I doubt Malcolm Turnbull or Scott Morrison, the supposed standout, go-to man for the Liberals, would understand the significance of the latest Wage Price Index. But here is the truth of it.
Australians are poorer today, in income terms than we were at the beginning of 2014. This has happened on the present government’s watch and their existing policies will ensure it gets worse.
The growth in the Wage Price Index released last week shows growth at the lowest on record with real wages having barely moved over the past year. They remain well below productivity growth, meaning the average worker’s share of the national income has fallen and company profits have risen.
Malcolm Turnbull and Scott Morrison keep telling us that our economy is in transition. But this is nothing more than code for: we have no idea where we are headed!
Currently, the labour market is bogged down with low employment growth, flat working hours and an underutilisation rate of 14.6 per cent excluding the suppressed participation rate which accounts for at least another 2 per cent.
Real GDP growth remains well below its trend rate (before the GFC) and is being propped up by the on-going government deficits. Australia is in an income recession evidenced by a fall of 1.1% in real net disposable income over the year to December 2015, nationally.
Private household debt has been increasing now for the last twenty years; the product of a credit explosion that rose from an historically steady 40-45% of net disposable income in 1996 to a peak in the September-quarter 2006 of 152% of disposable income, aggravated by the much heralded surplus years of the Howard administration.
The economic stimulus provided by the Rudd government in 2008 created a plateau for a few years but from 2012 it has been on the rise again.
Australian households are currently carrying record levels of debt, mostly mortgage related, currently at 186% of disposable income and interest payments on that debt at 8.7 % of disposable income.
This means that the Reserve Bank would, if it were to raise rates, trigger an avalanche of personal insolvencies that would not only further reduce non-government spending, it would be the catalyst for the mother of all recessions, if not depression.
Since the March-quarter of 2005, the divergence between real growth in output, that is, income that is generated by the economy, and real net national disposable income, has been getting wider and wider.
Which means that while the economy was pumping out mining exports at increasing volumes, Australian households were going backwards in real income terms. Only the extremely wealthy were receiving the benefits.
At this point, the balance sheet of the households holding the debt becomes very precarious and rising unemployment coupled with falling economic growth threatens major debt delinquencies.
The fall in real income has declined in line with the collapse of the mining contribution to real output growth. It has been exacerbated with declining export prices which have, in turn, had a devastating impact over the last 12 months in Australia’s current account (trade) and contributed to the flat wages result.
In other words, our capacity to purchase imports has fallen and Australian workers are not sharing in productivity growth. It means that Australians overall are poorer even though we are still producing more than we were a year ago.
It is against this morbid background that Malcolm Turnbull is trying to convince voters that he, his treasurer, Scott Morrison and a cabal of equally incompetent dreamers, or outright liars, should be returned to government on July 2nd.
Their ignorance of, or their unwillingness to address, the one necessary action to arrest this alarming situation, i.e. a major spending boost, is the most obvious reason they should not be returned to office.
If they are returned, we will be the ones to suffer their foolishness. Waiting for the economy to return to normal, as if this is some sort of normal cyclical process, will in time, prove to be a false analysis.
We are not transitioning to anything more than the road to continued decline.
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