There is no cost-of-living crisis in Australia. What we have is a fake wage crisis. It’s costing Australians their peace of mind, their ability to build a life and, as recent research from the Reserve Bank of Australia suggests, perhaps even their grasp on reality. It’s leading to a surge in populism as politicians gaslight voters over the solution to the problem.
In 2022, concerns over the cost of living decoupled from economic management in the minds of voters – though the two are, of course, directly related. Since then, the gap between them has become larger and more consistent.
First the good news. You’re not crazy. The OECD has confirmed that real hourly wages have fallen by 5 per cent in Australia over the past five years. The number on your payslip may have gone up, but it’s buying less than ever.
Now the bad news. Politicians have worked out that voters reward them for the illusion of extra money more than for actually doing the hard things necessary to make you better off. So they focus on pushing the number on the payslip up by backing wage increases. Or making the number at the petrol bowser look lower through a temporary excise cut or “discount”, as both the Morrison and Albanese governments have done, instead of fixing the fundamentals.
It should be called out for what it is: a con. Wage theft by stealth, or wage fakery. Many Australians have fallen for it, and it’s destroying our nation.
I follow polling closely and have access to some private polls as well as the public ones. And they all tell a consistent tale in recent years. By far and away the No.1 issue for voters is the cost of living. Economic management, which directly affects the cost of living by ensuring your wage rise actually improves your financial position, is a poor cousin, languishing around fifth in the priorities of respondents. It is often lower, especially among younger people surveyed and people who vote Green.
Ipsos Issues Monitor published a chart in May that illustrates the decoupling. From 2010, when the chart starts, concern over the cost of living is slightly higher than concern over economic management. Then, from 2013, economic management rules, falling back to a close run thing from 2016, before spiking again during the pandemic. In 2022, concern over the cost of living soars, while the importance of economic management to voters declines. Where the chart ends, in May 2026, the gap is the largest it’s ever been.
A different polling company, Spectre Strategy, asked voters in April what part of the cost and standard of living was most important to them. In that month, in the context of the Iran war, concern over the cost of fuel and transportation was up 11 points. But the cost of groceries and household goods, followed by that of energy and utilities, then rent and mortgage payments still topped the chart.
The government would have been seeing similar priorities in its internal polling. And lo and behold, in addition to making much of the fake wage rises it has backed, some of its signature policies have been legislating to make supermarket “price gouging” illegal, granting energy bill rebates (which ended last year), and the Housing Australia Future Fund (HAFF), which was supposed to make more affordable homes available. The “ambitious” HAFF has failed to meet its targets.
Each of these initiatives falls squarely into the category of government being seen to “do something” about issues voters care about. They are, to use that awful word, “announceables”. They signal to the electorate that the politician announcing them is “on your side”, as Albanese’s 2022 election slogan went.
A pickpocket is also on your side for as long as it takes him to swipe your wallet. I wouldn’t want to accuse any politician or party of bad faith in handing out political lollies while knowing they will make us worse off when the sugar wears off, but it’s either that or accept they themselves don’t understand how the economy works.
Shoppers may want to blame supermarkets for price gouging when it’s inflation that’s hurting consumers at the checkout.
Higher energy prices have more to do with decisions about what resources Australia uses and the logistics of changing the energy mix. And economists generally agree that the cost of housing has been pushed up because of zoning restrictions, red and green tape imposed by government, and the cost of construction.
The masking measures cause harm in a couple of ways. The discounts and rebates going into our pockets also come out of our pockets, shifting costs to a later date, when we have to pay it back with interest. They distort the cost signal, which is important information for voters to judge the desirability of a particular course of action. And by selling us get-fixed-quick schemes, they screw with our understanding of how the world works.
The RBA’s research hints at how that can play out. The independent central bank body asked 9000 respondents eight questions to assess their economic literacy. Younger and low-income Australians, the people who are most affected by economic hard times, had lower levels of understanding of the effect of interest rates on various aspects of the economy. Only a quarter of respondents correctly identified that higher interest rates bring down inflation. More than half thought that the RBA rate rises increase inflation. There’s a recognisable logic to the incorrect idea that the RBA raising rates increases inflation – once you’ve accepted that government handouts bring down costs, and fake wage rises increase prosperity.
Both major parties have indulged in what amounts to wage fakery, priming Australians for populist policies. They shouldn’t be shocked if their cost-of-living crisis con morphs into a crisis of democracy.
Parnell Palme McGuinness is an insights and advocacy strategist. She has done work for the Liberal Party and the German Greens and is a senior fellow at the Centre for Independent Studies. She is also an advisory board member of Australians For Prosperity, which is part-funded by the coal industry.
Parnell Palme McGuinnessis an insights and advocacy strategist. She has done work for the Liberal Party and the German Greens and is a senior fellow at the Centre for Independent Studies. She is also an advisory board member of Australians For Prosperity, which is part-funded by the coal industry.
