How can we take them seriously? - The AIM Network

How can we take them seriously?

March 6, 2015
Written by: John Kelly
6 Replies

The inter-generational report released yesterday
is no more than a crafted opportunity for those on the conservative
side of politics to scaremonger and justify their evil intent. They have
tailored a document to suit their own agenda. Just who do these pompous
pretenders think they are?

The report itself
tells us nothing we didn’t already know, or could not have suspected. It
paints a picture very similar to 2010 when I recall the media went into
hyper drive over the prospect of a BIG Australia. The fact is a larger
world population is inevitable which means our future will be no
different from those experienced in most OECD countries.

Each
nation faces increased health costs and aged care planning. Everything
will increase proportionately including revenues from greater work
participation, all of which will be serviced through innovation,
creativity, new technologies and so on. So what is all the fuss about?

To
suggest that those living in 2055 will somehow have a poorer standard
of living than we do today because we didn’t plan properly, is silly.
Each generation throughout history has enjoyed a better lifestyle than
the one before. Why would the next three generations be any different?
Each generation assumes responsibility for its own destiny and acts
accordingly.

One of the more interesting claims
is that there will be proportionately fewer numbers in the workforce,
thus putting pressure on our ability to provide adequate aged care for
older Australians. That trend has been occurring for decades and is the
product of families having fewer children.

To
compensate for that, it would seem logical to increase the immigration
intake with the emphasis on young families, effectively slowing down the
ratio of those employed to the ageing rate…oops, hang on, that’s what
successive governments have been doing, until now. But not this
government.

It chooses to continue increasing the
numbers of 457 visas for overseas workers, suppressing employment
opportunities for those out of work today and literally contradicting
itself and acting counter productively to its own findings.

It makes it very hard to take anything they say seriously.

While
we clearly need responsible planning to meet the challenges that occur
with what are quite natural demographic shifts, i.e. an ageing
population, that doesn’t mean we must run budget surpluses to achieve
it.

Budget surpluses merely alter the sectoral
balances; in this case, money withdrawn by government results in a
savings reduction and/or increased debt borne by the private domestic
sector.

If governments continue to try to run
budget surpluses to keep public debt low, that strategy will ensure
further deterioration in household savings until such time as aggregate
demand decreases to the point where economic activity slows down,
unemployment increases, revenues fall and real living standards decline.

If
this inter generational report highlights anything it is that this
government has no idea how to address it. Everything the report tells us
contradicts what the government is doing. In effect, we are undermining
our future prosperity and missing a wonderful opportunity to expand our
economy exponentially.

And still, not a word about the impact of climate change. What an incompetent bunch of boofheads.

The worst wages growth in 20 years is Joe Hockey's 'good news'

Greg Jericho

The treasurer ignores the fact that the 2.8% growth in average wages
he touted in question time is actually the third-worst annual growth
rate since 1994

**Wage rises below the inflation rate do not provide workers with ‘greater prosperity’. Photograph: Mick Tsikas/AAP**

Monday 2 March 2015 14.54 AEDT

Last modified on Monday 2 March 2015 16.57 AEDT

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Comments
145

Last Thursday, during question time,
Joe Hockey was asked to “outline how the government is building jobs,
growth and opportunity and how will this assist all Australians.”
Bizarrely, he chose to respond by suggesting “there has been more good
news today” in reference “average weekly earnings”, despite Australians’ earnings growing by less now than they have for more than 20 years.

In delivering the “good news” Hockey told parliament that “the
average wage in Australia has now increased to $76,800 a year. It
increased by 2.8% this year”. He noted this meant the average wage for
Australians “works out at $1,476.30 a week”.

Firstly, Hockey got a bit confused. The 2.8% growth referred to the
original data, while the $1,476.30 referred to the trend data – which
only grew by 2.7%. He was referring to full-time employment only, not
the average earnings of all workers – that is just $1,128.90 a week.

But what is worse is the treasurer’s suggestion that these growth figures were in any way “good news”.

They were, in fact, terrible.

The 2.8% growth (or 2.7%, to use the trend data) was the third-worst
annual growth going back to 1994. And the worst result occurred in the
12 months to May 2014 which saw just 2.4% growth:

And had Hockey referred to the average growth earnings for all
workers, rather than just full-time workers, he would have been boasting
about the “good news” of just 1.3% annual growth – the lowest growth
since August 1999.

But rather than note this poor performance, Hockey instead argued that “with the higher wages comes greater prosperity”.

Now certainly higher wages does as a rule mean greater prosperity –
for generally it will mean there is stronger jobs growth and greater
demand for workers and thus, all in all, a stronger economy.

But right now, by his own definition, Hockey is presiding over the
worst period of rising prosperity this century in over 20 years!

Moreover, the weekly earnings figures that he refers to don’t
actually measure “wages” but “average earnings”. If you work for $15 an
hour and this week you worked five more hours than last week, your
earnings will have risen, but your wage would not.

To look at actual wages growth, the best measure is the ABS’s wages price index – as this attempts to look at actual increases in wage rates rather than earnings which may be affected by hours worked.

The latest figures were also released last week. The annual growth of
2.5% was the lowest since the ABS began calculating the rate in 1998:

If strong wages growth is good news, then Hockey best keep quiet.

To give an idea of how weak wages growth is at the moment, since 1998
quarterly wages growth in trend terms has only been below 0.7% six
times; three of those six times have occurred in the past three
quarters; and five of them have occurred in the past seven:

What is also important when looking at wages is how fast they are
growing compared with inflation. If they are rising faster than
inflation then “real wages” are growing – because it means you are able
to buy more things with your wages than you could a year ago.

Right now real wages are barely growing above inflation and they have
grown by less than the 0.7% along term average since March 2013. This
is important because while Hockey was bizarrely gloating about strong
wages growth, in Senate estimates
last week, senators Abetz and Bernardi were equally bizarrely trying to
suggest that proposed wage rises to public servants – which are well
below inflation – are actually generous.

Public sector wages growth in the past year was 2.7% – the equal
lowest on record. The growth of wages for public servants in the ACT – a
good proxy for commonwealth public servants – was just 1.4%, the second
lowest 12-month period ever (the lowest was recorded three months ago).

During the estimates hearings, Abetz and Bernardi worked with the new
public service commissioner, John Lloyd, to come up with some truly
idiotic short-term logic to calculate inflation and low pay offers for
commonwealth public servants, such as the 3.16% over three years rise offered to those working in the Department of Defence, the 0.8% annual pay rise offered to those working for the Australian Taxation Office, or the mere 1.4% rise over three years offered to those working for Abetz’s own Department of Employment.

Lloyd, who was appointed to the post in December
and who previously worked as a director for the rightwing Institute of
Public Affairs, is not someone you would say unions see eye-to-eye with,
but it was still disappointing to see him go along with the idiocy on
low wages served up to him by senators Bernardi and Abetz last Monday.

Bernardi and Abetz suggested that because the Reserve Bank was
estimating inflation to June this year would grow by just 1.25%, the
government’s policy that no public servant would receive a pay rise over
the next three years of above 1.5% would in some cases see wage rises
that “at least matches inflation” or even “exceed inflation”.

Bernardi even argued that a pay rise of “around 2% or 2.5% would be
substantially in excess of inflation”. “It would,” he argued, “be twice
the inflation rate.”

To this Lloyd replied, “Yes, a 2% increase, of course, is well ahead of inflation, yes.”

The problem for Bernardi, Lloyd and Abetz is that they only bothered
to look forward to the rate of inflation three months to June – ignoring
that three years is rather longer than three months.

Yes, the RBA did indeed predict in its latest Statement on Monetary Policy that inflation in June 2015 would be 1.25%, but a three years wage agreement goes out to the end of 2017 at least.

Conveniently for us, if not for Bernardi, Lloyd and Abetz, the RBA also estimated inflation out to December 2017.

It estimated inflation for both 2016 and 2017 to be between 2.25% and
3.25% – for a mid-point of 2.75%, which means Bernardi’s assertion that
wage rises of “around 2% or 2.5% would be substantially in excess of
inflation” or “twice the inflation rate” is complete crap.

The only reason inflation is so low right now is because in the past
six months petrol prices have fallen around 10%, and because the current
inflation rate includes the fall in power prices due to the removal of
the carbon price in the September 2014 quarter. But after September
2015, that impact will be gone from the annual growth figures – and it
actually has no current impact on quarterly growth.

Most economists expect inflation over the next few years to be below
3%. But suggesting a rise in wages of 1.25% over the next three years
will be in line with inflation is to live in a fantasy world. For a
start, the RBA would not let inflation remain so low for so long as it
is well below its target band of 2%-3%.

Hockey may truly believe that wage rises are good news. If so, I hope
he does something about increasing the current pathetic wage growth. In
the first instance he could have a word with his cabinet colleague and
point out that no matter how much you spin it, wage rises below the
inflation rate do not provide workers with “greater prosperity”.

Thursday, 5 March 2015