Perth s prosperity through the 2008 Global Financial Crisis. Kirsten Martinus

Transcription

1 Perth s prosperity through the 2008 Global Financial Crisis Kirsten Martinus Introduction In September 2008, the world was hit by one of the worst financial crises since The Great Depression in the 1930s. Soon after, the International Monetary Fund (IMF) predicted global growth would contract by 1.3% before a slight recovery of 1.9% in 2010 this was significantly lower than past recessions (IMF, 2009). By April 2010, the IMF reported that higher than expected global economic growth of 4.5% was proceeding at varying speeds with advanced economies (e.g., Japan and USA) projected to grow less than emerging and developing economies such as China (10%), India (8.2%) and the ASEAN-5 (6%) (IMF, 2010). This FACTBase investigates the impact of the 2008 Global Financial Crisis (GFC) on Australia s capital cities by reviewing personal income between financial years 2004/05 to 2011/12 and consumer price changes for the period Personal income data is extracted from Taxation Statistics (Australian Taxation Office, years 2004/ /12) and indexed for inflation according to a weighted Consumer Price Index (CPI) average for eight Australian capital cities at 2012 prices 1. Following on from the analysis in FACTBase 3 and 15 (Tonts, 2009; 2010), this FACTBase is divided into two sections. The first discusses taxable incomes and CPIs within Australian cities to understand where Perth sits within the national context. The second unpacks the uneven geographies of prosperity emerging amongst the 40 Statistical Local Areas (SLAs) that make up the Perth and Peel Metropolitan Region 2. The smaller postcode spatial areas used by the ATO data have been adjusted to match SLAs using ABS (2012) concordance files. Personal income disparities between Australian Cities Bernard Salt (2014) has recently noted that the Australian economy changed profoundly at the time of the global financial crisis with more and more people engaged in healthcare and social assistance, education and training, and mining. Perth s relatively better performance through the GFC compared to other Australian cities must be tempered with an understanding of the increasing inflationary pressures rising incomes have placed on its households. This is of concern as wealth has not been evenly distributed with historically rich SLAs becoming even better off compared to the rest of Perth. Figure 1 outlines the average real personal income of residents across major Australian cities. All five cities experienced consistent growth for each year in the period Whilst Sydney was Australia s most prosperous city in the years preceding and immediately after GFC, it had slipped to second place by 2010 with Perth moving into first. Melbourne retained third position over the entire period after its fall from second place 3. Figure 1 illustrates the pre- GFC differentials between the wealthiest and poorest of Australian cities, moving from a gap of $8,000 in 2005 to a gap of almost $10,500 in 2008 (between Sydney and Adelaide in both periods). Perth became comparatively richer after the GFC this was largely due to WAs minerals and energy boom. Perth s mean personal incomes overtook Melbourne s and moved closer to Sydney s (the $5,000 gap with Sydney in 2005 had been reduced to 1 The index is calculated by Australian Taxation Office. 2 This differs from FACTBase 3 and 15 discussions which focus on postcodes. 3 FACTBases 3 and 15 record this in 2007 due to different spatial units used. FACTBase 1

2 around $1,500 in 2008). By 2010, the similar incomes of Perth and Sydney (around $64,000) remained at $5,500 above that of Melbourne. In 2012, however, Perth jumped to around $1,500 and $7,000 ahead of the respective average incomes of Sydney and Melbourne. Comparing annual movements in mean personal income (Figure 1) to that of the CPI (Figure 2; 1989/90 base is set at 100) highlights the relative change in wealth between Perth and Sydney. In 2004, Perth was relatively cheaper (at 140 points) compared to Sydney (at 145 points). By 2006, Perth prices rose against Sydney s placing pressure on its lower median income earners. During , Perth became relatively more prosperous than Sydney with similar price inflations but relatively higher incomes. Figure 1: Mean personal taxable incomes in major Australian cities, (in 2012 $) 80,000 Mean Personal Taxable Incomes, ,000 60,000 Personal Income $ 50,000 40,000 30,000 20,000 10, Perth 38,060 42,333 48,542 53,921 58,726 64,201 71,354 75,806 Sydney 42,889 46,086 51,802 55,524 59,443 63,951 70,058 71,835 Melbourne 38,748 41,836 46,774 50,176 54,265 58,651 64,475 66,133 Brisbane 35,066 39,478 44,459 48,442 52,313 56,882 61,821 65,498 Adelaide 34,854 37,471 41,621 45,198 48,931 52,889 57,223 59,920 Figure 2: Comparison of Perth and Sydney CPIs for years using 1989/90 CPI prices 190 CPI, Perth and Sydney, Quarterly Sydney Perth FACTBase 2

3 Figure 3: Percentage change in mean personal taxable income in Australian cities, % Perth Brisbane Darwin Adelaide Melbourne Canberra Hobart Sydney Figure 3 illustrates the percentage change in mean personal taxable income (MPTI) for all Australian cities in nominal terms. Perth has made the most significant gains with MPTI increasing by 64% between 2005 and This was followed by a 54% increase in Brisbane Australia s other energy and minerals capital. Whilst the relatively higher disposable income of these cities indicates increasing prosperity after the GFC, it has not come without a cost. Consumer prices in both cities increased significantly: Brisbane s CPI (based on 1989/90 prices) rose from 145 to 186 between 2004 and 2012; and Perth s from 140 to 180. Sydney experienced the lowest growth over (38%) which is not surprising given the impact of the GFC on the finance sector. Perth s uneven geographies of wealth The MPTI for all SLAs of Perth and Peel rose from around $58,000 in 2005 to $86,000 in 2012, an increase of 48% or 6.9% per annum on average. Figure 4 illustrates the MPTI for SLAs during the financial year. Unsurprisingly, the highest MPTIs were in those SLAs located within the western suburbs of Perth: (i) Peppermint Grove ($179,965); (ii) Cottesloe ($178,691) (iii) Nedlands ($142,335), (iv) Mosman Park ($141,553), and (v) Claremont ($129,193). The remaining inner city SLAs Cambridge, Subiaco, Vincent, Stirling South-East, South Perth, Fremantle (East, Inner and Remainder) and Melville created a ring of medium income earners ($80,000- $139,000) around Perth City. The lowest MPTI earners were found in the SLAs of Wanneroo-South ($60,751), Gosnells ($62,790) and Bassendean ($63,977). FACTBase 3

4 Rankings of Perth s wealthiest and poorest SLAs by MPTI have demonstrated little change since the 2004/05 tax year. However, the disparity between them has increased with the gap between the SLA with the highest MPTI (Peppermint Grove) and the lowest MPTI (Wanneroo South) almost doubling from around $64,000 in 2004/05 to $119,000 in 2011/12. Figure 4: Mean taxable income, (unadjusted) Enlargement Coastal Central Bayswater Bassendean South-Eastern Cambridge Vincent Nedlands Claremont Cottesloe Peppermint Grove Mosman Park Subiaco Perth - Remainder Perth - Inner South Perth Victoria Park Canning Belmont Fremantle - Inner # East Fremantle Melville Wanneroo - North-West Wanneroo - North-East # Fremantle - Remainder Swan Joondalup - North Joondalup - South Wanneroo - South Mundaring Enlargement Cockburn Kwinana Gosnells Kalamunda Armadale Rockingham Serpentine-Jarrahdale Mandurah Waroona Murray Legend Mean Taxable Income ($) 60,000-79,000 80,000-99, , , , , , , , , km ¹ FACTBase 4

5 Figure 5 illustrates the percentage change in MPTI across the 2005 to 2012 period. The average increase in MPTI for all SLAs was 64%; the highest being in Peppermint Grove (70%), Cottesloe (69%) and Claremont (68%). All other SLAs rose 40 49%, with the exception of Perth City (Inner and Remainder) SLAs which rose by only 33% and 32%. Outside of the Perth Inner Metropolitan Area, the highest income increases were in Joondalup North and Stirling Coastal (both up 48%). Figure 5: Percentage change in mean taxable income, Enlargement Coastal Central Bayswater Bassendean South-Eastern Cambridge Vincent Peppermint Grove Cottesloe Mosman Park Nedlands Claremont Subiaco Perth - Remainder Perth - Inner South Perth Victoria Park Canning Belmont Fremantle - Inner # East Fremantle Melville Wanneroo - North-West Wanneroo - North-East # Fremantle - Remainder Swan Joondalup - North Joondalup - South Wanneroo - South Mundaring Enlargement Cockburn Kwinana Gosnells Kalamunda Armadale Rockingham Serpentine-Jarrahdale Mandurah Waroona Murray Legend Percentage Change (%) km ¹ FACTBase 5

6 Table 1: Changes in mean individual taxable incomes in Perth (In 2012 $), ranked by percentage change SLA Income Income Absolute Change Percentage Change Percentage Change Percentage Change Peppermint Grove (S) Cottesloe (T) Mosman Park (T) Claremont (T) Cambridge (T) Joondalup (C) North Stirling (C) Coastal Stirling (C) South-Eastern Victoria Park (T) Melville (C) Fremantle (C) Remainder Nedlands (C) Serpentine-Jarrahdale (S) Wanneroo (C) North-East Joondalup (C) South South Perth (C) Murray (S) East Fremantle (T) Fremantle (C) Inner Wanneroo (C) South Wanneroo (C) North-West Subiaco (C) Cockburn (C) Waroona (S) Belmont (C) Kalamunda (S) Armadale (C) Rockingham (C) Stirling (C) Central Mandurah (C) Kwinana (T) Vincent (T) Bassendean (T) Mundaring (S) Canning (C) Bayswater (C) Gosnells (C) Swan (C) Perth (C) Inner Perth (C) Remainder FACTBase 6

7 Table 1 disaggregates MPTI percentage change data into pre ( ) and post ( ) GFC. While MPTI rose across all SLAs, the average rise of 25% in the first period dropped to 18% in the second. The lower percentage increase of the post- GFC period indicates a slight decline in economic prosperity across Perth. The largest change in MPTI occurred in Mosman Park, falling 42 points between the two periods. East Fremantle and South Perth were also hit by the GFC, with respective MPTIs down 20 points (the increase of 31% in 2005/08 fell to 11% in 2008/12) and 18 points (similarly 30% to 12%). The least affected were Inner Fremantle, Kwinana and Rockingham, which exhibited no MPTI percentage change between the periods. The three SLAs of Murray, Mandurah and Fremantle Inner demonstrated MPTI percentage increases between the two periods moving up 1, 2 and 7 points respectively. Conclusion Despite the significant economic downturn caused by the GFC in 2008, its geographic impacts have been far from universal. The experiences of nations, cities and regions have been varied some have sailed smoothly through the crisis and others have not. This FACTBase has examined how Perth has fared by comparing its economic performance, using MPTI and CPI, with other major Australian cities as well as across the Perth metropolitan region. The last decade or so of extraordinary growth in Perth has primarily resulted from its booming energy and minerals sectors. In this time, Perth has moved from being a relatively small branch city to one which has attracted some of the largest corporations in the mineral resources and supporting services sector. This growth is evident in its increasing relative income and prices before the GFC. Whilst the GFC slowed Perth s economy, the decline was relatively less than other Australian cities. As a result, Perth has become comparatively wealthier in the Australian urban network. Despite general rises in prosperity across metropolitan Perth and Peel, wealth was not evenly distributed with some SLAs becoming substantially richer than others. Much of this increase was concentrated around the so-called Golden Triangle suburbs west of Perth City Centre, which experienced the sharpest jump in incomes (up 68%-70%). Given that the rest of Perth and Peel SLAs increased similarly (between 40-49%), these historically rich areas became even better-off relative to the rest of the population. Highest mean taxable incomes were concentrated in Perth s inner SLAs, with secondary pockets of growth pushing up along Perth s coastal areas to the urban fringe (Stirling Coastal to Joondalup) as well as in the tree-change lifestyle SLAs such as Mundaring and Kalamunda. References ABS (2012) Postcode 2011 to Statistical Local Area 2011 ( C184). ABS, Canberra. ABS (2014) Consumer Price Index, Australia, Mar ABS Cat. No ABS, Canberra. Australian Taxation Office (years 2004/ /12) Taxation Statistics. ATO, Canberra. IMF (2009) World Economic Outlook April 2009: Crisis and Recovery, World Economic and Financial Surveys, International Monetary Fund, Washington DC. IMF (2010) World Economic Outlook April 2010: Rebalancing Growth, World Economic and Financial Surveys, International Monetary Fund, Washington DC. Salt, B. (2014) Before and after: GFC triggers the great divide. The Australian, April 03, accessed May 2014 from theaustralian.com.au/business/ opinion/before-and-after-gfctriggers-the-great-divide/storye6frg9jx #. Tonts, M. (2009) Boomtimes and Personal Income: Perth s Decade of Prosperity, FACTBase Bulletin 3, The University of Western Australia and the Committee for Perth, Perth. Tonts, M. (2010) Perth s Decade of Prosperity: 2010 Update, FACTBase Bulletin 15, The University of Western Australia and the Committee for Perth, Perth. FACTBase 7

8 About FACTBase FACTBase is a collaborative research project between the Committee for Perth and The University of Western Australia to benchmark the liveability of Perth and its global connectedness through an examination of Perth s economic, social, demographic and political character. The FACTBase team of academics and researchers condenses a plethora of existing information and databases on the major themes, map what is happening in Perth in pictures as well as words, and examine how Perth compares with, and connects to, other cities around the world. Copyright This paper is copyright of The University of Western Australia and the Committee for Perth. While we encourage its use, it should be referenced as: Martinus, K. (2014) Perth s Prosperity through the 2008 Global Financial Crisis, FACTBase Bulletin 36, The University of Western Australia and the Committee for Perth, Perth. The Committee for Perth is a member-funded organisation and we acknowledge Foundation partners: About the author Kirsten Martinus is an Assistant Professor at The University of Western Australia s School of Earth and Environment. She has broad research and consulting experience in North America, Asia and Australia in projects relating to international trade relations as well as strategic economic and regional development. Her research interests lie in the human geography impact of globalisation and technology. As part of her role at UWA, she conducts research for the FACTBase team and lectures in regional analysis and planning, economic geography and global cities. A complete list of current members is available at: UniPrint FACTBase 8