Household budgets squeeze intensifies says new research   
12 October 2018
ACTU



The peak body for working people today released new research that shows the pressure on ordinary household budgets is increasing far more quickly than previously thought with some key living costs rising much faster than inflation or wages.

Most analysis on the budget “squeeze” compares the percentage change in wages against the average increase in prices as measured by inflation (CPI).

The research released today by the ACTU looks at the increasing cost of essential items and shows that these costs are increasing much faster than CPI. These essential items are a much bigger part of the lower-paid household’s income than average.

In the year to June 2018:   

    Childcare has increased by an average 6% in the past year
    Housing has increased by an average 3.1% in the past year
    Electricity has increased by an average 10.4% in the past year
    Gas has increased by an average 7.10% in the past year
    Transport costs have increased by an average 5.2% in the past year
    Health costs have increased by an average 3.4% in the past year
    Education costs have increased by an average 2.7% in the past year

The CPI is a blunt tool for assessing cost of living pressure. For example, it weights childcare as a mere 1.56% of the average consumer’s expenditure, whereas many working families spend $600-$700 per week on childcare.

The report says: “The CPI was never designed to provide an indicator of price changes in the basket of goods and services that a low-income family needs for a reasonable standard of living.”

Meanwhile, since mid-2016, nominal wage growth in the public sector has been 2.5%, while pay in the private sector has gone backward with wages up just 2% per year compared with standard CPI increases of 2.1%. 

But even these figures understate the problem – a closer looks shows average hourly earnings have increased by only 1% per annum in the past 3 years.

Most Australians are seeing their wages go backwards very quickly compared with 5-10% increases in the cost of living for essential services like childcare, electricity and housing.

Low wages are a product of a broken system where working people don’t have the tools or job security to negotiate fair wages and conditions.

Quotes attributable to ACTU Secretary Sally McManus:

“While CEO salaries increased to an average $5.2 million this year and corporate bonuses ballooned, the rest of Australia has seen their pay go backwards in real terms, at least since 2016.

“People are feeling the pinch as their budgets are stretched further than the official data suggests, and this research proves this is the case with the key living costs increasing much faster than CPI.

“It is no coincidence that wages are going backwards at the same time as the number of workers covered by collective agreements has collapsed.

“The research found there are 700,000 fewer workers on collective agreements today compared with three years ago. We need to reverse this trend to bring back fairness to the workplace and raise Australian living standards.”