Company reporting season begins this week with confidence sky high that record annual profits will be achieved. With these will come exciting news of higher executive salaries, well-earned performance bonuses and, of course, increased shareholder dividends.
These are already being hailed by the corporate media as proof that all is well with the world.
Meanwhile, data on Australia’s economy published in July confirms two things. First, that much of the increased income and wealth accruing to rich corporations and individuals is taken from the poor and the middle. And second, that this rate of transfer is accelerating.
Productivity
The only way all sectors can advance together is for productivity to advance apace. This happened in Australia from March 2011 onwards with 17 consecutive quarterly rises. This impressive streak came to a grinding halt in June 2015 after then-treasurer Joe Hockey’s second failed budget.
Since then, productivity has see-sawed, but now sits at just 102.1 points on the productivity index — below the levels of three years ago. Thus, the extraordinary income accruing to the big corporations must be coming from other sectors.
Household income
“Household gross disposable income” is a fair measure of the nation’s earnings, which goes to regular working people.
The latest Bureau of Statistics (ABS) quarterly figures (File 5232, table 35) show the amount families had to spend declined from $296.7 billion in January to just $278.6 billion in March for the country overall. That followed a significant fall the quarter before, from $299.0 billion.
Hence, the decline over six months was $20.4 billion, the largest dollar fall in history and the steepest percentage drop since the 2002 recession.
Disposable income is now $29,640 per household per year. That is below the $31,960 of just six months ago and well below the $31,650 at the end of 2013.
After four Coalition budgets, allowing for inflation, households are now earning about the same as in 2007.
Household savings
The total increase in savings for the 12 months to the end of March was just $57.94 billion, the lowest increase since 2008-09, when the global financial crisis (GFC) was starting to hurt.
Income reductions
The twice-yearly ME Bank household financial comfort report released this week showed 27% of households experienced decreased income in the six months to June. Another 40% reported their income remained the same and only 33% reported annual income increases. This dismal outcome was “one of the lowest on record”.
People unemployed
In June, 728,132 people were unemployed. This is the eighth consecutive month the total has been above 715,000. The last time that happened before the 2013 election was during the Asian financial meltdown in 1997.
Underemployment
Workers chasing more hours now number 1,129,146. That’s slightly down from the all-time high of 1,137,122 in February. It is well above the peak in the Labor years, during the GFC, both in raw numbers and as a percentage of the population.
Weekly hours per person
Last week’s figures for weekly hours worked in all jobs per employed person (File 6291, Table 10) show this has plummeted under the Coalition. The last 12 months of this series — the best measure of actual work the economy generates — have been the worst since it began.
The lowest through the Howard years, was 36.48 hours per person, per week. The Rudd/Gillard nadir was 36.00 — even through the GFC.
The June figure was 35.65. This makes four months in a row below 35.70.
New house approvals
So far this year, January to May, approvals have numbered just 87,145. That is 14.5% below the same period last year and 15.3% below 2015. This is despite abundant cheap labour, record low interest rates and a chronic housing shortage.
Global trade boom and profits surge accelerates
ABS trade figures for July confirm exporters are now enjoying huge revenues. Australia’s trade surplus — i.e. the difference between the value of exports and imports — was an impressive $2471 million in May. This makes seven consecutive healthy surpluses after a streak of 31 monthly deficits.
Commodity prices are surging. Iron ore is now above US$73, up from US$54 in mid June. Other commodities showing strong price upswings include thermal coal, aluminium, lead, tin, fine wool, beef, lamb and poultry.
National Australia Bank affirmed that “the lift in business conditions this month was largely driven by stronger trading conditions (sales) and profitability, while employment conditions were steady.”
Chief economist with AMP Capital, Shane Oliver, believes 2016-17 profits overall are likely to be up “around 18%, driven by a 135% gain in resources profits”.
Time to change direction
So it is pretty clear. While the rich are dining out, the poor and middle are getting significantly poorer. Virtually all indicators of the wellbeing of most Australians are stagnant or deteriorating.
We have looked here at wages, hours worked, underemployment, productivity, gross household income, household savings and new house starts. We could have examined pensions, long-term joblessness, youth unemployment, household debt, energy costs and other living costs.
There is no excuse for these to be below GFC levels in Australia — alone in the developed world — during this sustained global boom.
There is no rationale for the current economic program — of which allowing foreign corporations to avoid paying their share of tax is the centrepiece — to continue.
I am waiting (patiently). For the trickle – down effect . . .
Don’t eat the yellow snow…..
….the husky weewee.
When we peasants have less money to circulate in the economy corporations will eventually feel the effect. They will be forced to recognise reality.
Nah Zut . . . they’ve still got plenty of ‘cake.’
unregulated SPEND – SPEND-SPEND policy of Canberra & State governments [for this & that program of public servants thought bubbles, tacitly accepted by the pollies] requires TAX-TAX – TAX [or weasel word for taxes LEVY ] policies. That is compounded for extra charges on basics. What private enterprise could survive charging say $100 for a product and $200 service charges for delivery – that is what electricity , water , councils etc charge.
The reason why retail is dying and all other small enterprises is not from competition but the average person has no money to spend after essential services have misappropriated their wages.
The economy is in free fall purely due to Government – not due to commercial activity – so corporates are only the ones able to absorb this assault on commercial activity in society- but this only gains them time so this shows up in trends as increasing inequality- the real crunch is coming to all of us including corporates.
No wonder populations are restive -last revolution was against capitalism – this one will be against ‘governments’ –
“What private enterprise could survive charging say $100 for a product and $200 service charges for delivery – that is what electricity , water , councils etc charge.”
Electricity has been privatised in three states – NSW, Victoria and South Australia. NSW has recently privatised parts of the distribution network (I believe other parts had been sold off previously). SA and Victoria sold the lot years ago.
So private companies are, indeed, doing what you suggest.
Not entirely true, Wayne.
The poles and wires sold by the Victorian governments in the 1990s were bought by Alinta Gas Limited, now trading as Jemena, which is majority owned by the governments of China and Singapore.
So they are still government-owned. Just by governments of smarter countries.
Alan you make a startlingly good point: the Australian problem (no doubt shared with other neolib economies) is that we would rather foreigners enjoyed the benefit of our fortunate circumstances more than ourselves, then complain like buggery about them doing so! Think our minerals, rural and urban real estate, power, comms, anything else not bolted down…
I do try to make good points, Mike.
But startlingly good ..?
I’ll try not to let it happen again.
Agree with your substantive observations, Mike. Thanks.
Yes, and no Desmond. Electricity and Gas are now commercial enterprises and the large increases in costs are a direct result of that commercialisation. Haven’t you heard?
Water, well sort of, mostly under government controlled enterprises, but water rates are small beer except if you are a coal mine owner or other large corporate, in which case billions of litres of our water are given away for free.
But you’re right, the average consumer is being bled dry, from the banks and from our tax system, principally negative gearing/capital gains concessions which have left them hocked up to the eyeballs to buy a bleeding home, and due to trusts and other corporate tax avoidance.
To say that is about government spending is to completely misinterpret the lived experience of the average punter. Actually, it’s more a deliberate obfuscation.
Actually Electricity & gas are really pseudo commercial enterprises as the reason anyone or any corporation buys anything is to make a profit – but essential services is an essential DUTY of government which they not only have neglected but outsourced .
The monies received were wasted before they had received it and made no dent in the financial woes of the States
Increasing inequality without limit is the inevitable result of rewarding and allowing ownership and control by those who acquire wealth (goods, services and the bounty of nature) over and above what (usually nothing) they PERSONALLY create.
Way back in 1920, an academic historian called Richard Henry Tawney published full details of the above truth in an essay entitled “The Acquisitive Society” which is available as a short booklet for about $24 from Amazon. Tawney’s essay differs from the econowonk Marxist class war narrative in that it treats the question from the perspective of moral right and wrong.
that is the Tawney of “Religion and the rise of Capitalism” a book so perfectly written that it is almost unreadable. He took great pains in its construction of sentences and paragraphs that one has to read it in chunks to really appreciate its depth.
I agree I had a hard time reading it but it came “together” and made its point clearly as it progressed.
I just wish I could afford those Rosé coloured glasses that some people wear so as not to see the bleeding obvious.