Victorian families are facing the most significant financial setback in over three decades, as the state grapples with rising living costs, mortgage difficulties, and rapid population growth. Recent data from the Bureau of Statistics reveals the alarming deterioration in the financial position of the average Victorian household, with real disposable income per person declining by 6.5% in the year leading up to June. This drop is the largest annual decline since records began in 1990, outstripping the declines seen in other states and territories.
The main factors contributing to this decline are soaring interest rates and rising prices. The burden of high costs, coupled with robust population growth, has put immense strain on households. According to Australian National University economist Ben Phillips, the state’s economy has been growing, but the increase in wages and other income sources has not kept pace with the rising cost pressures. Inflation has surged, while population growth has further exacerbated the need for higher income growth.
The figures also highlight the impact of rising interest rates on households. Victorian households paid a staggering $25.6 billion on their mortgages in the past year, more than double the amount paid in the previous year. The record 10 interest-rate hikes during the 2022-23 financial year, which raised the official rate to 4.1%, have significantly contributed to the financial strain faced by households. At the same time, government support for Victorian households decreased by 6.5% from the previous year, reaching $49.3 billion in 2022-23.
Deloitte Access Economics lead partner Pradeep Philip emphasizes that the burden on Victorian households stems not only from the withdrawal of government support but also from underlying weaknesses in the Australian economy. The situation is particularly acute for households most affected by rising interest rates and cost-of-living pressures. Philip calls attention to the fragility of households across the economy, highlighting the need for careful consideration of targeted policies to address distribution issues.
As younger cohorts bear the brunt of the cost-of-living pressures while still paying off mortgages, a report by CommBank iQ underscores the disproportionate impact on this demographic. Retirees, on the other hand, continue to spend while under-30s substantially reduce their expenses.
The economic challenges faced by Victorian households are crucial, as the state government relies on solid growth to restore the budget surplus and tackle Victoria’s significant debt. Recognizing the pressures faced by households, Treasurer Tim Pallas’s spokesperson has emphasized the government’s commitment to driving down the cost of living through initiatives such as free kinder, capped public transport fares, and sport vouchers for children.
What is real household disposable income per person?
Real household disposable income per person is a measure of the total cash available for spending after adjusting for inflation. It provides an indication of the financial resources available to individuals or households.
Why have Victorian households experienced such a significant decline in income?
The decline in income for Victorian households can be attributed to a combination of factors, including soaring interest rates, rising prices, inflation, and population growth. These factors have placed increased financial pressure on households, resulting in a decline in real disposable income per person.
How have rising interest rates affected Victorian households?
The record number of interest-rate hikes in the 2022-23 financial year has significantly impacted Victorian households. As interest rates rose, households had to allocate more of their income towards mortgage payments. This increase in mortgage costs has further strained household finances.
What measures are being taken to address the financial pressure on Victorian households?
The Victorian government is implementing various initiatives to alleviate the financial pressure on households. These include free kinder programs, capped public transport fares, and sport vouchers for children. These measures aim to reduce the cost of living for Victorian families and provide some relief from the current financial challenges.