HILDA: median household income falls $542

The latest Household Income and Labour Dynamics Australia (HILDA) survey demonstrates that in real terms, Australia’s median household income fell $542 from 2009 to 2017. That is, the spending power of the average household fell back, rather than growing, as was previously the case. The data is unsurprising, when considered in the context of very soft prices growth and increasing household debt levels.

There is so much economic data available in Australia these days, it is possible to miss the linkages between one ‘data point’ or ‘factoid’ and another. Here, we make an attempt to demonstrate how the above matters are connected.

But first, as The Guardian’s Greg Jericho pointed out, we need to see the annual HILDA survey as the very significant contribution that it genuinely represents:

“[It] is one of the most important economic studies done in this country. Unlike the figures for household incomes done by the bureau of statistics the Hilda survey is a longitudinal study which interviews the same households each year. This provides intriguing data on the changes within households as well as across the nation. It also allows us to track the movements of people across occupations, locations, income levels and other socio-economic indicators.”

So, what HILDA shows us is not some abstract average, but rather, the results of interviews with the same households each year. As the chart below shows, it may not look like much, but since 2009, adjusted for inflation, the median household income actually fell 0.6%


Now, compared to the US, since 2001, an indexation of median wages shows the effects of the mining boom on Australia through to 2009, but since then, compared with the US, there has been no growth. Real (inflation adjusted) median wages in the US have grown over the eight years to 2017, not declined, as is the case in Australia.


So, if Australian households are earning more or less the same in real terms as they were close on a decade ago, it is little wonder that price growth (inflation) has stagnated. This is addressed in the previous item in this edition of Statistics Count.

But the situation is actually worse than that, as this next chart shows. Australians are not only earning less in real terms, they have to spend more of their income to cover their debt than ever before. We have punched this chart back to line up with Greg Jericho’s charts that are set out above.


To go straight to the dashboard and take a closer look at the data, click here.

At the end of the March quarter of 2019, Australian households had an average debt to disposable income ratio of a record 189.7%, requiring payments of around 9.1% of disposable income just to cover the interest. That is, without paying off any of the principle!

So immediately, the average household is out around 10% of its otherwise available income, even before its starts to wipe out some of the debt that they have accumulated. And the blue line shows we are none too good at reducing our total debt. 

In fact, thanks to house price increases, we have increased our average debt, and thanks to falling interest rates, we have at the same time been able to hang onto reasonably stable interest payments for the last few years.

It is worth comparing the first and third of these charts. Australians grew their debt as they grew their wages up to about 2009. When real wages came under pressure around the GFC, Australian households reigned their total debt in. They used the headroom of lower interest rates on their borrowings to reduce the proportion of income required to service their debt.

For the same conditions to apply again and for households to reduce their debt levels, they have to earn more money, in real terms. And even then, they have to resist the temptations and pay down their debt. For the nation’s sake: sooner, rather than later please!