You seriously have to wonder about how delusional both the Business Council and Scott Morrison are.
In response to data showing annual wages growth at the lowest level ever record, the Treasurer and the country’s most discredited and out-of-touch business lobby offered their view of what would fix this extended wages slump, which is undermining growth and tax revenue and eating away at our social and political fabric.
Their solution? A program of infrastructure investment, as recommended by the International Monetary Fund and the Reserve Bank? More investment in training young Australians to reduce our reliance on imported workers? No — tax cuts for multinationals.
Seriously.
Tax cuts for multinationals would lead to stronger growth, better corporate profits and therefore higher wages, Morrison said yesterday.
[Multinational winners and grinners emerge from budget mayhem]
As we’ve repeatedly pointed out, there isn’t a skerrick of evidence from the real world that this trickle-down rubbish is true. All advocates of lower company taxes have is modelling. If anything, the real world evidence is that corporate tax cuts lead to lower wages growth, lower investment and lower productivity. Canadian provinces in fact have been increasing company tax levels. We’ve repeatedly asked advocates of company tax cuts in a variety of fora to provide real-world evidence of their claims, and no one ever has.
Meanwhile Jennifer Westacott of the Business Council says Trump’s election proves we need to urgently cut multinational tax rates because he’s going to. Yes, Jennifer, that will help address the resentment, anger and economic fragility felt by voters — seeing the world’s biggest companies, some of which currently pay negligible levels of tax, get given a handout by conservative elites.
[Company profits soar, but taxes MIA]
Whatever impact low wages growth is having on the Australian electorate is set to continue. The data from the ABS yesterday showed annual wages growth at an all-time low of just 1.9%, with a rise of 0.4% in the September quarter, itself the smallest quarterly rise on record. Seeing the Consumer Price Index rose an annual 1.3% in the year to June, wages growth is still real, but inflation is starting to rise and could easily overtake wages growth in the next year to again push employee incomes lower in real terms.
Oddly enough, in the US, where those poor workers have been forced to embrace racism because of neoliberalism, wages rose by 3.9% over the year to October — the fastest rate of growth since November 2008.
[Trump: it wasn’t the economy, stupid — it was racism]
Compounding the problem here has been some significant revisions of data from the past year. Yesterday’s report reveals changes to the December and June quarter data: annual growth in the December 2015 quarter was originally 2.2%, but now it’s been revised down to 2.0%; in the June quarter, it was originally 2.0%, now revised down to 1.9%, the same as in the September quarter.
And the RBA doesn’t expect the situation to improve any time soon. In its most recent Statement On Monetary Policy, the RBA singled out low wages growth as something to watch: “Growth in the WPI is expected to remain low as it is anticipated that there will continue to be spare capacity in the labour market over the next few years. Indeed, liaison suggests that there is not strong ‘pent-up’ demand for larger wage increases, following below-average increases in recent years.”
That sentiment was backed up by today’s jobs data: in trend terms, the shift to part-time employment continues, only this time the growth in trend part-time jobs wasn’t enough to offset the fall in trend full-time jobs. That saw a trend fall in employment of 1000 people. Trend participation was also down again and, as the ABS pointed out, it’s fallen by 0.6 points over the last year — which undermines one of the success stories of the Joe Hockey period as treasurer, a pause in falling participation.
The ABS also noted that part-time employment is now at 32% of the workforce, compared to 29% a decade ago. That doesn’t seem like a large shift, but it reflects a significant trend underway within the employment market. The trend unemployment rate — which the ABS prefers given the problems with its seasonally adjusted series — remains at 5.6%, as did the seasonally adjusted rate.
Given the relative weakness and direction of jobs growth, don’t expect yesterday’s wages growth numbers to be the last bad ones. And certainly not if policymakers actually believe the trickle-down nonsense about company tax cuts.
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