Gains in the average Australian's income have been largely offset by the increases in housing and living costs, the latest AMP.NATSEM report has shown.
The gross income of the average Australian household increased by 31 per cent between 2001 and 2006, while housing costs grew by twice that amount to 62 per cent.
Census data collected between 2001 and 2006 has revealed living costs for food, petrol, education and childcare also escalated in that time, according to the AMP-commissioned report by the National Centre for Social and Economic Modelling (NATSEM).
The hardest hit households were those in middle Australia, with housing costs increasing almost 65 per cent, while income only improved by around 30 per cent, the report said.
Incomes in affluent areas grew more rapidly than low income areas, but the bigger pay cheques were "whittled away" by the increase in housing costs, which in affluent areas jumped 54 per cent compared to 48 per cent in low income areas, it said.
"This could go some way to explaining the shift in behaviour we have seen in Australian communities in recent times; where high employment, high incomes and strong economic conditions have not necessarily reflected the perceptions of average Australians," AMP Financial Services managing director Craig Meller said.
Planners should be talking to clients regularly and encouraging them to get back to basics and become more conservative with their budgets, AMP financial planner Tony Rigby said.
"Clients should, to an extent, overestimate expenses, underestimate income, take into account more rate rises, pay off high-interest bearing debts first and carefully consider borrowing against their mortgage," he said.
'Advance Australia Fair?' was the 20th AMP.NATSEM income and wealth report to be released.
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