Deflated changes in Wages and Debt: 7.30 Report Data

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Tables like the ones below take my breath away when I see them for the first time–because the sto­ry they tell is worse than any I would have dared make up. As I not­ed in the inter­view with Ker­ry O’Brien on the 7.30 Report, real wages have increased since 1990, and since Aus­trali­a’s last elec­tion in late 2004. How­ev­er, mort­gage debt has increased by far more.

My apolo­gies in advance that the data here is shown in links to Excel files, rather than as a native table. I’m using an old ver­sion of Word­Press, and its impor­ta­tion of tables is flaky; once I update, hope­ful­ly I’ll be able to post a table direct­ly into the blog, but for now the fastest way to get the data up is via a link to an Excel File. So here we go:

Real Wages 1990-Now

Real Mort­gage Debt Per Capi­ta 1990-Now

Real Wages 2004-Now

Real Mort­gage Debt Per Capi­ta 2004-Now

Real Mort­gage Inter­est Per Capi­ta 1990-Now

Real Mort­gage Inter­est Per Capi­ta 2004-Now

Real Mort­gage Inter­est Per Capi­ta 2004–2008

The punch line in the data is that real wages have increased sub­stan­tial­ly, but not by any­where near as much as has debt. Real wages have risen 25.6% since 1990, and 4.7% since the 2004 elec­tion. Real mort­gage debt per Aus­tralian has risen 526% since 1990, and 18.3% since the last elec­tion. Giv­en the increase in inter­est rates since 2004, the real inter­est repay­ment bur­den rose by 35.1% between the 2004 elec­tion and the start of 2007–and it was up by 45.7% before the rate rise this week.

Giv­en the rate rise, the real inter­est bur­den on the econ­o­my has increased by 50% since the 2004 election–and much of that bur­den is falling on the west­ern sub­urbs of Syd­ney and Mel­bourne. It’s no won­der that the slo­gan “you’ve nev­er had it so good” isn’t real­ly res­onat­ing with the entire Aus­tralian elec­torate.

For parts of it, that is undoubt­ed­ly true: West­ern Aus­trali­a and Queens­land are boom­ing, those whose make their liv­ing from cred­it are doing very well, and those in the East­ern Sub­urbs are still enjoy­ing ris­ing prop­er­ty val­ues. But for those in NSW, Vic­to­ria, South Aus­tralia and Tas­ma­nia, work­ing for a wage, bor­row­ing rather than lend­ing, and liv­ing in the West­ern Sub­urb­s (or Ade­laide’s North and South, I believe) and region­al areas, ris­ing debt has more than coun­tered ris­ing real wages.

I’ll add more data once I’ve installed an updat­ed ver­sion of Word­Press!

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.