Household income growth evaporates

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By Leith van Onselen

The ABS has just released its biannual Household Income and Income Distribution report covering the 2011-12 financial year, which revealed that average post-tax household disposable income was $80,600:

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An examination of the states and territories shows that pre-tax household disposable income was highest in the ACT and lowest in Tasmania. Capital city households also earn around 10% more than the nation as a whole (whole of state and capital city figures shown below).

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An examination of biannual income growth since 1996 shows that average real inflation-adjusted household income (pre-tax) has essentially flatlined since 2008 when measured on a equivalised basis (i.e. adjusted for household size and composition):

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As shown below, household income growth exploded after the commencement of the commodity price boom in 2003. However, following the Global Financial Crisis and the more recent drag from falling commodity prices, income growth has moderated substantially:

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As explained last week, Australian households should expect income growth to remain weak going forward. The huge uplift from rising commodity prices was an anomally, and as commodity prices and the terms-of-trade retrace back toward their longer-term average level, it will detract from household income growth.

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Leith van Onselen
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  1. Highest in the ACT, eh?
    Looks like that hog trough’s pretty full over there.

    Or the hogs have really large jaws.

    • Snide remarks aside, probably a reflection of the concentration of higher incomes in the ACT than the usual spread of income categories in other places?

      Or is it all those ministerial spin doctors on high wages pushing up those averages?

  2. Interesting article.

    I wonder where the impact of the post-GFC recovery in the terms-of-trade is?

  3. I wonder does that income figure include realized capital gains on property and stocks? That would have been strong leading up to GFC and could have bumped up many tax returns…

    • From my understanding yes, defined on pg 102

      Income consists of all current receipts, whether monetary or in kind, that are received by the household or by individual members of the household, and which are available for, or intended to support, current consumption.

      Income includes receipts from:

      – wages and salaries and other receipts from employment (whether from an employer or own incorporated enterprise), including income provided as part of salary sacrificed and/or salary package arrangements

      – profit/loss from own unincorporated business (including partnerships)

      – net investment income (interest, rent, dividends, royalties)

      – government pensions and allowances

      – private transfers (e.g. superannuation, workers’ compensation, income from annuities, child support, and financial support received from family members not living in the same household).

      Gross income is the sum of the income from all these sources before income tax, the Medicare levy and the Medicare levy surcharge are deducted. Other measures of income are Disposable income and Equivalised disposable household income. Note that child support and other transfers from other households are not deducted from the incomes of the households making the transfers.

      • Do you know if that gross household income includes Super?

        And no imputed rent in that calculation? (Although the affect of imputed rent is rather small, I believe.)

      • boyracerMEMBER

        Velocity – that list suggests capital gains are not included (div/rental income from shares/property yes, the cap gains no). They are treated very differently and are not classified by the ATO as income as such.

        Capital gains certainly should not be included in any income measure due to their inherent volatility.