The average household is getting poorer

By in Australian Economy

| 56 comments

Those who support Australia’s exorbitant house prices and new economic model of Quarry Australia usually rationalise that support with figures showing that household income growth is strong and widespread. Well, no longer.

The ABS has just released its biannual Household Income and Income Distribution report and the results are a shock. From the report, the 2007/08 years, average post-tax household disposable income was $71,032:

Two years later, in the 2009/2010 years, the average post-tax household taxable income was $74,360.  Growth of only 5% over two years:

However, when we look closer, we discover that the growth, such as it is, can be put down entirely to a change in methodology. Removing the impact of imputed rents, which was not included in the 2007-08 figures quoted above, HDI has actaully fallen. This is shown below with equivalised household disposable income of $859 per week in 2007-08 compared with $848 per week in 2009-10:

The average Australian household is getting poorer.

Comments

  1. Delraiser

    Who’da thunk it eh?

    With all the self contratulation going on between mining, banking and real estate, you’d think we’d all be driving Maseratis and gargling with Veuve Cliquot by now.

    Bet you a schooner that this won’t get a run in the MSM…..

  2. Matt C

    Hi,
    Any reason for focusing on the these figures rather than the equivalised household disposable income figures? They are adjusted for household size, so they provide a truer measure of changes in Australians’ standard of living.

    • john cage

      Household size is hard to measure between censuses and it seems that is going up since 2006. With new data from this year census, I wouldn’t be surprised that we are even poorer

  3. Al

    Another proof lifestyle improvements are due to households taking on more debt than ever before. As it is obviously not the income growth. We are about to find out how sustainable this economic practice is.

  4. The Prince

    Although a small comparison (i.e year on year) it doesn’t bode well for those who claim disposable real income increases 4 to 5.5% a year….

      • Mav

        Saw your ‘No mention of “real” or after inflation in any of that.’ statement below. If you continue with that level of hairsplitting, I don’t think anyone here will take you seriously.
        .
        Re defamation, I guess whoever went after Kris Sayce hadn’t heard of the Streisand Effect. Come to think of it, I hadn’t heard of Kris Sayce until that incident you refer to. Now I do check his blog once in a while.

      • Foundation

        If you think that distinguishing between nominal and “real” is hairsplitting then I suggest you are well out of your depth here.

      • Mav

        I am, but a humble student of this blog, without any baggage or the internal contradictions of a typical Bullhawk.
        .
        Educate me with this example – If a typical Bullhawk is now fully aware that RBA board is a conflicted bunch of manufacturing industry execs, would the Bullhawk’s next rate HIKE predictions be real or nominal?

      • Mav

        ok.. If it makes you happy, it was just the the whole of Federal Treasury and RBA, and not Chris Joye.
        .
        Anyway, I don’t know why associating someone with great institutions like the Treasury and RBA is considered defamatory these days!
        .
        PS: I hope Treasury and RBA won’t come after me for THAT! LOL

    • The Prince

      http://christopherjoye.blogspot.com/2011/08/house-prices-will-be-flat-in-income.html

      By way of historical context, disposable income on a per household basis has averaged a healthy 5.8 per cent per annum over the last 10 years, and 4.9 per cent per annum over the past 18 years.

      …we undertook a survey of Australia’s top 21 market economists. In short, the ‘average’ and ‘median’ expectations for nominal house price growth over the next 10 years were 4.4 per cent per annum and 5.0 per cent per annum, respectively

      …. this work suggests that they will likely be 55 per cent higher in 10 years’ time.

  5. Macster

    “Removing the impact of imputed rents, which was not included in the 2007-08 figures quoted above, HDI has actaully fallen.”

    So this is basically just more fudging by the ABS?

  6. Lighter Fluid

    On the brighter side, the top 10% only earn 9 times what the bottom 10% earns per week, down from 10 times in 07-08…

  7. Mav

    Like the average American household, the average Aussie household will soon realise that they have been hollowed out – they have been poor all along, but kept from realising that fact by a housing bubble “Wealth effect”.
    .
    Soon, they will find there aren’t enough jobs to go around as well.

    • Mav

      China fanboy, you may not agree – but the same is true for the Australian economy –
      .
      While the economy is being hollowed out, Mining + housing bubble is the scaffolding that is keeping the economy from falling apart.
      .
      Once the housing bubble bursts and Chindia no longer wants our resources, we will be left with McMansions and giant holes that resemble the lunar landscape.

      • China Fanboy

        “…and giant holes that resemble the lunar landscape.” Touch of hyperbowl there!

        I’m not sure what you are saying as I actually agree – housing wealth has duped many into feeling, well, wealthy – that an a glorious credit binge on lots of stuff.

      • China Fanboy

        And with the purchase of Macarthur coal it would seem that some have long term faith in Australian coking coal – demand largely driven by India and Japan.

  9. The Lorax

    I told you so.

    The massive boost in national income has all gone to BHP and Rio’s bottom line. The Aussie household has missed out.

    Some boom eh?

  10. PETER_W

    What the #$%!?

    38,300 households were kicked out of renting public housing from the state/territory housing authorities during the past 2 years

    Where do they now live???

  11. ASX3K

    So the average working renter is $176 a week better off than the average housing commission tenant? or have I done my math wrong?

    If I’m right then I may as well go on the dole. $176 isn’t worth working full time for and that is before we factor in the costs of getting to and from work, incidental work expenses then throw in the plonkers you have to put up with and I’d gladly forgo that extra $35 a day 😉

  12. PhilBest

    Who wants to bet that breaking down the data by “demographic”, would show the younger generation in a declining situation MUCH SOONER and MUCH WORSE than all this glorious “aggregate data”?

    I bet there is a demographic bulge that has come up through the data and finally managed to turn the “aggregate” data once it was big enough. It will be all downhill from here.

    Page 5 of THIS shows what eventually happens to “discretionary income” in “high land price cities”:

    http://www.houston.org/economic-development/joel-kotkin/pdf/KotkinAppendices%20Policy%20Framework%20with%20table.pdf

  13. PETER_W

    $29 – 30 BILLION GROSS private rents were charged

    In my opinion thats a fairly pathetic pre-cost return on $1 – 1.3 TRILLION of private rental dwelling assets

    • Matt

      Peter or anyone,

      I don’t understand how imputed rents can add to household income… doesn’t the rent that one household pays come directly out of the income of another?

      Or does rent count as income for the person who gets it, but ‘consumption’ for the person who pays it?

      Does imputed rent distinguish between land rent (pure economic rent) and the rent of the house / apartment itself (which income from capital?).

      Thanks to whoever sets me right 🙂

  15. Johnno

    Stop your whining and spend says Gerry. That’s the sort of blinkered, philistine pig ignorance I’ve come to expect from you non-creative garbage. You sit there on your loathsome, spotty behinds squeezing blackheads, not caring a tinker’s cuss for us struggling billionaire retailers.

    • Dumb_Non_Economist

      Well, everyone should of been aware of Gerry’s attitude when he whinged a number of years back at not being able to employ people cheaply enough to look after his expensive nags!

      • runalltheway

        Seriously though, Gerry is right…anyone that doesn’t buy a 2nd plasma TV this year is a goddamn communist!

        Maybe we could form a House Committee on UnAustralian activities:

        ‘Are you now, or have you ever been, a macrobusiness reader?’