Company reporting season begins this week with confidence sky high that record annual profits will be achieved. With these will come exciting news of higher executive salaries, well-earned performance bonuses and, of course, increased shareholder dividends.
These are already being hailed by the corporate media as proof that all is well with the world.
Meanwhile, data on Australia’s economy published in July confirms two things. First, that much of the increased income and wealth accruing to rich corporations and individuals is taken from the poor and the middle. And second, that this rate of transfer is accelerating.
The only way all sectors can advance together is for productivity to advance apace. This happened in Australia from March 2011 onwards with 17 consecutive quarterly rises. This impressive streak came to a grinding halt in June 2015 after then-treasurer Joe Hockey’s second failed budget.
Since then, productivity has see-sawed, but now sits at just 102.1 points on the productivity index — below the levels of three years ago. Thus, the extraordinary income accruing to the big corporations must be coming from other sectors.
“Household gross disposable income” is a fair measure of the nation’s earnings, which goes to regular working people.
The latest Bureau of Statistics (ABS) quarterly figures (File 5232, table 35) show the amount families had to spend declined from $296.7 billion in January to just $278.6 billion in March for the country overall. That followed a significant fall the quarter before, from $299.0 billion.
Hence, the decline over six months was $20.4 billion, the largest dollar fall in history and the steepest percentage drop since the 2002 recession.
Disposable income is now $29,640 per household per year. That is below the $31,960 of just six months ago and well below the $31,650 at the end of 2013.
After four Coalition budgets, allowing for inflation, households are now earning about the same as in 2007.
The total increase in savings for the 12 months to the end of March was just $57.94 billion, the lowest increase since 2008-09, when the global financial crisis (GFC) was starting to hurt.
The twice-yearly ME Bank household financial comfort report released this week showed 27% of households experienced decreased income in the six months to June. Another 40% reported their income remained the same and only 33% reported annual income increases. This dismal outcome was “one of the lowest on record”.
In June, 728,132 people were unemployed. This is the eighth consecutive month the total has been above 715,000. The last time that happened before the 2013 election was during the Asian financial meltdown in 1997.
Workers chasing more hours now number 1,129,146. That’s slightly down from the all-time high of 1,137,122 in February. It is well above the peak in the Labor years, during the GFC, both in raw numbers and as a percentage of the population.
Weekly hours per person
Last week’s figures for weekly hours worked in all jobs per employed person (File 6291, Table 10) show this has plummeted under the Coalition. The last 12 months of this series — the best measure of actual work the economy generates — have been the worst since it began.
The lowest through the Howard years, was 36.48 hours per person, per week. The Rudd/Gillard nadir was 36.00 — even through the GFC.
The June figure was 35.65. This makes four months in a row below 35.70.
New house approvals
So far this year, January to May, approvals have numbered just 87,145. That is 14.5% below the same period last year and 15.3% below 2015. This is despite abundant cheap labour, record low interest rates and a chronic housing shortage.
Global trade boom and profits surge accelerates
ABS trade figures for July confirm exporters are now enjoying huge revenues. Australia’s trade surplus — i.e. the difference between the value of exports and imports — was an impressive $2471 million in May. This makes seven consecutive healthy surpluses after a streak of 31 monthly deficits.
Commodity prices are surging. Iron ore is now above US$73, up from US$54 in mid June. Other commodities showing strong price upswings include thermal coal, aluminium, lead, tin, fine wool, beef, lamb and poultry.
National Australia Bank affirmed that “the lift in business conditions this month was largely driven by stronger trading conditions (sales) and profitability, while employment conditions were steady.”
Chief economist with AMP Capital, Shane Oliver, believes 2016-17 profits overall are likely to be up “around 18%, driven by a 135% gain in resources profits”.
Time to change direction
So it is pretty clear. While the rich are dining out, the poor and middle are getting significantly poorer. Virtually all indicators of the wellbeing of most Australians are stagnant or deteriorating.
We have looked here at wages, hours worked, underemployment, productivity, gross household income, household savings and new house starts. We could have examined pensions, long-term joblessness, youth unemployment, household debt, energy costs and other living costs.
There is no excuse for these to be below GFC levels in Australia — alone in the developed world — during this sustained global boom.
There is no rationale for the current economic program — of which allowing foreign corporations to avoid paying their share of tax is the centrepiece — to continue.