Feeling the pinch? Here's how you compare |
The US mid-term elections this year will be shaped by one thing: affordability. It's an even bigger issue here in Australia.
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How do you measure affordability? It seems logical to look at prices, but this only tells you half the story.
Prices have definitely increased. Prices are up 22 per cent nationally over the last 5 years - a whopping 27 per cent if you live in Western Australia or 24 per cent in Queensland.
For Canberra, prices have increased about 21 per cent, a bit below the national average but still the biggest increase in more than half a century.
Prices are obviously an important part of the affordability crisis. But they are only half the story. The other half is income.
If prices go up 21 per cent but your income also goes up 21 per cent, then affordability hasn't changed. This is what economists call the 'real wage': it's the wage you get in your paycheck each fortnight (your 'nominal wage') divided by prices.
Armed with this metric, we can see what the affordability challenge looks like across Australia. Turns out, it depends a lot on where you live, what you do, and where you work.
Start with the national picture.
Prices increased significantly from 2000 to 2020. But our nominal wages increased by more. The result was that real wages (and affordability) improved by about 15 per cent.
What happened after 2020 was a catastrophe for affordability.
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In the space of just three years, Australians lost two-thirds of all that growth in affordability; we lost 14 years' worth of real wage growth. Our affordability of goods and........