Have voters been better off under Anthony Albanese and Jim Chalmers?Credit: Marija Ercegvoac
It will be the question posed by Peter Dutton throughout the election campaign – are you better off after Anthony Albanese’s three-year term in office?
Better off can stretch from whether someone has a job, has enjoyed a pay rise, has been stung by higher taxes or mortgage repayments, has seen the value of their home soar or has suffered from expensive daily essentials.
Anthony Albanese on election night 2022. The question that will be put to him three years later will be: Are you better off?Credit: Alex Ellinghausen
But independent economist Saul Eslake says that if you want just one number, one indicator, then the best measure is real net disposable income per capita.
Taking into account both inflation and the size of the population, this attempts to measure how much money people have in their pockets to spend and save.
And on this count, Eslake says, it is clear that Australians are not better off today compared with when Anthony Albanese came to office in May 2022.
Over the term of the Albanese government, this measure has fallen by 6 per cent. By contrast, it increased by about 7 per cent in the United States and by 3 per cent across the eurozone and Britain over the same period.
All countries enjoyed a large lift in new net disposable income early in the pandemic as governments threw money at their communities to help them through the deepest economic downturn since the 1930s.
These handouts, from money deposited in bank accounts to free childcare to wage subsidies for employers, could not last. The federal budget alone recorded two consecutive budget deficits worth a combined $220 billion across 2020 and 2021.
As the handouts ended and inflation climbed, real incomes began to fall.
In Australia’s case, the drop between the peak in mid-2021 and today is more than 10 per cent.
Eslake says Australia’s sharp decline is due to a string of interrelated factors: nominal wages didn’t grow as fast here as they did in other nations because of our use of multi-year collective pay deals, the amount of pay taken by our income tax system and the lift in official interest rates.
Economist Saul Eslake says net disposable income per person shows people have gone backwards since the 2022 election.Credit: Alex Ellinghausen
While Australia’s cash rate did not reach the levels experienced in other nations such as the United States, the large number of people on floating mortgage rates and the size of our mortgages meant the Reserve Bank’s actions caused more direct financial pain to borrowers.
Eslake says much of the great fall in household disposable income was beyond the control of the government.
Inflation, especially early, was an international problem.
“A significant part of the increase in inflation, especially in its initial stages, reflected global factors, including disruptions to global supply chains and the effects of Putin’s invasion of Ukraine on energy and food prices,” he says.
Eslake also notes that the Reserve Bank, by holding interest rates too low for too long during a strong economy, contributed to the pain that followed.
Current RBA governor Michele Bullock admitted last month that the Reserve should have started lifting interest rates earlier than May 2022 to bring inflation under control.
“We didn’t respond as quickly as we should have to rising inflation,” she told a House of Representatives committee.
The fall in real disposable income has been felt in various ways. The most obvious is through the intersection between wages and inflation.
Inflation was already at a 22-year high when Labor took office in 2022. It would climb further, reaching its highest point since 1990 at year’s end at 7.8 per cent. At the same time, wages were barely growing, delivering a huge hit to households’ real incomes.
Wages are now growing faster than inflation, at a healthy clip. While the pace of wage growth has come off, inflation has eased by more.
But it’s the cumulative pain that many people are feeling.
Total inflation is up about 15 per cent since just before Albanese got the keys to the Lodge. Wages, over the same period, have climbed by less than 12 per cent.
Making up that gap is going to take years.
The overall measure of inflation is made up of tens of thousands of goods and services. Since the last election, there have been some wild price swings.
Electricity has been a touchstone price issue for years. But the official measure of electricity inflation for consumers has actually fallen since mid-2022. This is an illusion, as it has been paid for by the federal and state governments through their subsidies to households and businesses.
Eventually, prices will lift as the subsidies end. Jim Chalmers’ fourth budget set that end date as December 31 this year.
One standout cost pressure has been insurance, which has climbed a staggering 35 per cent over the past 2½ years. But Australia is not alone, as insurance prices around the world have soared.
High inflation pushed up the prices of rebuilding or repairing homes and vehicles, climate change exacerbated natural disasters that have become more prevalent, while low interest rates during the pandemic made it difficult for insurers to make enough money to offset higher payouts to customers.
In some parts of the world, insurers are pulling out of particular regions because it is now too expensive for them to protect the assets of millions of people.
While insurance has gone up, petrol prices are lower today than when the government took office. Beef is cheaper too.
Floods and fires have helped push up insurance costs across Australia and the world over recent years.Credit:
But across all goods and services, inflation – while easing – is higher today than in 2022.
On one measure, though, there is no doubt Australians are better off.
Household wealth has grown by more than $2 trillion, driven by a lift in the value of the nation’s homes and superannuation holdings.
Total household wealth is now approaching $17 trillion, or $620,000 for every man, woman and child. When the government took office, wealth per person was $577,078.
A key part of that growth is what’s happened to the value of our homes.
Outside of Melbourne, where the economy is struggling, and Canberra (where housing supply has lifted), house prices in capital cities and especially among most regional centres are up on where they were when Albanese became prime minister.
Higher house prices for those who own their home outright, or their mortgage is much diminished after years of repayments, is generally perceived as an improvement. But for those trying to get into the property market, they are a major impediment.
The average new mortgage reached a record $666,000 at the end of 2024, a $75,000 increase since the Albanese government was elected. In NSW, the average mortgage has climbed to an eye-watering $811,000.
Victoria’s average mortgage has been relatively stable, but big increases in house prices across Brisbane and Perth have contributed to a surge in the size of their average home loans.
For those renting, the story has been far worse.
A lack of housing stock and the return of international students has driven one of the largest run-ups in asking rents on record.
Across Sydney, Melbourne, Brisbane and Perth, asking rents have increased by at least 40 per cent. Only Canberra, where a building boom increased the supply of units across the fast-growing city, and territory rental laws, managed to prevent an explosion in rental costs.
The federal government increased Commonwealth Rent Assistance by 15 per cent in its 2023 budget before following that up with a further 10 per cent jump the following year in recognition of the pressure on the third of people who rent.
The surge in prices, while painful, would have wrought far more economic damage but for the creation of more than 1.1 million jobs since Labor took office, the largest increase for a first-term administration on record.
Of that, more than 700,000 have been full-time positions, while the proportion of people in work or looking for it has reached an all-time high.
Independent economist Nicki Hutley says the resilience of the jobs market has offset pain felt elsewhere across the economy, and government policies have helped too, through targeted policies in areas such as prescription medicines and childcare.
But she is critical of all levels of government for the long-term problem of housing affordability.
Regardless of where the blame lies, Hutley says: “It’s reasonable to say the majority of Australians are worse off because their pay packets buy a lot less.
“But importantly, this ignores the counterfactual of how much worse things could have been as we fought the inflation dragon.”
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