The Middle Class

I may be one of the few finance-oriented writers this week to not focus on the budget. It isn't that it doesn't interest me, it does. But federal budgets come and go as do economic cycles.

What caught my attention and really made me sit up, was the new definition coming out of Canberra that a household income of $150,000 is now 'wealthy'. This seems to me to be a little unfair on Middle Australia, while also being a portent of how hard-working Australians are going to travel over this economic cycle.

I looked into it, to see what a 'wealthy' household looks like in Middle Australia right now. And this household might actually have been better-off during the GFC than it is right now. Take an average Australian couple earning $150,000 a year, where one person brings in $125,000 working full time and the other earns $25,000 working a few days per week.

Let's say they have a joint mortgage of $750,000 and their annual lifestyle expenses rise by 5 per cent per annum. Before the GFC, this family would have about $264 a week in surplus after paying their mortgage and average household expenditure. After the GFC (2010-11) and allowing for the eight official interest rate rises (and one independent bank rate rise), this dropped to about $116 per week.

Now consider the recent changes announced in the budget which will freeze indexation on family tax benefits at $150,000, and introduces a flood levy. Add a future carbon tax and two additional rate rises expected before Christmas, and this household has no comfort-margin for unexpected expenses, such as medical bills, household repairs, or even a family holiday.

They are actually in deficit. I worry about a small group of people formulating a number that equates to something as abstract as 'wealth', because often this number will be divorced from reality. The reality for a household that earns $150,000 a year is that there is a lot of hard work and a lot of worrying going on at the kitchen table.

This Middle Australian income doesn't translate to 'wealth' - it translates to working six days and worrying seven nights. It's tradies who get out of bed before dawn and managers who bring their work home; it's young mothers having to juggle child minding because they're going back part-time to school or hospital, and it's the two million Australian business owners who work their tails off to try and stay ahead.

So while the budget interested me, what caught my attention was what Australians were talking about this week: how working flat-out to live a normal life became the definition of wealthy.