Many have thought Australia is a strong economy because it has raised interest rates demonstrating how the strong the economy is. The real story is, Australians are suffering greatly from these interest rate rises, and inflation is getting out of control in Australia, making Australia as one of the most expensive places in the world and things are about to get much worse, here is our analysis.
The Government never tells the true story about the economy, a big proportion of Australia’s economy relates to Spending Power, and this is a real concern, the Retail Spending is rising in Australia, but much of that has been contributed to rising consumer goods prices, so you are spending more for less, but it does look good superfically, and allows the Government to justify its cause to raise interest rates.
The banks in Australia have also taken opportunities to pass more interest rates to consumers, Australia is the only country in the developed world that allows this to happen, banks pass up to 0.45% rate when the Government has only increased the rate by 0.25%.
The real inflation in Australia, for those relating to necessities such as food, nappies, other grocery items is getting completely out of control. UN in fact, has even raised its concerns to the Government, as Australian families are struggling to keep up with the increase, most people are employees and have very little room to increase their income, bonus is almost non-existent this year and bonus has never been a big contributor in Australia because the hourly rate is higher than some US and Canadian States, but Australian personal income tax is also high, so a bonus can be halved straight-away.
To give you some ideas, in Australia, food price has gone up by around 40% last 3 years! It is now approx. twice more expensve than Canada, and can be up to 3 times more expensive than in US (exchange rate taking consideration). The best way we perform is Household Income vs Daily Spending so that it will not take account of the exchange rates.
On average, in Canada, you can feed a family of 4 very easily for less than $30 a day, and that probably includes eat-out as well! The servings in Canada is very generous. In US, you can probably feed a family for US$20.00 a day if you cook, and have a quick eat-out, maybe allow $30 if you want seafood.
In Australia, it is becoming very difficult to have “a” meal under $20.0 a meal, most people tell me it will cost them at least $50 to $60 a day just on groceries and that’s just home cooking. Weekly grocery spending can add up to $200 easily without buying much. If you have babies, a box of nappies can cost up to $42 in Coles, and the same size would only cost $20 to $25 in Canada or US.
Petrol is very expensive in Australia because of the fuel levies, it is 30% more expensive than Canada and around 50% more expensive than in US (because of the exchange rate). What consumer do not understand is why rising AUD has not helped them at all.
It’s simple: At the end of the day, Australia is a very tiny market and isolated market - and no competition. There are 2 major shopping supermrkets (Woolworths & Coles), with the rest (IGA, Aldi and 1 Costco) claiming a tiny market share, individual grocers have been pushed out by the giants already.
Similarly, 2 department stores take maybe 80% of market share already.
Similarly, 3 petrol stations (BP, Shell, Caltex), and they do not need to compete each other as each station will service one area, and they are almost exclusive in that area (monopoly).
Lack of competition is causing real problems to consumers in Australia, banks (top 4 banks have 90% of market share) is the same.
There is in fact, nothing can be done..Australia’s future growth is more or less constrainted because the average households are left without much savings.
They should open up more competition but the market is too small to justify for new entrants to come in and there is almost no gaps to fill. Therefore, for many Australians, they are left with the following choices:
1. Move somewhere further, cheaper to save money, but Australia is the most “tolled” country in the world with all types of e-tolls
2. Find a higher paid job, but that’s really opportunistic as we know, or set up 2nd business and have a 2nd income which seems to be the trend, but this means up to 70 working hours a week becayse you are doing 2 jobs.
3. Or, you will be like many other Expats or skilled Australians - move somewhere else, this is a real concern, many expats are moving because of the living cost, and Australia is facing “Brain Drainage” where skilled professionals have relocated to US, Canada or Asia. The latest figure is scary that Australia loses up to 100,000 professionals a year, while new immigrants do balance the number, the new immigrants are mostly less skilled and their language barrier is often a limitation.
No wonder we always have teachers shortage, nurses shortage, doctors shortage, I found them in Canada and US, ah..that’s where all skilled Australians are. I came back on a full flight on V Australia, and the whole flight is 90% Australians working overseas returning for X’mas holiday and 10% tourists.
I asked 10 of them, with recession in North America, would you consider moving back to Australia.
No one has said yes, in fact, al of them have said the same thing “Australia is a real bubble economy, there is actually very little activities and opportunities for them” and for families, in fact, the education system is bettern in North America simply because there are more choices, you don’t need to live in a shabby neighborhood, because the living cost is so low, you can afford to live in a better neighborhood which has excellent public schools.
The real inflation in Australia will get worse as new utilities bills come in - if you have a family, it is a good time to start consider if this is the right place for you, as the cost of living in Australia will catch up with the most expensive cities in the world in 5 years time.
