If
ever you needed evidence of the disconnect between the economic big
picture and people’s lives it came this week – a week in which the
government was meekly trying to argue in support of the decision to cut
Sunday penalty rates while at the same time dealing with the GDP figures
that showed both strong economic growth and falling wages.
It used to be so easy: the treasurer would tell a story about economic growth and everyone would agree that if you focus on growth good things will follow.
But that narrative has been dealt a pretty strong blow since the GFC, and the latest GDP figures released this week were a perfect example.
On first glance the figures suggest that the economy is doing very well – the quarterly growth of 1.1% is the second-best in four years. And yet the treasurer had to be careful not to appear too happy.
While the economy grew by 3% in nominal terms in the December quarter – the third-best quarterly growth in 28 years! – the amount of money going to employees actually fell by 0.5%.
How out of whack is that?
Since the ABS began measuring quarterly GDP figures in September 1959, nominal GDP has grown in a quarter by 3% or more 58 times, and not once in those 58 times has the total wages and salaries of employees also fallen.
That is, not until the December quarter of 2016.
Little wonder that Scott Morrison on Wednesday was quick to note that “we must continue to remember that our growth cannot be taken for granted and is not being experienced by all Australians in all parts of the country in the same way”.
Of course, hanging over this result was the decision by the Fair Work Commission to cut Sunday penalty rates.
The government – which is in favour of a reduction in penalty rates – would rather the decision had not been made the day after record low wages growth was announced and a week before it was found that the total amount of wages was falling at the same time that profits rose faster in one quarter than they have for 40 years.
Even if the increase in profits occurred after a four-year run of weak profit growth, it made for a tough sell.
But we should not believe that the disconnect between the big economic numbers and people’s lives has just arrived.
The latest OECD report on Australia, released on Friday, highlighted that inequality has been growing in Australia – even during the mining boom years.
While most coverage of the OECD’s report focussed on its warning about a housing market collapse, the report also warned of the danger of Australia’s increasing levels of inequality.
It noted that in the decade of the mining boom from 2004 to 2014 the income of the poorest quintile grew by just over 35% but the richest saw their income increase by 42%. In wealth terms the disparity is even greater. The wealth of the poorest quintile grew by less than 5%, while for the richest it surged nearly 40%.
The report noted that in Australia “inclusiveness has been eroded”. It found that inequality since 2004 “has been drifting up” and that “households in upper income brackets have benefited disproportionally from Australia’s long period of economic growth.”
When the economic tide is at flood level, that disproportion is easy to hide and is more likely to be forgiven – all boats appear to be rising. But when the tide goes out it is not hard to see those left in the mud.
It was one reason why the OECD recommended the government “avoid freezing welfare payouts as part of fiscal restraint so as to not compromise inclusiveness.”
But welfare is not the only issue – the wages of the poorest are also key.
Since 2004 the wages of those working in accommodation and food services have risen by the least of any industry – just 38% compared with the average of 48% for all workers. Those in retail faired little better – wages up by 41.5% in that period.
For the 2.1m workers in those industries – whether affected directly by the penalty rates decision or not (and all will be when new agreements are made that use the award rates as the benchmark) – there would be little joy to hear the economy in December grew faster than it has for four years.
And Scott Morrison acknowledged this on Wednesday when he noted that “as a government, we are extremely mindful of these differences”.
That mindfulness seemed mostly reflected in the government’s response to the Fair Work Commission.
Repeatedly in his press conference on Wednesday the treasurer refused to argue in favour of the case for cutting penalty rates, and yet tried to also suggest it would lead to greater employment.
On Wednesday his standard response was that “the view expressed by the Fair Work Commission in coming to their view is their view”.
By the end of the week the best the government could do was suggest that while the decision would help small business employ more people, the reduction should be phased in over two to five years.
It is clear the government will need to do better. It either has to embrace the decision or come up with an alternative.
But the problem for the government is the argument for reduced penalty rates is bound within the old narrative – focus on reducing labour costs and increasing competiveness in order to drive economic growth.
And yet this week we received a very clear demonstration that greater growth does not always translate to greater benefits for all workers.
It used to be so easy: the treasurer would tell a story about economic growth and everyone would agree that if you focus on growth good things will follow.
But that narrative has been dealt a pretty strong blow since the GFC, and the latest GDP figures released this week were a perfect example.
On first glance the figures suggest that the economy is doing very well – the quarterly growth of 1.1% is the second-best in four years. And yet the treasurer had to be careful not to appear too happy.
While the economy grew by 3% in nominal terms in the December quarter – the third-best quarterly growth in 28 years! – the amount of money going to employees actually fell by 0.5%.
How out of whack is that?
Since the ABS began measuring quarterly GDP figures in September 1959, nominal GDP has grown in a quarter by 3% or more 58 times, and not once in those 58 times has the total wages and salaries of employees also fallen.
That is, not until the December quarter of 2016.
Little wonder that Scott Morrison on Wednesday was quick to note that “we must continue to remember that our growth cannot be taken for granted and is not being experienced by all Australians in all parts of the country in the same way”.
Of course, hanging over this result was the decision by the Fair Work Commission to cut Sunday penalty rates.
The government – which is in favour of a reduction in penalty rates – would rather the decision had not been made the day after record low wages growth was announced and a week before it was found that the total amount of wages was falling at the same time that profits rose faster in one quarter than they have for 40 years.
Even if the increase in profits occurred after a four-year run of weak profit growth, it made for a tough sell.
But we should not believe that the disconnect between the big economic numbers and people’s lives has just arrived.
The latest OECD report on Australia, released on Friday, highlighted that inequality has been growing in Australia – even during the mining boom years.
While most coverage of the OECD’s report focussed on its warning about a housing market collapse, the report also warned of the danger of Australia’s increasing levels of inequality.
It noted that in the decade of the mining boom from 2004 to 2014 the income of the poorest quintile grew by just over 35% but the richest saw their income increase by 42%. In wealth terms the disparity is even greater. The wealth of the poorest quintile grew by less than 5%, while for the richest it surged nearly 40%.
The report noted that in Australia “inclusiveness has been eroded”. It found that inequality since 2004 “has been drifting up” and that “households in upper income brackets have benefited disproportionally from Australia’s long period of economic growth.”
When the economic tide is at flood level, that disproportion is easy to hide and is more likely to be forgiven – all boats appear to be rising. But when the tide goes out it is not hard to see those left in the mud.
It was one reason why the OECD recommended the government “avoid freezing welfare payouts as part of fiscal restraint so as to not compromise inclusiveness.”
But welfare is not the only issue – the wages of the poorest are also key.
Since 2004 the wages of those working in accommodation and food services have risen by the least of any industry – just 38% compared with the average of 48% for all workers. Those in retail faired little better – wages up by 41.5% in that period.
For the 2.1m workers in those industries – whether affected directly by the penalty rates decision or not (and all will be when new agreements are made that use the award rates as the benchmark) – there would be little joy to hear the economy in December grew faster than it has for four years.
And Scott Morrison acknowledged this on Wednesday when he noted that “as a government, we are extremely mindful of these differences”.
That mindfulness seemed mostly reflected in the government’s response to the Fair Work Commission.
Repeatedly in his press conference on Wednesday the treasurer refused to argue in favour of the case for cutting penalty rates, and yet tried to also suggest it would lead to greater employment.
On Wednesday his standard response was that “the view expressed by the Fair Work Commission in coming to their view is their view”.
By the end of the week the best the government could do was suggest that while the decision would help small business employ more people, the reduction should be phased in over two to five years.
It is clear the government will need to do better. It either has to embrace the decision or come up with an alternative.
But the problem for the government is the argument for reduced penalty rates is bound within the old narrative – focus on reducing labour costs and increasing competiveness in order to drive economic growth.
And yet this week we received a very clear demonstration that greater growth does not always translate to greater benefits for all workers.
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