Wealth strategies update

Australia’s falling living standards – what’s driving it and how to fix it

Decades ago, the Australian economist Dr Don Stammer observed that while Australia may manage a boom poorly it manages crises well. This was certainly evident in the 1980s when a terms of trade shock after years of stagflation galvanised the Hawke/Keating Labor Government to undertake more supply side productivity enhancing economic reforms to get the economy back on track. These were continued in the Howard/Costello years and Australians saw rapidly rising material living standards. But since then, the wheels seem to have fallen off the reform agenda and productivity has suffered. Numerous economists have been pointing this out for years but with the problem masked by strong export earnings no one really worried. Maybe until now. The past few weeks have seen increasing coverage of Australia’s falling living standards with headlines like “plunging living standards hit households harder than recessions” and “how Australia became world’s cost-of-living loser”. So, what’s driving it? And is it the sort of crisis that sees Australia reinvent itself again?