Australians have suffered their deepest decline in material living standards in modern history.
Real per capita household disposable income has collapsed by more than 8% since the Albanese government took office in Q2 2022, the sharpest decline on record.
Australia’s decline in real per capita household disposable income has been among the worst in the advanced world.
The contrast between Australia and the OECD average is startling, as illustrated below.
Falling real wages have underpinned the decline in Australia’s real household disposable income.
As illustrated in the next chart, Australian real wages have fallen nearly 7% from their peak. Reserve Bank of Australia (RBA) forecasts also predict that Australian real wages will still be 6% below their peak as of December 2026.
Deloitte Deloitte Access Economics has released its Business Outlook, which forecasts that real wages will not recover until 2030.
“Real wages are now grinding higher, but it is likely to be 2030 before Australian workers recover their pre-pandemic purchasing power”, Deloitte Access Economics Partner and report lead author Stephen Smith said.
Smith also said that “Australia’s housing crisis is likely to persist”.
While I agree wholeheartedly with the sentiment, Deloitte’s forecasts are likely too generous.
As illustrated below, extrapolating the RBA’s forecasts suggests that real wages won’t recover until around the mid-2030s.
Regardless, Australians are facing a decade or more of declining material living standards.
