Top five findings
- Australians are spending more on discretionary items
The highest income households are spending around 30 per cent on basic necessities and 45 per cent on discretionary items, while the lowest income households, such as pensioners, devote a surprisingly high 30 per cent to discretionary items, such as restaurant meals and holidays.
- Incomes have outpaced the cost of living
When households are split by main source of income, we find that all households, on average, easily cover the cost of living increases. The big winners are those who own their house outright, with their incomes rising by 25 per cent between 2003-04 and 2009-10, compared to 17 per cent for both renters and those with a mortgage.
- Increased government payments have made a difference
Increased government payments to pensioners are likely to have contributed to the strong gains in households whose main source of income comes from the government. This group saw incomes rising above the cost of living by $69 per week over the six years up to 2009-10.
- The cost of goods and services, and pensioner pressures
Considerable attention is being paid to cost of living pressures facing pensioner households. Pensioners are often considered to pay large portions of income on electricity and essential food items, both of which have grown sharply in price.
- Standard of living has increased on an international level
Australians have it better than most, especially in comparison with recession hit Europe. The report shows that while our prices are higher than most countries, our incomes and general standard of living are also very high.
On balance, we’re better off. So maybe it’s not ‘prices these days’ that are out of control, but rather the aspirational pressure we put on ourselves as a society.
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 Phillips B, Li, J, Taylor, M (2012), Prices these days! The cost of living in Australia.
AMP.NATSEM Income and Wealth Report, Issue 31, May 2012, Sydney, AMP.
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