Australians are not doing it tough

02 September 2013

Throughout the 2013 Federal election campaign, both major parties have pledged to address ‘cost of living’ pressures. Kevin Rudd used the phrase 14 times during a press conference the day after calling the election, and the Liberal Party includes ‘cost of living’ among its 11-point criticism of Labor on its campaign website. Tony Abbott’s recent announcement of a generous paid parental leave scheme is another example of tapping into middle-class anxiety over making ends meet. But is the average Australian household really ‘doing it tough’?

In May 2012, AMP and the National Centre for Social and Economic Modelling (NATSEM) released a report that argued rising prices were only half the picture: ‘…of greater importance is how incomes change relative to prices. This is what determines the financial standard of living for households.’ After all, if prices rise by 5 per cent but incomes rise by 10 per cent, households are better off, even if the cost of a litre of petrol reaches a new pinnacle.

The report found that from the period 1984 to 2009-2010, living costs increased by 164 per cent, but average disposable incomes increased by 217 per cent. This meant that households in 2009-2010 had around $224 per week extra spending money than they did 25 years earlier.

Ah, but what about the cost of living for Rudd’s proverbial ‘working families’? Aren’t couples with mortgages and kids spending more on the basics? The report tested this by splitting expenditure into three categories: basic necessities, relative necessities and discretionary items. For Australian households as a whole, there was little evidence of spending a greater proportion on the basics such as shelter, food and clothing. As for working families, the historical data showed ‘that this group, more than any other, has increased spending towards discretionary items while maintaining a steady proportion of basic necessities’. For many Australians, what’s increasing isn’t the cost of living, but the cost of lifestyle.

The report was released in 2012, and energy prices have risen since then. But in August this year PolitiFact tested Rudd’s claim that Australian families were ‘all struggling from cost of living pressures’ and found that although the total price of items bought from a typical pay packet climbed by 2.4 per cent over the past year, the pay packet itself climbed by 3.1 per cent. Once again, it’s a case of income outpacing living costs.

A quick comparison with the economies of other industrialised

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Australians are not doing it tough

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