Throughout the 2013 Federal election campaign, both major parties have pledged to address ‘cost of living’ pressures. Kevin Rudd used the phrase 14 times during a press conference the day after calling the election, and the Liberal Party includes ‘cost of living’ among its 11-point criticism of Labor on its campaign website. Tony Abbott’s recent announcement of a generous paid parental leave scheme is another example of tapping into middle-class anxiety over making ends meet. But is the average Australian household really ‘doing it tough’?
In May 2012, AMP and the National Centre for Social and Economic Modelling (NATSEM) released a report that argued rising prices were only half the picture: ‘…of greater importance is how incomes change relative to prices. This is what determines the financial standard of living for households.’ After all, if prices rise by 5 per cent but incomes rise by 10 per cent, households are better off, even if the cost of a litre of petrol reaches a new pinnacle.
The report found that from the period 1984 to 2009-2010, living costs increased by 164 per cent, but average disposable incomes increased by 217 per cent. This meant that households in 2009-2010 had around $224 per week extra spending money than they did 25 years earlier.
Ah, but what about the cost of living for Rudd’s proverbial ‘working families’? Aren’t couples with mortgages and kids spending more on the basics? The report tested this by splitting expenditure into three categories: basic necessities, relative necessities and discretionary items. For Australian households as a whole, there was little evidence of spending a greater proportion on the basics such as shelter, food and clothing. As for working families, the historical data showed ‘that this group, more than any other, has increased spending towards discretionary items while maintaining a steady proportion of basic necessities’. For many Australians, what’s increasing isn’t the cost of living, but the cost of lifestyle.
The report was released in 2012, and energy prices have risen since then. But in August this year PolitiFact tested Rudd’s claim that Australian families were ‘all struggling from cost of living pressures’ and found that although the total price of items bought from a typical pay packet climbed by 2.4 per cent over the past year, the pay packet itself climbed by 3.1 per cent. Once again, it’s a case of income outpacing living costs.
A quick comparison with the economies of other industrialised nations confirms that Australians have nothing to complain about. The annual disposable income of the average Aussie household is more than US$5800 above the OECD average. ‘The Australian economy has experienced continuous growth and features low unemployment, contained inflation, very low public debt, and a strong and stable financial system,’ explains the CIA’s World Factbook. We also largely escaped the Global Financial Crisis.
If we broaden the comparison to include all the world’s countries, our howls of struggling to survive start to sound like the whinging of spoilt brats. The World Factbook ranks Australia’s Gross Domestic Product (GDP) per person as twentieth out of 229 countries, but that only accounts for the financial aspects of living standards. The UN’s Human Development Index, which uses a broader range of measures (including health, education and inequality), ranks Australia second out of 186 countries.
This isn’t to say Australia doesn’t have people living in poverty. John Falzon, CEO of St Vincent Paul de Society National Council of Australia, recently pointed out in Eureka Street that there are more than 105,000 homeless people in our country. A minority of the population is genuinely struggling due to degrading circumstances such as long-term unemployment or socio-economic disadvantage. But ‘cost of living’ political rhetoric is explicitly aimed at ‘ordinary Australians’, and the international figures show the average Aussie is very well off indeed.
If we’re so rich, why do we cry poor? It would be easy to blame political speeches that evoke the myth of the ‘little Aussie battler’, who struggles gallantly forward in the face of perceived financial hardship. But the reason for our self-perception of doing it tough runs deeper.
Once people are above the breadline, poverty becomes relative. In his seminal work on the ‘income-happiness paradox’, economist Richard Easterlin argued there was a ‘consumption norm’ which provides a common point of reference for appraising personal wellbeing, ‘leading those below the norm to feel less happy and those above the norm, more happy’. In other words, once you have the basics sorted, your wellbeing is the result of your perceived place in society rather an objective measure of wealth. What matters for whether you feel ‘rich’ or ‘poor’ is your reference group – the people to whom you compare yourself.
Although Australians are extremely wealthy in a global sense, we don’t always feel wealthy because our reference group is largely domestic – we are comparing ourselves to each other. When your friends, co-workers and neighbours are as rich as you are, it’s easy to fool yourself into thinking that the unprecedented luxury and convenience around you is nothing special. You can become blind to your own privilege.
Worse still, aspirational advertising and the cult of celebrity prompt people to compare themselves to an even richer set of peers. The desired standard of living soars ever higher, and the little Aussie battler is beset with anxiety not because he’s struggling to pay for basic necessities, but because he can’t keep up with rising social expectations.
So if wealth and poverty are relative, the question becomes this: to whom should we compare ourselves?
In 2012 my partner and I went on a nine-month research trip exploring the idea of ‘voluntary simplicity’, a philosophy that involves reducing material consumption in order to focus on the personal, emotional or spiritual aspects of life. We met several families who said they’d raised children on very low incomes, but they didn’t complain about ‘cost of living’. They recognised that although they were poor by Australian standards, they were still rich in global terms. A man with two young boys told me he’d once fed his modest annual income into a website called globalrichlist.com and was shocked to discover that he was the ninety-seventh millionth richest person in the world.
This is the proper perspective from which to assess our wealth – in comparison to the average world citizen. Once we realise that in a global context most Australians are incredibly rich, we’ll start to feel happy with what we have, rather than feeling hard done by because we aren’t as fabulously wealthy as people on the next social rung.
Australians, on the whole, are not doing it tough. It’s time we stopped whinging about First World problems and started counting our blessings.
Greg Foyster is the author of Changing Gears: A Pedal-Powered Detour from the Rat Race, out now through Affirm Press.