November saw Australia break three records – which is not as good as it sounds when you consider the dire consequences.
This month, the Albanian government broke three records for the poor Economic management And deteriorating living standards.
The first of these records relates to real household disposable income in Australia, which is arguably the best single measure of living standards.
The latest national accounts from the Australian Bureau of Statistics (ABS) showed real household disposable income suffered its largest annual decline on record last financial year, falling by 5.1 per cent:
Loading embed…
As a result, Australian households have given up all income gains from COVID-19 stimulus measures.
Real per capita household disposable income in Australia has fallen to levels observed in early 2019, which were slightly higher than in 2010:
Loading embed…
This means Australian households have endured 13 years of near-zero income gains.
AFR’s Michael Reed analyzed how the decline in per capita household disposable income in Australia compares globally using OECD data.
According to Reid, Australian households suffered the world’s largest income collapse in the last financial year:
Loading embed…
This collapse in disposable household income helped reduce real per capita spending by households by 0.2 percent, resulting in a corresponding decline in the country’s economic growth:
Loading embed…
The outcome could have been worse had the household savings rate not fallen to its lowest level since the June quarter of 2008, which helped boost spending in the face of falling income.
Alex Joiner, chief economist at IFM Investors, published the chart below tracking the household finances subcomponent from the latest Westpac Consumer Confidence Survey against household spending per capita:
Loading embed…
It is clear that family financial resources are in a state of stagnation, which portends a further decline in per capita household spending in the coming period, in addition to the continuation of the per capita stagnation that Australia is suffering from.
The worst rental crisis in the world?
This brings us to the second record broken by the Albanian government this month.
Bloomberg published a report showing that Australia has the lowest rental rates available among peer countries, with a vacancy rate of just 0.9 per cent:
Loading embed…
Collapse in Australia Vacant for rent This rate comes on the heels of the strongest net outward migration and population growth in history, which saw the country’s population grow by more than 600,000 people in the last fiscal year.
This increase in population, combined with a tight rental market, has combined to push rental inflation in Australia to higher levels, also driving overall CPI inflation higher:
Loading embed…
“High rent inflation has been widespread, consistent with tight rental market conditions across the country. Housing supply has not kept pace,” the RBA noted in its latest Statement of Monetary Policy (SoMP).
“Advertised rents have increased by 30 per cent since before the pandemic, which is significantly more than the increase in CPI rents to date.”
“Combined with historically low vacancy rates, and little sign that tight rental market conditions will ease in the near term, this is expected to keep rental inflation high for some time,” the RBA warned.
Australian inflation ‘firm’
finally, The Economist This month’s magazine ranked Australia number one for anchored inflation, partly due to strong rental growth.
The Economist The “solid” measure of inflation is based on an assessment of actual inflation and inflation expectations, with Australia ranking poorly on both:
Loading embed…
More pain is coming for Australian families
The outlook for Australian households remains weak, given that housing debt servicing costs had already reached all-time highs ahead of this month’s rate hike from the Reserve Bank of Australia:
Loading embed…
The debt repayment burden will rise further following this month’s official interest rate increase by the Reserve Bank of Australia, coupled with the expiration of cheap fixed-rate mortgages.
Meanwhile, the Reserve Bank of Australia expects Australian real wages to remain in the red for years following pre-pandemic levels:
Loading embed…
So Australians face a long period of declining living standards amid sharp per capita stagnation, falling real wages and incomes, rising mortgage and rent payments, and overburdened infrastructure and services.
Never before have we seen a federal government destroy living standards so quickly, largely due to extreme levels of net overseas migration crushing everything in sight, pushing inflation and the cost of living up, and forcing the Reserve Bank of Australia to retaliate with higher interest rates. .
If the Albanian government was truly concerned with ending the country’s housing crisis and reducing inflation, it would moderate Net migration abroad To a level below the country’s ability to provide housing and infrastructure, rather than operating it at record levels.
Leith van Onselen is co-founder of MacroBusiness.com.au and chief economist at MB Fund and MB Super. Leith previously worked at the Australian Treasury, the Victorian Treasury and Goldman Sachs.