Normal
Excellent analysis on the ABC about the real increase in cost of living vs the CPI. Certainly highlights the desperation of many people trying to pay a mortgage. Renters of course are also getting it in teh neck.Why Australian workers' true cost of living has climbed far faster than we've been toldWhy is Prime Minister Anthony Albanese suddenly so keen to deliver extra cost-of-living relief — keen enough to summon Labor members of parliament to Canberra for a briefing on Wednesday, followed by an address to the National Press Club on Thursday?One immediate reason is that he is keen to make sure Labor wins the upcoming by-election in the outer-Melbourne electorate of Dunkley on March 2.But the cost of living wouldn't matter much for Dunkley — and it wouldn't matter much for the rest of us — unless it was really biting.And despite what the treasurer himself has been trying to tell us, it is biting.Treasurer Jim Chalmers has been pointing out that in the June quarter and the September quarter (the three months to June and to September), real wages grew for the first time in years. By that, he means that the wages index compiled by the Bureau of Statistics began growing faster than the consumer price index.It's better than growing more slowly, but it tells us next to nothing about what's happening to buying power. Here's why.Way back in the late 1990s, more than a quarter of a century ago, the consumer price index used to actually reflect the cost of living. It included all of the big costs incurred by households including — importantly — mortgage interest payments, which at the time accounted for an average of $5 of every $100 each wage earner spent.Then in September 1998, in response to representations from the Reserve Bank and the Treasury, the bureau changed the way it calculated the index, excluding mortgage and other interest payments in a decision it acknowledged would make the index worse at measuring living costs.It still carries the warning on its website, saying the consumer price index is "not the conceptually ideal measure for assessing the changes in the purchasing power of the disposable incomes of households".The index actually does a pretty good job of measuring changes in living costs at times when mortgage rates aren't much changing, but at times when they are tumbling it'll overestimate living costs, and at times like the ones we are in when mortgage rates are soaring it will way understate what's happening to living costs.We know by how much. For years the bureau has also published a separate set of measures it pointedly calls "living cost indexes". These do include mortgage and other interest charges, and for households headed by employers (those for whom the buying power of wages matters) they are substantial.Living costs are up 9 per cent rather than 5.4 per cent[URL unfurl="true"]https://www.abc.net.au/news/2024-01-24/cost-of-living-climbing-faster-than-weve-been-told/103380312[/URL]
Excellent analysis on the ABC about the real increase in cost of living vs the CPI. Certainly highlights the desperation of many people trying to pay a mortgage. Renters of course are also getting it in teh neck.
Why is Prime Minister Anthony Albanese suddenly so keen to deliver extra cost-of-living relief — keen enough to summon Labor members of parliament to Canberra for a briefing on Wednesday, followed by an address to the National Press Club on Thursday?
One immediate reason is that he is keen to make sure Labor wins the upcoming by-election in the outer-Melbourne electorate of Dunkley on March 2.
But the cost of living wouldn't matter much for Dunkley — and it wouldn't matter much for the rest of us — unless it was really biting.
And despite what the treasurer himself has been trying to tell us, it is biting.
Treasurer Jim Chalmers has been pointing out that in the June quarter and the September quarter (the three months to June and to September), real wages grew for the first time in years. By that, he means that the wages index compiled by the Bureau of Statistics began growing faster than the consumer price index.
It's better than growing more slowly, but it tells us next to nothing about what's happening to buying power. Here's why.
Way back in the late 1990s, more than a quarter of a century ago, the consumer price index used to actually reflect the cost of living. It included all of the big costs incurred by households including — importantly — mortgage interest payments, which at the time accounted for an average of $5 of every $100 each wage earner spent.
Then in September 1998, in response to representations from the Reserve Bank and the Treasury, the bureau changed the way it calculated the index, excluding mortgage and other interest payments in a decision it acknowledged would make the index worse at measuring living costs.
It still carries the warning on its website, saying the consumer price index is "not the conceptually ideal measure for assessing the changes in the purchasing power of the disposable incomes of households".
The index actually does a pretty good job of measuring changes in living costs at times when mortgage rates aren't much changing, but at times when they are tumbling it'll overestimate living costs, and at times like the ones we are in when mortgage rates are soaring it will way understate what's happening to living costs.
We know by how much. For years the bureau has also published a separate set of measures it pointedly calls "living cost indexes". These do include mortgage and other interest charges, and for households headed by employers (those for whom the buying power of wages matters) they are substantial.
[URL unfurl="true"]https://www.abc.net.au/news/2024-01-24/cost-of-living-climbing-faster-than-weve-been-told/103380312[/URL]
Hello and welcome to Aussie Stock Forums!
To gain full access you must register. Registration is free and takes only a few seconds to complete.
Already a member? Log in here.
