The March quarter GDP figures look fairly good, however they disguise a large shift within the economic system away from staff and in direction of firms and earnings. A few weeks in the past when writing concerning the newest wage figures I famous that whereas the GDP figures have been helpful, the issue was “you may’t eat GDP”.
This has by no means been made extra clear than with the March quarter figures which confirmed robust development general, however a surprising consequence for employees.
The 0.8% development within the quarter was nicely above expectations and the annual development of three.4% is the kind you wish to see in a restoration:
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And but our makes an attempt to catch as much as the pre-pandemic pattern degree has faltered a bit. On the finish of final 12 months, annual GDP was 2% beneath the pre-pandemic pattern; now it's 1.7% beneath. At that price we are going to solely catch up round this time subsequent 12 months:
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As has been the case all through the pandemic and the restoration, the large driver of the economic system has been family spending, contributing 0.8 proportion factors to development within the March quarter. The buildup of inventories, which hopefully will now be purchased and used, additionally added a proportion level.
Authorities spending additionally helped the economic system, though a lot of the rise was because of flood help in New South Wales and Queensland and the continuing buy of speedy antigen assessments.
General, the home economic system grew fairly strongly, however we misplaced out on the commerce aspect of issues.
Within the first three months of this 12 months our consumption of imports rose 8.1%, whereas the quantity of our exports fell 0.9%. All up, web exports detracted 1.7 proportion factors from GDP.
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That's not too dangerous, given our purchasing imports means we're spending nicely. The issue, although, is that the price of the whole lot is rising.
The Australian Bureau of Statistics estimates that imports costs rose 19% previously 12 months whereas the price of dwelling building and alterations rose 11.4% – the quickest rise since 1989 aside from the introduction of the GST:
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So costs are going up, and going up quick.
However it's right here that we begin to get to who's benefiting from this, and why the truth that the economic system is rising so nicely disguises what is basically taking place.
Through the election marketing campaign, as Anthony Albanese mentioned he would help the Truthful Work Fee elevating the minimal wage by 5.1%, there was a number of very silly speak about a return to the hyperinflation of the Seventies or the Weimar Republic days.
These newest figures present an enormous actuality verify to such deceptive commentary.
Within the March quarter actual (non-farm) labour prices fell 2.3%. Exterior of the June 2002 quarter that was ravaged by the pandemic, that's the largest one quarter fall since 2016 and the second-worst fall for greater than 20 years.
Actual (non-farm) unit labour prices are actually 5.3% beneath the place they have been earlier than the pandemic:
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Certainly ideas that wages are driving inflation ought to a minimum of have some proof?
But when wages and general labour prices are happening in actual phrases, then how is the economic system rising?
To be trustworthy, we acquired the reply on Tuesday when the most recent Enterprise Indicator survey confirmed that earnings within the March quarter rose 10.2% whereas complete wages rose simply 1.8%.
The large cause is mining.
The large rise in mineral costs and the relative lack of must pay for additional employees within the export part has seen mining earnings explode:
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Up to now 12 months, mining earnings rose 48% whereas their wages invoice rose simply 11.7%
It has led to company earnings now accounting for a report 31.1% of nationwide earnings:
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Because the Bureau of Statistics put it, “Australian companies benefited from rising costs.” Australian employees? Not a lot.
We're nonetheless spending large. Family consumption was up 1.5% within the quarter, largely pushed by our renewed capability to eat out, journey and luxuriate in ourselves doing leisure and cultural actions. We additionally proceed to purchase garments, family furnishings and gear and automobiles in large numbers.
However whereas there was a powerful development in journey and consuming out, it stays nicely beneath pre-pandemic ranges:
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Largely the rise in spending was pushed by households lowering the extent of their financial savings – down from 13.4% of earnings to 10.1%.
The financial savings ratio is almost again at pre-pandemic ranges:
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This means that the beneficial properties from family spending through lowering their degree of financial savings is coming to an finish. It means for family consumption to continue to grow strongly, we are going to really need family earnings to continue to grow strongly.
However with rates of interest set to maintain rising, households’ capability to maintain spending will falter. And with worries of inflation on the forefront, the push to restrict wages development will rise.
And but as these figures present, companies have benefited from the rise in inflation; and except wages rise quicker than they presently are, the story of our economic system will proceed to be one the place employees get much less and fewer of their justifiable share.
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