Australian incomes are declining due to record high immigration and rising mortgage rates, while high inflation is causing wages to fall.
Since Prime Minister Anthony Albanese came to power, after-tax income for each household has fallen by 5.1 percent, the worst decline among developed countries.
Rising inflation means workers are facing a cut in real wages, while the Reserve Bank’s 13 rate hikes in 18 months have eroded the savings of those with mortgages.
Australian borrowers are also much more likely to have floating rates, meaning central bank rate hikes cause more pain compared to other rich countries.
Record immigration levels are also fueling Australia’s housing crisis, with more than 400,000 net overseas arrivals in the year to August and population growth of 2.2 per cent, among the highest in the rich world.
Australia’s real gross disposable income per capita fell by 5.1 percent in the last financial year, an analysis of OECD data from The Australian Financial Review found it.
Australian incomes are declining due to record high immigration and rising mortgage rates, while high inflation is causing wages to fall (pictured are pedestrians in Sydney’s Pitt Street Mall)
Since Prime Minister Anthony Albanese came to power, after-tax income for each household has fallen by 5.1 percent – making this the worst decline among developed countries (he is pictured at the Pacific Islands Forum in the Cook Islands)
By comparison, Canada, another country with high levels of immigration, saw per capita income fall 1.5 percent in the year to June.
The United States, which has much lower immigration and population growth, saw its income level rise by 3.5 percent.
AMP chief economist Shane Oliver said the strongest population growth since the 1950s was hurting Australians financially.
“It’s been excessive lately,” he told Ny Breaking Australia.
‘We are seeing the fastest population growth since the early 1950s.
‘The problem is that if you have strong population growth and an inflation problem at the same time, that only increases inflation.
‘The average person may feel the weight of higher interest rates and pressure on the cost of living. If more people come to the country in total, that will push up demand.’
Economist Saul Eslake, director of Corinna Economic Advisory, agreed that Australia’s high levels of immigration were contributing to inflation.
“Population growth is certainly contributing to inflationary pressures,” he told Ny Breaking Australia.
‘It contributes to the inflation of both the rental and purchase costs of a home.
“Migrants who come here will demand different services, as well as different goods, and therefore spend money.”
High inflation also means Australian workers face a 1.8 percent reduction in real wages, as the 5.4 percent inflation rate is significantly higher than the 3.6 percent wage increase.
“Wages have contributed more to inflation in those countries than in Australia,” Eslake said.
“Real wages have not fallen as much in those countries as in Australia.”
The Reserve Bank of Australia this month raised interest rates for the thirteenth time in eighteen months, bringing the cash rate to a twelve-year high of 4.35 percent.
But this is lower than the Canadian level of 5 percent and the U.S. rate of 5.25 percent to 5.5 percent.
Mr Eslake said Australian interest rates were lower than those of other rich countries because a greater proportion of borrowers had variable interest rates, meaning central bank rate hikes would have a more immediate impact, compared to countries where fixed interest rates occur more often.
“Fixed rate loans are much more common in most other countries,” he said.
Rising inflation means workers are facing a reduction in real wages, while the Reserve Bank’s 13 rate hikes in 18 months have eroded the savings of those with mortgages (pictured at an auction in Sydney)
Economist Saul Eslake, director of Corinna Economic Advisory, agreed that Australia’s high levels of immigration were contributing to inflation
Australia’s debt-to-income ratio is also the highest in the world at 197.6 percent, after Switzerland.
Due to the sharp increase in mortgage interest rates, mortgage interest rates have risen faster than savings interest rates at banks.
“The interest paid by borrowers has risen much faster than the interest received by savers,” Mr Eslake said.
‘The second point is the significant decline in net interest income, because interest paid has increased much more than interest received.’
The personal income tax share, as a percentage of gross household income excluding investment properties and small business incomes, was also at its highest level in the June quarter since the September 1998 quarter.
“Partly it’s people being pushed into higher tax brackets, but it’s also because the share of working people is at a record high,” Mr Eslake said.
In the year to March, real household disposable income fell by four percent, the biggest fall since the June 1983 quarter, when Australia was in a deep recession.