While some in the media insist on pandering to Australians’ vast #firstworldproblems conviction that the cost of living is relentlessly rising, it was good to see the new report from the National Centre for Social and Economic Modelling yesterday about disposable income receiving significant coverage.
The NATSEM report showed that Australians’ incomes have significantly outstripped prices since 1984, with disposable incomes rising on average 20% ahead of inflation over the period. The report also showed that the gains were spread across all incomes groups, although the highest income groups had benefited more in the last decade compared to earlier.
It confirmed earlier evidence that, far from facing massive cost of living pressures, Australians have done very well from our extended period of economic growth — the Herald-Sun (commendably for a tabloid) last year found average households were $23 a day better off than five years ago.
If even the tabloid media are prepared to look seriously at exactly how much substance there is to claims about “cost of living” pressures, how about politicians?
On that front, there was a revealing moment last week after the ABS revealed a remarkably low CPI figure, so low it had some pundits suggesting the economy was tanking. Joe Hockey immediately produced a press release claiming the data showed essential household items were outstripping average incomes. Not to be outdone, Wayne Swan declared that the government knew that families were still doing it tough.
Actually, no, the evidence is they’re not doing it tough at all. Strong growth in incomes for the last thirty years and even through a financial and economic crisis is not “doing it tough”. The only households that are doing it tough are those in the bottom quintile of incomes, who spend a much bigger proportion of their income on necessities than the rest of us. But even they have enjoyed nearly 20% growth in real income over the last 30 years.
If you’re not in that income group and you think you’re “doing it tough”, it’s because you don’t know how to live within your means, not because politicians have failed you, or the economy is difficult. Even when it comes to identified issues like electricity prices, they are only playing catch up to the real levels they were at in the early 1980s. And in any event, the evidence shows that if you want lower electricity prices, you should privatise your generators. But voters dislike privatisation, as Anna Bligh can tell you.
No politician is willing to tell the truth, to make the obvious point that Australians are richer than ever before and should be grateful that economic reform paved the way for such a big rise in incomes, rather than whingeing about not being able to afford the wealthy lifestyles they want. Such a politician would be instantly declared “out of touch”. The last politician who tried that was John Howard, not long before he lost his own seat. His example has been heeded by everyone he left behind in parliament.
But here’s where it gets more interesting. Australia has entered a period of low inflation. We’re now saving more than ever before. We’re spending more on services, meaning retailers have to endlessly discount products. We’re shopping online and buying clothing, footwear and books, in fact all sorts of products, offshore, often for half the price we can get them here — a competitive shock that is making its way through supply chains across the country. The Australian dollar is putting downward pressure on everything from fuel prices to household goods. Electronic manufacturers are in a deflationary spiral due to overcapacity.
Traditional retailers are tearing their hair out. Even housing affordability is improving.
Politicians are continuing to live in the pre-GFC world of high demand, high income growth and high interest rates, where they fell over themselves to pander to voters’ delusion that they were under the hammer financially. But occasionally a pollie lets the mask slip a bit and we realise they know perfectly well what’s going on — like when Joe Hockey commendably challenged the “age of entitlement”. They must know what’s going on, because they can see the evidence in the lower tax revenue growth the government keeps having to deal with — David Uren of The Australian asked a good question of Wayne Swan last week when he wanted to know how much the low inflation result would curb revenue growth (Swan deflected the question to Budget Night).
The world has changed. The politicians know it, even if they won’t admit it. Even sections of the media know it. At some point a brave politician has to come forward and tell voters the truth.