Public debate about the cost of living is based on a misunderstanding of how living standards should be measured, a new Centre for Independent Studies paper argues.
In Hours not Dollars: Rethinking the cost-of-living debate, economist and author Marian L. Tupy outlines that Australians are, in many areas, more materially better off than headline price figures suggest.
Drawing on long-run data from both the United States and Australia, the paper contrasts movements in consumer prices with movements in wages.
“While prices have risen across most categories over the past three decades, wages have also increased,” Tupy says. “When prices are measured against hourly earnings — using a method known as ‘time pricing’ — the overall picture becomes more nuanced.
“Between 1997 and 2025, Australia’s Consumer Price Index rose 115.6 per cent. However, when adjusted for wage growth, the time required to purchase many goods has fallen substantially.
“The affordability of, for example, communication services, clothing, household furnishings, recreation and most foods have increased markedly relative to wages. These gains reflect the benefits of productivity growth, global trade, technological innovation and competitive markets.”
However, the paper identifies housing, education and health as sectors where affordability has deteriorated in wage-adjusted terms.
Australian housing prices have risen 181.2% since 1997 and remain less affordable relative to wages. Education and health have also become significantly less affordable when measured in work time.
The paper argues that these outcomes are not arbitrary. Sectors in which affordability has increased tend to be tradable, scalable and exposed to competition. Sectors in which affordability has declined tend to be characterised by supply constraints, government regulatory barriers, third-party payment systems and heavy subsidies that weaken price discipline.
In housing, government planning restrictions and zoning rules have significantly limited supply in major cities, contributing to sustained price-cost gaps.
In education and healthcare, extensive subsidies and third-party payment arrangements reduce consumer sensitivity to price and weaken competitive pressures. The result is rising costs that outpace wage growth.
The paper cautions against broad claims that ‘capitalism’ or ‘market failure’ are responsible for cost-of-living pressures.
Instead, it contends that the evidence points to sector-specific policy distortions. Where markets are allowed to operate with competition and innovation, abundance rises. Where supply is restricted or pricing insulated from consumers, scarcity persists.
“The central policy implication is clear: reforms should focus on removing barriers to supply, improving price transparency and strengthening competitive pressures in the sectors where affordability has declined,” Tupy says.
“Addressing these structural constraints, rather than pursuing sweeping systemic changes, offers the most credible path to improving living standards.”
Marian L. Tupy is the 2026 Max Hartwell Scholar-in-Residence at the Centre for Independent Studies. He is a Senior Fellow at the Cato Institute’s Center for Global Liberty and Prosperity and founder of HumanProgress.org.