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We are blind to our fortune

Date

Canberrans probably believe the cost of living is outpacing their ability to keep up. But, over the 11 years Labor has governed this city, we've become much wealthier.


Price rises for goods and services in Canberra from December 2001 to June 2012. Wages represent average full-time earnings in the ACT over the same period. Source: Australian Bureau of Statistics.

 

Will next month's US presidential vote hinge on a single, unguarded comment from one candidate, and the public's reaction to it? Many pundits believe Mitt Romney's dismissal of the "47 per cent" of Americans who don't pay federal income tax was that disastrous for the Republicans.

I suspect few Australians realise they live in one of the developed world's lowest-taxing countries. 

To recap, multimillionaire Romney told a private audience in May that the 47 per cent were "victims" who took no responsibility for their lives. "My job is not to worry about those people," he said. Perhaps he forgot that many of those Americans were retirees, war veterans and others who might normally vote Republican. The comment was leaked, and the Democrats' TV ads have reminded the public of it ever since.

Last week, however, a survey for The Economist magazine detailed a curious reaction to the remark. Romney's tax figures were spot on, yet only 24 per cent of Americans thought they were part of the "47 per cent".

There are two possible, but conflicting, explanations for this misconception. One is that we like to believe we're not at the bottom of the pecking order, even when we are. This may also explain the prevalence of "downwards envy" among low-income earners, who, as a group, tend to have more hostile views towards those who are even less advantaged (such as asylum seekers or Aborigines). Looking down on others makes us feel better about ourselves.

The other explanation, which I think is more likely, is we tend to feel harder done by than we truly are. The Economist's poll showed almost one in four Americans believed they paid income tax when they didn't. It's hardly surprising. When the think tank Per Capita surveyed Australians last year, it found we were about 20 times more likely to say we paid too much tax than to say too little. I suspect few Australians realise they live in one of the developed world's lowest-taxing countries.

The federal government's ineffectual attempts to sell its carbon tax also fell foul of our inclination towards financial victimhood. A few months back, an Ipsos Social Research survey found 52 per cent of Australians opposed the tax while only 28 per cent supported it. But when they were told that some revenue would be redistributed to low and middle-income earners (i.e. that they'd get some cash), support for the tax jumped to 47 per cent and opposition collapsed to 29 per cent. The hip-pocket nerve never dulls.

Which is why I don't discount the Canberra Liberals' chances of a very strong showing in tomorrow's election, whatever this newspaper's polling might have predicted this week. Opposition Leader Zed Seselja's minimalist campaign theme – that Labor will "triple your rates" – will net its fair share of voters. The details – such as whether Labor's tax reform is good policy, over what period our rates will rise, and what savings we will make through cuts to other taxes – are irrelevant, because details don't matter to most voters. They will believe the cost of living is outpacing their efforts to keep up.

The data, however, undoes this myth. Over the 11 years Labor has governed this city, the earnings of the average full-time Canberra worker increased 72 per cent, while the prices of goods and services in the ACT rose just 34 per cent. Sure, some prices – particularly health expenses and utility bills – rose more quickly than wages, but the vast majority didn't. On the whole, we're much wealthier than we were in 2001.

The trend is similar in most parts of the country, not that we admit it to ourselves. When the motorists' group NRMA polled Australians in the middle of this year about their finances, two in three said the cost of living had affected their "stress levels". What rubbish. Life itself is what's worrying these poor souls, not the cost of it. Spending ever more on stuff is a choice; it's not forced on us.

Not that a politician would tell us that. They know we want good news, but will only believe the bad.

Markus Mannheim edits The Public Sector Informant. Send your tips to aps6@canberratimes.com.au.

12 comments

  • Spot on, Markus!

    I suspect that the majority of those complaining are doing so because they have been told that they are worse off, by politicians with a vested interest (usually the opposition).

    Equally, many people simply MUST have the latest smartphone, a great big new flat-screen TV, a new car, overseas holidays and so on, with the result that, when they have to pay for utilities etc they don't have much cash left lying around.

    Of course, there are some who truly are doing it tough, just as in the US. The irony is that tax cuts are of little benefit to these people; it is the meagre income from pensions or allowances which is the problem. We should increase taxes and increase welfare for the genuinely needy, not just the greedy "middle classes".

    Commenter
    Robert
    Location
    Canberra
    Date and time
    October 19, 2012, 12:32PM
    • The "average income" in ACT is VERY misleading, as it's vastly biased by the horde of bureaucrats earning well above the national average. Yet, there are many of us here - the "normal" mortals who have to do with far less to survive. And we are not doing so well... By Jove! If "an average woman's income" in Canberra is over 60K and I - as a highly qualified specialist earn less - something is wrong with the statistics...

      Commenter
      Blackanga
      Location
      ACT
      Date and time
      October 19, 2012, 1:29PM
      • It's a fair point; averages are just that. As of the May quarter this year, the average earnings of a full-time Canberra worker in the public sector was $87,391. By comparison, the private sector average was $80,064. As for women, the average full-time earnings was $77,2612 (public and private sector combined).
        For the record, I didn't intend to suggest that ACT Labor is responsible for our income rises; most of it was no doubt a result of national trends, as well as the federal bureaucracy's rapid growth under the second and third terms of the Howard government. But nor is ACT Labor responsible for most price rises.
        The point I meant to make is less political: we don't pay much attention to our good fortunes; we seem to indulge in pessimism regardless of whether it's warranted.

        Commenter
        Markus Mannheim
        Location
        Canberra
        Date and time
        October 19, 2012, 1:45PM
      • A billionaire walking into a bar doesn't make everyone a millionaire, but the government sure does think so.

        There is nothing more profane than an army of tax sucking bureaucrats bleeding us to death and telling us we are better for it.

        Apply the leaches is the catch-cry!

        Commenter
        evanism
        Location
        Unfortunately Canberra
        Date and time
        October 19, 2012, 3:19PM
    • Is this another government spin??? All of my costs have risen far and way above the inflation rate. Take your pick...rates, rego, petrol, electricity, gas, water, insurance on and on and on. The government has helped to contribute to the rises in each. My salary rises? Well I got a whopping 1% this year on top of the 1.5% last year. But to state in print that we've actually become wealthier during the life of this present government beggars belief.

      Commenter
      befuddled
      Date and time
      October 19, 2012, 2:04PM
      • Beggars belief, befuddled? It's not true for everyone, but, on the whole, it is correct. Unless you're accusing the Bureau of Statistics of mass fraud.
        I don't care much for the politics of this matter; I'm just interested in comparing people's perceptions of their finances with the reality.

        Commenter
        Markus Mannheim
        Location
        Canberra
        Date and time
        October 19, 2012, 2:37PM
      • Markus, You are NOT comparing "peoples' perception of their finances with the REALITY". You are comparing with STATISTICS. They don't have much common ground with reality. Not for real people anyway...

        Commenter
        Blackanga
        Date and time
        October 19, 2012, 3:15PM
    • Check out AMP-NATSEM report on cost of living - most (not everyone) are well ahead over the past 10 years. I wouldn't put this down to the amazing policies of the lab government or the libs federally (up to 2007) or any other government. Just a very strong economy in Australia and Canberra is full of hightly educated and well paid people. Have a think back 10 years ago. What was your income? what tv did you have, what was your car? what was your mobile? - most of us doing better (as I said - not everyone - there are alway examples of those who are doing worse but that doesn't mean that cost of living pressures are overtaking the capital! We just notice few highly visible items such as elect and gas and forget about how cheap a phone call is or how cheap tv's or computers are or that many grocery items are cheaper. We just focus on the bad news.

      Commenter
      econobrat
      Date and time
      October 19, 2012, 3:09PM
      • Public servants get a guaranteed wage rises each and every year, no matter if they perform or not, let alone the top heavy overpaid El1's 2's in this town. The PS pay structure is highly flawed and is not based on merit, just if you show up for long enough. Pitiful. The graph is misleading.
        Private sector? no, Private sector are way behind CPI and the cost of living is going up, no matter what the above bar graph states. It gets worse for private sector with every Govt budget cut, yet not one word of a pay freeze to already overpaid PS.
        Proof? Food in the ACT is more expensive than most of Europe, Proof is from my wallet, not bar graphs.

        Commenter
        NRG
        Location
        ACT
        Date and time
        October 19, 2012, 3:19PM
        • See statistics can be spun anyway the government, economists, real estates, or other vested interests like. Hey but don't let the true facts get in the way of a good story labor=greens.
          Canberra seems to have a high income level due to the bloating of dual income public servant EL1+ childless couples who call it home. Even than most are up to their eyeballs in mortgage and other debt. Speak to the real essential workers here and see if they feel wealthy.
          Don't worry people, forget that we have the highest personal debt levels in the developed world, just spend spend spend. Our treasurer of the year Mr Swan needs you too, his budget is looking to none too flash.
          Just because the rich drag up the average and make everyone appear even better off, doesn't mean people are better off. It doesn't take much searching on the net to find the truth. The wealthy top income earners are getting richer, middle incomers have stood still, and the lower income have been left behind.
          The richest 20% of households in Australia earn 60% of total income. That is just incredible when you think about it. The lucky country, well for some I guess.

          Commenter
          Peter
          Date and time
          October 19, 2012, 4:39PM

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