We’ve come a long way from gotcha questions about economic indices during the election campaign. Treasurer Jim Chalmers has the press gallery eating out of his hand ahead of tomorrow’s budget. Even The Australian has run a puff piece on him.
Every leaked number has been lapped up, every narrative readily accepted. Especially the dominant narrative that things are far worse economically and fiscally than the previous government said.
The Charter of Budget Honesty and the Pre-election Economic and Fiscal Outlook was supposed to end this hackneyed bit of political theatre, but Chalmers and Finance Minister Katy Gallagher have kept it going successfully — helped by the fact that, in succeeding the most corrupt government in federal history, they had a budget riddled with garbage spending. If you’re flogging a political narrative, it helps if it’s true, though it’s no necessity.
The sillier narrative is that this is genuine budget, rather than a glorified Mid-Year Economic and Fiscal Outlook (MYEFO). The purpose of the MYEFO is to provide a reality check on economic and fiscal forecasts made well before the start of the relevant financial year. In this case, the forecasts back in April by the Morrison government were wildly optimistic in some areas and wildly pessimistic in others.
The revenue forecasts were deliberately downplayed despite what was already apparent at the time: that the invasion of Ukraine was going to inject a huge shot of tax revenue from coal companies. As it’s turned out, the spike in energy prices has been so massive that even Australia’s worst tax avoiders, gas companies, have been forced to pay some.
But the economic forecasts were already too optimistic on budget night and have only proven more so since then: inflation has surged, interest rates have soared and economic growth, under the hammer of much higher interest rates and a likely global recession, is looking parlous. Thus the “we’ll all be rooned” tenor of Chalmers’ commentary.
Oddly, the area where things have deteriorated worst of all has received relatively sparse coverage: real wages are in freefall courtesy of higher inflation and the continuing absence of wages growth — despite the insistence from the Reserve Bank that pay rises are just around the corner (the RBA, proudly predicting a wage surge since 2014!).
Yesterday a gormless subeditor at the ABC claimed “Treasurer Jim Chalmers reveals workers’ pay will go backwards until 2024-25”. There was no revelation — it’s been obvious for many months that dramatically higher inflation was going to see real wages go even further backwards well into next year and beyond.
Wages growth has been stuck at 0.7% since late 2021. The only reason it might rise off that in the September quarter is the Fair Work Commission’s minimum wage increase, due to mostly kick in in July. The RBA, hilariously, thinks wages growth will be 3.4% in annual terms by June next year. If we accept that, it still means that real wages will fall by 2.35% in a single year if Chalmers’ inflation forecast is accurate. That’s on top of the 3.5% real wages fall in 2021-22.
So your average household will have lost more than $1 in $20 between July last year and June next year. With more to come in 2023-24 and beyond. Even under the most optimistic of scenarios — wages growth of 4% and inflation back within the target band of 2%-3%, it will take ordinary households the rest of the decade to get real wages back to where they were early last year.
That’s before we get to increased mortgage payments, of course. And before you take into account low-income earners have consistently had lower wages growth than the rest of us.
Strange that none of this is reported with anything like the breathless enthusiasm that attaches to other leaked numbers from the “budget”. It’s almost as if — stay with us here, this is pretty wild — the media have some sort of in-built resistance to seeing how badly workers have been dudded for the last decade.
And inflation will get worse, courtesy of the widespread flooding currently ravaging communities. It’s something we need to get used to; having cooked the planet, we’ll have to get used to much more extreme weather.
The 7% to 8% inflation we’ll endure for the rest of this year isn’t as bad as in the UK or the US, but the wrecking of real wages along with higher mortgage payments at some point is going to be expressed in spending. No wonder Chalmers has — per today’s leaked number — significantly revised down growth next year.
At that point, the penny might drop in Australia’s business sector, which has been enjoying the goldilocks environment of low wages growth and high inflation (which provides a cover to lift prices beyond what’s necessary), that smashing household incomes in the name of increasing profits comes with some downside. If we enter a recession, that downside might be considerable.
How is your household feeling the economic pinch? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
A couple of points:
(1) I am staggered that nobody seems to have a decent crack at the RBA.
Journalists seem to just accept their forecasts without hard questioning. In my memory almost every forecast the RBA puts out, they end up being proven wrong, and not just by a little bit, but often by huge margins.
(2) At times like these there are only one set of winners – Big Businesses.
And that is most definitely the case at the moment, with low wages not keeping up with inflation, coupled with higher and higher profits.
(3) When is a Government of any stripe actually going to bring Big Corporations, like Fossil fuel Industry companies, and other large Corporates, to account by paying their fair share of Taxation, instead of offshoring profits and dodgy write offs.
Remember how cutting weekend/public holidays rates was going to increase employment. They told us this for years until they finally got their way.
And now many of those industries that cut “penalty” rates and locked down menial wages are struggling to fill shifts. Strange coincidence?
But not for long! Ta da! Immigration to the rescue!
Ain’t it grand? Don’t it make you proud? Don’t it make you feel all warm and fuzzy as you wag your little flag on Australia Day?
Good to see a damn good component of utterly cynical comments… the new government richly deserving the serving! Best govt corporates could buy! TINA rules. There Is No Alternative.
And the response to this from a “labor” government?
Import hundreds and thousands of low wage earners right into the teeth of a recession-under the guise of a “skills shortage”.
That’ll help with wages.
Long as the oligarchy over at the BCA and big property are happy right?
And here we all were thinking we’d voted for change.
FMD.
Co-signed Robert Reynolds!
Yes disappointing the lack of risk-taking innovation. Maybe getting through the 1st term is seen by the cautious Albo as the priority? With Dutton as leader of LNP and so patently hopeless, now would be a good time as any to do things like adjust / revisit the stupid tax cuts.
As Sean Kelly wrote in today’s Nine rags, Albanese and Chalmers are building credibility for the shocks to come.
Not with me! And only a rusted on ALP tragic would be…
Fall for the ‘nativist libertarian trap’ blaming ‘immigrants’ for ‘taking our jerbs’ yet our working age has passed the ‘demographic sweet spot’.
Maybe we should be looking at how employees can be better supported with improved award conditions, and compliance?
Not ‘taking our jerbs’ so much as being an easily exploitable resource to add extra downward pressure on wages.
Really, evidence vs. myth?
Myth? Ha! You’d really have to be gullible to ignore the repeated evidence of the folk that migrate to do farm picking every year (apart from pandemics) for a measly income. That’s just one bit.
Evidence, there isn’t any? It’s an old eugenics based myth or trope used by industry, right wing conservatives, their media and the 1-10% to keep native workers submissive; immigrant and local employees have shared interests i.e. what’s good for one group is good for the other.
Don’t they do an amazing imitation of the full regressive neoliberal! I’m almost disappointed that they NEVER seem to get a cheer from the LNP droogs. When will they be satisfied with the replacement neo-Liberal Party?
Why wouldn’t the Coalition media lap-dogs be lapping up the latest Chalmers’ morsels – they wouldn’t want to be reminding us how they were selling the previous government’s economic policies without question, would they?
….. Funny watching Tinkerbell Taylor on Insiders yesterday trying to land a glove…. even with Spivsy leading him.
I though it was almost comical when Taylor as strongly suggesting that Chalmers had inherited a great balanced budget from the Coalition.
Who would believe anything to do with numbers that Taylor puts out, remembering the Clover Moore incident.
His head’s always stuck in Jamland – lying beside those colonic irrigation channels…..
Clover is destroyed by glyphosate.
Don’t tell the Terrorgraph that, it’s been trying to kill off the Lord Mayor of Sydney for 18 years.
Well, Bernard and Glenn’s analysis certainly provides a ‘dose of reality’ that we cannot expect from the mainstream media. I suspect that it will not go down too well with the fantasists in the Crikey Labor Club either.
A few weeks ago, I wondered just how much ‘leaking’ would be associated with this budget. It seems that Chalmers et.al. are following the ‘time-honored’ tradition (for the last few decades at least), of making carefully chosen information available to the public before budget night.
As I have said before and will continue to say, the only reason that this Albanese ‘Labor’ Government looks so good, is because its predecessor was so disastrously bad. As they say, “It’s all relative”.
Hoping for progress is probably less frustrating than expecting miracles Robert.
‘Progress’ under a ‘Labor’ government proceeds at a pace that would cause a geriatric snail to incur a fine for speeding!
I learned decades ago Fairmind, that “hoping for progress” under a ‘Labor’ government is an exercise in utter futility. It is the epitome of a forlorn hope.
Agree totally Robert. Anthony has tended to “do a Starmer” far too much for my liking!
Inflation is one of those things that allows businesses to ask workers to go backwards while framing it as an increase.
“No it’s a pay cut because when I agreed to the previous pay rate money was worth more than it is now” is true but not what management wants to hear as feedback during an annual review.
Not the companies problem I’m afraid. Agreement was reached in good faith.
Not really sure what your afraid of there. Are you one of the people who acts like you’re doing a favour by asking employees to take a pay cut in real terms?