Wednesday, August 14, 2019

A Downer Down-Under

Wages are stagnant. Wealth is falling. House prices are down. Consumers aren’t spending. Businesses aren’t investing. Interest rates are at record lows. Unemployment has stopped going down. The annual Hilda survey of household disposable incomes, released a fortnight ago, showed that Australians’ wealth and living standards had fallen slightly, in real terms, since 2009.

Australia has managed to avoid recession for a record-breaking 28 years, but this run of good fortune cannot continue indefinitely.

Jim Stanford, director of the Australia Institute’s Centre for Future Work says Australia has finally run out of luck. For close to 20 years the twin drivers of the economy have been the mining boom and a debt-fuelled housing boom, and both have predictably run their course. Stanford argues, “Australia has experienced the biggest deceleration in wages since 2013, of any major industrial country.” Stanford says, business simply lobbies for a friendlier environment through tax cuts and red tape removal and labour market deregulation – all trademark trickle-down economics, which has not paid off. “The business class has been content to sit back, watch the profits continue to roll in from investments that they’ve already made … but really not get out of bed to do their job,” he says. “It’s funny, with all this conversation about dole bludgers, the group in Australia that’s really been accustomed to getting money without working is the business community. Their profits are at near-record levels, and their investment effort has rarely been weaker. And yet all they can do is demand more government handouts.”

Melbourne University professor Mark Wooden, director of the Hilda survey, explains, There is this expectation, based on the past, that we should just get richer and richer and richer. I guess that’s based on some view that about technology driving huge productivity gains, etcetera. Well, it’s not so obvious to me, that that need be the case. We can’t continue to think each generation will be better than the previous one.”

The Commonwealth Bank chief economist, Michael Blythe, points out “We do have a large group of people who feel they are going backwards,” Blythe says, citing the well-known “elephant curve” which charts the real increase in income per adult globally and shows rising wealth in developing countries representing the bottom three-quarters of the world population, but no growth at all in the next quarter (the angry working and middle classes of developed countries) excepting a huge spike for the top 1%.

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