To answer the question, we need three things:
- Average Australian house price from 2000 to 2020
- The average yearly increase in house prices from 2000 to 2020
- Average full time earnings
1) Australian house prices from 2000 to 2020
Below is a table of average house prices in Australia from 2000 to 2020.
House prices in Australia increased from approximately $200,714 in the year 2000 to approximately $690,200 by March 2020.
2) Average yearly increase in house prices from 2000 to 2020
What percentage increase would we need each year to go from $200,000 in year 1 to $690,000 in year 20?
To find out let’s plug the data into a compound calculator:
We will use the above figure of 6.4% for the average yearly increase in house prices from 2000 to 2020.
3) Average full-time earnings
For this we need to look at Average Weekly Earnings from the Australian Bureau of Statistics (ABS) – series 6302.0
The latest data release from the ABS is November 2019.
Full-time adult average weekly ordinary time earnings were $1,658.40 in November 2019.
$1,658.40 times 52 gives us a yearly figure of $86,237.
So average full-time earnings in November 2019 in Australia was $86,237.
If house prices in Australia increased by 6.4% for one more year, what would the increase be in dollars?
$690,200 = 100%
X = 6.4%
(690,200 x 6.4 ) / 100
Therefore, the increase would be $44,172.80
For a worker on $86,237 per year, what wage increase do they need so they have an extra $44,173 in their hand at the end of the financial year?
First we calculate the after tax income on $86,237.
From the ATO rates table below, $86,237 – $37,000 = $49,237.
32.5% of $49,237 is $16,002.
$16,002 + $3,572 = $19,574
Therefore the after tax income is $86,237 – $19,574 = $66,663
Source for the above image: ATO website > Rates > Individual income tax rates
Now we take 2% of $86,237 for the medicare levy, which is $1,725.
$66,663 – $1,725 = $64,938
Add our after tax income of $64,938 to the one year increase of $44,173 and we have:
$64,938 + $44,173 = $109,111.
This gives us the after tax income of $109,111 but we need the gross figure now.
Using numbers (excel for pages) and the settings from above we find the gross wage required below.
The gross wage required is $158,374.
So what’s the percentage wage growth increase from $86,237 in 2020 to $158,374 in 2021?
( $158,374 x 100 ) / $86,237
Therefore, the answer to the question is 83.65%.
Wage growth would need to be 83.65% over the next 12 months for a worker earning the average wage of $86,237 for it to be possible to keep up with house prices increasing from $690,200 by 6.4% for one more year.