Lowest Wage Growth On Record

Definitely worth a read:

Peter Martin: Reserve Bank's hands tied as wage growth hits new record low

Especially since this data is telling a very different story than what the Treasury is telling (which is basically "Nothing to see here, the economy is all fine and dandy. 'She'll be right, mate' type sentiments". This data tells otherwise. Check out the chart plotting annualised (adjusted) wage growth! That is rather glum.

On the upside, check out the end about the states seeing the highest % wage growth and it may surprise you. TAS and SA are reporting higher % wage-growth than other states for once!

 

Can you explain what the challenges are on juggling multiple objectives and the reluctance to reduce interest rates? Between pushing house prices higher vs spurring business activity for wages growth, surely one of these takes priority over the other.

 

In another blow to wages the Fairwork Commission has today declared that Sunday penalty rates will be reduced starting from July.
http://www.adelaidenow.com.au/busin...n/news-story/a4aad17a380a8a2281cecf3ad3cbd4d3

 

Yep, a long record, a whole 19 years.

Can someone remind me how long it is since we have had a recession.

 

According to former Reserve Bank Governor Ian Macfarlane: The recession started in the September quarter of 1990 and lasted until the September quarter of 1991​

Early 1990s recession in Australia - Wikipedia

It felt a lot longer than that to me.

Interestingly, the recession was preceded by high interest rates, high inflation and low wage growth. This time around we have record low interest rates, low inflation and low wage growth.

 

The argument for not lowering rates is that recent attempts at using lower rates to boost business haven't worked. The concept is that lower rates means lower borrowing costs for businesses, and households have more money to spend on goods and services.

What seems to have happened is that households have instead spent more money on buying houses, and the barriers to business are economic uncertainty, not cost of doing it. Renewable energy is a great example, with more than $1bn in projects underway since Turnbull committed to a renewable energy target and gave some certainty to the industry. So all a further rate cut would do is exacerbate the situation of house prices without addressing the core barriers to business.

A rate cut also lowers the value of the AUD. Given our primary exports are very profitable at the moment (iron ore nearing $100USD/tonne and coking coal at $300) and we are seeing good tourism demand, there is no need to sell ourselves short on a lower exchange rate. Some may argue that we are better off upping rates while things are good, as futures markets are expecting falls for these resorces. We are better off saving our rate-cutting ammo for then.

 

Thanks @JL1 . It's clearer with that explanation. I don't envy the guys who pull the interest rate levers given all the complexity of it all. What books, sites blogs would you recommend to get a better grasp of Aussie economics?

 

@Zoolander Aussie economics is a mix of western schools of economic thought so if you're keen on learning, its best to read up on the theory. Each school advocates a slightly different role for government, and will watch different economic indicators (eg. Austrian school is very concerned about inflation and advocates a minimal role for government, but Keynsians are more concerned with "full employment" and the government's role in jobs growth). Ultimately there is no "right and wrong".

I prefer books and Economics: The User's Guide I can't recommend enough. Probably the best written book for an introduction to the subject covering off all major schools of thought and advocates an impartial view, which is rare.

 

After 50 odd years the Fair Work Commission handed down a major reform knocking out the ridiculous (for some) penalty rates which applies to retail, fast food, hospitality and pharmacy industries. Sunday rates are now only a 50% surcharge not 100% ie Time & a half vs Double Time.

Will this lead to more cafes opening on Sundays or Public Holidays? We will wait and see.

 

Wow! Or maybe price drops on the menu? Maybe I'll be able to afford smashed avo on rye now!?

 

Neoclassical economics theory is what appears to be the order of the day for how the AU economy is currently performing/behaving.

I think a flat or negative wage growth, coupled with inflation on essential items will be what throws us into a technical recession.

I say inflation on 'essentials' - what does this mean?

Well, has anyone noticed that prices for things you DON'T really need (or at least, things you buy very infrequently such as: movie tickets, cruises, fancy shoes/clothes, TV's, playstations etc., amd critically: NON-fresh grocery foods referring specifically to your boxed sugary/salty junk foods and freezer meals - you know... the crap that fills the first 6 pages of the coles/woolworths weekly catalogues) has been relatively flatlined for years? Or at best, perhaps a nominal CPI increase each year.

But at the same time, everyday essentials such as fresh food (specifically, fruits vegetables meats seafood grains/rice etc.), health/car insurance policies, fuel, medical costs (the cost after health insurance/medicare kickbacks) etc.; these have all been jukping in price and inflated well ahead of the 1-2% CPI and average annual wage growth rates?

To me that is very telling.

 

If the demand is there... there are many times where I wished my favorite cafe open on Sunday but I think this is due to the choice of the owner (as other cafes are open).

Even post office is now open on Sunday... I personally think it's better to have some public services open on Sunday instead of one of the weekday.

 

Maybe i should be going to your local cinema, last time I took my girlfriend I almost had to refinance my home loan by the time I'd covered off two tickets and popcorn

 

Monetary policies have not had the effect bankers hope for. That's why they talk about the need for fiscal reform.

 

Inevitably this will lead to other industries/occupations having their penalty rates reduced in the future- aged care, nurses, paramedics, factory workers etc, which isn't necessarily a bad thing!

 

What the unions haven't said is that they had a while ago, they had already signed new EBAs with the major retailers and foodies that traded off a small increase in the hourly rate for full/part timers for the same loss of penalty rates. This now brings mum and dad outlets on par with the majors.