Australia and the world are facing growing prospects of a nasty global slowdown with multiple signs of faltering growth and further stagnation over the last 24 hours — and yet more rotten wage growth data here.
Preliminary estimates revealed a shock 0.1% fall in German economic growth in the three months to June, and annual growth of 0.4%, down from 0.7% in the March quarter, as tensions triggered by Donald Trump’s trade war with China hit its export-heavy manufacturing sector (the mechanism by which concerns about the trade war end up harming growth and investment are well explained by Reserve Bank Deputy Governor Guy Debelle in a speech today). And key Chinese data slowed more sharply than expected: its industrial sector lifted output by 4.8% in July, down sharply from the 6.3% jump in June and the lowest monthly reading since 2002.
Collapsing bond yields are also signalling that a recession could be near for the US and Brexit-beleaguered UK economies, and lack of confidence in growth over coming quarters here. America’s 10-year Treasury yield dropped 1 basis point (0.01 percentage point) below that of the two-year, according to Tradeweb data — the first time this has occurred since the lead-up to the 2008-09 recession. Australian 10-year bonds — the key bond to watch — remained under the Reserve Bank’s 1% cash rate for another day yesterday at 0.94%, up from the record low of 0.93% on Tuesday.
Stock markets are taking fright as well. The S&P 500 index finished down 2.93% with energy stocks leading the declines, closely followed by financials. The tech-heavy Nasdaq lost just over 3% while the Dow lost more than 3% or over 800 points. The Australian market will start with a fall of around 2% after a 128 point slump on the overnight share price futures contract. The one bright spot: the Aussie dollar ended around $US0.675.
Investor concerns about growth here look entirely justified given yesterday brought further confirmation that the government’s policy of deliberate wage stagnation continues to be a huge success. According to Wednesday’s June quarter wage price index (WPI) numbers, wages growth is mired for yet another quarter at an annual growth rate of 2.3% in seasonally adjusted terms. Wages grew just 0.6% in the quarter, seasonally adjusted, with private sector wages performing even worse, at just 0.5%, while public sector wages grew 0.8%. That’s the third quarter in a row WPI growth has been at 2.3% annual growth and it means the budget forecast of 2.5% growth has also been missed — even after it was lowered.
To add to the sense of Groundhog Day, health and social care yet again provided what little growth there was. According to the Australian Bureau of Statistics (ABS), “the most significant contribution to wage growth this quarter came from the public sector component of the health care and social assistance industry, where a number of large increases were recorded in Victoria under a plan to ensure wage parity with other states”. If it weren’t for the Andrews government giving pay rises to public servants, growth nationally would have fallen to 2.2% or even 2.1%. It also means Victoria, at least, is complying with Reserve Bank Governor Philip Lowe’s call for governments to give higher wages to public servants in an effort to lift overall wages.
Just to continue the bad news, on Tuesday, NAB’s July monthly business survey — which the Reserve Bank looks closely at — showed little change in a tepid economy, with business conditions down and business confidence up a little but still below average. NAB’s chief economist Alan Oster noted “while there were some positive signs with a post-election lift in confidence, this bounce now looks to have been short lived with confidence also tracking at below average levels in the two months since the election”.
Retailing, in particular, is a black hole (NAB called a recession for the retail sector in its May survey). “Weakness in the retail industry continues to stand out, with conditions in that industry at recessionary levels — and declining further in the month. A worrying result, given we expected some boost to the industry following the post-election tax cuts.”
Yes, remember how those tax cuts were going to boost the economy, Rudd style? We’re still waiting.
Keep hammering chaps. But this government appears determined to cause a recession. Only then will most Australians wake up to the fact that they elected a bunch ideological idiots who could not organise a chook raffle, let alone ‘manage’ an economy.
So much for trump and scomos tax cuts lift the economy bullshit, down the gurgler thanks to these pair of economic fxxxkwits and the idiots that vote them in, at least I`ll be able to enjoy watching their voter base lose everything, wonder how they`ll manage to blame labor for that.
Don’t disagree with what you say, but it could have been worse. After sending several signals that our US-blinded government totally failed to see, the Chinese are now starting to apply the screws. Refusals to talk to the Australian PM at G20 meetings for two successive years, and Australian cargo ships waiting for long periods at Chinese ports are just the beginning. What is Plan B when the Chinese government suddenly stops key Australians exports from landing at all, as they recently did with US agriculture?
Is it some cosmic joke that both Drumpf & Mr Shouty are perfect examples of the dominant mindset of their populations?
It seems true that people get the governments they deserve but what about the rest of us?
Kick-start wages growth? Start with a large increase in the Minimum Wage by 5% a year for 5 years. Payable by business, which will be a novel experience for it.
Note it needs to be linked to an extra tax table calculated to avoid any extra tax, for those being paid at the minimum wage rate who are receiving Centrelink payments, are migrants with no recourse to public funds, or whose household expenditure (including on savings) is less than $60,000 a year (the bottom 40% of households). Otherwise those on low incomes would lose perhaps a third of it to tax increases and benefits cuts.
It would benefit millions, and our economy in billions. After all, we believe in rewarding little Aussie battlers, don’t we?
Recall how the Den of Thieves (CCI / AiG) said that corporate tax cuts would make them eager to spend on employees. Recall how hundreds of media articles told us that personal tax cuts would stimulate the economy. Let’s give them the opportunity.