Alan Kohler explains why everyone in Australia feels so poor right now: ‘The news ahead is not good’
ABC finance guru Alan Kohler has warned Australians suffered a ‘great, quiet disaster’ in the wake of the pandemic, with workers effectively taking a massive pay cut as inflation surged.
Kohler explained how Australians earning the average wage were hit from March 2021, as soaring prices swallowed up the pay rises they received over the following two years.
‘That average wage earner got pay rises over the following two years, but they were eaten by prices,’ he said on ABC TV.
‘So by March 2023, an average wage earner was $5,000 a year behind.’
He said workers were unlikely to simply make up that lost ground as inflation eased.
‘The gradient of the Reserve Bank’s forecast of real wages tells us that they’re not going to catch up,’ he said.
‘That was a permanent loss – real wages stopped rising after 2022 and flatlined.
‘The result is that for three years, real per person disposable income has been going negative.’
Alan Kohler says Australians have been hit by ‘great, quiet disaster’ as real wages plunge
A shocking graph shows how real wages plunged dramatically after the Covid pandemic as inflation soared
Real wages measure how much a worker’s pay is actually worth after taking inflation into account.
‘On top of that, up to a few months ago, house prices have been rising faster than incomes for 25 years, locking a generation out of owning a house,’ he said.
Kohler said the Reserve Bank hiking interest rates 13 times had also impacted Australians, along with rising taxes.
‘Those born in the 1990s are the first Australian generation in history to not do better than those who came before,’ he said.
‘Those born in the ’50s were better off than those born in the ’40s.
‘Those born in the ’60s were better off than those born in the ’50s.
‘Those born in the ’70s were better off than those born in the ’60s.
‘And those born in the ’80s were better off than those born in the ’70s.
Another shocking graph shows just how fast house prices have grown relative to wages
Greg Jericho, chief economist of the Australia Institute, said Australia had seen the biggest collapse in real wages in living memory
‘Those born in the ’90s are no better off than those who are 10 years older than them – this is the first time that’s happened, and they’re not happy,’ Kohler said.
Greg Jericho, chief economist of the Australia Institute, said wages are supposed to rise faster than inflation.
‘The last 5 years have seen the worst collapse in the value of people’s wages in living memory, and forecasts by the Reserve Bank suggest it will take till 2037 to get back to the levels they were before the collapse, which is why we need state and federal governments to take the lead to speed recovery.
‘That is the key behind rising living standards. If your wage goes up 3 per cent but inflation rises 3 per cent, then you are no better off – your “real” wage has not increased. Even with your pay rise, you cannot buy more stuff (and once you take taxes into account, you will likely be worse off).
‘The news ahead is not good – the RBA estimates that by the end of 2028, a wage worth $90,000 in 2021 will still be worth just $86,696, and it will take till the end of 2036 for us to get all the way back to 2021 levels.’
He called on the public sector to lead the way by increasing wages, which will directly impact wages for all Australians.
‘One path to return quicker is to reverse the role the public sector played before the pandemic. Rather than suppressing wage growth, the public sector should take a lead and assist in the recovery of real wages,’ he said/
‘The public sector, directly and indirectly, employs roughly one-third of the labour force, and they’re saying wage increases across the public sector may be averaging two per cent.
‘That has an indirect effect on the private sector, because there’s competition for workers and it reinforces the wage norm in the economy at two-point something.’
