By Joe Montero
Some of the agencies that tell us how the Australian economy is going seem to be exhibiting a bit of honesty. The reason for saying this is that analysis and predictions are routinely conditioned by business needs. Institutions like banks and financial advisers, and others profiting from providing good news to their clients, have an incentive to mould their reports in this direction, Government agencies have their own incentive to take account of the political agenda of the government that that employs them.
On top of this, there is the orthodoxy of the existing dominant political theory that the role of government is to lift the morale of investors and let the market take care of the rest.
It’s telling when they start deviating from this path.
On Wednesday, the Australian Bureau of Statistics (ABS) said the unemployment will rise to 4.3 percent this year by the way it calculates the rate, and that there will be no turnaround soon. The Seek jobs agency reported its analysis shows that the number of jobs advertisements has fallen back to the pre-covid level. This indicates that the post lockdown rise in jobs was a temporary aberration, until the longer-term trend reasserted itself.
The longer-term trend in the unemployment rate continued on an uphill trajectory in 2023. It continues to do so today. note that the Roy Morgan rate is more accurate that of the ABS, because it counts those actually out of work, rather than just those registered as unemployed.
Inflationary pressures are on the rise. The exchange rate of the Australian dollar is falling. Property prices are falling a little in the big cities. Only the subsidisation of the market by the government is preventing a steeper fall.
In November last year the Reserve Bank stated that “growth in the Australian economy is expected to remain below trend over 2023 and 2024 as cost-of-living pressures and higher interest rates continue to weigh on demand. Hence, the outlook for growth has been revised up in the near term compared with the August Statement.”
The prediction was short lived. The tune has changed in February. The economy will “remain subdued in the near term,” it says. Interest rates didn’t rise after 13 successive hikes because of this. The purpose was to not dampen purchasing power when it is already low. Average Household debt now sits at 185 percent of income, and wages growth continues to stagnate. It’s now 119.3 percent of GDP and an average of $250,000 per household.
The reserve Bank has rewritten its expected wages growth for this year, down from 4.1 percent for last December’s quarter, to 3.2 percent for this year. Reserve Bank of Australia’s projections and shows that Australian real wages will be 3.5 percent below their 2019 level by 2026. The cost of living, loosely defined as what it costs for food, transportation, healthcare, transport, utilities, and taxes, is rising more steeply than expected.
Australia’s cost of living rose 9 percent last year to September and continues to grow this year. The sobering fact is that even according to this definition, real wages fell last year. for most it’s the cost of housing and food, the latter of which is now rising rapidly. All you have to do is go into a supermarket to see it. There are also other necessities that aren’t counted in the package. Their price is going up too.
All five LCIs rose in the December 2023 quarter
The Organisation for Economic Cooperation and Development has now revealed that Australia ranked the highest in the developed world in terms of the fall in standard of living. Using date from the ABS, it said the fall in household disposable income per capita till September last year was 6.1 percent.
The above graph shows the steady decline in Australia’s standard of living since 2021, where the performance became worse than the OECD average. The trend continues in 2024.
There remains a lot of talk about the falling inflation rate. The rising cost of living proves that this is overstated. Furthermore, the falling exchange rate of the Australia dollar means imports are more expensive. Prices for carbon and mineral exports are falling, and this means a significant inflationary pressure and fewer jobs at home. Greater instability in the global economy, especially through the impact of the United States and Europe, and Australia’s economy being welded to that of the United States are major factors.
There has been little real growth in the economy. The share of manufacturing remains at a poor 5.7 percent of the economy. A declining mining sector makes up 14.3 percent, education 12.8, construction 7.1, and finance 7.4. These are the Reserve Bank’s figures. They leave out that the largest part of the economy is now devoted to the creation of debt for the sake of creating debt as a form of profit, and this is connected to the shifting around of ownership of assets, rather than real economic growth.
In other words, finance has been severed from the real economy, where we produce and circulate those things we need to live. The centrepiece of this is in a global financial system dominated by the United States, and to some extent Europe, dependent on such a creation od debt and asset ownership shifts. Australia’s integration into this system and the specific forms it takes here are lies behind the present economic woes.
It doesn’t have to be this way.