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Profit-Price Spiral: The Truth Behind Australia’s Inflation
Workers in Australia have suffered considerable economic losses as a result of accelerating inflation since the onset of the COVID pandemic. Reaching a year-over-year rate of 7.8% by end-2022, inflation has rapidly eroded the real purchasing power of workers’ incomes; average wages are currently growing at less than half the pace of prices. Now, severe
Reserve Bank Review
This is the Australia Institute’s submission to the review into the functions and operations of the Reserve Bank of Australia (“the RBA”).
Polling – Wages and cost of living
The Australia Institute surveyed a nationally representative sample of 1,001 Australians about their views on wages and cost of living. The majority of Australians report that their wages have not kept up with the cost of living over the past 12 months. For two in three Australians (68%) their wages have either not grown at
Inflation: A Primer
Over the past year, inflation has accelerated both in Australia and in most advanced economies, to rates much faster than have been observed for many years. Not unsurprisingly, this has caused much concern among people whose cost of living has risen abruptly. It has also created great challenges for policy makers: the risks of tackling higher inflation are high, given that the conventional response is to reduce aggregate demand, economic activity, and employment in order to “cool off” spending and thus reduce price pressures. This can mean that the “cure” can be worse than the “disease” – especially if, as occurred in the 1980s and 1990s, a recession follows efforts to constrain inflation.
The roles of profits, wages and costs in driving inflation has been widely discussed in recent months. Claims by the Business Council of Australia that profit shares are at a 20-year low are not supported by official data sources.
An Economy That Works for People
The new Commonwealth government is hosting a major Jobs Summit in September 2022, bring together representatives from a range of stakeholder groups to discuss the challenges facing Australia’s labour market, and how to achieve strong employment, job quality and security, and better skills and training opportunities.
Are Wages or Profits Driving Australia’s Inflation?
Labour costs have played an insignificant role in the recent increase in inflation, accounting for just 15 percent of economy wide price increases while profits have played an overwhelming role, accounting for about 60 percent of recent inflation.
Wage price spiral or price wage spiral?
Firms like Woolworths would have still seen profit growth if they paid all of their workers a five percent pay rise and did not increase prices.
Wage growth played no significant role in the recent surge in inflation and, as the analysis shows, maintaining real wages across the entire economy as distinct from merely maintaining the minimum wage in real terms would have a trivial impact on the price level even if firms seek to recoup all of a nominal wage rise as further price increases.
Post-COVID-19 policy responses to climate change: beyond capitalism?
A sustainable social, political and environmental response to the “twin crises” of the COVID-19 pandemic and climate change will require policymaking beyond capitalism. Only by achieving a post-growth response to these crises can we meaningfully shape a future of jobs in renewable-powered industries shaped by organised labour, democratic values and public institutions. Anything less will merely create more markets and more technocratic fixes that reinforce the growing social and environmental inequalities that our current political system cannot overcome.
Tax cuts or spending: What is the most effective stimulus?
Bringing forward stage 2 of the tax cuts is ineffective stimulus. Up to 12 times as many jobs could be created if an equivalent amount of money was spent on labour intensive industries.
Needle in a Haystack
The latest economic statistics have confirmed that Australia’s economy is barely limping along – with quarterly GDP growth of just 0.4%. One of the weakest spots in the report was consumer spending, which recorded its weakest performance since December 2008 (amidst the worst days of the Global Financial Crisis). This was despite the supposed benefit of recent Commonwealth government tax cuts in boosting disposable income and stimulating more spending.
Analysis from Dr. Jim Stanford shows that the tax cut is in fact completely invisible in the macroeconomic data.
Tolerate Unemployment, but Blame the Unemployed
For the last generation macroeconomic policy in Australia has been based on the assumption that unemployment must be maintained at a certain minimum level in order to restrain wages and prevent an outbreak of accelerating inflation. Now, after six years of record-low wage growth – which weakened even further in the latest ABS wage statistics – it is time for that policy to be abandoned.
Wages, Taxes and the Budget: How to Genuinely Improve Living Standards
This week’s pre-election Commonwealth budget will feature reductions in personal income taxes, as the Coalition government tries to overcome a disadvantage in the polls in the coming federal election. Public debate in recent weeks has been focused on the economic and social hardship caused by the unprecedented slowdown since 2013 in Australian wage growth. It is likely that the government will portray its personal tax cuts as a form of “compensation” for slower wage growth.
Australia’s Economy Heads Into Election on a Weak Note
The ABS has released what is likely the last quarterly GDP report before a Commonwealth election expected in May. Coalition leaders were hoping a strong report would underline their standard talking points about being the best “economic managers.” But they were badly disappointed.
What’s a Million, Anyway?
In the lead-up to the 2013 federal election, then-Opposition Leader Tony Abbott made a high-profile pledge that a Coalition government, if elected, would create 1 million new jobs over the next five years. Abbott was elected (although later ousted by his own party), and total employment in Australia did indeed grow by over 1 million positions between 2013 and 2018. Current Prime Minister Scott Morrison hopes that this success can resuscitate his party’s flagging fortunes: he has pledged, if elected, to create even more jobs (1.25 million) over the next five years.
Four Views on Basic Income, Job Guarantees, and the Future of Work
The unprecedented insecurity of work in Australia’s economy – with the labour market buffeted by technology, globalisation, and new digital business models – has sparked big thinking about policies for addressing this insecurity and enhancing the incomes and well-being of working people. Two ideas which have generated much discussion and debate are proposals for a
Exploring the Decline in the Labour Share of GDP
The share of total economic output in Australia that is paid to workers (in the form of wages, salaries, and superannuation contributions) has been declining for decades. Workers produce more real output with each hour of labour (thanks to ongoing efficiency improvements and productivity growth), but growth in real wages has been much slower –
June GDP Numbers Confirm Lopsided Economy
This week the ABS released new GDP data, covering the June quarter, which confirm the continuing structural shift away labour toward capital in the distribution of income. We have prepared a short briefing note, contrasting the strong growth in corporate profits over the past year with the stagnation of labour incomes. Workers simply do not
Labour Share of Australian GDP Hits All-Time Record Low
Amidst increasing concerns among economists and budget forecasters about the historic stagnation of Australian wages, the latest GDP statistics from the Australian Bureau of Statistics have confirmed that the proportion of national economic output that is paid to workers has reached an all-time low.
Economic Management by PM
New report from the Centre for Future Work ranks Prime Ministerships by 10 key economic performance indicators.
Long overdue: The macroeconomic benefits of paid parental leave
In responding to the release of the recent Productivity Commission (PC) draft report into paid parental leave, Prime Minister Kevin Rudd stated: ‘This Australian Government believes the time has come to bite the bullet on this and we intend to do so’. He did not however commit to addressing the issue before the 2009 Federal
Avoiding Recessions and Australian Long-Term Unemployment
This paper examines the relationship between recessions and the size and duration of long-term unemployment. The results should leave us in no doubt that just a few poor years of economic growth have very significant medium-term implications for long-term unemployment.