South-west households struggling despite strong wage rises

National data released by the Australian Bureau of Statistics on February 22 showed hourly wages had risen by 3.3 per cent over the past year and 0.8 per cent in the final three months of 2022. ABS head of prices statistics Michelle Marquardt said it was the biggest rise for the December quarter in a decade, following on from record quarters in September and June.

"In combination these quarterly increases have resulted in the highest annual growth in hourly wages since December quarter 2012," Ms Marquardt said.

Average weekly earnings data released on February 23 showed the same pattern with a 3.4 per cent annual rise driven largely by jumps in skilled sectors like mining, professional, scientific and technical services.

Nationwide the average adult working full time earned $1876.80 each week with the Victorian average a fraction lower at $1856.70.

The gender pay gap remains a prominent issue both nationwide and within Victoria. Full-time female workers in Victoria earn $314.7 less per week on average than males, a nearly 19 per cent difference. Over the past decade the gap has oscillated, dropping from 24 per cent in 2012 to just 14 per cent in 2019, but blowing back out again through the pandemic to a peak of 19.5 per cent in mid-2022.

But as the nation records 10-year-high wages growth, why aren't workers feeling any more financially secure? Ambleside Wealth Advisors principal James Kelly said it was because that record growth wasn't ending up in the average worker's pocket or bank account once expenses were taken into account.

"Wages may have gone up, but inflation has gone up more, so people aren't actually better off in a real sense," he said.

"It's like they're treading water but being washed backwards."

The latest inflation figures released by the ABS in late January put the annual rate at 7.8 per cent, meaning while wages had increased 3.3 per cent, and earnings 3.4 per cent, the cost of things people need to pay for had surged by double that.

"Some people might feel good having more money in their pocket but because expenses have gone up so much they can't do more with the money they have coming in," Mr Kelly said.

He said in south-west Victoria the inflation and cost-of-living crisis was slamming both employees and small business owners.

"I've got clients on both sides of the ledger but the ones making most noise are the business owners trying to find staff, because the labour just isn't there," he said.

"As a result employers are having to pay above the odds to get staff. That puts pressure on their bottom lines and the best way to alleviate that pressure is to raise the price of their goods or services."

Mr Kelly said that process could end up feeding back on itself, becoming what's called a wage price spiral.

"People keep paying more for goods and services pushing demand higher and prices keep rising," he said.

The Reserve Bank of Australia's run of nine consecutive interest rate hikes was meant to put the brakes on people's ability to keep paying more and fuelling the spiral, Mr Kelly said.

"That is what the government wants, for people to stop spending so much," he said.

"The only way they can do that is to make mortgages so bloody high that people have no money to do anything else with."

It's a process that has put many households under additional pressure when all their other costs are already rising. Mr Kelly said most of his client were in a good position to ride out the mortgage pain because they foresaw the hikes.

"In an ideal world people will have kept ahead on their mortgages knowing this was coming, but I don't think that's happened for a lot of other households," he said.

"Now we're heading towards this cliff where 85 per cent of fixed rates will come off in the next 12 months. A lot of people will be going from 2 per cent interest to 5 per cent overnight."

Mr Kelly said the best thing any homeowner could have done was got ahead on their mortgage during the pandemic but for the ones who didn't, or couldn't, some serious belt tightening was in store.

"People are really starting to sit up and pay attention and really scrutinise every dollar they spend," he said.

"Now that we're here, facing the cliff, it's about critically looking at what is a discretionary item. Do I really need that?"

In some ways homeowners have been paying under the odds for accommodation during the preceding period of low interest rates. But south-west renters have faced several years of climbing accommodation costs, with persistently low vacancy rates keeping demand sky high.

The rising cost of essential items has added an extra burden with many renters struggling to find homes they can afford.

Brophy Family and Youth Services housing support and linkages programs manager Leah McDonald said more than 100 people had already sought help to find a home in 2023.

"We are seeing people on a low income completely priced out of the rental market," Ms McDonald said.

"Those fortunate enough to obtain a rental are finding it difficult to cover the cost of bond and rent in advance by themselves.

"We are also seeing high incidences of couch surfing and severe overcrowding in homes as family and friends try their best to support those who are seeking shelter."

Ms McDonald said the number of people seeking help to cover the cost of groceries, rent arrears or motel accommodation had grown in 2023.

A Food Insecurity in Warrnambool 2022 report released by South West Healthcare this week showed residents on a median income were struggling to keep up with the rising cost of living.

Surveyed families of four in Warrnambool were being forced to pay between 13 and 20 per cent of their weekly income on a healthy food basket, a tool used across Australia to gauge whether people have access to affordable healthy food.

The survey found a family of four relying on Centrelink payments would be forced to shell out between 25 and 37 per cent of their weekly income for a healthy food basket.

Survey respondents said their grocery bill had risen in recent months, in line with The Standard's investigation into the cost of staple items, which revealed the prices had risen by 11 per cent in 12 months.

They said their previous budget for groceries no longer covered essential items.

"It was noted that the rising costs of food are impacting 'not just the people that are the poorest of the poor, (it) might just be people that can't afford to buy the food they want to eat'," the survey found.

A lack of affordable housing was also making it hard for Warrnambool residents to eat healthy food, the survey found.

"The biggest barrier at the moment is housing," the report found.

"Because if people don't have cooking facilities, they can't meal prep. And so many people are in that boat".

The survey found the rising cost of living was making it difficult for individuals and families to prioritise food in the way they would like to.

"(It's) really hard because I feel like I should be doing a better job but financially I can't really because that means that I'm not going to be able to pay the bills," one survey respondent said.

This comes after it was recently revealed Warrnambool residents are paying a massive $875 more on their energy bills than they were 12 months ago.

Mr Kelly said most financial experts were tipping a couple more interest rate rises, peaking around the middle of the year.

"There's a bit of a lag between the rates rising and then having an effect, so usually (the RBA) go a little too far and have to pull them back slightly," he said.

"If unemployment were to go up, coupled with high interest rates, that's where the wheels could fall off."

Mr Kelly said there were few answers in the short term and many people would have to grind out the coming year, but things would look different by the end of 2023.

"I believe this is a hangover from COVID, so it will pass, but if your margins are thin it will be tough," he said.

"I'm not convinced prices will necessarily come down by the end of the year, but hopefully they will be steady and there's a better balance between wage growth and inflation."