We are Making More Money but It’s Worth Less

Firstly, the following graph is based on data from the USA. However I am pretty sure a similar research project conducted for Australia would come up with a very similar result.

What the graph is telling us is that the purchasing power of household incomes in America peaked in the year 2000 and then from 2000 to 2010 it fell sharply to the point where, by 2010, the average household purchasing power had fallen back to 1993 levels.

So even though in absolute dollar amounts of most household incomes in 2010 were higher than they were in 2000, due to increases in regular unavoidable outgoings and the necessities of life (food and shelter), household purchasing power has dropped.

The graph also shows us that since 2000 the value of household incomes have suffered their longest trending fall since at least 1965.

Maybe this has more to do with why people, in Australia anyway, have cut back on retail spending so dramatically. This makes more sense to me than the official reason being told to us by our government which is that we are all saving our money away rather than spending it. I can assure you that over the last five years or so the amount I have ‘saved’ is less than the amount I have withdrawn from savings, hence my savings have gone backwards. My savings balance has not, as the government would have us believe, been rocketing skyward because I have been piling in truck loads of spare cash.