The Australian economy is performing “modestly”, according to Treasury secretary Steven Kennedy. Meanwhile, federal Treasurer Josh Frydenberg has dismissed calls for additional stimulus spending and Reserve Bank of Australia (RBA) chief Philip Lowe predicts growth will return to “trend” (around 3% a year) over the next year.
So nothing to worry about, right?
JB Hi-Fi boss Richard Murray, whose company also owns The Good Guys white goods and home electrical store chain, indicated that “the jury was still out” on whether this year’s federal budget tax cuts and three RBA interest rate cuts would help raise flagging retail sales.
He has, however, hailed the intended tax cuts for the rich — those on $120,000-$200,000 incomes — over the next few years, which he said would flow through to taxpayers, according to the Sydney Morning Herald.
Murray said: “We all want minimum wage or low-income earners to benefit from tax cuts first, so that's terrific, but the second and third tax cuts go to mums and dads with private school fees and homes and mortgages.”
It would appear, though, that many of the “low-income earners” who received the tax cuts are using it to pay down debt, particularly on mortgages, rather than spending it. In fact, the relatively meagre savings of working people have been run down significantly.
Low wages and rising costs are forcing households to significantly draw down on money they may have put aside. According to Shane Wright, writing in the SMH: “In 2018–19, net household savings fell by $7.8 billion. Since 2014–15, the total fall in savings is now $46.4 billion, or more than 50%. Savings are now at their lowest level since 2006.”
Reinflating the housing bubble
Boosting hopes for a rise in spending by the wealthy is the expectation that record low interest rates will push up the price of housing.
ANZ bank predicts that the price of houses in Sydney and Melbourne will rise by 12–13% over the next year, quickly wiping out all of the falls in prices from 2017.
According to University of NSW professor of economics Richard Holden, writing for The Conversation: “This is predicted to lead to greater consumer spending, as a result of the so-called wealth effect, ‘the pseudo-psychological effect of existing home owners feeling wealthier when house prices go up’.”
While rising house prices and tax cuts for the rich may encourage some — particularly those who own multiple dwellings — to spend more, for many, household debt has never been higher.
In fact, Australia now has the second-highest level of household debt in the world, with more than one third of young people indicating that personal debt is a problem for them, according to the ABC.
Personal debt for those with a mortgage has more than doubled in the past 18 years to an average of $350,000.
Wage growth continues to flatline at not much more than inflation and the RBA does not expect that to improve any time soon. Its Forecast Table, accompanying its Statement on Monetary Policy from August, predicts that wage growth will continue to stagnate at about 2.3–2.4% a year, until at least the end of 2021.
Meanwhile, it predicts that inflation will begin to rise, up to 2.1% in December 2021, placing an additional squeeze on working people’s ability to make ends meet.
People are working well into their later years in response to declining wages, lower superannuation balances and the rise in the pension age from 65 to 67, according to the SMH.
The rise in the number of older workers has, over time, provided an overall boost to the participation rate (the percentage of people working or looking for work).
More people looking for work increases the “spare capacity” of the workforce. As competition for jobs rises, the pressure on bosses to raise wages falls.
Former federal treasurer Peter Costello, who now chairs the board of Nine Media, has called on the federal government to make “structural reforms” to the economy and help raise “productivity”.
Right on cue, Frydenburg told the SMH on October 20: “There is a synchronised slowdown taking place across the global economy and the main reason for that is the uncertainty that trade tensions have wrought, but also Brexit.
“That means it’s really important to continue to pursue structural reform.”
Lest there should be any doubt as to what kind of “structural reform” the government intends, Frydenburg was clear: “We’re talking about competition, infrastructure, deregulation, industrial relations, tax.”
The first step in the Coalition government’s campaign to bring in “structural reform” in terms of industrial relations (IR) is the so-called Ensuring Integrity Bill, which is aimed at weakening militant unions, particularly the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU).
Speaking about the government’s IR agenda, workplace relations minister Christian Porter said on September 19: “Workplaces in Australia will not be fair, high performing places that drive job growth and wages growth if they are not lawful places and if activities like those of the CFMMEU are allowed to go on and on and on unchallenged.”
Addressing an audience of bosses, Porter assured them that the Coalition government has been listening, saying he had received “representations” over many years concerning IR issues.
“There have been many recurring themes — complex awards, complex agreement requirements, delayed resolution of disputes, unpredictability of decisions, inconsistent levels of compliance, lack of flexibility, inconsistent meanings of casual employment, inconsistency in codes dealing with small business dismissals.
“The list is long enough to warrant serious attention.”
Porter’s rhetoric, alarming as it is, is almost indistinguishable from that of the former John Howard-led Coalition government, prior to its introduction of its anti-union WorkChoices legislation in 2006.
The intent of the government’s policy is clear.
The slowdown in the economy, stagnating wage growth and higher unemployment, mean a weakening of working people’s bargaining power and their ability to fight. Couple that with an attack on the most militant unions, and the opportunity for takebacks (of wages, conditions and working rights) is greater than the bosses and their mates in parliament can resist.
In 2007, a Coalition government was thrown out of office, in no small part owing to the organised resistance of working people against WorkChoices. In 2019, the threats facing working people, if anything, are even greater.
The challenge now is to resist and build a political alternative that will defend and extend working people’s rights into the future.