In this period of high inflation, most have noticed our weekly income can't buy the same amount of goods as it could a few years ago.
But long before this inflation crisis, a similar phenomenon has been eating away at the value of the money we use to buy a home.
Since the early 1990s until recently, the average annual rate of inflation in consumer prices has been 2.5 per cent, so it may have felt like the value of our currency was relatively stable before the pandemic.
But the value of our dollar hasn't been maintained in every market.
When it comes to the property market, it's been obliterated.
Property price inflation has killed the Australian Dream of widespread home ownership for younger generations.
What is a dollar worth these days?
Why did policymakers let this happen?
In the post-war years, it typically cost two to three times average household earnings to buy a property.
Today, it's up to six to 10 times (or even higher).
Useless is the old advice, that our grandparents provided, that you could buy a house for three times your annual income and pay it off in 30 years on autopilot.
Millennials and Gen Z's are working just as many hours as previous generations did, often more, and their wages can buy them groceries, petrol, cheap clothes and electronic goods.
In markets for many consumer items, the value of the currency has been reasonably well-maintained since the 1990s. It's even strengthened in some markets.
But when they try to use that same dollar to buy their first property? It's like the currency belongs to a less-wealthy country.
According to the Bureau of Statistics, the median Australian employee earned $65,000 in 2022.
Right now, the average loan size in New South Wales is $726,902 and, in Sydney itself, the median dwelling value is $1.01 million.
A unit of currency is worth far less in modern housing markets than it was in post-war housing markets.
Should we start indexing wages to property prices, to give younger generations a chance?
The Reserve Bank's charter
It raises an important question.
One of the Reserve Bank's main jobs is to maintain the stability of our currency.
According to the famous 'charter' (found in the Reserve Bank Act 1959), the RBA has three main objectives. They are:
But what does "stability of the currency" really mean?
On one hand, it sounds like policymakers are talking about the exchange rate.
It's saying the RBA must do what it can to keep the value of Australia's currency relatively stable, over the long-term, against the value of our major trading partners' currencies.
But then, on the other hand, in some of the RBA's modern educational material, the bank has dropped the phrase "stability of the currency" and replaced it with "price stability."
That makes it sound like the RBA is supposed to be maintaining the stability of prices inside Australia's economy (i.e. domestic inflation).
So which one is it? It turns out it's both.
It's often forgotten, but the RBA's charter didn't originate in the Reserve Bank Act 1959. It was inherited almost word-for-word from the Commonwealth Bank Act 1945.
The year 1945 was an extremely important one in Australia's economic development.
It was the year in which John Curtin's Labor government produced its famous White Paper on Full Employment, which detailed how the government planned to rebuild Australia's economy after the war, on a foundation of full employment.
During the war, the government had become increasingly interested in using the banking system as an instrument of social policy.
In 1944, the Labor Treasurer Ben Chifley sought advice from Herbert "Nugget" Coombs, the director-general of the Department of Post-War Reconstruction, on what the relationship between the federal government and central bank ought to look like after the war.
Dr Coombs said the Commonwealth Bank (Australia's central bank at the time) ought to be substantially independent of government, but it should be used to play a crucial supporting role in Australia's post-war full-employment economy.
In his autobiography, Trial Balance (1981), Dr Coombs explained that that's where the central bank's new 'charter' came in:
"From the Keynesian stronghold of the Ministry of Post-War Reconstruction, I and my colleagues were urging that the bank legislation should record the commitment of the objective of full employment," he wrote.
"Treasury and the bank argued that the concern of the bank was essentially financial and that its primary objectives should be the stability of the value of the currency in both its domestic and international contexts.
"In the event, it was finally agreed that there was no profit to be gained from exploring legislatively the compatibility of these objectives or the nature of the trade-offs between them which might be required.
"Accordingly, with varying degrees and styles of reluctance, we all accepted a 'charter' for the bank which committed it to both, balanced by a third which was so imprecise that it could be welcomed equally by those who saw the bank as the instrument of the populist vision of 'The People's Bank', correcting the inherent inequalities of the capitalist system, and those who saw the interest of all being best served by the separate pursuit of their individual interests.
"It was, I believe, the first time parliament had given one of its many statutory corporations a general set of 'riding instructions,' although the example has occasionally been followed since then."
Dr Coombs said when the authors of the Bank's charter talked about the "stability of the currency," they had in mind the value of the currency in its domestic and international contexts.
But I wonder what they'd make of the deterioration in the value of the dollar today, when it's taken to the housing market.
Would they be satisfied with the outcome that the growth in consumer prices has been relatively stable over the past 30 years, but the growth in house prices has been socially destructive, which is undermining the welfare of millions of Australians?
In a very important sense, the value of our currency has definitely not been maintained.
It's written in stone, vaguely
At any rate, Dr Coombs was appointed governor of the Commonwealth Bank in January 1949, and when Robert Menzies, the founder of the Liberal Party, won the 1949 election, he retained Coombs in his role.
Through the 1950s, private banks were increasingly agitating for the Commonwealth Bank to be broken up, to separate its central banking from its trading and savings divisions.
Mr Menzies eventually agreed, and his Reserve Bank Act 1959 created the Reserve Bank of Australia as we know it today. It retained the famous 'charter' from the Labor government's 1945 legislation.
Mr Menzies appointed Dr Coombs the first governor of the RBA in 1960, a role Dr Coombs held until 1968.
And during his time as RBA governor, Dr Coombs oversaw the building of the RBA's new headquarters in Sydney's Martin Place, between Phillip and Macquarie streets.
He saw to it that the words of the bank's charter were placed on the wall of the building's foyer.
Interestingly, the third of those objectives in the bank's charter is increasingly being mentioned today.
Do bank officials feel like current policy settings are promoting the economic prosperity and welfare of all Australians?
Surely the stability of the currency, in all its senses, would feed into that.
Is the bank an important instrument of the populist vision of 'The People's Bank', correcting the inherent inequalities of the capitalist system, or is the interest of all best being served by the separate pursuit of individual interests?
Perhaps these contradictions will never be solved. They're written into the Act.
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