Industrial disputes are becoming once again a frequent feature of the daily media. Unions are pushing for wage rises in the face of the falling buying power of the fixed wage (as costs of living rise). Those wage push pressures are being resisted by businesses which are trying to stay afloat in a very ordinary domestic economy and in the face of rising global competition. But as unions push for more wages, is it not possible to consider lower living costs as a solution which benefits fixed wage workers and which also benefits business? And if lower living costs are part of a solution, then housing – one of our highest living costs of all – ought to take centre stage.
It's ironic that the rapid and undeniable escalation of housing costs relative to average wages has taken place largely due to policies introduced during the terms of State Labor Governments. The introduction of artificial growth boundaries that limited land supply, the introduction of upfront taxes on new development, and the spawning of myriad and complex planning and development regulation, whether it's been in Queensland, NSW or Victoria, have all occurred generally with Labor Governments in power.
The reason it's ironic is that the adverse impacts of those policies have been most felt by the very constituency which Labor traditionally sought to represent: working people, in largely fixed wage environments. In the very early days of the Australian Labor Party, these were symbolised by shearers in their Jackie Howe's. Later in the 20th century, they expanded to include the unionised 'white collar' workforce of teachers, nurses, police and other para-professional groups. Today though, wage pressures by unions of teachers, police or other groups (especially those on public payrolls) are assiduously resisted by Labor Governments, as they defend their budgets. And this is the irony – having presided over and championed policy mechanisms which have had a large impact on the cost of living of these groups of workers, these same governments then resist attempts to recover that standard of living through wage growth.
Now before you think I've gone all militant on you all (trust me, I haven't), here's an example of what I'm driving at.
Much has been said about housing affordability, and what it will mean to lock an entire generation out of the housing market. Even as late as this week, this story documents yet another report attesting to falling home ownership and the rise of a renting class. Most of what is said and written about affordability though works on averages – average incomes, and average house prices. These are convenient measures, so it makes sense to do so.
Consider for a moment though the people who are trying to enter the housing market and buy a home in which to raise a family. They could typically be around their mid to late 20s, and biologically in their prime for having and raising children. At this stage of life, you are probably below the average income for your career or profession as you're really only starting out. But it's at this stage of life that the reality of the affordability problem is most acute.
In Queensland, this might be a teacher in their mid 20s, with two or three years of training, who will earn around $50,000 per annum gross and pay roughly $9,000 per annum in income tax. He (or she) may be married to a police constable, of the same age, who will earn roughly $58,000 per annum gross including their operational shift allowance, and pay around $11,500 in tax. Their combined after tax income could be around $87,500 per annum. (This combined income would be much less of course if, for example, one of our young couple was a child care or retail worker).
Now, take a modest new family home in an outer suburb like North Lakes or Springfield. Let's assume they've saved a small deposit, and with a loan of $400,000, they buy something for around $450,000. That's hardly McMansion territory. But that loan, over 30 years at 7.8%, will cost them close to $35,000 per annum in repayments, or 40% of their combined after tax incomes.
This, of course, is before they even think about children, and the prospect (despite generous maternity and paternity pay and leave provisions) of enduring a significant household income reduction while one of them isn't working. Even on returning to work, there would then be child care fees, which quickly erode their pre-child household budget.
The basic sums are not horrendous but neither are they full of promise. Buying a home and starting a family have become a huge financial consideration, instead of a fairly normal and unremarkable pattern of generational and social growth. And it is now absolutely dependent on a dual income family, with both of them preferably good incomes.
This is a profound change, and it's happened just in the last decade. As a result, fewer people are buying homes, people are postponing children (until they can afford them) and when they do, they're having fewer children. A countless stream of statistical and demographic reports are now underlining this change on an all too frequent basis. All of which is very bad news for the economy, for society and the community as a whole.
But returning to my original theme – is it any wonder we're seeing wage push pressures from people such as those in this example?