Reason 2023 was so challenging for many Aussies

This year has been of the most challenging years for Australian households in decades and there’s a clear reason why.

2023 has proven to be one of the most challenging years for Australian households in decades by many metrics. An, given the season, we’ll be looking at the Australian economy through the lens of the ghost of the past, present and future.

Ghost of Christmas past

It’s clear how much the economic landscape has changed. Things like double digit unemployment and recessions coming along once or twice a decade have in time, become consigned to the history books.

But while there were hurdles thrown up in the decades from the 1970s through to the 1990s, this also presented an amazing period of opportunity for Australians. In aggregate inflation adjusted household disposable incomes rocketed, while the impact of inflation and strong wages growth helped deflate the cost of servicing debt, leaving some households able to pay off a mortgage in under a decade.

To further borrow from Charles Dickens, from the perspective of some Australians: “It was the best of times, it was the worst of times”

There are some who look back on this era as a period of upheaval, defined by the challenges it presented. But there is another school of thought that, despite the difficulties the era threw at Australians, on balance it was arguably one of most broadly prosperous in our nation’s economic history.

Ghost of Christmas present

As we look over the current state of the economy and the run of economic data releases over the last 12 months, it’s immediately clear that things have not gone swimmingly in 2023.

According to the latest national accounts data, which was released earlier this month, the economy continues to languish in recession in per capita terms and has contracted by 0.3 per cent over the last 12 months on a per person basis.

Arguably the best proxy for measuring household outcomes in aggregate in the national accounts is real household disposable income per capita. On this metric, households have fallen back to where they were 15 years ago, following the Rudd governments 2008 stimulus. This represents the longest and most sustained drop in household outcomes since comparable records began in the early 1970s.

This brings us to perhaps the most Christmas related statistic in today’s line up, the retail sales figures. Given the current backdrop of high inflation, we’ll be focusing on the figures produced by the ABS which focus on the volume of goods sold, not their dollar value at the checkout register.

On this metric, retail sales have declined by 1.7 per cent over the past 12 months, the worst performance outside of the data points impacted by lockdowns during the pandemic. It’s worth noting that the ABS’s data series covers almost 40 years, including the period of the early 1990s when interest rates were 17 per cent and unemployment was on its way to over 11 per cent.

In per capita terms, the data makes for even worse reading, with turnover per person falling by 4 per cent over the last 12 months of data, its largest drop on record, including the pandemic.

Ghost of Christmas future

This is where we peer into the far more murky crystal ball of the days that lay ahead. One lens through which the future can be looked at is the recent forecasts from the RBA and the Albanese’s governments mid-year budget update.

On this front, both Treasury and the RBA see rising unemployment over the next 18 months. Meanwhile wages growth is expected to moderate from the current peak of 4 per cent, but remain robust compared with historically weak levels seen prior to the pandemic.

But where the RBA and Treasury really differ is their longer-term view of inflation. For the year ending June 2025, the RBA sees headline inflation at 3.3 per cent, while Treasury sees inflation at 2.75 per cent, within the RBA’s 2-3 per cent target range.

Looking at the path of some of the nation’s most important economic indicators such as GDP growth, unemployment and job vacancies, the trend is very much not our friend.

However, despite the negative connotation and potential future downside, the silver lining is that the labour market is starting its downturn from its strongest position in almost 50 years. Job losses at the end of an economic cycle are par for the course, but if the coming downturn can be relatively contained, then perhaps unemployment may not have to rise above where it was prior to the pandemic, as Treasury and the RBA are predicting.

Ultimately, the performance of the economy at the moment is in the eye of the beholder. On some metrics things are doing pretty well, on others the worst in decades. But like Scrooge after the visits of the ghosts, its ultimately up to the individual to decide how they see it, how you see it and whether or not the economy is working for you.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator

Originally published as Reason 2023 was so challenging for many Aussies