ACT News


'Income recession': New NATSEM study shows Canberra families face tough times

Canberra families face an "income recession" with the city's households more than $2500 worse-off on average last year, according to a new study of Australia's standard-of-living.

Decades of good times for the capital came to a crashing halt in 2014, according to the research, with University of Canberra economists blaming successive Labor and Liberal budget cuts for the hit to local household wealth.

The ACT was the only territory or state to go backwards in its standard-of-living last year, the university's National Centre for Social and Economic Modelling (NATSEM) found, with even struggling states like Tasmania and South Australia outperforming the ACT.

The centre's principal researcher also warned Canberrans to save their pennies, saying there was little prospect of an early return to the good times.

According to NATSEM's first annual Household Budget Report, the ACT's standard of living declined in 2014 by 2.3 per cent, or $2571 while all other states improved through the year with households in the Northern Territory surging ahead by an average of more than $4600.

The report aims to provide a more accurate picture of changes to living standards across the nation by calculating income growth minus cost-of-living increases and including factors like interest rates, which are not included in the consumer price index.


NATSEM Principal Research Fellow Ben Phillips said Canberrans had enjoyed some good decades since 1988, with households just under $50,000 better-off over those 27 years.

But the good times came to an end in 2014, according to the research, with a shrinking public service and wage stagnation making themselves felt on Canberra's family budgets.

"The past 12 months has been very difficult for the ACT," Mr Phillips said.

"In terms of growth we're going backwards, so I guess you could call it an income recession for the ACT."

The latest official figures show the capital has lost about 5700 full time public service jobs since mid-2013 and Mr Phillips said the cull, combined with wage stagnation in the bureaucracy, definitely showed in the NATSEM research.

"With the ACT, you've got relatively weak wages growth in Canberra, the public servants haven't done very well and even the private sector is going fairly poorly," Mr Phillips said.

"Unemployment is on the increase, employment is actually going down and the other states are actually doing a lot better than us.

"The trend is not a good one and there's no doubt that tough budgets, not just from Labor, not just from the Liberals, have impacted the ACT more than other places because of efficiency dividends, job cuts and lack of promotions in the public service."

The economist emphasised that ACT households had done remarkably well, according to his research, in the decades since 1988, surging ahead even of boom state Western Australia.

"If you look at the financial gain, we've had a pretty momentous time in Canberra over the past 10, 15, 20 years," he said.

"We've had more growth than WA which is remarkable given that we didn't have a mining boom."

But now the boom times were over, Mr Phillips said, the signs pointed to a continuation of Canberra's recent poor performance and advised families to prepare for more tough times.

"While we've done very well in the past, I'm not entirely sure what the next big thing is going to be to push the ACT to reverse that (recent) trend," he said.


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