The latest data from the Bureau of Statistics shows current policy settings are causing wider and deeper economic hardship. Alan Austin reports.
REMEMBER WHEN former Prime Minister Malcolm Turnbull warned that the wrong policies would result in collapsing house prices? He was right.
That was in early 2016 when the boom after the global financial crisis (GFC) was surging worldwide but Australia’s economy was looking increasingly wobbly.
Turnbull was warning specifically against Labor’s tax policies, which, he claimed,
"should put concern into the minds of every single house owner."
Turnbull was right to advise that the wrong policy settings would see home values "smashed". But as last week’s quarterly economic update shows, it is the Coalition that has applied the destructive policies.
House and land values tumbling
The pink chart below shows the trajectory of house and land values since the GFC. This is the data the Australian Bureau of Statistics (ABS) released in last Thursday’s national accounts.
We shall put aside the issue of whether house prices have been too high and it’s time the bubble burst. That’s a healthy debate for another time. For now, let’s judge the Coalition by its own standards.
The ABS file of house and land values has been one of the steadiest indicators of increasing wealth across the Australian population since it began in 1988. There have been rare quarters which have slipped backwards, but these have always been followed by quick recoveries. Before the GFC, there have not been two consecutive quarterly falls. And never three. Not even during the global recessions of the 1990s and the early 2000s.
There was a run of four shallow declines in 2008, following the onset of the GFC — the worst global downturn in 80 years. That was no surprise, as it happened in all developed countries. The lost value in Australia was relatively low, however, and it was fully restored less than a year later.
Then came the disastrous Coalition period following the 2013 Federal Election, with two failed budgets from Treasurer Joe Hockey, followed by three, even worse, Scott Morrison budgets.
The last four consecutive quarters have seen declines in land and house values — but with no plausible excuse or justification.
The whole world is now enjoying the strongest boom in investment, jobs, corporate profits and executive salaries since World War II. None of the 36 members of the Organisation for Economic Cooperation and Development (OECD) is currently in recession. In the entire world, only four countries – Argentina, Jamaica, Indonesia and Trinidad and Tobago – are in a shallow technical recession. Many developed countries have jobless rates close to an all-time low. Only two poorly-managed developed countries have increased government debt by more than ten per cent since 2013 — Chile and Australia.
Australia is now one of the OECD’s conspicuous laggards.
Household income growth at all-time low
Thursday’s ABS release also shows why Australians can no longer afford the housing they once could. The numbers prove that wealth and income are shifting relentlessly from households and individuals to the corporate sector and offshore.
"Household gross disposable income" measures the cash Australian families and individuals receive from all sources – jobs, investments and other streams – after paying taxes and the Medicare levy.
This is the key indicator of the share of the nation’s income going to workers and families — compared with that going to corporations, state and federal governments and foreign investors and bondholders.
This has been another steady area of annual growth, with the average since 1993 at 5.62%. Only five times has the increase been below 3%. These were in 2003 and the last four years, from 2016 to 2019.
Income per person
The situation worsens considerably when we look at the results per household or per adult. The mauve chart below shows the annual growth in household income adjusted for population.
Again, this shows positive growth every year, including through worldwide recessions and the GFC. The average growth since records have been kept is 4.01%. The highest was 8.37% in 2002, just beating the 8.24% in 2008.
The lowest was in 2017, at just 0.64%. The last four years to March have been among the five worst since records have been kept.
Wealth per person
Total household wealth – as distinct from income – at the end of March was just $10.24 trillion. That is a per person decline of 2.38% – or $69.8 billion – over the year to March 2018.
The loss per adult was $12,190 over the year to March. The decline since the end of 2017 is now $14,900.
Household savings down
The same ABS file shows household net savings in March was just $7.68 billion. That is 27% below the level of $10.58 billion for March last year. It is a thumping 58% below the level at the time of the 2013 election. Household savings have declined every year since 2014.
How is this possible?
The only available explanation is that the Coalition has set the levers – tax levels, tax non-collections, wages, penalty rates, government spending, infrastructure investment or lack thereof – to maximise corporate profits and minimise incomes for the vast majority. There is no other reason.
It should not be like this. It’s not like this in comparable countries. It wasn’t like this before 2014.
When is the next election?
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