Were things really better in Australia’s ‘good old days’? A team of economists put it to the test with their data. While the answer is mostly no, there’s one big exception.
There’s a lot of yearning these days for how things used to be. AMP’s economists, chief economist Shane Oliver, deputy chief economist Diana Mousina and economist My Bui, say the angst is real. They attribute it to consumer confidence stuck at chronically low levels, a long downtrend in happiness, and the rise of populist politics here and overseas.
So they went looking for an answer to a simple question: were things actually better a generation or two ago? On their read of half a century of data, the past wins on housing, and loses on almost everything else.
What’s actually worse
Housing is the standout. AMP puts the ratio of average home prices to average annual wages, a per-worker measure, at 5.5 in 1975 and 14.4 today. Where a deposit once took under four years to save, the note has it at about 11 years now.
Consumer sentiment is the other. It sits well below where it was in 1975 or 2000, even without the high unemployment of the 1980s and 1990s recessions. And we hand over more of our income in tax, up from 11.3 per cent of gross household income in 1975 to 21.6 per cent now.
| The bad news | 1975 | 2000 | Latest |
|---|---|---|---|
| Consumer sentiment (index) | 105.0 | 102.2 | 80.6 |
| Home price to wage ratio | 5.5 | 6.4 | 14.4 |
| Years to save a deposit | <4 | 5.8 | 11 |
| Home ownership rate (%) | 62.7 | 66 | 63 |
| Income tax (% of gross household income) | 11.3 | 18.7 | 21.6 |
Source: ABS, Westpac-Melbourne Institute, Cotality, AMP.
AMP grants the intangibles too. Life back then was less regulated, there was a stronger sense of community, and with four TV channels and no social media there were fewer decisions to make and no perpetual sense of missing out. Though, as the note dryly adds, small-town gossip was probably worse than anything online.
What’s far better
Almost everything else, AMP argues, has improved. And not by a little.
Real net household disposable income per person has roughly doubled over 50 years, from about $30,600 to about $61,000 in today’s dollars. Inflation is back around 4 per cent after the double digits of the mid-1970s, unemployment is lower, and a bigger share of the population is in work, around 64 per cent versus about 60 per cent in the 1970s.
It’s also a more equitable and safer country. Female workforce participation has climbed from 44.8 per cent to 62.8 per cent, and the full-time gender pay gap has narrowed from about 35 per cent to 12 per cent. Men’s life expectancy has risen from 69.4 years to 81.1. Road deaths have collapsed from 26.6 per 100,000 people a year to 4.8, and homicides have roughly halved.
We’re richer in the small luxuries as well. Fifty years ago the average Australian took an overseas holiday about once every 16 years. Now it’s a little less than once every two.
| The good news (selected) | 1975 | 2000 | Latest |
|---|---|---|---|
| Real net household income per person ($) | 30,602 | 40,803 | 61,065 |
| Employment to population (%) | 59.3 | 59.1 | 63.7 |
| Female participation rate (%) | 44.8 | 54.4 | 62.8 |
| Gender pay gap, full time (%) | ~35 | 15 | 12 |
| Life expectancy, males (years) | 69.4 | 76.6 | 81.1 |
| Overseas holidays, per 100 people a year | 6.3 | 17.9 | 45.1 |
| Road deaths per 100,000 a year | 26.6 | 9.5 | 4.8 |
| Homicides per 100,000 a year | ~1.9 | 1.8 | 1.0 |
| Foreign-born population (%) | 19.9 | 23 | 32 |
Source: ABS, PBO, AIC, BITRE, AIHW, AMP.
AMP doesn’t dodge the gender debate that sits under those participation and pay numbers. Answering what it calls the “manosphere crowd” arguing that men are now the ones being discriminated against, the note tells readers to “get a grip”, and adds that “manosphere influencers are just telling you what you want to hear so they can get a buck out of you”.
So why does everyone feel miserable?
If the numbers are this good, why the gloom? AMP offers three reasons.
The first is memory. Around 65 per cent of Australians were born after 1975, and on AMP’s figures 78 per cent were either not born or too young in the 1970s to remember them clearly. Most of the hardship in the note sits outside people’s lived experience. Add recency bias and higher expectations, and a comparison with 25 or 50 years ago starts to lose its meaning.
The second is that some things actually have got a bit worse over the last five years in particular. AMP notes bulk billing fell sharply from 2022, after averaging 89 per cent of GP visits over 2020 to 2022, with some surveys suggesting people have delayed appointments over cost. And while real wages are higher across 25 and 50 years, the note says the average earner who hasn’t changed jobs or reskilled has seen their pay lag inflation since 2021.
The third, and the one AMP keeps returning to, is productivity. The structural decline in happiness that began around 2015, the note points out, started at about the same time productivity growth stalled.
No quick fixes
There’s no easy lever to pull. Its economists say governments need to do more to lift productivity, and to resist the idea that the answer is simply more government.
A big part of the malaise, they argue, is poor housing affordability and the widening wealth gap between the haves and the have-nots. They want that addressed with a rebalancing of housing supply and demand, and immigration set at a level that doesn’t cut so hard it creates labour shortages and leaves an ageing population struggling.
Some of it, AMP suggests, is a problem of success. Rising affluence has lifted expectations beyond what the economy can always deliver, and social media feeds the malaise through its focus on grievance and quick hits. As the note puts it, recognising that more “things” won’t necessarily make us happier is probably key.
This article does not take into account the investment objectives, financial situation or particular needs of any individual. It does not constitute formal advice. Before acting on any information, consider its appropriateness in regard to your own circumstances and seek professional advice.
