13 August 2012

Something for "The Kouk"?

The economist Stephen Koukoulos has an article in today's Business Spectator on living costs (it's here but might be hiding behind a [free] registration requirement).  Essentially, it says that, on average, living standards have increased over Labor's period in office and so, on average, whinges about increases in the cost of living and falling living standards are misplaced (to say the least).

One of the key elements in his argument is that wage increases (along with tax cuts and interest rate reductions, etc) have helped ensure this upward movement.  Now, if you've read my other posts you'll know that I don't think that over the period of the current government (Parliament 43) the tax-transfer system (tax cuts, welfare changes and the like) have actually done this, except at low incomes.  If you look at the 4 Parliament comparison posts you can see this effect and where it comes from.

Anyway, this provided me with an excuse to whip out an updated chart that looks at how much wages would need to have increased over the term of the current government for real disposable income to have stayed the same.  I use the same 3 household types as I've done for the 4 Parliament series - single people, single income couples without children, and a single parent with 2 children aged 8 & 11.

I'm sure "The Kouk" (to use his Twitter handle) will be pleased to see that for 2 of the 3 family types it looks like wage increases have probably undone the decrease in living standards that the tax-transfer system might otherwise inflict.  Here's the chart:

(click to enlarge)

The chart is simple enough - the solid lines are telling you the percentage increase in wages needed since August 2010 to maintain the real living standard (that's in CPI adjusted terms).  I've also stuck in two vertical dotted lines which show how much the National Minimum Wage and the Average Weekly Wage have increased in that time.  The AWE figure is a little undercooked - there's a new number due soon which will almost certainly increase the amount shown.

Anyway, apart from single income couples, it looks like AWE has already been enough to put people into positive territory, except for a few income ranges for single parents.  Single income couples without children are a different story, having been deliberately targetted.

The Kouk's article has been criticised for relying on averages, and similar criticisms can be applied here too.  However, it's also fair to say that breaking it down to 3 household types across wide range of income does give a slightly more nuanced picture!  A few more household types wouldn't go astray though, but that's for another day.

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