
Stephen Lunn, Social affairs writer | July 24, 2008
PAY packets bulged by a healthy 31 per cent over the final five years of the Howard government, but the extra household cash was whittled away by the cost of housing, which grew over the same period by 60 per cent.
When living costs such as food, petrol, education and childcare were also taken into account, household income in Sydney and Melbourne ended up growing by a mere 1.5 per cent a year from 2001 to 2006. Adelaide was only slightly higher at 2 per cent a year.
New economic modelling released today by AMP/NATSEM reveals that Western Australia and Queensland performed better, with Brisbane averaging 3.2per cent income growth a year after cost-of-living changes were factored in, and Queensland generally managing 4.2 per cent, the study showed. For Perth, the figure was 4 per cent and WA overall, 4.8 per cent.
"(Outside of WA and Queensland) it appeared that many households had only managed to tread water between 2001 and 2006, with what initially appeared as substantial increases in household income over this period being offset by rising prices for housing and costs of living," the analysis said.
The report, entitled Advance Australia Fair?, showed that for average Australian households, a 31 per cent increase in gross income between 2001 and 2006 was gouged by rising household costs - mortgage payments and rents - of an average 62 per cent for the same period.
Middle-income households were least able to enjoy their higher gross incomes, "with housing costs (rents or mortgage repayments) in these areas increasing almost 65 per cent (compared) with 54 per cent for affluent areas and 48 per cent for the poorest areas.
"A lot of the richer households already own their houses, so they aren't going to be recent purchasers buying into a high market and taking out a big mortgage.
"That group is the middle-income sector," the report's author, NATSEM principal research fellow Robert Tanton told The Australian.
"And they aren't even necessarily buying into the first-home market, but upgrading and therefore, giving themselves higher loan repayments," Mr Tanton said.
The study explains why Australians, despite receiving signals the economy was powering ahead on the back of the resources boom between 2001-2006, have nevertheless felt themselves struggling.
"The perception has not met the reality in that while the economy has been strong and incomes have been on the up, housing costs in particular were really biting into incomes," Mr Tanton said.
AMP managing director financial services Craig Mellor agreed.
"We've all been earning more money and that's great, but at the end of the day we've been using that money to pay for the houses we live in," Mr Mellor said.
"One thing we'd like to find out more about is whether the higher housing costs are for us to live in nicer houses, or is it costing us twice as much to live in the same house? I think it's somewhere between the two, but weighted toward costing more to live in the same house because of the increase in interest rates and house prices."
The rich widened the gap from the poor, with gross incomes for the 10 per cent living in the most affluent areas increasing 36.5 per cent compared to 29 per cent for the 10 per cent in the poorest neighbourhoods. Those affluent areas are mainly in the capital cities, with regional pockets chiefly in West Australia and Queensland mining areas.
"I think the geographical differences are more pronounced now after the last three years. People in the west of Sydney are doing it tough, while people in the west of Australia are doing it relatively easier," Mr Mellor said.
source: http://www.theaustralian.news.com.au/st ... 01,00.html