It seems like only yesterday we were being exhorted to spend. Pensioners, parents, homebuyers and workers were plied with "free" money from the Labor government and asked to go and spend it to save the economy.
Now comes the payback: higher inflation, rising interest rates and frozen wages.
On October 28, the Australian Bureau of Statistics (ABS) released official figures for inflation (the Consumer Price Index — CPI) for the three months ending on September 30. The CPI rose by 1% for the quarter. If sustained for a year, this would equal a yearly inflation rate of 4%.
By far the biggest overall contributor to the inflation increase was housing costs, which rose by 1.9% for the quarter, up by 5.5% for the year ending September 30.
The largest price hikes were for necessities such as water and sewerage (14.1%) and electricity (11.4%). House prices also rose by 1.1%.
Inflation has risen, but workers wages have not kept up. The Labour Price Index for the June quarter, released by the ABS on August 12, showed wages rose by only 0.8% on average between April and June. In the private sector, this increase was just 0.7%.
The inflation rate for the June quarter was only 0.5%, but there is no reason to think that wages growth has picked up in the last three months to match the latest inflation rise. It is more likely a fall in real wages for most workers.
For those on the lowest wages, the situation is even worse.
In its July 7 national wage decision, the Rudd government's so-called Fair Pay Commission decided to freeze pay rates for all award-dependent workers. For about 20% of the workforce, it means an even bigger cut in take-home pay as inflation rises.
At least part of the blame for the rise in inflation must be put on the federal government's "stimulus" spending. The doubling of the first homebuyers grant for existing homes (and its tripling for new homes), coupled with record-low interest rates, encouraged a surge of demand in the housing market.
However, rather than genuinely raising the purchasing power of homebuyers, the government grants only forced up the price of housing at the bottom-end of the market.
This bucks the trend in other developed countries, where the economic crisis has resulted in big falls in house prices. In the US, house prices fell by up to 50% in three years in some of the worst hit cities, said the September 2 New York Times.
In Britain, housing prices fell by 13.6% in the year to March, but have begun increasing in value since, the October 13 Times Online said.
In Australia, house prices fell only 1.4% between June 2008 and 2009, said the ABS. In the three months to June 30, prices increased across the country by an average of 4.2%, fed by demand from first homebuyers.
State governments must also accept blame for the inflation spike. Following neoliberal policies, corporatised government water and electricity providers have increased prices for households, to maintain profit margins. At the same time these utilities continue to offer cheap electricity and subsidised water to industry.
For instance, BHP's Olympic Dam mine in South Australia uses 35 million litres of water every day. It receives the water completely free from the state government. A planned expansion of the mine could increase its free water usage to 150 million litres a day.
Ongoing electricity subsidies to two Alcoa aluminium smelters in Victoria will amount to at least $4.5 billion by the time the contracts end in 2014 and 2016.
The October 17 Age said: "Coupled with special levies and taxes on electricity consumers, imposed by the Kennett and Bracks governments to cover the subsidies, the public bill for the contracts by 2016 would be closer to $6 billion."
The higher inflation figure has given rise to expectations of a further rise in official interest rates when the Reserve Bank of Australia (RBA) meets on November 3.
The RBA's "underlying inflation" figure, which discounts the most volatile price rises, rose to 3.5% for the year based on the September quarter figures, said the October 28 Sydney Morning Herald. The RBA is likely to raise interest rates in an effort to bring the underlying inflation back below 3%.
The banks are certain to pass on the expected RBA rate rise in full. This will be a further blow to working people, especially those struggling to pay a mortgage on an over-priced house or unit.
Rising interest rates will quickly wipe out the financial gains made from cheaper mortgages and "stimulus" payments — now a thing of the past for most.
Even for those without a mortgage, the economic situation is very uncertain. With steeply rising utility bills, wages dropping against inflation and the ongoing threat of unemployment, living standards will likely go backwards.
Constrained by Labor's Fair Work Australia industrial laws, and unwilling to make a political break from Labor, unions will be hard-pressed to defend members' wages and conditions.
Unless there is a much-needed rise in union resistance, it's likely the "recovery" will cause even greater losses for working people than the recession did.