The latest inflation data is out and prices are continuing to soar in Australia. It is bending our country out of shape. Some things are going up in price so much faster than others; and almost everything is up more than wages.
Fuel is a classic.
Ten years ago it took 3 hours of average wage work to fill up a big tank. Wages have actually gone up steadily since then. But fuel has risen faster.
RELATED
Now buying a tank of fuel costs more. To be exact, 3 hours and 40 minutes of your labour goes into pumping at the bowser. (These are averages, right. If you’re a barrister or a footballer, maybe it was 3 minutes work and now it’s 3.6 minutes work. The point remains the same: fuel is rising faster than average wages.)
Wages are up 36 per cent on average over ten years, which lags most items, as the next chart shows.
Prices since 2016 show a mixed bag. · Yahoo Finance
Some things have risen in price more slowly than earnings. That means they got cheaper in terms of how many hours work you need to spend to buy them – cars, wine, clothes, shoes, TVs, phone bills.
A lot of things have gone the other way. Fruit, electricity, insurance, and the number one biggest price rise: legal tobacco. These you have to work much harder to buy these days.
Fruit has risen and footwear has fallen, as the next chart shows, which is leading to a very surprising situation.
In 2026 a kilo of apples can now cost the same, or more, as a pair of cheap shoes. Which is just weird. Your grandpa wouldn’t believe it.
It’s apples and shoes, these days. · Yahoo Finance It’s not like footwear grows on trees… · Yahoo Finance
We have not caught up mentally with these price changes. The relativities feel wrong and our gut instincts about what costs more than other things can be out of whack.
Another example. Ten years ago a holiday in Queensland might have cost the same as a laptop. Now it costs the same as two laptops. The holiday has shot up while the laptop has plunged in price.
What about homes?
I’ve heard people complaining that Melbourne property prices have barely risen in the last five years. In Melbourne, prices are up just 8.5 per cent in that time. Which looks like a small gain until you remember inflation and you realise, in terms of what you could buy for that money, it’s a loss.
Seen another way, the loss could be even worse.
Pretend for a second you bought a house in Melbourne in 2021 and paid for it in gold. It might have cost you 10 kilograms of gold. Selling that house today, you’d get 4 kilograms of gold for it. That’s a lot less gold! In fact, in gold terms, you’d have lost money buying property anywhere in Australia – even Perth where prices are up 92% in five years.