Prices These Days! The Cost of Living In Australia AMP-NATSEM Report 31
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Prices These Days!The Cost of Living In Australia
AMP-NATSEM Report 31Ben Phillips June 20, 2012
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Introduction● Report analyses cost of living pressures in Australia
● Are households better/worse off than previous decades?● Which groups in Australia are at most pressure?● Is it prices or expectations/wants that drive the
pressures?● What are we spending our money on these days?● Which capital cities are most expensive?● International comparisons
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The Macro picture on prices and income in Australia
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The macro picture on prices in Australia
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National Accounts – Real Income/Expenditure (per-household)
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ABS Surveys – Real Disposable incomeReal Disposable Income, ABS, NATSEM $pw
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: ABS Survey of Income and Housing, NATSEM calculations
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What’s gone up? What’s gone down in price?
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Luxuries versus Necessities
● Discretionary items
● Necessities
● Relative necessity
● Have necessities increased more in price than other items? Do we devote more expenditure to necessities?
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Examples
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Discretionary and Necessary SpendingDiscretionary vs Necessary Expenditure by Income Level,
Households 2009-10 %
33.536.3
39.6 40.5
44.6
19.420.8 21.5
23.0 22.3
47.0
42.9
38.936.6
33.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Q1 (Low) Q2 Q3 Q4 Q5 (High)
Discretionary Relative Necessity Necessary
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Figure 6 - Household Income Quintile Basic Necessity Purchase %
30
32
34
36
38
40
42
44
46
48
50
1984 1988 1993 1998 2003 2009
Q1 (Lowest) Q2Q3 Q4Q5 (Highest) All
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Figure 5 - Household Income Quintiles Discretionary Purchase %
30
32
34
36
38
40
42
44
46
48
50
1984 1988 1993 1998 2003 2009
Q1 (lowest) Q2 Q3
Q4 Q5 (Highest) All
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Figure 7 - Household Income Quintile Relative Necessity Purchase %
15
17
19
21
23
25
27
29
1984 1988 1993 1998 2003 2009
Q1 (Lowest) Q2 Q3
Q4 Q5 (Highest) All
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Figure 9 - Housheold Main Source of Income Basic Necessities %
30
32
34
36
38
40
42
44
46
48
50
1984 1988 1993 1998 2003 2009
W&S BusinessGovernment Benefits Other
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Figure 10 - Working Families, Necessities vs Discretionary Expenditure %
25
27
29
31
33
35
37
39
41
43
45
1984 1988 1993 1998 2003 2009
Necessities Discretionary
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Living Cost Indexes
● CPI vs LCI vs cost of living index
● How is an LCI calculated
● Data sources
● Standard of living
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Living Cost IndexABS Living Cost Index and CPI, Index = 100 Jun-98
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
Jun-
98
Dec-9
8
Jun-
99
Dec-9
9
Jun-
00
Dec-0
0
Jun-
01
Dec-0
1
Jun-
02
Dec-0
2
Jun-
03
Dec-0
3
Jun-
04
Dec-0
4
Jun-
05
Dec-0
5
Jun-
06
Dec-0
6
Jun-
07
Dec-0
7
Jun-
08
Dec-0
8
Jun-
09
Dec-0
9
Jun-
10
Dec-1
0
Jun-
11
Dec-1
1
Employee Age pensioner
Self-funded retiree CPI (re–referenced)
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Living Costs Index
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Standard of living gains
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Income gains beyond the cost of living
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What are we spending all the extra money on?
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Expenditure, Volume and Price Change
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Capital City Cost of Living Comparison
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International Cost of Living Comparison
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GDP per capita
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Conclusions● Many households are doing it tough – but on
average this situation is not getting worse in fact most are doing better.
● Cost of living pressures have more to do with pressures of modern living and aspirations than Prices these days!
● Given that prices are in control government policy is better focussed on staple areas (eg Health or education, the economy) rather than simplistic cost of living pressures.
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THANKYOU FOR YOUR TIME TODAY
Ben Phillips
Principal Research Fellow
NATSEM – University of Canberra
June 2012