How quickly the sunny days of recovery can turn cloudy — ominous, even.
The prime minister is now assuring us we’re going to dodge a recession that as of last week no one had even thought was possible. This morning Josh Frydenberg suggested that growth and employment will take a hit in the current quarter thanks to Sydney, Melbourne and Adelaide being in lockdown. We shouldn’t forget that we saw a bigger than expected 1.8% slide in retail sales in June, thanks to the earlier Victorian lockdown and the lockdown that started in NSW near the end of the month. That will have a small impact on growth in the June quarter too.
We’re seeing layoffs and reduced hours in retail, with shoe retailer Accent Group telling staff it had used up the $9.6 million in old JobKeeper funds that enabled it to keep staffing levels steady during the previous lockdowns and clamps. Qantas is in the middle of 6000 layoffs as well. And now the extended uncertainty of, in particular, lockdown in Sydney where the first three weeks of Gladys Berejiklian’s patented lockdown-lite had little impact on reducing numbers.
New support payments from the federal government might tide people over but don’t prevent them losing their jobs — the kind of unmooring of workers that JobKeeper was designed, rightly, to prevent. The long queues outside Centrelink offices in Sydney reflect that we’re in a different world compared to 2020.
Economists agree there’ll be no recession, but this quarter will be bad. On Tuesday (before the South Australian lockdown) Westpac forecast a 0.7% fall for the three months to September, but a 2.6% rebound in the December quarter — though that’s assuming NSW and Victoria emerge quickly. Yesterday AMP Chief Economist Shane Oliver also changed his forecast from a flat reading (which was already a downgrade) for this quarter to a slide of 0.7%.
But the real story is that these new lockdowns will end Reserve Bank hopes to boost wages and make it harder to lift inflation by 2024.
This week’s minutes from the bank’s July monetary policy meeting hint at desperation about the prospect of wages growth.
Information from the Bank’s liaison program suggested that firms were not expecting to make up for the period of wage freezes earlier in the pandemic. Further, the outlook for public sector wages, and rates of wages growth featuring in new enterprise bargaining agreements, suggested aggregate wage outcomes were unlikely to increase materially beyond pre-pandemic rates in coming quarters.
That’s because, as governor Philip Lowe has explained, businesses are still obsessed with preventing wage rises to keep costs down even as labour markets tighten. That’s why Oliver now forecasts the RBA will delay policy moves planned for later in the year. He still anticipates “the first rate hike to come in 2023 albeit it may now be later in the year rather than at the start of the year”.
Then there’s the issue of migration. Big business is still clamouring for borders to be reopened so that they can use foreign labour to offset pressure to pay Australians more. The call from Commonwealth Bank chair Catherine Livingstone (we missed the memo about how the Commonwealth Bank gets to lecture anyone about anything since the royal commission) to set a timeline for re-opening borders is all about ensuring worried businesses they can hold off paying Australians higher wages — especially in industries where foreign workers can be easily exploited.
With that sort of mentality, Lowe’s ambition for wage rises to exceed the stagnation of the pre-pandemic period looks forlorn.
Covid lockdowns have given us a peek under the hood of Australia’s economic engine, and what we discover is an underclass of foreign workers being used to maximise profits and suppress wage growth, universities that can’t function without their foreign student cash-cows, and the bulk of new money coming from digging up stuff, loading it into ships and selling it to…for the most part…a nation that doesn’t really like us anymore.
To right things, businesses and the current mob in power will just try to re-establish all the short-sighted, bad old ways so we can get on with pretending our economic model is first world and world class, but we’ve already seen how ragged and primitive it is, how it’s all gloss on the surface, like a really sick patient that’s had a top rate make-up artist working on him – while in reality, the slightest cold will knock him off the perch. It’s pretty apparent how fragile, how unsustainable, and how short-sighted our country’s economic set-up.
Covid and Climate change are the twin crushing pincers forcing us to a crossroads which will, in all likelihood, decide whether we’re going to make it on this planet. There will be two clear paths, the way of the neo-con who refuses to accept that their way has had its time, or the other which will require a paradigm shift in how we think about what makes a life a good and happy life, one that is sustainable in the long term, and doesn’t require so much frantic consumption, looking for that ultimate buzz.
It absolutely can be done, I think the first lockdown gave us a glimpse into the scale of changes that can be made, if large chunks of the world decide they are all going to do it together.
“It’s pretty apparent how fragile, how unsustainable, and how short-sighted our country’s economic set-up IS.”
Forgot the “is”
🙂
Well if you make everyone stay home for a year, stop kids going to school, shut down tourism and hospitality sectors and close factories, it has an effect. What did we think would happen? Nothing?
We have a Government that says that our economy is fundamentally strong. Yet it is largely a ponzi real estate scheme X dig it up and ship it out X cash mining economy. It is not strong nor resilient and we have a Government that is ideologically opposed to undertaking the actions needed to make it so.
Perhaps the new government funded think tank gifted a member of a prominent liberal family will help them to embrace an idea or two.
Totally agree Glenn. Options include abundant renewables, green manufacturing, green steel, locally made batteries exported to the world, an electric car industry.
But that would require a smart country, rather than a lucky country.
“[..] all about ensuring worried businesses they can hold off paying Australians higher wages — especially in industries where foreign workers can be easily exploited.”
This is a perfect summation of why all that rhetoric about Australia being the land of the “fair go” is just nonsense. There’s no real political will to even pretend that we’re an egalitarian society anymore…
Australia possibly to experience a dystopian 2022, bought to you by our premiers who will drink from the public trough now and for the rest of their lives.
Can’t wait for those olympics in 11 years.
The more undeserving federal cabinet members have a much bigger trough.
“But the real story is that these new lockdowns will end Reserve Bank hopes to boost wages and make it harder to lift inflation by 2024.”
So the RBA wants to see a boost in wages which has flow on effect causing greater inflation so interest rates can be increased which result in all sorts of problems including unemployment and increased mortgage payments?
The conservative’s worldwide practice wage and income suppression, it`s in their DNA and is what destroyed the middle classes in the U.S and Britain under Thatcher and Reagan and is doing the same in Australia.