As the United States gears up for mid-term elections dominated by the cost of living, a stark new analysis reveals the affordability crisis biting Australian households is even more severe, with recovery decades away for many.
The Two Sides of the Affordability Equation
While soaring prices capture headlines, they tell only half the story of the financial pressure facing Australians. The true measure of affordability is the real wage – what your pay packet buys after accounting for inflation.
Nationally, prices have surged by 22 per cent over the past five years, with some states hit harder. Western Australia saw a 27 per cent jump, Queensland 24 per cent, and the Australian Capital Territory around 21 per cent. However, the catastrophic shift occurred after 2020.
Australians lost two-thirds of all affordability growth achieved since 2000 in just three years, wiping out 14 years of real wage gains. The nation's purchasing power has been rolled back to 2009 levels. Even under optimistic projections, a full recovery to pre-crisis affordability is unlikely before 2040.
Location, Occupation, Sector: A Triple Whammy
The severity of the crisis is not evenly shared. It forms a perfect storm based on where you live, what you do, and who employs you.
Geographically, the Northern Territory has suffered the most, with real wages crashing 10 per cent since 2020. Western Australia (8.2 per cent) and Queensland (8.1 per cent) follow closely. The larger states fared slightly better, with New South Wales down 7 per cent and Victoria 6 per cent.
Your occupation dramatically alters your experience. Workers in accommodation, food services, and retail have lost all real wage growth since 2000 and then some, now earning less in real terms than they did over two decades ago.
Public sector employees have been hit harder than their private sector counterparts, suffering a 10 per cent fall in real wages versus 7 per cent. This creates a severe intersectional impact. For example, while Canberra's overall affordability fell by 6.2 per cent, a public servant in the capital faced an strong>8.2 per cent drop, requiring an estimated 16 years to recover the loss.
The most affected groups are public sector workers in the Northern Territory and Western Australia, where real wages have plummeted by 13 and 10 per cent respectively.
The Path Forward: Supply Reforms to Tame Prices
Economist Adam Triggs, a partner at advisory firm Mandala, argues the solution lies in boosting supply to pull prices down, as simply raising wages risks fuelling further inflation.
He proposes immediate, aggressive supply-side reforms, starting with the abolition of all tariffs and automatically allowing the import of any product that meets European Union or United States standards. This would cut costs for consumer goods, pharmaceuticals, cars, electronics, and crucial building materials.
Longer-term measures must tackle runaway inflation in housing and healthcare, while government demand should be withdrawn by returning the federal budget to balance.
The window for action has already closed once. Triggs notes that had these reforms begun after the 2022 election, when economists first raised alarms, the current crisis could have been mitigated. The time for decisive policy is now, before another generation of wage growth is lost.
