THIS is well worth the read … one of the best we have come across in sometime!
Within this narrative there is reference to the power imbalance in favour of employers …
However, don’t recall seeing anything in the main article that refers to …
the sustainable economy nor …
-the systematic weakening of the Award structure including removal of penalty rates
-the increase in employment being a contract engagement to avoid costs for the employer
-the increase in casualisation of employment
WHAT was made clear high immigration is achieving at least 3 ideological drivers for the government …
-injects competition into the labour market and adds downward pressure on wages
-further weakens the position of unions and their ability to influence wage rises
-stimulates growth by forcing up demand and therefore assisting growth
AND has the added effect of sustaining businesses that otherwise may have failed owing to their dependence on labour
The construct, the population ponzi scheme promoted by the government means
-those sectors of the economy that are more labour intensive no longer have wage pressures to be so concerned about
.this helps to maintain profits and dividends enjoyed by their political supporters
.puts organised labour in a weakened position to the extent they are bogged down with holding the line on existing wages and conditions
.creates an environment more conducive to further erosion of conditions and greater use of contract labour
How a consumer go-slow and a pile of debt is killing the economy
By Stephen Long
8 SEPTEMBER 2019
On a warm weeknight, Carol Salloum greets a couple of regulars at her restaurant, Almond Bar, in Sydney’s inner eastern suburbs.
A year or so back, the popular Syrian eatery would have been full. Tonight, empty tables are a sign of the times.
And it’s not just that custom is down; spending is slimmer, even among loyal guests.
“I mean, we’ve been here now for 12 years and the last 12 months have probably been the most difficult by way of customers not spending,” Ms Salloum says.
“You know, rather than two people getting a bottle of wine, they are getting a glass of wine each, that kind of thing. They are thinking twice about where their money is going.”
It’s no isolated case.
Consumers aren’t quite on strike, but there’s definitely a consumer go-slow
“At one point I thought we were going into a recession, to be honest but I’d say [it’s] somewhere before that,” Ms Salloum says.
“Very weak; it doesn’t look great from a business point of view.”
Her assessment is on the money.
According to the official estimate from the ABS, Australia’s economy expanded at an annual pace of just 1.4 per cent in the last quarter — the slowest rate of economic growth since the global financial crisis.
You have to go back nearly 20 years to find a weaker result — in the year 2000 when the GST was introduced. Leave that one-off event aside, and the economy is the weakest it’s been since the early 1990s.
Wage growth remains a massive issue
Parlous consumption was one of the big drags on the economy, which is not surprising, considering what’s been happening with wages growth.
It’s been woeful.
Why is wage growth so low?
Why is Australia experiencing its slowest wages growth since World War Two? There are countless theories, but many come back to a shift in power between workers and employers.
“The last six years has been the worst period for wages growth since the Second World War,” says Jim Stanford, chief economist and director of The Australia Institute’s Centre for Future Work.
“Wages have grown so slowly its undermined consumption, its undermined job creation and its contributed to Australia being the most indebted consumers of almost any country in the world.”
The wage price index has managed to pull ahead of consumer price rises. But only because — reflecting the weakness in the economy — the inflation rate is extraordinarily low.
If it doesn’t feel like your cost of living is falling, though — and you’re scratching your head at the talk of wages beating price rises — there may be a good reason.
The price of many necessities of life — food, healthcare, electricity and other utilities — has risen strongly over many years, far outpacing average wage gains.
But the “basket of goods and services” that make up the consumer price index also includes stuff most of us only buy now and again, and people on tight budgets might just forgo: the latest smartphone, for example, or a new whiz-bang laptop, the latest fashion clothing, or international travel.
These luxury items (“discretionary spending” in economist speak) are what’s bringing down the inflation rate — either because such goods and services fall in price outright or because they cost the same or not much more for better quality are a recorded as price falls under the ABS’s measures.
It means, in effect, that there’s a bias towards the well-off and people with a lot of disposable income in the cost of living.
“It all depends on what you buy,” says Dr Stanford.
“The reality is that the price of many household essentials has been rising much faster than wages.”
“So, if you can afford to spend a lot of your income on luxuries, your inflation rate may well be lower than average, but if you spend most of your income goes on the basic necessities, your cost of living will be likely to have risen far more than your wages and your standard of living will be going backwards.”
Home ownership a distant dream for many
House prices aren’t included in the Consumer Price Index. If they were, it would tell a very different story.
Despite recent falls, the cost of buying a home has soared in recent decades relative to incomes, pushing the Australian dream of home ownership out of reach for many.
Soaring property prices have also created a huge debt burden.
On some measures, Australia’s household debt is the highest in the world; on others, merely second to Switzerland — and that makes us vulnerable.
Martin North of Digital Finance Analytics, who has long warned about the dangers of Australia’s high household debt levels, notes that mortgage “delinquencies” — the share of borrowers who aren’t keeping up with required loan repayments — have risen significantly, even though the RBA’s cash rate and bank lending rates are at historic lows.
“If unemployment starts to rise, that will accelerate,” he says.
Australia’s unprecedented levels of household debt have never been tested in a recession — but it’s worth noting that in the last recession, in the early 1990s, house prices fell by in the order of 20 per cent.
If Australia were to experience mass unemployment at the levels seen back then with today’s levels of household debt, Mr North is among those who fear the consequences will be dire.
During the election campaign and the lead up to it, Treasurer Josh Frydenberg and his colleagues boasted of “the strong economy” — a claim that was not accurate even back then.
The mantra then became that the “economy is sound”. Then, as a weakening economy mugged the rhetoric, it changed to “the fundamentals are strong” — a phrase echoed by the Reserve Bank governor.
The claims don’t wash with Ms Salloum.
“I can’t see it,” she says. “Nothing seems ‘sound’ or ‘strong’ from our point of view.”
There’s plenty of folks who would share her feelings.
Low productivity growth by historical standards doesn’t sit well with the claims about a “sound” economy with strong fundamentals, either.
*Mr North and Dr Stanford are among the many economists and financial analysts worried about the structure of the Australian economy, which relies heavily on two industries to sustain its momentum — mining and construction.
“Both of those sectors have gone from boom to bust and right now we have very little of the hi-tech export-oriented sectors we need to drive growth,” says Dr Stanford.
Many of the new jobs being created are not in “hi-tech, export-oriented” sectors but in a suite of industries that Mr North refers to as “the bedpan economy” — labour intensive human services such as aged care, community care and health care.
“Those jobs are not necessarily productive jobs, they are important jobs but they won’t tend to deliver high productivity growth,” says Mr North.
“My question is where is the next generation of value in the economy going to come from?”
How long can Australia’s ‘resilient’ economy hold on?
In the face of the undeniable weakness, Mr Frydenberg has not dropped the reference to a “strong” economy, instead describing it as “resilient“.
That’s a fair call; a world-record 28 years without a recession is evidence enough.
Australia’s weathered the Asian financial crisis of the 1990s, the tech wreck of the 2000s, and the Global Financial Crisis a decade ago without succumbing. But that record has involved some sound management and a lot of luck.
At some stage, the luck will run out.
Alongside spluttering economic growth and households hunkering down at home, a series of risks lurk offshore — a bad Brexit, the US-China trade war, underlying problems in the Chinese economy blowing up among them.
“Any one of those could play us into a GFC 2.0,” says Mr North.
“And if that happens then essentially all bets are off.”
“We are going to see very high levels of unemployment, we’re going to see a lot of households defaulting on their mortgages and that would have a spillover effect on the economy. That would hit the banks and take us into a very dark corner, in my view.”
In recent times, it’s only been population growth that’s kept Australia out of recession. More people have created more demand but high immigration has also helped to suppress wages.
While the pie’s been growing larger, the slices have been getting smaller (leaving aside the distribution of the pie, which is skewed towards those at the top).
Per head, living standards have fallen — a phenomenon that’s been dubbed a “per capita recession”.
The government and the RBA will be banking on the tax cuts which commenced in July and interest rate cuts to lift the economy out of the doldrums. If we’re lucky, things may start to turn around.
But if the luck runs out, there could be far worse to come.