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Victorian families have suffered their biggest financial hit in more than 30 years, with cost of living pressures, mortgage pain and soaring population growth dragging the state’s households backwards at the fastest pace in the nation.
Figures released by the Bureau of Statistics on Tuesday show how much the financial position of the average Victorian household has deteriorated under the burden of soaring interest rates and rising prices.
Real household disposable income per person – a key measure of cash available for spending – slumped by 6.5 per cent over the year to June, after adjusting for the impact of inflation.
It was the biggest annual drop since records started in 1990, and also the largest of all the states and territories, with declines of 4.2 per cent recorded in NSW, 3.8 per cent in Queensland, 6 per cent in South Australia and 3.5 per cent in Western Australia.
Over the year to March, the number of people in the state swelled by almost 162,000 – the biggest increase in the nation – meaning the state’s financial gains have been spread more thinly than in other jurisdictions.
Australian National University economist Ben Phillips said that although the state’s economy had been growing, incomes from wages and other sources had not risen quickly enough to offset the added cost pressures.
Associate Professor Ben PhillipsCredit: Alex Ellinghausen
“Inflation has increased sharply and there has also been pretty strong population growth, which means you have to get even higher income growth,” Phillips said.
The figures also highlighted the massive strain placed on households by rising interest rates. Over the course of the year, Victorian households paid out a record $25.6 billion on their mortgages, more than double the $12.5 billion paid in 2021-22.
In the 2022-23 financial year, there were 10 interest-rate rises that took the official rate from 1.35 per cent to 4.1 per cent. At the same time, households across the state received $49.3 billion worth of government support in 2022-23, down 6.5 per cent from the previous year.
Deloitte Access Economics lead partner Pradeep Philip said the disproportionate amount of government support that Victorians had received during the pandemic was now being wound back, which partly explained why the state had witnessed a bigger drop in household disposable income per person than other states.
But he also said the figures showed an underlying weakness in the Australian economy that was more acute in Victoria, particularly for some households hardest hit by rising interest rates and cost-of-living pressures.
“Households across the economy are fragile,” he said. “There is a distribution issue that needs to be looked at carefully as the government thinks about how to target policy.”
This week a report by CommBank iQ indicated that the cost-of-living pain was being disproportionately inflicted on younger cohorts still pay off mortgages, with retirees continuing to spend as under-30s dramatically scaled back spending.
The household income slump comes at a critical point for the Victorian economy, with the state government banking on solid growth to help push the budget back into surplus and eventually drive down Victoria’s hulking debt.
A spokesman for Treasurer Tim Pallas said the government understood the pressure households were facing.
“We’ll keep working to drive down the cost of living with initiatives like free kinder, capped public transport fares and sport vouchers for kids,” the spokesman said.
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