Of all of the magnificent displays of data and analysis in Friday’s SoMP, one chart stands head and shoulders above all others. It is this:
That red line is your crashing living standards as inflation overwhelms wage growth. Worse, in three months, the chart has gotten worse, not better, with a deeper trough and shallower recovery. Here’s the August SoMP version:
Moreover, the chart assumes accelerating wage growth throughout the period, which is not going to happen after Albo opened the floodgates to cheap foreign labour.
With more realistic wage growth assumptions, here’s what it looks like in a waterfall chart:
Do not mistake this event for anything in Australia’s modern experience. Prior inflation shocks in the seventies and eighties were met with tearaway wages growth and worker living standards roared higher:
And that was when households were under-indebted and wages deflated mortgages away in five years. Today’s mortgagees face a nightmare of rising repayments, crashing real wages, and falling asset prices.
The Albanese Government has blundered spectacularly in just six months of office by dropping a wage-destroying immigration bomb the moment it came to power while doing nothing to prevent the energy shock.
The resulting real income smash is dropping Aussie living standards at the fastest pace since the Great Depression.
