Facebook Google Menu Linkedin lock Pinterest Search Twitter


People & Ideas

Feb 7, 2013

The strange case of the national delusion on cost of living

Polling has found many people think the cost of living is soaring -- when in fact it's not. Crikey investigates which purchases we're particularly deluded about.

User login status :


Last week, Essential Research asked voters to give their impressions of how much prices had changed on a range of basic consumer items over the last two to three years. The results give us an idea of how realistic voters actually are about what’s happening with inflation.

Let’s start with something on which there is universal agreement: 70% of voters said they were paying “a lot more” for electricity and gas (22% said “a little more”). And that corresponds with reality: according to ABS inflation data, electricity prices have increased by 38 index points since December 2009, or over 16% a year. Gas has gone up by 29 index points, or around 11% a year.

So far so good — data and perceptions match. But what about petrol? That’s gone up by just over 16 index points, or just over 6% a year on average — ahead of CPI, but not in the same league as electricity. Yet 50% of voters say they’re paying a lot more than they were three years ago; 33% say a little more. That’s bordering on the implausible, but not wildly inconsistent with the electricity result.

On water, perceptions look more plausible: 47% said they were paying “a lot more” for water, and water prices have increased 22 index points or around 9% a year on average.

After that, though, there’s a growing gulf between perceptions of inflation and reality. Forty three per cent of voters say they’re paying “a lot more” for insurance. It’s true that many households in Queensland have been hit by higher premiums or even struggled to get insurance since the 2011 floods. But insurance across the country has only increased 10 index points, or less than 4% a year — around about CPI.

And 36% of voters complain they are paying “a lot more” for fruit and vegetables. Fruit and veg prices have been on a rollercoaster ride due to cyclones over the last couple of years, but in net terms, they’ve only gone up just over 10 index points since December 2009, or less than 4% a year; 43% of voters accurately said they were paying “a little more”. Twenty eight per cent said they were paying “a lot more” for food generally, when in fact food and non-alcoholic beverages prices have grown at less than the CPI; the 24% who thought they were paying “about the same” for food were more correct.

Health costs have gone up 15 points, or just over 5% a year, but 33% said they were paying “a lot more” for medical expenses. Just under a qaurter, 24%, thought they were paying “a lot more” for housing (both mortgages and rent) when housing costs have only increased slightly faster than inflation — however, that reflects the fact that 40% of respondents who rent said they were paying a lot more for rent, a sentiment we know to be accurate, especially in cities like Sydney.

Education costs have gone up by around 16 points, or about 6% a year, ahead of inflation, but only 24% said they were paying “a lot more”.

One category stands out as being the basis of what is almost a national delusion. Clothing has fallen in price by 7 index points or around 2% a year each year, since 2009 (kids’ clothing has fallen by more, 11 points). But 21% of voters say they’re paying “a lot more” for clothing, 30% say they’re paying “a little more” and 37% say they’re paying “about the same”. Only 9% accurately said they were paying “a little less”.

Clothing — and education — are less frequent purchases, so voters’ failure to properly comprehend price movements is perhaps more understandable (electricity bills are only quarterly but have attracted huge media and political attention). It’s also the case (except for property-related products like water and insurance), that renters tend to be more sensitive to price rises than those who have a home with a mortgage, who in turn are more inclined to see big price increases than those who own their home outright. For example, 25% of renters thought they were paying a lot more for clothing and 41% said they were paying a lot more for fruit and veg.

So frequency of purchase contributes to perceptions of price rises, as does income, to the extent that renting is a proxy for income. And there’s another factor that distorts perceptions: partisanship. On average, 10% more Liberal voters say they are paying “a lot more” for products compared to Labor voters.

Is that because Labor voters have a positively-skewed perception of the economy, or because Liberal voters have a negatively-skewed perception? A bit of both, it seems, but more the latter. Both share the delusion about clothing prices — 20% of Labor voters say they’re paying a lot more for clothing and 23% of Liberal voters. But 77% of Liberal voters more realistically say they’re paying a lot more for electricity, compared to 67% of Labor voters.

Other categories, though, suggest Liberal voters see price rises everywhere even when they don’t exist. Fifty eight per cent said they were paying “a lot more” for petrol, compared to 41% of Labor voters. Forty two per cent said they were paying a lot more for fruit and veg compared to 28% of Labor voters. Insurance was 50% to 38%. Food, 32% to 23%. Medical, 42% to 25%.

All this illustrates why it’s no good complaining about the current generation of politicians who eternally claim that families are “doing it tough” and struggling to “make ends meet”. A substantial proportion of voters will always be convinced inflation is much worse than it is, and in fact filter their perceptions of inflation through partisan bias. To tell voters otherwise is to tell them something they don’t already agree with, and that’s not a strategy widely in use among political tacticians currently.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

Get a free trial to post comments
More from Bernard Keane


We recommend

From around the web

Powered by Taboola


Leave a comment

29 thoughts on “The strange case of the national delusion on cost of living

  1. Hamis Hill

    With the ascension of the Abbott administration, we will witness the last throes of the insidious “Dispossession through (unsustainable) private debt” policy of conservative politicians, who merely represent the international “agents” of this process.
    An impoverished nation requires foreign capital and foreign capital requires an impoverished nation.
    Who’s winning?
    Is this why Abbott is so keen for Australia to emulate the failed policies of his overseas counterparts?
    The recession we had to have? All according to established financial formulae?
    It will be a massive “fire sale”, conveniently to be hidden by the civil strife that conservatives so love to engender among their captive electorates.
    Howard’s battlers will be distracted by poverty induced battles amongst themselves as the ancient conquerors’ policy of Div ide et Vin cit is ramped up.
    All enabled, of course, by a nation-wide amnesia of the lessons of history.
    The first conservative victory was to remove history from the school curricula, because it some how offended multi-cultural sensitivites, initially of the “proud” Irish Catholic variety, then enthusiastically taken up by every other “deprived” sub-group suffering from an inferiority complex.
    That lot, by keeping their wounds “Green”, have essentially deprived all other Australians of their “proud” cultural heritage: such as “Britons never, never, never shall be slaves”?
    That national back bone replaced by jelly?

  2. blackdog

    These figures just show that anything can be “proven” with playing around with figures and boundaries of definitions!! Give a person hardly any money to live with – and he/she will be highly sensitive to even 50c increases because the miniscule income we have can only stretch so far. Turning cost of living into percentages is just stupid. It is typical of bureaucratc and wealthy people who don’t have to live in the real world, juggling the demands of the real world. How about a 5 or ten year gap and then you will definitely see some big differences!! My rent has increased by $50 in ten years…my rent assistance has increased (I think) $15!! Petrol is over $1.50 a litre where I live…10 years ago?? Don’t you think I noticed this increase in my ability to cover all living expenses/necessities and especially to support my 2 kids on my own, that I have a realistic handle on what has happened to prices, especially of necessary products? How about dairy and meat?? I can hardly afford red meat anymore..only mince and sausages and even they have gone up, or what about lamb shanks which used to be a really cheap cut of meat…???

    The other issue of concern not mentioned here, is WHY are somethings like some foods and clothing cheaper than last few years? Have you checked what country your stuff is manufactured in lately? Even heaps of the chips, biscuits etc are made in other countries with cheaper labor costs (and the neglects on human rights that enables the cheap cost of production). This means our own manufacturing and priduction jobs are leaving our shores…how does this help the wellbeing of our own nation, jobs, people’s futures, purchasing power in the long term???

    Or have you considered what th main supermarkets do to our farmers in order for you to have your cheap apples or oranges? They offer them prices barely able to cover costs of production…farming families and communities everywhere are going broke, suffering, struggling by hadly able to meet their own living costs…

    So in the long term – how great is this little lie of low cost of living?? Things are going to get WAY more expensive in the long term – just you wait til our pissweak pollies and their neoliberal policies sell off our food bowls to corporations and we have no control/voice over anything – no agricultural industry then!! What do you think will happen? Or how about with pollies not making any real reforms/policies to assist in protecting the environment and placing ideas in the pipelines for global warming…what do you think will happen to food, or hell, even water?!!!

    Without vision the people perish…

  3. Hamis Hill

    Taking up Hugh’s point, anyone who has spent any amount of time in Australia’s “Mother Country” will recognise that most Australians identify as “middle class” aspirationals, as shown by the adulation of the ultimate middle class pretender John Howard.
    Sickening and pathetic, but disgustingly true, with all the real estate policies from the late sixties on devoted to feeding the petit burgeois pretentions concerning the conspicuous consumption of the right address.
    But Hugh is right in identifying how there is consequently hardly any choice for those who do not wish to live conspicuously with regard to the amount they pay for housing. Free Market anyone?
    Affordable housing? Ugh! How working class!
    Now unless middle class Australia, (care of the credit card?) is intent upon eliminating working class Australians altogether they had better upgrade to the aristocratic concept of Noblesse Oblige and abandon the delusion and irrationality that “Looking after number one” will deliver a just nation.
    Aristocrats rel ied upon their “clientele” (to use the ancient Roman term)to back them up in contests with other aristocrats.
    Empire building was a contest of aristocrats.
    Protecting “National” sovereignity is beyond the dreams, delusions and credit driven pretensions of “Middle class Australia”.
    Middle class self-centered “entitlement” is no substitute for noblesse oblige; middle class consciousness is a curse which is destroying Australia and as Hugh indicates is happening in the myopic, major cities whose inhabitants hardly know who or where they are.

  4. Hamis Hill

    Now wasn’t the sole subject of conversation at millions of middle class dinners during the “golden years” the rise in the value of their homes?
    The continual, lottery-like rise in house prices defined and named the “golden era”.
    The cost of living during this time?
    No-one gave a damn! They couldn’t care less. the cost of living paled in comparison to the capital gains.
    And since the GFC? No Capital gains, no euphoric dinner party conversations of burgeoning wealth(look, everybody I’m a millionaire, let’s have a toast to Little Johnny). And now like debt junkies coming down from a high those terrible costs of living that never impinged on their consciousness during the whole of the Howard era just will not go away.
    Capiyal Gains were the economic endorphins of the Howard era and now the junkies feel the pain and, lo and behold,
    Labor is to blame.
    It will be shadenfreude, joy at the misfortunes of these debt junkies, when they go back to their dealers and find themselves writhing in the python squeeze of the worst withdrawal symptoms they will ever experience; the inevitable Abbott Recession.
    Check your capital gains then debt turkeys and your cost of living?
    Who says you’re going to live?
    Hard lessons ahead as the first become last and the last, who know how to survive mean times, rise above these fallen fools to become first.
    Hey, Abbottt and Rudd brought the Bible into this!
    Is psychology left out of economics degrees?
    Too onerous?

Leave a comment