Australian real incomes in decline but many regions doing better than expected

Many parts of Australia are experiencing declines in real incomes. This means that dropping living standards is already a reality for many Australians.

This is the worrying trend revealed by the Regional Australia Institute’s analysis of the latest income data from the Australian Bureau of Statistics which tracks income rates in Australia from 2010-11 to 2014-15.

“This is the first genuine sign that the US disease of stagnant and declining real incomes coinciding with decent overall economic growth may be catching for Australia” said RAI CEO Jack Archer. “The decades long rise in Australian living standards has just about ground to a halt.”

Between 2011-12 and 2014-15, real incomes in Australia only grew 2.36 per cent. The trend is also slowing.

However, like all national statistics, this overall result masks areas already experiencing declining living standards, as income growth dips below inflation and other areas whose incomes are growing well. A total of 118 Local Government Areas recorded declines in real incomes between 2011-12 and 2014-15.

A diverse group of areas have been affected by this decline in real incomes including much of inland and central Queensland, the Hunter Valley in New South Wales and remote Western Australia.

The expectation that has been shattered however is that this decline is a regional Australia story. In good news for regional areas, real incomes have actually grown faster than inner metropolitan areas, with regional areas experiencing a 2.6 per cent growth in real incomes compared to 2.3 per cent in inner metropolitan areas.

Many regional cities are doing well, as are many small rural and remote areas whose mining or agriculture sectors are supporting good wages growth. Regional cities such as Bendigo, Toowoomba, and rural areas such as the Wheatbelt in Western Australia and the Upper Murray have all done well alongside areas of our cities.

Outer metropolitan areas are the places really feeling the squeeze however with only a 1.6 per cent real income growth in this period.

As a result of strong regional performance, the gap between regional and the inner metropolitan incomes is back to 30 per cent from 32 per cent in 2010-11. The mean income for 2014-15 was $77,967 in inner city areas compared to $53,170 in regions.

However this positive trend may be at a turning point with inner city incomes growth outpacing regional and outer suburban area growth rates since 2012-13. If this trend has continued in the last few years for which we don’t yet have data, then the gains in the regional metro earnings gap may have already been eroded.

“This data tracks the end of the strong growth in incomes from the mining boom and the start of a new phase for Australia,” Archer said. “If you live in inner city areas this next phase will probably be okay, but the outer suburbs and some regions are really going to find the next period challenging”.