Australia is at last sharing in the extraordinary, worldwide trade and company profits boom. At least, Australia’s big corporations are. Monday’s figures from the Australian Bureau of Statistics show gross operating profits for the full financial year to June reached all-time records in several sectors.
The winners are companies in:
- finance and insurance;
- electricity, gas, water and waste;
- professional, scientific and technical services;
- manufacturing; and
- administrative and support services.
The laggards include:
- accommodation and food;
- information media and telecommunications; and
- arts and recreation.
Mining profits for the full financial year were up an impressive 59.8% over last year to $101.2 billion. That’s a new all-time record, beating the previous best — back in 2011 — by nearly $8.5 billion.
Financial and insurance services
Full-year profits were $5.9 billion, up a staggering 46.9% on last year. What makes this extraordinary is that 2015-16 was up 17.6% on 2014-15, and that year leapt by 21.3% above 2013-14. So, in three years, gross profits have risen 109.6%.
This sector continues its recent recovery with profits up a satisfactory 9.9% to $30.1 billion in the year to June. Although that quantum is below levels achieved from 2005 to 2011, this is the fourth consecutive annual rise, and the strongest.
Sectors still struggling
As is expected when jobs, wages, salaries and pensions are depressed, accommodation and food companies are doing it tough, with profits down 10.9% to just $5.9 billion. This is the second annual decline in a row.
Similarly, arts and recreation profits declined for the second year, this time by 5.0% to $4.0 billion.
Retail and wholesale both experienced small profit rises, but well below inflation and population increases. Construction profits increased just 3.1%, also below rises in population and inflation.
Company profits overall
Gross profits for all sectors combined — which is the main game — reached a new record $304.9 billion. That is up an impressive 21.9% on 2015-16, the highest annual percentage increase since 2002, when the economy was recovering from the early 2000s global recession.
There was a small decline in the June quarter from the May quarter. But with May being an all-time high by a huge margin, this was expected.
Clearly, Australia’s national wealth and income are increasing rapidly, as is happening across the developed world. This is evident in the record streak of trade balances, the value of the sharemarket, tourist arrivals, the inexorable growth in gross domestic product — a world-record 26 years — and, now, booming company profits.
All these — together with the results in company annual reports — confirm that the big corporations are raking it in and executives are dining out.
The tragedy for Australia is that, simultaneously, other indicators show that the majority of the community are missing out badly on a fair share of the rapidly expanding economic pie.
Record-low wage rises
Last month’s ABS wages data show wage growth jammed at 1.9%, the lowest rate ever recorded. As a proportion of Australia’s total income — gross domestic product — wages are now the lowest since records began in 1959.
In July, 730,600 people were unemployed. This makes two monthly increases in a row and is the ninth consecutive month the total has been at or above 710,000. The last time that happened before the Coalition was elected in 2013 was in 1997.
Monthly hours worked per adult
This is the best measure of jobs any economy generates, as it takes into account full-time work, part-time work and population shifts.
In July, this tumbled to 85.04. This brings to 15 the number of months below 85.10 during the 22 months since PM Malcolm Turnbull installed the current ministry. The lowest this reached through the Labor period was 85.7.
What needs to happen?
Clearly the rich are getting richer while workers and welfare beneficiaries are falling behind. The budget deficit is stuck in the high thirty billions, government debt keeps rising, infrastructure spending has declined for three years in a row — for the first time ever — and there are inadequate funds for urgently needed services.
The critical area the government and its key economic departments must now examine, in light of Monday’s profits data, is company tax paid by the booming corporations.
If collections are anywhere near the nominal rate payable under Australian law, there should be funds aplenty for all current fiscal and social challenges.