Anthony Albanese appears to be living up to the Liberal Party’s election campaign taunt – ‘it won’t be easy under Albanese’ – with economic data showing Australians are worse off.
Since Mr Albanese’s government was elected in May 2022, Australians have suffered from high inflation – with the cost of essential commodities such as gas, power and groceries, surging. That is causing wages to fall in real terms.
Inflation is running hot as the national population grows at the fastest pace since the early 1950s due to high immigration. More than 400,000 people moving to Australia in the year to August.
Meanwhile, Australians are battling a housing shortage and have the world’s highest mortgage stress and debt levels. The Reserve Bank just last week lifted interest rates for a 13th time in 18 months, driving up the cost of mortgages.
So why has there been so much pain for working-class Aussies while Mr Albanese has been Prime Minister – and what’s causing it?
Anthony Albanese appears to be living up the the Liberal Party’s election campaign taunt – following a dozen interest rate rises under his watch
The Prime Minister won the May 2022 election despite Labor scoring just 32.6 per cent of the primary vote, the party’s lowest first-preference score since 1910 (Anthony Albanese is pictured second left with Foreign Minister Penny Wong, girlfriend Jodie Haydon and son Nathan Albanese)
Inflation and a dozen rate rises
By the time Mr Albanese won last year’s election, inflation was on the rise due to several factors, including the Morrison government’s substantial Covid stimulus spending, the ongoing war in Ukraine, Covid-related supply chain constraints, and historically low interest rates of 0.1 per cent.
To cope with the rising inflation, the Reserve Bank raised interest rates 13 times in 18 months.
RBA Governor Michele Bullock on Tuesday raised rates by a quarter of a percentage point, taking the cash rate to a 12-year high of 4.35 per cent and adding $131 a month to an $800,000 mortgage.
She hinted that there are more rate rises to come, which will put more pressure on already struggling households.
‘Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago,’ she said.
‘Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.’
Warwick McKibbin, a former Reserve Bank of Australia board member, said that while Labor delivered a $22.1billion surplus in 2022-23, its policies were adding to inflation because they weren’t designed to reduce demand in the economy.
Mr McKibbin said the Federal government has a budget that is ‘neutral’ toward inflation, but argued it is only neutral ‘in the context they’re not adding demand to the economy’.
‘What we have is excess demand so either consumers can spend less or government can spend less,’ he told Daily Mail Australia.
‘Something has to adjust when you have excess demand. At the moment, we’ve got too much demand in the economy so we have to take some out.’
Labor returned to power in May 2022 less than three weeks after the Reserve Bank raised interest rates during an election campaign. Since then, 12 of the RBA’s 13 rate rises in 18 months have occurred on Mr Albanese’s watch (pictured are past and present RBA governors Philip Lowe and Michele Bullock)
High immigration: ‘Fastest since the 50s’
More than 400,000 migrants moved to Australia in the year to August, following an influx of skilled migrants and international students.
Should that level be maintained, immigration would far surpass the 315,000 level that Treasury predicted for 2023-24 in the May Budget.
AMP chief economist Shane Oliver said Australia’s net overseas migration level was set to surpass the 500,000 mark in 2023. He called for it to be halved to the pre-mining boom level of 200,000 of the mid-2000s.
‘It looks like the fastest population growth since the early 1950s,’ he told Daily Mail Australia.
‘Net migration is current running around 500,000 – ideally you’d knock it back to about 200,000.’
Treasury is expecting 260,000 net overseas arrivals in 2024-25.
Higher immigration is also adding to inflationary pressures, and leading to even higher interest rates.
‘High immigration is one of the problems at present, keeping aggregate demand up – stronger than it would have been – and therefore keeping inflation high,’ Dr Oliver said.
‘When you’ve got more people in total coming into the country, it pushes demand up and, of course, the Reserve Bank then responds to that – so it leads to not only higher prices but it’s leading to higher interest rates.
‘A remedy could be to slow down population growth, which takes pressure off demand; takes some of the pressure off housing and therefore makes life a little bit easy for the Reserve Bank.’
Dr Oliver said immigration was within the control of the federal government, noting Treasury had underestimated the immigration surge that would follow Australia’s reopening in December 2021.
‘Ultimately, though, it is the responsibility of government to deliver higher living standards – on a per capita basis, that should be the focus,’ he said.
‘You don’t necessarily raise living standards by putting more and more people in Australia.’
Dr Chalmers has said immigration levels are not something the government controls or sets targets on – something which Dr Oliver disputed.
‘You’d think that immigration levels is something the government has control of,’ he said.
AMP chief economist Shane Oliver said Australia’s net overseas migration level was set to surpass the 500,000 mark in 2023, and called for it to be halved to the pre-mining boom level of 200,000 of the mid-2000s (pictured is Sydney’s Town Hall train station)
The housing crisis is hurting more borrowers and renters, as immigration pace outpaces building activity.
Sydney’s median house price has risen by 12.1 per cent since January, hitting an unaffordable $1.397million in October.
After Hong Kong, Sydney is already considered the world’s most unaffordable housing market when median household incomes were compared with the mid-point house price.
An individual borrower or a couple would need to earn more than $186,000 between them to avoid being in severe mortgage stress, where someone owes the bank more than six times what they earn.
Australia’s household debt-to-income level of 197.6 per cent is also the highest in the world after Switzerland.
But economist Saul Eslake, the principal of Corinna Economic Advisory, said Swiss owner-occupier borrowers could claim mortgage interest on tax – unlike Australians unless they are landlord renters.
‘That’s why Swiss don’t pay off their mortgages because it doesn’t make sense to,’ he told Daily Mail Australia.
Mr Eslake said strong population growth in Australia from high immigration was hurting renters and prospective home buyers.
‘It’s contributing to inflation of both rental and home purchase costs,’ he said.
The national rental vacancy rate is at a record low of just one per cent, new PropTrack data for October showed.
The REA Group, which also owns Flatmates.com.au, also revealed suburbs with zero rooms available. Clovelly in Sydney’s east has 516 flat mate seekers while East Perth has 350 looking for a share home.
The housing crisis is hurting more borrowers and renters, as immigration pace outpaces building activity (pictured is a rent queue in Bondi in Sydney’s east)
Claudia Conley, the community manager at Flatmates.com.au, said the housing shortage was clearly biting.
‘More property listings are still needed across the country to keep up with the growing demand for share accommodation,’ she said.
Separate data from SQM Research showed capital city rents surging by 16 per cent over the past year.
This has taken Sydney’s mid-point weekly house rent to $996. Melbourne’s median house rent has surged by 20.7 per cent to $702.
During the last financial year, only 168,231 private homes were built, with higher construction costs causing building companies to collapse.
With an average of 2.5 people per home in Australia, the 420,578 people they would theoretically house was well below the annual population increase of 563,200 in March, covering both net overseas migration and births minus deaths.
Australians are getting poorer
Since Prime Minister Anthony Albanese came to power, after-tax income for every household has fallen by 5.1 per cent – making it the worst plunge among developed nations.
Real wages are also falling because pay rises of 3.6 per cent are lagging behind the 5.4 per cent inflation rate – meaning effective wage cuts of 1.8 per cent.
But unemployment was still low at 3.6 per cent in September, rivalling levels that had not been seen since 1974.
‘It seems that everything that could go wrong has gone wrong except strong employment growth,’ Dr Oliver said.
‘We’ve had strong employment growth, wages haven’t kept up with inflation so real wages have fallen.’
Labor’s time in power has also coincided with Australia sinking into a per-capita recession where output for every Australian declined for the first since the 2020 Covid lockdowns.
The economy shrank by 0.3 per cent in the June quarter, on a per- capita basis, followed by a 0.3 per cent drop in the March quarter.
Rising gas, petrol and power bills
Labor in Opposition last year promised to reduce power bills by $275 by 2025, only for electricity prices to surge by 18 per cent in the year to September.
Treasurer Jim Chalmers responded in the May Budget with Energy Bill Relief Fund rebates of up to $500.
However, it’s important to note that the rebate only applied to certain groups, including pensioners, veterans, seniors, those on the family tax benefit and other concession card holders
Petrol prices have also soared by more than seven per cent in the last three months as volatility in oil markets and the weakening Australian dollar threatens to keep up prices.
Motorists have been commonly paying more than $2-a-litre.
Gas prices went up by 12.7 per cent, even though the federal government in December 2022 intervened in the gas market and capped wholesale prices at $12 a gigajoule for a year.
Mr Albanese has been contacted for comment.