Don't whinge, you've never had it so good

Crude menus and the colour of ties. This week may have sounded a new low in Australia's political discourse - and there has been some competition. Meanwhile, economically speaking, a casual observer of federal politics might imagine the country is on the road to Athenian ruin. The truth lies elsewhere. Materially, at least, we've never had it so good.

Crude menus and the colour of ties. This week may have sounded a new low in Australia's political discourse - and there has been some competition. Meanwhile, economically speaking, a casual observer of federal politics might imagine the country is on the road to Athenian ruin. The truth lies elsewhere. Materially, at least, we've never had it so good.

"Absolutely, unambiguously," says researcher Roger Wilkins on whether the country is financially better off than it was a decade ago.

Wilkins is the co-author of the latest Household, Income and Labour Dynamics in Australia (HILDA) survey. Every year since 2001 it has taken a snapshot of how we live by interviewing the same 12,000 people. The data for 2010 was released this week.

It offers some surprising conclusions. After dipping in the mid-2000s, income inequality has risen again in recent years, so that it is about the same as it was in 2001. Those in full-time work are working fewer hours, but part-time workers slightly more.

Across all income groups, wages have risen faster than inflation. And Australians are much wealthier than they were a decade ago. Even so, a recent Essential poll found fewer than half those surveyed thought Australia's public debt was lower than comparable countries (the correct answer), with the rest thinking it was either higher, the same or not knowing the answer.

A reflection, perhaps, of underlying negativity about the economy fuelled by a rampaging opposition and a toxic politic - a consistent theme for the last three years.

"The data does not support this seemingly widespread perception that living costs have outpaced our incomes and that we are becoming worse off," Wilkins said.

The HILDA data shows annual average household disposable incomes have increased by nearly 30 per cent over the decade to $77,000. A far cry from recession-riddled Europe and the United States. Still, Australia seems stuck in a moment - longing for the boom years of the early to mid-2000s when house prices only went up along with the All Ordinaries.

"People became accustomed to a rate of growth of income that hasn't been sustained," Wilkins said. "Living standards are rising, just not at the same pace that they were."

Australia should, theoretically, have been made less equal after big tax cuts for high-income earners were introduced under the Howard government and followed by further cuts under the Rudd government.

Welfare has also become less generous, providing ripe conditions for an ever-rising gap between rich and poor. Instead, although inequality has risen since the mid-2000s, it is little changed from 2001.

The key, says Wilkins, is Australia's solid job market, with employment providing a surer path out of poverty than welfare payments. Even so, Wilkins says that for some blameless people, their circumstances mean full-time paid work is out of reach, and the government could do more to help them.

Rather than raise the $35-a-day Newstart allowance, this year's budget increased the amount those receiving the unemployment benefit can earn for themselves before their payment is reduced.

Wilkins says the amount is still too low to sustain an acceptable standard of living. More generous tax benefits once people enter the workforce are one way he suggests the government can encourage people to move off benefits and into work once they are able.

Gavin Dufty, manager of policy and research at St Vincent de Paul Society, says another economic shock, and rise in joblessness, would leave many exposed. "While income inequality might not have shifted now - given that we have had the global financial crisis in the last four years - if we have another hit then people might not have room in their budget to adjust."

Dufty says that with the economy going "quite well", the number of people seeking help from St Vincent de Paul to cover healthcare, housing and utilities has plateaued.

The amount spent on those who did seek help, however, has shot up dramatically.

Income is only part of the story. "As we move to a society that is more based on individuals needing to establish their own resources for retirement, wealth becomes critical because it is your financial shock absorber," Dufty says.

"The recent changes to superannuation are one example of a tax system that encourages people who have disposable income to squirrel that away into wealth-building assets for their future retirement."

Wealth in Australia is far less equally distributed than income. Despite the HILDA survey pointing to a slight decrease in wealth inequality over the decade, the difference between the rich and poor is stark.

The top 1 per cent had net wealth of more than $5 million in 2010; for the bottom 10 per cent, a typical household has less than $10,000. The median net wealth was just shy of $400,000. Another possible explanation for community unease about the economy is the climbing level of debt recorded in the data.

When adjusted into current day prices, average household debt nearly doubled from 2001 to 2010.

Yet the survey paints a more nuanced picture of where the debt is held. Among the wealthiest 20 per cent of households with debt, the average ballooned to more than $700,000, while for those on the lowest incomes it barely changed.

Credit cards represent a declining share of debt for all households, including the least well-off.

Wilkins contrasts the high level of debt carried by those on high incomes with early 2000s America, where sub-prime lending targeted people often unable to pay off their loans - with disastrous results.

"Our banks seem to know what they're doing," Wilkins says. "They are lending to people who can afford to repay the debt."

There were some caveats. The typical household's debt-to-income ratio increased from 22 per cent in the early 2000s to about a third of their income in 2010.

The use of debt has changed, too. Over the decade, much more of the debt that households have is being used on property or property investments. The wealthier you are, the more of your debt goes on property, the data shows. Wilkins says this leaves Australians particularly vulnerable to falling property prices.

Households with negative equity, where the level of debt outstripped the value of the assets, was at a low level but rising.

"If house prices were to decline considerably the net wealth position of many households would look a lot, lot worse," he says.

To some extent that has begun to play out since this most recent HILDA survey was done in 2010. House prices have been flat, so have declined in real terms after inflation has been taken into account. Households have responded by becoming more cautious, saving more and paying off debt.

Wilkins says the survey shows that there has been little change in people's satisfaction with their lives.

Meanwhile, the political debate is marked by dire warnings of catastrophe, with the National Party's Senator Barnaby Joyce once even claiming Australia was reaching a point where it could not repay its debts.

'The current government is of course very unpopular," Wilkins says. "But maybe that is not so much to do with sentiment about living standards."

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