Leslie Massey
Australia's income growth has been a mixed bag in recent years, with some sectors and regions performing better than others. Overall, Australian wages grew by 3.3% in the year leading up to the December quarter of 2024, slowing from 4.1% in the previous quarter. However, this growth has not been evenly distributed, with some industries like accommodation and food, ICT, and mining experiencing above-average wage increases, while others like professional services, healthcare, and social sectors lag. The country's economy is often characterised as a 'two-speed economy, with Western Australia and the Northern Territory being the only states that have consistently experienced economic growth. At the same time, other states have faced recessions and public sector job cuts. Despite some positive signs, there are concerns about the government's handling of the cost-of-living crisis, with a decline in real disposable income and stagnant wages affecting living standards, especially for middle- and low-income earners.
| Characteristics | Values |
|---|---|
| Real per capita household disposable income | Fell by 8.0% over the two years leading up to March 2024 |
| National median personal income | $805 per week |
| People earning below the national median personal income or no income | Over 9.6 million |
| People living below the internationally accepted poverty line | 3.3 million (13.5% of the population) |
| Children under the age of 15 living in poverty | 761,000 (17.7%) |
| Household saving to income ratio | 5.2% |
| Wage growth rate in 2024 | 3.3% |
| FWC National Minimum Wage increase for 2024-25 | 3.75% |
| Wage growth prediction for 2024-25 by RBA | 3.4% |
| Wage growth prediction for 2026 by RBA | 3.1% |
| Wage growth prediction for mid-2026 by Treasury | 3.25% |
| Top employing industries | Health Care and Social Assistance (14.5%), Retail Trade (9.1%), and Construction (8.9%) |
| Top occupations | Sales Assistants (514,084), Registered Nurses (262,742), and General Clerks (244,849) |
| GDP in Western Australia and Northern Territory | Significant downturns |
| Manufacturing sector growth between 1983-1984 and 2003-2004 | From 10.1% to 17.8% |
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What You'll Learn
Income growth vs. consumption
Income growth and consumption are two key indicators of a country's economic health. In Australia, household consumption accounts for around half of all economic activity and is influenced by factors such as income, interest rates, and labour market conditions.
Recent data from the Australian Bureau of Statistics (ABS) shows that the household saving-to-income ratio rose to 5.2% as growth in gross disposable income outpaced nominal household consumption. This indicates that households are spending less relative to their income, which could be due to various factors such as higher interest rates, increased savings, or financial stress caused by rising costs of living.
While higher interest rates have impacted the incomes of mortgagor households, they have managed to maintain their spending by drawing on financial buffers or reducing their savings. On the other hand, lower-income households and renters, who often have fewer financial resources, have faced financial stress due to rising costs of living, affecting their wellbeing.
Economic growth in Australia has been measured in nominal and real terms. Nominal economic growth refers to the increase in the dollar value of production, including changes in volume and prices. Real economic growth, however, focuses solely on the increase in volume produced, providing a better indication of the country's production at a given time. According to the ABS, the Australian economy rose by 0.2% in seasonally adjusted chain volume measures, indicating modest growth.
Private demand has been a key contributor to growth, driven by household consumption and private investment. However, public investment has detracted from growth, and net trade has also had a negative impact due to reduced exports. The Australian government's revenue is largely dependent on personal income taxes and business taxes, and the country's income is closely tied to its exports, particularly to major trading partners like China.
In summary, while Australia has experienced growth in income and consumption, there are disparities across household groups. The cost-of-living crisis has disproportionately affected lower-income households, leading to concerns about the government's management of the economy. These factors highlight the complex interplay between income growth and consumption in Australia, shaping the economic landscape and the wellbeing of its citizens.
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Income by industry
Australia's income position has been affected by a variety of factors, including the COVID-19 pandemic, government policies, and the global economic landscape. The pandemic caused a recession in 2020, with GDP falling by 7% in the June quarter. However, by December 2021, Australia's GDP had rebounded by 3.4%, outpacing comparable economies. This recovery was attributed to the JobKeeper programme, which disbursed $130 billion to support wages and businesses.
In terms of income by industry, Australia's economy has diverse sectors contributing to its revenue. Here is a breakdown of some key industries:
Mining and Resources: Mining is a significant industry in Australia, particularly in Western Australia and the Northern Territory. In August 2024, mining had the highest median weekly earnings of any industry, with an average of $2,593 per week. This industry has experienced fluctuations, with a recent downturn in GDP in mining-dependent regions. However, overall, the mining industry continues to be a major contributor to Australia's economy.
Health Services: The Health Services industry, including general hospitals, general practitioners, and clinical specialists, accounts for a substantial portion of Australia's revenue. The ageing population has increased the demand for health services, and the COVID-19 pandemic also impacted this industry as resources were redirected to manage the public health crisis. Despite the challenges, the health services industry is projected to grow, with an expected revenue increase of 1.2% over the five years leading up to 2023-24.
Professional Services: This industry encompasses professional, scientific, and technical services. It is influenced by overall economic conditions and business confidence. The COVID-19 pandemic disrupted the professional services industry, particularly in sectors like architecture and surveying, as construction projects were delayed. However, factors like greater business profits and rising public sector investment have supported the demand for professional services.
Manufacturing: The Australian government has focused on redeveloping the manufacturing sector as part of its microeconomic reform agenda. This initiative has shown success, with the manufacturing sector growing from 10.1% in 1983-1984 to 17.8% in 2003-2004.
Services: The services industry is a significant contributor to Australia's economy, with a focus on health care, social assistance, arts and recreation, and personal services. In recent times, there has been growth in these sectors, driven by factors such as increased GP attendance, sports and recreation activities, and a rise in personal services.
While Australia has experienced economic growth and recovery, there are concerns about the impact on middle- and low-income earners. Poverty rates have increased, with an estimated 3.3 million people living below the poverty line. Additionally, there has been a decline in living standards due to stagnant wages and rising costs, particularly in housing and migration. These issues have prompted discussions about the government's fiscal strategies and their effectiveness in addressing the cost-of-living crisis.
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Income inequality
Over the past two decades, income inequality in Australia has widened, with the Global Financial Crisis and the removal of COVID income supports contributing to this trend. In 2019-20, the highest 20% of households by income had an average income of $4,306 per week after tax, five times that of the lowest 20%. The wealthiest 20% held six times the wealth of the middle 20% and 90 times that of the lowest 20%. This disparity is partly due to the concentration of investment property, shares, and financial investments among the highest income group.
Despite the overall economic growth, there has been a tangible reduction in living standards, particularly for middle- and low-income earners. Wages have failed to keep up with rising costs, resulting in stagnant or declining real incomes. This has led to growing concern over the government's management of the cost-of-living crisis and its impact on income inequality.
While income is an important factor in considering inequality, other aspects such as equality of access to health, education, housing, and community safety are also crucial, especially for those at the lower end of the income distribution. Additionally, measures of poverty in Australia are relevant when examining the implications of changing trends in income inequality.
To fully understand income inequality in Australia, a broad range of measures and data sources must be considered. Single measures, such as the Gini coefficient, may not provide a comprehensive understanding of the disparities in income and wealth across the community. By utilising various data sources, such as the Household, Income and Labour Dynamics in Australia (HILDA) Survey, a clearer picture of income inequality can be obtained.
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Income taxes
The Australian Taxation Office (ATO) provides tax rates for Australian residents for income years from 1983/84 up to 2024/25. These rates do not include the 2% Medicare levy or the Temporary Budget Repair Levy, which is payable at a rate of 2% for taxable incomes over $180,000. The ATO website also provides tools such as a simple tax calculator and an income tax estimator to help individuals calculate their tax owed or refund/debt estimate.
In addition to income from salaries, wages, and allowances, residents are also taxed on dividends, interest, royalties, and rental income. Dividends received by resident shareholders include all dividends, including franked dividends (paid from taxed corporate profits), and foreign-source dividends. Franked dividends may be eligible for a tax credit, depending on the individual's marginal tax rate. Interest, royalties, and rental income derived by residents are included in assessable income with applicable deductions.
For non-residents, interest, royalties, and dividends are generally subject to withholding tax. From 1 July 2024, a revised phase of tax cuts has been legislated to take effect. It is important to note that these tax rates do not include tax offsets, such as the Low Income Tax Offset, which can reduce the overall tax payable for those with taxable incomes up to a certain threshold.
While the above provides an overview of income taxes in Australia, it is important to refer to the ATO website and seek professional advice for specific tax rates, calculations, and exemptions, as the tax system can be complex and subject to change.
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Income and cost of living
In terms of income distribution, individual arrangements were the most common method of setting pay, followed by collective agreements. As of 2024, there were approximately 7 million full-time workers and 4 million part-time workers in Australia, with a median work week of 38 hours.
The household saving-to-income ratio in Australia increased to 5.2%, indicating that growth in gross disposable income outpaced nominal household consumption. However, real per capita household disposable income in Australia decreased by 8% in the two years leading up to March 2024, contrasting the OECD average, which saw a 2.6% increase. This has raised concerns about the government's management of the cost-of-living crisis.
Wage growth in Australia has been mixed across industries. While wages overall grew by 3.3% in the year leading up to the December quarter of 2024, industries such as professional services, healthcare, social services, finance, and arts and recreation experienced lower wage growth. The national minimum wage increase for 2024-25 was set at 3.75%, following two years of record-setting increases. The RBA predicts that wage growth will ease further in the coming years, reaching 3.4% during 2024-25 and 3.1% by the end of 2026.
Despite some positive indicators, there are concerns about growing poverty in Australia. A 2022 ACOSS report estimated that 3.3 million people, or 13.5% of the population, were living below the poverty line, with 761,000 children under the age of 15 affected. The impact of stagnant wage growth and rising costs has disproportionately affected middle- and low-income earners, resulting in a tangible reduction in their living standards.
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Frequently asked questions
Australia's income is growing, but at a slower pace. In 2023, GDP growth slowed to 2.1% from 3.7% in 2022.
Household income has been declining. Real per capita household disposable income fell by 8% in the two years leading up to March 2024. This decline has been driven by higher inflation and mortgage interest rates.
Australia's per-capita GDP is higher than that of the UK, Canada, Germany, and France in terms of purchasing power parity. However, under Labor, Australian households experienced the sharpest decline in real disposable income compared to other OECD countries.
Australia's income growth is driven by various factors, including elevated net migration, resilient private investment, strong public investment in sectors like transport and health, and net exports, particularly of iron ore and coal.
Australia faces challenges such as increasing poverty, with an estimated 3.3 million people living below the poverty line. Indigenous Australians have significantly higher poverty rates. Additionally, there has been a decline in real disposable income, stagnant wage growth, and increasing costs of living.
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