Sunday Sanity Break 17 June 2018 – Big Meeting + Australian (and global) wages
Henry and Mrs T have just arrived in Vienna. Clean, broad street, prosperous and with pleasant people. Our (young female) taxi driver was unhappy at massive numbers of immigrants who receive large welfare payments and do not work. From last October faces are not allowed to be covered in public but no-one knows what to do to those who fail to comply.
In my opinion in his post Kim press conference President Trump finally looked presidential. However, as Greg Sheridan has noted, duing and after his meetings with President Kim he effectively ‘threw his regional allies under the bus’. Only time will tell if Trump was conned by Kim, as previous American Presidents were, but subsequent material released in North Korea seem to promise official desire for economic prosperity.
Australian wage restraint
Jamie Smith in Sydney says ‘Australia is no lucky country for workers as pay stagnates’, and that ‘Central bank unnerved by weak wages growth as gig economy expands’.
His article starts: ‘Australia has created 1m jobs over five years and its economy is growing at a healthy 3.1 per cent a year, but for workers the “lucky country” has lost some of its shine. Wages growth is stuck near record lows and household debt is among the highest in the developed world’.
Here is a reason: ‘In Australia there is a sharpening focus on the changing structure of employment, particularly casualisation of the workforce. It has the third-largest share of part-time workers among the 34 OECD member countries, behind the Netherlands and Switzerland. Some economists warn this factor is undermining the bargaining power of workers’.
Henry’s own contribution to this debates digs into people’s psychology rather than facts, though the facts have of course created the psychological flavour. Over a year ago Henry wrote as follows: ‘As a minister in the Whitlam government said: 'One man's wage increase is another man's job', or words to that effect. The Hawke government accepted that logic and unions agreed. Jobs grew more quickly when the Howard government's labor market reforms were introduced but the Rudd-Gillard-Rudd governments knew better and reversed these reforms. Yet real people ('the punters' in political argot) are capable of understanding the messages of market experience and many have settled for low wage increases rather than risk becoming unemployed.’
Read on here, and wonder why the mighty RBA cannot see the key point, great caution by real workers who know just how fragile is the Australian labor market. Low wages growth is a global matter and in my view the ‘punters’ would rather have jobs than wage increases. Of course, how could men on large salaries, mighty pensions and safe jobs imagine the psychology of ordinary workers?
There is an equally important fact, due to the central bank and Treasury, who collude on national forecasts, have over-estimated wages for nearly a decade now. Over predicting wages means overestimating tax receipts and underestimating budget deficits. Meaning fiscal policy has been too easy, meaning Australia’s government debt is now over half a trillion dollars, and still rising.
Take care, gentle readers. RBA Chief has an important point to add to this argument, again quoted by Mr Smyth: ‘… the Reserve Bank of Australia … has warned that weak household income growth and high debt posed a risk to the economy. “The crisis is really in wage growth,” Philip Lowe, the RBA governor, cautioned last year as he implored workers to demand higher wages to stimulate the economy.’ Again I must disagree. The crisis is due to excess borrowing by households and will create a doozy of a recession before long.
Do not miss Fiona Prior’s review of Gurrumul’s movie, and do see the movie itself.
The sporting like
Caaarlton! Absolutely flogged by Freo, despite much hope for a gutsy effort at least. One of Henry’s son’s described their effort as ‘a disgrace’ and forces us to ask ‘what is the f**k is wrong?’
One the other hand, the Aussie futball team in Kazan showed great bravery and diligence in holding France to a 2-1 goal win. We await games against Denmark and Peru and must have a chance to progress.
Image of the week - Economists in confusion