A casual glance at the news in recent months may have left you thinking the average Australian earns almost $85,000 a year.

If that sounded insanely high to you, then your instincts were bang on. An ordinary Australian earns way, way less than that.

But it doesn’t appear to have stopped Treasurer Scott Morrison using the figure to sell his  https://thenewdaily.com.au/money/news-federal-budget/2018/05/08/budget-2018-morrison-tax-system/" rel="nofollow - income tax cuts .

A piece of Treasury modelling given to  https://www.afr.com/news/middleincome-earner-biggest-winners-from-tax-cuts-today-and-in-the-future-20180525-h10jwo?login_token=MdKt-TH-iqk_X9cjXSZxeiOG3E8rzjhCsMPunGUjA1Ds-60iZo3J7xeSkgpW8HBq431wT4jp9rSLqbshDW-_Yw&expiry=1528436364&single_use_token=kr6eiT_GIy_rKZjpoyYtsHO46M2dturjA2xAfw4kecYcbFMBwb7iXNs9OhRh11Cd6oiJlr7frOWGnOSCIoTVSA" rel="nofollow - Fairfax  and  https://www.theaustralian.com.au/national-affairs/treasury/turnbulls-tax-plan-targets-middle-class/news-story/17ad2257df93adc28c6ce503a3a164be" rel="nofollow - News Corp  two weeks ago appeared to claim $84,600 a year was an average income. And that,  https://thenewdaily.com.au/money/finance-news/2018/05/28/government-tax-cuts-middle-australia/" rel="nofollow - by a specious line of reasoning , meant the tax cuts would benefit middle Australia the most.

But official government figures show this is highly misleading. According to figures provided to The New Daily by Treasury itself, the average wage is just over $62,000 a year.

And the median wage — a more useful measure — is just over $55,000 a year.

Figures from the Grattan Institute, meanwhile, show the median tax-filer’s income is just under $45,000 — only just over half the supposed “average income” used by The Australian and others to justify the government’s proposed income tax cuts.

The $84,600 a year is not plucked out of thin air. It actually comes from the Australian Bureau of Statistics’ ‘full-time adult average weekly total earnings’.

According to the ABS, in November last year the average full-time wage, with overtime and penalty rates, was $1628 a week. Multiply that by the number of weeks in a year (52) and you get $84,656.

Sounds fair enough, right? Wrong.

First of all, only 68% of workers are full-time workers, according to the ABS. Include the 32% of workers who are part-time, and the average drops dramatically to around $62,000 a year.

Secondly, this ‘average’ is the mean rather than the median. This is a crucial difference. The mean takes the total collective income earned, and divides it by the number of earners. But because some people earn way, way more than others, the mean is significantly skewed towards the upper end.

As independent economist Saul Eslake put it: “If Bill Gates walks into a bar full of ordinary Australians, the mean income of the room has suddenly gone up a lot; but the median income hasn’t changed at all.”

The median is more focused on actual people rather than abstract numbers. It essentially lines up every worker in Australia from lowest income to highest income, finds the person right in the middle, and that person’s income is the median wage.

According to Treasury, the median wage or salary is $55,063 a year.

The New Daily’s calculations, using ATO data which you can view  https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2015-16/?anchor=info1#Table3" rel="nofollow - here , suggested the median income is closer to $50,000. But either way, nobody is seriously arguing that it is anywhere near $84,661.

And if you’re wondering why the graphic above puts average full-time wages at $81,843 — well, that’s because it refers to ordinary earnings. The $84,661 includes penalty rates.

That means doing something about it requires true political leadership – that is, doing something right that’s unpopular. Study after study on the subject has concluded that the high price of housing is leading to dangerous inequality and distorting the economy and society, yet political leaders have never tackled it effectively, for obvious reasons.

The fact that one of the three least-populated countries on earth contains the world’s second-most expensive housing is a national calamity and a stunning failure of public policy. For decades, political leaders have paid lip service to housing affordability, while doing nothing that would bring prices down. In fact, most of the big political decisions have done the opposite.

For example, the capital gains tax discount in 1999 was designed by business leaders to encourage investing in their businesses, but it only led to a surge in investment in housing. Since then, there have been official inquiries and taskforces into housing affordability in 2003, 2004, 2008, 2009, 2012, 2013, 2014, 2015, 2016, 2018 and 2022. Throughout all this time, house prices kept rising, except when APRA cracked down on bank lending to investors in 2017, and when the Reserve Bank increased interest rates in 2022. Policy has been nowhere, done nothing.

When the ALP adopted its policy to modify negative gearing in 2016 and there was an opportunity for the political class to come together and actually achieve something, it was turned into another occasion for rivalry, and was later excluded from the terms of reference of yet another inquiry. https://www.smh.com.au/link/follow-20170101-p5ek6z" rel="nofollow - Transport infrastructure decisions have usually favoured roads – usually toll roads, not fast rail – and all the work on the latter has focused on the pie in the sky of https://www.smh.com.au/link/follow-20170101-p5c4f6" rel="nofollow - inter-capital city trains , rather than anything designed to increase the supply of housing.

And perhaps most important of all, decisions about the https://www.smh.com.au/link/follow-20170101-p5ejm7" rel="nofollow - level of immigration have been driven by the needs of business, with little thought to housing the new arrivals or to the impact on house prices.

...

The bottom line is that Australian capital-city housing is too expensive compared to incomes for a healthy society, and that needs to change. Merely bringing the rate of increase in house prices back to the rate of growth in incomes isn’t enough – that ratio needs to come down, so it isn’t a stretch to buy a place to live. To achieve this will require active, and serious, government intervention. It won’t be enough simply to restore the amount of housing construction to what it was before the pandemic, as the federal government is now aspiring to do.

We don’t need another inquiry or a royal commission; there’s a room full of inquiries, reports and submissions. They just need a taskforce drawn from Treasury and the housing department to go through the work that’s been done already and come up with a policy that has a clear aim and is likely to work. That would be a good start.

Alan Kohler

https://www.smh.com.au/national/the-dirty-little-secret-that-keeps-australian-housing-wildly-unaffordable-20231121-p5elo7.html