Liv­ing stan­dards are go­ing up but are lower than six years ago – hardly a win­ning ar­gu­ment

The Guardian Australia - - News - Greg Jeri­cho

Of­ten pol­i­tics will in­volve as­sert­ing things that feel right even though the ev­i­dence doesn’t sup­port it. Such was the case this week with the La­bor party’s as­ser­tion about ris­ing en­ergy prices. But we also had the sit­u­a­tion of the trea­surer ar­gu­ing that liv­ing stan­dards had im­proved, which not only didn’t feel right but also was ques­tion­able when his ev­i­dence was held up to the light.

The ALP’s fo­cus this week was on en­ergy prices and saw Bill Shorten and Mark But­ler ask a va­ri­ety of ques­tions at­tempt­ing to as­sert that power prices have gone up. Shorten for ex­am­ple asked, could “the prime min­is­ter con­firm that the av­er­age Syd­ney house­hold is pay­ing al­most $1,000 more in power bills since this fed­eral Lib­eral gov­ern­ment was elected to of­fice?”

The claim that power prices have gone up by $1,000 is a big one and the ALP didn’t re­ally back it up.

Be­cause the data doesn’t sup­port

it.

The most re­cent in­fla­tion fig­ures show that since Septem­ber 2013 elec­tric­ity prices in Syd­ney have ac­tu­ally fallen 2.1%. That’s be­cause the car­bon price ended in July 2014 and prices did fall once power com­pa­nies could pump car­bon emis­sions into the at­mos­phere for free.

That last as­pect re­ally is the crux of the is­sue. But rather than de­bate the im­pact of car­bon emis­sions, our en­ergy de­bate as ever is stuck on the is­sue of price. Be­cause pro­vid­ing car­bon emis­sions had zero cost, the quar­ter af­ter the car­bon price ended, elec­tric­ity prices in Syd­ney on av­er­age fell 7.3%.

But be­cause prices of things do in­evitably go up, they have risen since then – and very much so in the past year.

In the 12 months to June this year, the Aus­tralian Bureau of Sta­tis­tics cal­cu­lated that Syd­ney elec­tric­ity prices rose 10%. That is a size­able jump – but it is still a long way from see­ing en­ergy prices go­ing up $1,000.

The ALP knows that while prices might have fallen two years ago, they are ris­ing now, and that will take prece­dence in peo­ple’s minds – not only be­cause it is more re­cent, but be­cause the re­cent rises re­in­forces the pre-held be­lief that power prices al­ways go up.

And it should be stated that is not an in­cor­rect as­sump­tion.

In the past decade elec­tric­ity prices in Syd­ney have risen 116% com­pared with the over­all rate of in­fla­tion in Syd­ney dur­ing that time of just 27%.

Ar­gu­ing that elec­tric­ity prices are go­ing up is al­ways go­ing to be an easy sell, and while the gov­ern­ment is right that prices have fallen, it is only that case if they use a time frame that suits their nar­ra­tive – ie since the 2013 elec­tion rather than the past year.

Such cher­ryp­ick­ing of time frames was also done by the trea­surer in a re­sponse to an as­ser­tion made by Shorten in par­lia­ment that de­spite promis­ing eco­nomic lead­er­ship Mal­colm Turn­bull had de­liv­ered (among other things ) “de­clin­ing liv­ing stan­dards”.

The trea­surer tweeted on Thurs­day that this was “false” and the “Na­tional Ac­cts show they’re up 3.8%”

The fig­ure Mor­ri­son is us­ing to jus­tify this claim is “real net na­tional dis­pos­able in­come per capita” – a mea­sure Chris Bowen has also used in the past to talk about liv­ing stan­dards.

A while it is cor­rect that since Septem­ber 2015 the mea­sure has grown 3.8%, and the trea­surer might feel on strong foot­ing given the op­po­si­tion has also used this data, the use of it does pro­vide some less than happy sto­ry­telling.

For ex­am­ple, us­ing that mea­sure you could ar­gue that liv­ing stan­dards fell 1.4% in the June quar­ter alone – the big­gest quar­terly fall in two years, and the sec­ond big­gest fall since the GFC.

Not ex­actly a solid nar­ra­tive.

The trea­surer would also need to ad­mit that on this mea­sure liv­ing stan­dards re­main lower now than they were in 2011.

The ABS es­ti­mates that in June this year real net na­tional dis­pos­able in­come per capita was $13,942 – lower than the $13,971 mea­sured six years ago in June 2011.

That liv­ing stan­dards are go­ing up but they are lower than they were six years ago – and also a mere 0.8% bet­ter than they were when the Lib­eral party took of­fice – is a hardly a win­ning ar­gu­ment. And this is even more the case given it doesn’t fit with other data or peo­ple’s per­cep­tions that liv­ing stan­dards have ac­tu­ally fallen in re­cent times.

Cer­tainly over the past four years real wages have been flat – since March 2013 the Re­serve Bank’s un­der­ly­ing mea­sure of in­fla­tion has risen 9.4%, while in that time pri­vate sec­tor wages have risen just 9.3%.

Sim­i­larly fig­ures out just this

week showed that both me­dian and av­er­age house­hold in­comes fell from 2013-14 to 2015-16.

One rea­son for the dis­crep­ancy be­tween th­ese fig­ures and Mor­ri­son’s as­ser­tions is that the mea­sure he has used is a mea­sure of na­tional in­come, not house­hold in­come.

And na­tional in­come gets a big boost when the price of our ex­ports rises. As the ABS noted back in 2013 this caused na­tional in­come to rise much faster the GDP dur­ing the min­ing boom.

And once again fast ris­ing ex­port prices has been a big driver of na­tional in­come. Since Septem­ber 2015 the terms of trade have risen 18% in trend terms – a growth level sim­i­lar to that ex­pe­ri­enced in 2005-06.

But the dif­fer­ence was that back then it fu­elled an em­ploy­ment boom that saw wages grow strongly. This time round the boom has seen a mas­sive jump in com­pany prof­its while wages growth has shud­dered along at record lows.

Prof­its how­ever add to na­tional in­come and thus makes the mea­sure of real net na­tional dis­pos­able in­come look rather good.

But the na­tional ac­counts also mea­sure house­hold in­come, and there the pic­ture is rather less cheery.

In nom­i­nal terms, since Turn­bull took over the prime min­is­ter­ship, house­hold dis­pos­able in­come has grown by less than half that of na­tional dis­pos­able in­come, and on a real per capita ba­sis it has if any­thing gone back­wards and is mostly flat since 2011.

While the ALP’s ar­gu­ment strug­gles when held up against the data and time frames but gels with peo­ple’s per­cep­tions, Mor­ri­son’s claims not only fal­ter against other data and other time frames, they also jar with peo­ple’s per­cep­tions.

Peo­ple are of­ten slow to ac­knowl­edge im­prove­ments in their stan­dard of liv­ing, and to that ex­tent trea­sur­ers of­ten have a hard time sell­ing a pos­i­tive pic­ture. Gen­er­ally they need strong em­ploy­ment growth and wages growth.

This week showed that em­ploy­ment con­tin­ues to grow well, but un­til wages fol­lows suit, the trea­surer is go­ing to have a hard time con­vinc­ing any­one that their stan­dard of liv­ing has im­proved – what­ever mea­sure or time frame he chooses to use.

Since ‘Turn­bull took over the prime min­is­ter­ship, house­hold dis­pos­able in­come has grown by less than half that of na­tional dis­pos­able in­come’. Pho­to­graph: Dan Peled/AAP

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