Business Environment Profiles - Australia
Published: 07 August 2024
Real household disposable income
1166 $ billion
0.7 %
This report analyses aggregate real household disposable income in Australia. The data for this report is sourced from the Australian Bureau of Statistics (ABS) and is seasonally adjusted. The ABS and IBISWorld define disposable income as gross income less taxes on income and wealth, interest payments, non-life insurance premiums and other current transfers payable. Disposable income is, therefore, the income available to people to be spent on both necessary and other goods and services. This differs from discretionary income, which is the income available to be spent after all necessary purchases have been made. The data is presented in 2011-12 dollars, converted using the Consumer Price Index and is presented in financial years.
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IBISWorld forecasts real household disposable income to inch upward by 3.2% in 2024-25, to $1,165.6 billion. Tight labour market conditions are expected to support wage growth over the year, underpinning a rise in household disposable income. Federal and state governments have invested in several infrastructure projects to facilitate employment and ongoing economic growth in the aftermath of the pandemic. This rise in economic activity is anticipated to motivate businesses to provide more working hours, contributing to growth in household disposable income. However, inflationary pressures and the resulting high interest rates will continue to challenge economic growth, subduing growth in household disposable incomes.
Household disposable income rose strongly over the two years through 2020-21, despite the significant economic shock caused by the COVID-19 pandemic. Unemployment rose, and many Australians who remained employed had their working hours reduced. However, the drop in payroll wages was more than offset by a significant rise in social assistance payments to households. Examples of government policies that increased disposable income include JobKeeper, JobSeeker and Boosting Cash Flow for Employers.
Growth in real household disposable income had been subdued leading out of the pandemic, when compared with historical benchmarks. This weak growth was largely a result of limited wage growth. While low unemployment fuelled an increase in average weekly earnings, excess capacity in the Australian labour market limited this growth. Negligible productivity growth, one of the driving forces behind increasing wages, also weighed on disposable incomes over the three years through 2024-25. High interest rates over the period have also boosted interest payments on mortgages (one of the largest deductions when calculating disposable income), which has limited growth in real disposable income over the past few years. However, the rises in the cash rate have also pushed up yields on income sources other than salary and wages, like savings accounts, reducing the effect of higher mortgage repayments. Overall, IBISWorld forecasts real household disposable income to rise at a compound annual rate of 0.7% over the five years through 2024-25.
IBISWorld forecasts real household disposable income to total $1,187.0 billion in 2025-26, a 1.8%...
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