It’s almost enough to make you believe in conspiracies.
During the campaign for the recent federal election the Coalition promised “more jobs in a stronger economy”. Economic growth would continue, wage growth would increase and living standards would improve.
Even the “independent” Reserve Bank of Australia (RBA) chimed in nicely, keeping interest rates on hold at 1.5%, where they have been since August 2016. The expectation of a rate cut among economists was thwarted.
No sooner has the Coalition been safely returned to government and the cracks began to appear. Suddenly, all the talk is about interest rate cuts.
The RBA has dramatically reduced its expectation for economic growth in Australia for the 2018–19 financial year to 1.7% from its November prediction of 3.25%. The 0.25% interest rate cut in June is expected to be a prelude to more cuts later in the year, with the aim of stimulating economic growth, fuelled by cheaper credit.
At least the monthly repayment of mortgages is likely to decrease a little bit, providing some relief for working people seeking to buy their own home.
However, further decreasing interest rates, combined with renewed confidence for real estate speculators and with the threat of Labor’s proposed crimping of the capital gains tax discount and negative gearing evaporating, will force up house prices. This will make things harder for first-time buyers, forcing them to stump up for increasingly higher loans, just to get into the market.
A further indication of economic headwinds came when the so-called Fair Work Commission (FWC) issued its minimum wage decision on May 30. It increased the minimum wage by 3% to $19.49 an hour from July 1.
The increase in the minimum wage was barely half that sought by the Australian Council of Trade Unions (ACTU) for the lowest paid 2.2 million workers. Nevertheless, the ACTU described the FWC decision as “a step in the right direction”, while noting that the increase was “not enough to establish a living wage and falls well short of the union submission for $43 [a week]”.
Last year, the FWC awarded minimum wage workers a 3.5% increase. In 2017, the increase was 3.3%. Even the Reserve Bank governor called for 3.5% increase in the minimum wage, in February.
The Australian Industry Group, a peak body for industry across Australia, welcomed the lower increase in the minimum wage and claimed the FWC had accepted their submission that any increase should be lower than previous years because of the slowing economy.
Nevertheless, the paltry increase in the minimum wage will ensure low-paid workers remain in poverty.
In its submission to the FWC the Australian Council of Social Service (ACOSS) noted the minimum wage “has only increased in real terms by an average of 0.7% per annum over the past decade ... Over the long-term, the [minimum wage] has fallen when compared with the median fulltime wage (from 61% of fulltime median weekly earnings in 1996 to 49% in 2018), leaving minimum wage-earners and their families to fall behind community living standards.”
In yet another slug to low-paid workers, penalty rates for working on Sundays are due to be cut (again) from July 1 for a range of workers. Hospitality workers, pharmacy staff, fast food workers and retail workers will all have their Sunday penalty rates cut. For retail and pharmacy workers, the cuts continue into 2020.
It’s not just low-paid workers who are feeling the pinch. For the majority of workers, wages have been stagnating.
Wages growth of 2.3% last year is only two-thirds of the growth in the period before the election of the Coalition in 2013, according to ABC News. Casualisation — one in four workers is now employed casually — contract based work and outsourcing are significant causes of wage stagnation.
At least there is a promise of a $1080 rebate at tax time for workers earning more than $48,000 and less than $90,000 a year, as foreshadowed in the federal budget. However, with the new parliament not sitting until July, it is unclear when workers will receive these rebates.
And what if the economy should slow further, increasing unemployment, with wage growth continuing to stagnate?
“Any major slowdown in the economy would reduce tax collections and increase government spending on unemployment benefits, either stopping the budget returning to surplus or soon putting it back into deficit,” wrote Ross Gittens in the Sydney Morning Herald. The government’s response will determine what happens next.
Either the Coalition will abandon its promise of increasing budget surpluses and increase government spending — on infrastructure for instance — to stimulate the economy, or it will double down on its commitment to a surplus, necessitating spending cuts.
Should the government renew its commitment to delivering budget surpluses, its only choice may be to increase austerity, as many economies did following the 2008 Global Financial Crisis. In Britain, for instance, an estimated £30 billion has been cut from welfare payments, housing subsidies and social services by the Tories since 2010, according to the New York Times. The cuts have had a devastating impact on British society, exacerbating poverty and radically increasing reliance on food charities among the poor.
The threats to working people are mounting. Meanwhile profits are surging. In the 12 months to last December, profits increased by 9.6%, according to the Guardian Australia. Plenty for the few is predicated on shortage for the many.
While the mainstream media is blaming Labor’s election loss on its rhetorical attacks on the “top end of town”, the evidence shows that Labor was right. Working people are being forced to pay too high a price for surging corporate profits and a promised budget surplus. After all, our lives are worth more than their profits.
Unfortunately, with the return of a Coalition government, it will only get worse.