Press Release – Council of Trade Unions
Households have lost spending power of 3.6 percent in the last two years, says CTU economist Bill Rosenberg. “The Household Economic Survey released today shows that average household incomes have risen only 3.4 percent over the last two years (June …CTU Media Release
25 November 2011
New evidence shows stagnating incomes and greater rent burden
Households have lost spending power of 3.6 percent in the last two years, says CTU economist Bill Rosenberg. “The Household Economic Survey released today shows that average household incomes have risen only 3.4 percent over the last two years (June 2009 to 2011). Wage income increased only 3.2 percent. This compares to inflation over that period of 7.0 percent.”
At the same time, people who are renting are spending more of their income on housing costs. Rents rose 7.4 percent in the last year – considerably faster than even the record CPI increase of 5.3 percent. However they had fallen slightly in the previous year, so the increase over the two years was 6.6 percent, a little less than inflation at 7.0 percent.
Because incomes rose only slowly, housing costs rose from 15.1 percent to 16.0 percent as a proportion of regular household income over the two years.
That increase falls on renters, because people owning their own home were cushioned by lower interest rates.
“Unfortunately this burden falls most on people on lower incomes,” says Rosenberg. “Household expenditure surveys show that as a proportion of their income the lowest income 30 percent of households spend half as much on interest payments (3.7 percent) as the highest 30 percent (7.7 percent), and almost three times as much on rents (15.5 percent compared to 5.5 percent).
So higher income households have been the main beneficiaries of lower interest rates while low income households have felt the burden of fast rising rents.”
The rent rises are leading to greater hardship. Housing costs in excess of 30 percent of income are an indicator of households likely to be struggling with the cost of housing, which in turn means less to spend on other necessities.
The survey showed that by June this year, 39.1 percent of households who are renting their homes were paying over 30 percent of their regular income in housing costs – a sharp increase from 33.8 percent two years ago.