A letter to the people of Western Sydney
Dear people of Western Sydney
It is not clear exactly what issues are fuelling your apparent displeasure with the Gillard Government, but can I point out a couple of issues that you may wish to consider in terms of things that actually matter to you, your family and businesses.
Around 40 per cent of you have a mortgage. Have a look at the interest rate you are paying now versus the rate prevailing 4 or 5 years ago. The average standard mortgage interest rate is around 6.4% at the moment. In 2008, it was 9.6%. On an average Sydney mortgage of around $375,000, that is a saving of around $800 a month or close to $10,000 a year in mortgage repayments. Recall that this is a saving in after tax earnings. This is a quite massive boost to your purchasing power, simply because interest rates are low.
There are similar interest savings for the small to medium business sector borrowers.
According to various surveys, over half of you drive to work, no doubt covering many kilometres along the way. I would note that car prices have actually fallen by around 5% in the last few years and by the look of the recent news on the number of car sales, most of you will be driving nice newish vehicles. That is a good thing. Add to that the fact that the price of petrol is only a fraction (around 5%) higher than 5 years ago, the cost of owning and running a car has been well contained which is no doubt very helpful for the average household budget.
It has also been the case that wages have risen solidly, by a little over 20%, in the last 5 years. This compares favourably with a 14.5% rise in the consumer price index (inflation) over the same time. Real wages therefore have been rising by about 1% per year on average over the past 5 years. While you are paying more for electricity, in small part because of the carbon tax, you are paying less for things like clothes, household appliances, a bunch of electronic goods and overseas holidays.
Relative to wages, the cost of living for the vast bulk of people is falling.
There are a range of other national economic management issues that should be important to consider.
All three major credit rating agencies rate Australia triple-A. This is the highest possible rating. It is like your kids getting A+ in all of their exams. The final upgrade to triple-A occurred in late 2011, from the Fitch agency, under the Gillard government. Never once has a Liberal Government had triple-A rating from all three rating agencies. This matters because a triple-A credit rating helps keep interest rates and borrowing costs low. It also feeds through to the sound functioning of the banking system and whole business sector in Australia. It is a sign that the whole economy is being very well managed and well regarded by international investors.
It is also worth noting that the unemployment rate in NSW is just 5.1%. This is a very low reading when looked at over the last 35 or so years of Australia’s economic history and is certainly low compared to the rest of the world. Low unemployment is of course great news, arguably it is the best thing any government can deliver to its people.
Jobs give people income, security, well-being and an ability to build for the future. Job creation and low unemployment are a vital benchmark of good economic management. Recall that the opposite, high unemployment, leads to social disfunction, poverty and poor self esteem. Note also that the 5.1% unemployment rate in NSW compared with the national average of 5.4%.
On the topic of well-being and planning for the future, can you all have a look at your superannuation statement next time your fund sends it to you? While the extreme volatility in financial markets due to the global economic and financial crisis has seen returns fall sharply and then rebound in recent years, for anyone who has been working for the last 20 years or more, the value of super is likely to be quite high. This is your money for your retirement. Superannuation was one of these long run policy issues implemented some 20 years ago that is now yielding the returns intended for everyone who has had a job. Prime Minister Gillard has legislated for the super contribution to rise from 9% to 12% of gross income in the years ahead, meaning that all workers will be building their retirement savings over the next couple of decades.
In terms of policies that are important for the long run future, think of the education reforms, the NBN and disability insurance scheme. These are critical changes that will in time boost productivity, opportunity and common decency in Australia.
While things are far from perfect and not everyone is benefitting equally in these terrific times for the Australian economy, much of the favourable news outlined above is overlooked in the daily hustle and bustle of life.
Take some time to reflect on the good things. We are all doing pretty well, just take some time to smell the roses.
- February 2014
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