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.
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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…..
I’ll take that schooner bet.
MSM love running the pessimistic stuff at the moment, plus we all know they’ll be reading this article given that most of them have been macrobated!
Agree. Its all doom and gloom out there – the recession meme has taken off, that and Macrobation.
Macrobation?
Is that what you do when you don’t have a Health Services Union credit card?
lol
Gold!
But back in april Craig James said it was all in our minds :
“For most, the perception is that they are going backwards – the cost of living is rising, incomes aren’t keeping up and wealth levels are stagnating,”
“But the reality is that incomes continue to grow at a faster pace than prices, while balance sheets are improving through record wealth levels and reduced debt levels.”
Dont tell me another mainstream econartist, sorry, i meant economist has no idea what they are talking about?
Read more: http://www.news.com.au/money/money-matters/australian-bureau-of-statistics-data-shows-australians-wealth-at-record-high/story-e6frfmd9-1226038685947#ixzz1WUG86Ehq
Craig James!
Whenever economic news from the real world is getting you down, read Craig James.
Guaranteed to give you a laugh.
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.
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
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.
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….
Who made that claim?
Not in any particular order – the whole of Federal Treasury, RBA, Chris Joye.
That’s false. Defamation perhaps. Kris Sayce tried that.
What is false?
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.
If you think that distinguishing between nominal and “real” is hairsplitting then I suggest you are well out of your depth here.
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?
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
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.
No mention of “real” or after inflation in any of that.
This was your statement:
“those who claim disposable real income increases 4 to 5.5% a year….”
Come on, that’s just childish. If anyone is guilty of selecting obtuse constructs to support arguments, Chris Joye is a beacon.
It’s childish to make up assertions and attribute them to known public figures.
Ok then. How about these claims.
“In the 12 months to September 2010, disposable incomes per Australian household rose by 6.8 per cent ”
“Rismark estimates that in the September quarter this would have reduced average disposable income per household from $98,859 to $90,476.”
http://christopherjoye.blogspot.com/2010/12/australian-housing-markets-valuation.html
Or maybe look at the graphs in this article
http://www.businessspectator.com.au/bs.nsf/Article/RBA-house-prices-mortgage-rates-disposable-income-pd20110816-KS3L5?OpenDocument&src=rot
That doesn’t sound like assertion or inappropriate attribution to me. Using national accounts data to estimate a meaningful measure of household incomes is completely flawed.
Have you read this article –
http://www.macrobusiness.com.au/2011/03/response-to-chris-joye-on-australias-dwelling-price-to-income-ratio/
Cameron, off topic, apologies. A few days back you mentioned correspondence with a Swiss colleague and Swiss action to protect CHF against excessive rise, said you might come back with info. If you did, could you please point me in the direction. Thanks.
3d1k – I’ve heard nothing back yet. but will probably post something on my blog when I do.
Cameron Murray – none of those quotes support Mav’s assertion.
My mistake – I meant nominal in all quotes (income and price rises) above, thanks for pointing it out Foundation.
But as we have contended here before, using the National Accounts data (which includes imputed rent, superannuation contributions, Workcover premiums and charity income etc) to derive disposable income per household is not an accurate method.
I doubt that wages and hence disposable income can be increased at an inflation-adjusted rate above 1-2% from here on in, unless there is serious micro-economic reform (e.g IR legislation, overhaul of tax system), productivity improvements etc
As an endnote, I’d like to know of the 21 economists, which predicted the GFC, or has since created a model that can predict (with a margin of error less than 100%) the rise and fall of GDP and inflation.
I’ve yet to come across a “market economist” who can do so.
“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?
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…
so is it better for the poor to get poorer as long as the gap is reduced?
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”.
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Soon, they will find there aren’t enough jobs to go around as well.
There’s some truth there.
China fanboy, you may not agree – but the same is true for the Australian economy –
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While the economy is being hollowed out, Mining + housing bubble is the scaffolding that is keeping the economy from falling apart.
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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.
“…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.
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.
Wonder how the sample is taken?
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?
don’t forget twiggy, clive and gina!!
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???
In Mosman. 🙂
I thought they were all living just outside of Darwin in Palmerston.
probably for the best, public housing has been a grand failure over the decades globally
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 😉
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
$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
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 🙂
+1
Another reason to not use the National Accounts data for estimating household incomes.
Seems to agree with the data on per capita wealth being at 2006 levels (http://ckmurray.blogspot.com/2011/07/real-per-capita-wealth-trend.html), savings rates shooting up, and retail seeing a massive slump in turnover.
Not good for housing bulls (with the Rismark price index coming out tomorrow as well we should see the slide continue)
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.
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!
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?’
Ouch. I still have a tube TV. What does that make me?
A nihlist 🙂
I don’t even own a TV. With the majority of what I want to watch
online, why bother?
i dont think you can bring the Palestinians into this..