Australian Wages See Biggest Drop in 20 Years

DG Institute
DG Institute

Published 5:47 am 20 Aug 2021

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Australians are now getting less bang for their buck than ever as ABS data finds wage growth is at record lows. 

On Wednesday, data from the Australian Bureau of Statistics (ABS) revealed some concerning information about Australia’s wages; they’ve been moving backward. 

For the year, inflation grew by 3.8% while wages grew by 1.7%. This means that Australia’s real wages actually fell by 2.1% over the year, the largest fall in about 20 years.

Real wages reflect the purchasing power of Australians, and real wage growth can only occur when wages rise at a faster rate than increases in the prices of goods and services in the country. Instead, the opposite has occurred. 

The cost of living in Australia – the price of petrol, fruits, vegetables etc. –  is rising more quickly than wages are.

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June quarter price changes. Created by The New Daily using ABS data. 

“Rising fuel prices accounted for much of the increase in June quarter CPI [consumer price index] with prices surpassing pre-pandemic levels,” said the ABS head of prices statistics Michelle Marquardt. 

The drop in real wages came as a surprise given the labour supply shortage brought about by reduced overseas migration, which many suspected would place upward pressure on wages. Instead, while unemployment has dropped, wage growth hasn’t occurred. 

Australians Are Parking Their Cash in Property, But With a Twist

The Nobel Prize-winning economist Milton Friedman famously observed that “inflation is taxation without legislation.”

This is certainly proving to be the case here in Australia, with wages going backwards and interest rates at historic lows, Australians’ money is losing value while it sits in the bank.

By contrast, a well-known defence against inflation is to purchase property, which is precisely what many Australians are doing. In fact, demand for property in Australia has soared to such heights that Australian house prices are on track to climb 10 times faster than wages this year.

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For example, even if you are in one of the highest-paying professions in Australia, house values in Sydney and Canberra are out-earning your salary each quarter.

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Though as a rising number of Australians park their cash into property, property prices are being driven to heights that are becoming unaffordable for many Australians, particularly in more expensive regions near capital cities.

The increasing affordability crisis of Australia’s property market combined with the fact that working from home during COVID-19 is becoming the new norm, is causing an exodus from capital cities and toward more regional areas. 

This increased demand for property in regional areas led to a 1.7 per cent increase in regional dwelling prices over the month of July, just narrowly outpacing the 1.6 per cent recorded for combined capital cities.

“We’ve seen more city dwellers move to those regional areas because that house and job equation does add up,” said Domain’s senior research analyst Dr Nicola Powell.

These Are The Booming Regional Areas 

In the first quarter of 2021, more than 11,000 people left capital cities for regional areas – the highest quarterly exodus on record. In fact, over the past 12 months, domestic migration has reached levels not seen since the ABS began measuring it in 2001.

Areas like Byron Bay and Kiama have been top picks for those moving to regional NSW, with median house prices surging 51 and 44 percent respectively. 

Now, there are over 50 regional NSW locations with an average house price above $1 million, in part due to this new influx of Sydneysiders that are looking to escape the big smoke. 

Though we would be remiss to ignore the fact that the bulk of this domestic migration has led people to Queensland, which appears to be the destination of choice for those looking to get out of the city and into a bigger, regional property. In 2020, Queensland recorded a net gain of 30,000 people in 2020.

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Over the March quarter, over 104,100 people moved interstate, which saw Queensland gain 7,000 people over the quarter, while Victoria lost 4,900 and New South Wales lost 4,500. 

Of those leaving Sydney, the biggest movement was by people aged between 45 and 64, with 2,700 leaving the capital city. This demographic was also predominantly composed of parents, as their exodus was accompanied by a net loss of 2,100 people aged under 14. 

The head of research at Propertyology, Simon Pressley, has said that the lockdowns have demonstrated why regional areas can be preferable to cities:

“In just 12 months, the combined (net) volume of people to have relocated away from Sydney and Melbourne is enough to fill entire cities as big as Albury, Dubbo Hervey Bay, Gladstone, Launceston, Noosa, Mildura, Shepparton, Tamworth or Wagga Wagga. Clearly, humans value freedom, space, jobs, affordable housing and not being locked-up,” Pressley concluded. 

And, while it’s evident that many are seeking to escape the lockdowns seen in Victoria and Sydney, some believe the exodus away from cities may be permanent. 

Tim Reardon, chief economist at the Housing Industry Association has said that “Given that the population is moving interstate and building new homes it is unlikely that they intend to return to Sydney or Melbourne.” 

Learn Small Property Developments 

With wage growth going backwards, It’s clear that putting your money in the bank isn’t going to move you toward financial freedom. 

That’s why many are purchasing property. 

However, as affordability begins to become a growing concern, the parabolic growth rates we’ve seen during the pandemic may begin to slow down. 

This means that the “buy-and-hold” strategy could take even longer to yield significant returns as we enter 2022. 

The solution? Small property developments. 

Simple projects like subdivisions and DA uplifts that are suitable for ‘everyday’ investors offer a great way to manufacture equity and cash flow virtually overnight, so you can potentially generate up to 4 times better returns than the market.

[FREE] Property Development Masterclass


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DOMINIQUE GRUBISA
Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.


This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.


This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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