Our pay dropped, even as the economy boomed

Australians did not cash in on the booming local economy as much as economists originally believed, with a new report from the Melbourne Institute for Applied Economic and Social Research revealing 40% of Australians experienced a loss of average income b

Australians did not cash in on the booming local economy as much as economists originally believed, with a new report from the Melbourne Institute for Applied Economic and Social Research revealing 40% of Australians experienced a loss of average income between 2001 and 2005.

The report, released today, also reveals households between 2001 and 2005 only experienced economic growth of 5.2%, compared to the GDP per capita growth of 7%.

The report says that 2001 to 2005 “have been years of good economic growth, so we would certainly expect to find that most people’s living standards have risen”.

“So it is an interesting and only partly-explained puzzle that… only 58% of Australian residents recorded a gain in equivalent income,” it says.

The survey, financed by the Department of Housing, also quashed speculation the gains would be in higher income brackets. It reveals childless couples aged 25 to 54 reported the highest gains, with the median gain being 13.4%.

“Lone-mother households also made substantial gains, although coming off a low base; 63% recorded real income increases, with the median gain being 10.6%,” the report reveals.

The report says these results can be explained by the increases in family tax benefits and “increasing pressure” for single parents to find work. But it still admits the overall results are puzzling.

“A very partial and limited explanation may be that an increasing share of national income went to profits rather than to wages and salaries.

“So, the puzzle remains and it is one that may well claim the attention of both policy makers and researchers in the future.”

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