This article first appeared on the Yahoo7 Finance at this link: https://au.finance.yahoo.com/news/1607453-054918623.html
Are you paying more or less in 2017?
When it comes to questions of cost of living, Australians are not all that good at identifying where their household budgets are being stretched or where they are making savings.
In its most recent survey, polling company Essential Research, asked voters whether “compared to two or three years ago, is your household paying more or less for the following” and thereafter it listed 10 items. Since the end of 2014, two and a half years ago, the overall consumer price index has risen by 3.8 per cent, a modest overall gain over that time.
The respondents were spot on when it came to judging electricity and gas prices. A total of 84 per cent said that they were paying “a lot more or a little more” for their power. According to the Australian Bureau of Statistics, since the end of 2014, electricity prices have in fact risen 7.1 per cent.In terms of insurance costs, 69 per cent indicated that they were paying more, a figure confirmed by the ABS with an 11.6 per cent rise since the end of 2014.
For medical and dental costs, 63 per cent indicated they were paying more, with just 3 per cent saying they were paying less. The ABS data indicate that medical, dental and hospital costs have risen a substantial 16.9 per cent in just two and a half years.
These results are not surprising.
Consumers were, however, wide of the mark when it came to some other items.
The cost of clothing was a case in point. Over the past two and a half years, the price of clothing has fallen 4.3 per cent, but 44 per cent said that they were paying a little or a lot more. Only 10 per cent answered that they were paying “a little or a lot less” for their clothing.
It was a similar, yet more extreme, picture for petrol, where prices have fallen by 7.0 per cent over the past two and half years. Yet 59 per cent of respondents in the Essential Research survey indicated that they were paying more for petrol, and only 8 per cent said they were paying less.
Interestingly, in all 10 categories covered in the poll, a significant majority of consumers indicated that they were a little or a lot more for the item in question, even when prices had fallen.
Part of the question of “paying more or paying less” may be linked to changes in spending patterns – medial and dental costs might fall, for example, if your health has improved and you are in fact paying less. So too with education if your children have finished school, you will be spending less on schooling. But the critical point is that consumers perceive that the price of everything always goes up, regardless of whether it does or not.
And it should be noted, that even in a climate of record low wages growth, wages have increased by a touch over 5 per cent since the end of 2014, which is a little above the overall rate of inflation and it indicates that household purchasing power has actually improved over that time.
All of which goes to show that perceptions can and often do overwhelm facts.