The misery index was created by economist Arthur Okun who, in the late 1960s, reckoned if you add the level of unemployment to the inflation rate, you have a rudimentary insight into misery – unless you’re rolling in cash and have two or three freehold properties.
The higher the index, the more miserable the population.
You actually can’t quantify misery as it’s a quality, an emotion, but it gives a major heads up that statistics don’t tell the story on the street.
If prices are going up and people are losing jobs, then households and businesses can rightfully think the economy is not working for them. They may be miserable. They may also be angry.
In Australia, we need another: the official cash rate.
When you add the cash rate to inflation to unemployment right now, you can see the pickle that Treasurer Jim Chalmers and Reserve Bank governor Michele Bullock – and the rest of us – find ourselves in.
The Australian misery index has climbed sharply this year.
It was at its most recent low point around March 2025, the time of the federal election that Anthony Albanese won easily. Inflation was 2.1 per cent, the jobless rate was 4.1 per cent, and official interest rates were 3.85 per cent.
But it started climbing from the middle of the year. By December, it was about 15 per cent higher. And then, after Donald Trump and Benjamin Netanyahu began their war on Iran, it climbed again.
It worsened as inflation climbed, the Reserve Bank started lifting interest rates and the jobless rate began to inch up. In March this year, the misery index was 25 per cent higher than it had been about 12 months earlier.
The index is not as high as it was in 2022, when inflation was surging and the Reserve Bank was driving up interest rates half a percentage point at a time. That was also the year voters gave Scott Morrison the big heave-ho.
It’s no coincidence that as the misery index has risen, support for parties like One Nation has climbed.
If you happen to be the leader of a major party that has to offer real and sometimes complex solutions to assuaging the public’s misery, then you’re on a hiding to nothing.
Jim Chalmers and Anthony Albanese are betting that a key part of the angst felt by young Australians is down to the state of the housing market. Hence, the budget changes to property taxation.
It could also be rising rents, rising youth unemployment – especially long term, AI taking graduate jobs, and unfolding disaster of a lack of intergenerational transfer of funds (except when rich parents buy their kids homes), etc, etc.
If the Aussie misery index included house price growth over the past five or 10 or 20 years, for young people it would be off the scale.
The budget’s changes to negative gearing and capital gains tax have had an impact on the property market. This, in turn, has prompted an outpouring of anger from the vested interests that stand to gain from ever-increasing house prices (and damn the consequences for young Australians or future generations).
Announcing on Tuesday that the RBA had decided to hold interest rates steady, Bullock went hard at her press conference to warn that if inflation doesn’t slow as quickly as the bank is expecting, then the nation’s home borrowers are going to get whacked with another rate rise.
But she did note that the bank’s three previous rate hikes have yet to fully work their way through the economy (which can take up to 18 months), and that a slowdown in the property market would be likely to curb consumer spending and dwelling investment, which has been a key source of inflation over the past five years.
It’s going to be some time before Australians will start feeling much better about themselves.
But keep in mind the misery index is relative. A man who can put a roof over his family in Bangladesh and feed them may feel blessed.