What's the catalyst to provide the next big jump in family discretionary income?

House prices have risen in proportion to discretionary income growth for a generation or more.

We've had inflation lower than wages growth which has given us exponentially bigger discretionary income.
We've been relying on dual family incomes.

But what's the catalyst to provide the next big jump in family discretionary income ?

A few ideas...
Send the kids out to work :eek:
Some countries have 60yr P&I loans
Multi family residences (eg planning laws allow granny flats in NSW)

Anything else ?
 
The strong Australian dollar increases discretionary income by reducing the cost of petrol and imported consumer items. Who knows how long it will last though...

Working from home is another one. Many companies, including mine, are actively promoting employees working from home. It saves the company in terms of real estate, services and utilities costs. It increases employee's discretionary income by reducing petrol/travel costs, less car maintenance, less need for formal work clothing and dry cleaning, no need to pay restaurant prices for lunch/breakfast etc.
 
The strong Australian dollar increases discretionary income by reducing the cost of petrol and imported consumer items. Who knows how long it will last though...

Working from home is another one. Many companies, including mine, are actively promoting employees working from home. It saves the company in terms of real estate, services and utilities costs. It increases employee's discretionary income by reducing petrol/travel costs, less car maintenance, less need for formal work clothing and dry cleaning, don't need to pay restaurant prices for lunch/breakfast etc.

I see this happening in our offices at the moment and tend to agree.
 
Life expectancy in Australia has increased significantly over the last century and certainly in the last 50 years we have seen incredible discoveries not only in cures and remedies but in technology inabling surgeons to perform the most amazing of life-saving procedures.

In Australia, the average mortality age for males is 80 and for females, it's 84.

This would certainly be a strong arguement to increase the Maximum Loan Term from 30 years to at least 40 years.

Regards JO
 
More income means:

1. Earn more (from regular job or business)
2. Pay less tax (by claiming more deuctions by investing earned income)
3. Spend carefully (Revisit your definition of 'happiness' and 'enjoy')

Can we combine all the 3 above?:D
 
The difference in repayments between 30yr P&I and IO is rather small (in Oz, due to our relatively high interest rates). No point focusing on extending 30yr P&I to 40 year, its not going to make much of a difference.

Example on $300k principal:

7% Interest rate (Oz)
30yr P&I $2000 per month
IO $1750 per month

2% Interest rate (Japan)
30yr P&I $1100 per month
IO $500 per month.

As you can see, only about 12% difference in repayments in Oz, not much of an impact. In Japan it makes a huge difference with less than half the repayments with 'lifetime' loans.
 
Don't think there's anything obvious (nor need there be) and certainly nothing of the structural significance of the women in the workforce, two income families until mid 30s or the greater borrowing capacity brought about by innovations in the finance sector (product, credit and funding options).

The bigger issue is that the latter point - increased availability of credit both at a macro and per-borrower level - is unlikely to provide the fuel it did over the last 20 years.
 
- Longer working lives: The age to be able to claim superannuation is steadily creeping up. This means more people working for longer, dragging the income of the average household up.

- Lower marginal tax rates / thresholds: These have been steadily decreasing due to the royalty income courtesy of mining coming into Federal coffers. Lower personal income tax thresholds = more take home pay. Mining revenue will also allow the largesse to continue in areas like social security.

- Not such a big jump but the cost of consumer items keeps dropping in real terms, particular with the exchange rate as Shadow pointed out.

- More skills: We are seeing a long term trend for a greater skill level of the average Australian worker whether in goods or service industries. It is one of our only enduring competitive advantages in the face of cheaper labour elsewhere. This will see average wages continue to outpace inflation, particularly with unemployment at these levels.

Still plenty of upside IMO... :)
 
Increased skills through more education - proportion of uni grads is constantly rising.
Increased fraction of non-physically intensive jobs - although good money will be had in most trades
Increased work hours - the hours worked in only rising in most industries (in many they no longer even pretend that 40 hours is normal).
Increased career length - partly due to the less physically demand nature of more jobs
 
none mention slump in home prices:D
If average home price would drop from 500k$ to 250k$ a lot of extra disposable income would be available...;)
 
none mention slump in home prices:D
If average home price would drop from 500k$ to 250k$ a lot of extra disposable income would be available...;)

Increased discretionary income as property price falls would put a ceiling on the fall of housing so in actual fact no big increase in income there.

For prices to stay down discretionary income would have to drop also for eg. when unemployment very high, wages not increasing.
 
The strong Australian dollar increases discretionary income by reducing the cost of petrol and imported consumer items.

+1 Agree with Shadow :)eek:, :rolleyes:)

Another cause could be a China Effect II - new source of low priced everyday goods (from underwear to bicycles) that will make their cost even lower, like China did in the last 20 years. Where would it come from, Africa? I doubt it... Though....
 
Increased discretionary income as property price falls would put a ceiling on the fall of housing so in actual fact no big increase in income there.

For prices to stay down discretionary income would have to drop also for eg. when unemployment very high, wages not increasing.

I would agree with you if nothing else change.
But don't forget the dark hand of RBA and politicians that can legislate to get better return from your disposable income from other investment (may be even the boring savings in the banks :eek:)

Spark
Another cause could be a China Effect II - new source of low priced everyday goods (from underwear to bicycles) that will make their cost even lower, like China did in the last 20 years. Where would it come from, Africa? I doubt it... Though....
I don't believe China can hold their currency artificially lower for much longer, they can't run trade surplus forever, specially now that China economy is getting quite big, even globablization could make a step back if China insist in undervaluing the currency.
I also agree with Shadow that while the AU$ is strong disposable income is high (just think of those imported car getting cheaper and cheaper...)
 
A great bit of lateral thinking and very true. Excellent post Jo.

Life expectancy in Australia has increased significantly over the last century and certainly in the last 50 years we have seen incredible discoveries not only in cures and remedies but in technology inabling surgeons to perform the most amazing of life-saving procedures.

In Australia, the average mortality age for males is 80 and for females, it's 84.

This would certainly be a strong arguement to increase the Maximum Loan Term from 30 years to at least 40 years.

Regards JO
 
I'd say increased company tax revenues from the resources boom may allow structurally lower income tax levels over time.

The trend of "exporting deflation" from china will also continue with anything manufactured, combined with the strong aussie dollar.

Whether that equates to anything significant compared to the past, I don't have the figures at hand to determine.
 
Life expectancy in Australia has increased significantly over the last century and certainly in the last 50 years we have seen incredible discoveries not only in cures and remedies but in technology inabling surgeons to perform the most amazing of life-saving procedures.

In Australia, the average mortality age for males is 80 and for females, it's 84.

This would certainly be a strong arguement to increase the Maximum Loan Term from 30 years to at least 40 years.

Regards JO

It's far more likely to result in increased taxes than longer loans terms. Those titanium hips don't grow on trees.
 
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