John Watson Senior writer April 26, 2013
Soaring living costs and a rising reliance on private services are a double blow.
Australians are irate about all the demands on good incomes. Photo: Louise Kennerley
''You need to earn $150,000 just to live in Sydney,'' read the online comment on the recent article, ''High earners don't realise own wealth'' - one of many that unwittingly confirmed the point.
Labor MP Joel Fitzgibbon added his $250,000-worth. Families on that income in Sydney's west were ''still struggling'', he said.
''Coal miners in my electorate earning 100, 120, 130, 140,000 a year are not wealthy.''
Get real, Joel: such earnings are way above average.
Half of all employees earn less than $50,000 a year, the Australian Bureau of Statistics reports. Only one in 10 full-time workers gets more than $123,000.
As for households, half get by on less than $70,000.
Yes, living in Sydney is expensive. But the cut-off mark for Australia's top 5 per cent of earners, 530,000 of them, is just above $130,000. Almost all Sydney's 4.6 million residents live on much less.
So why don't the wealthy feel well off? They can't blame tax. Australia ranks 30th of 34 Organisation for Economic Co-operation and Development nations, with taxation as a share of the economy about 8 percentage points below average.
Taxation by all governments has fallen from a high of 30.4 per cent of GDP in 2000 and 29.7 per cent as recently as 2007 to about 26 per cent. Personal taxes are down from 12.6 per cent in 1999-00 to 9.5 per cent of GDP, although the GST offset much of that shift.
The reason wealthy households ''struggle'' is two-fold: higher living costs and consumption - think big houses and purchases, plus GST - and cost shifting from government.
The biggest household costs are housing, groceries and transport. Where were the big increases between the past two ABS Household Expenditure Surveys? In six years, the costs of food and drink, miscellaneous goods and services (driven by a doubling of school fees) and housing costs rose two to three times as fast as the consumer price index.
Wealthy households also have much of their money tied up in superannuation and homes. Many years paying much higher interest rates than most of the world hasn't helped, especially as Australian houses are the biggest and least affordable relative to income.
Non-housing living costs are high, too. The Economist Intelligence Unit's global living cost rankings put Sydney at three, Melbourne at four, Perth at 11, Brisbane at 13 and Adelaide at 14.
We pay more for everything from groceries, restaurants and parking to cinema tickets, IT products and electronic goods.
Just as the big four banks have exploited domestic dominance to grow into some of the world's biggest, so have our big two retailers. Woolworths and Wesfarmers have tied up almost 70 per cent of supermarket spending, 60 per cent of the liquor market and 50 per cent of fuel sales. Australia had the fastest-rising food and grocery prices of any developed nation in the past decade.
Retailers in general charged what a captive market would bear until online competition arrived.
Higher-income groups face extra costs, though, because they also tend to use private service providers instead of public services. This is related to the fact that governments get roughly $60 billion less revenue this year than if the tax-to-GDP ratio were the same as in 2000.
Spending on transport and infrastructure, health and education must suffer, leaving the private sector to fill the gap. Poor public transport leads many of us to bear the considerable costs of a car. And governments have not just run down public education and health but promoted the private alternatives.
Over five years to 2010-11, the ABS reports, household education spending, including university fees, grew 40 per cent faster than government spending.
Total private spending on education is nearly two-thirds of government spending.
The Independent Schools Council of Australia calculates more than half the sector's funding comes from private sources, mostly parents, ''saving'' government nearly $4 billion a year.
Families of the 37 per cent of students in Catholic and independent schools (up from 22 per cent in 1980) spend three to eight times as much on schooling as those using government schools.
They face an average extra cost per child of between $140,000 and $435,000, the Australian Scholarships Group estimates.
Half the population also has private health cover, up from 30 per cent 17 years ago, and their premiums total $17 billion a year - equal to a third of the federal Department of Health and Ageing budget. Premiums have risen three times as fast as the CPI for a decade, with no relief in sight.
Private patients spend several times as much on their health as public patients, and ''gap'' charges just add to the pain.
Prime Minister Julia Gillard recently hinted at why millions are burdened by the soaring costs of private services: ''In Australia, revenue to government for every unit of GDP has been at its lowest since the recession of the early 1990s. In other words, for a given amount of economic income generated, less money is finishing in the public purse, to be used for the Australian people.''
That is a deliberate policy choice of recent decades, as Australians repeatedly voted for big tax cuts. It seems they do not feel better off as a result, especially those most reliant on private services.
Australians are irate about all the demands on good incomes. Should they feel dudded by two decades of government tax and spending policy? That is a debate for this year's election. Let's see whether politicians venture there, let alone do anything about it.
John Watson is a senior writer at The Age.
