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Economics Analysis

Coalition plans on track — corporate slice of the nation’s pie hits all-time high

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Cartoon by Paul Dorin / @DorinToons

The process of shifting wealth and income from the poor and middle to the rich continues apace. Alan Austin examines the latest national accounts.

FOR THE FIRST TIME since 1959, when Australia first published detailed national accounts, the share of all income going to corporations has risen above 30%. Simultaneously, the share for employees has fallen below 50% for the first time ever.

These are among several disastrous outcomes for Australian families revealed in last week’s national accounts published by the Australian Bureau of Statistics (ABS).

Poor getting poorer

The ABS measures “compensation to employees” which is the sum of salaries plus social security contributions from employers. This is shown as one component of Australia’s total income along with the other components — corporate profits, government operating surplus, housing stock and other minor items (ABS file 5206 table 7).

The share going to employees gradually increased from 1959 to 1972 as the nation prospered. It surged from 1973 to 1975, illustrating what economists know but the media refused to report — that the Whitlam years achieved remarkable reforms for working Australians.

For those workers, it has been downhill all the way since then (although defenders of the Hawke-Keating regime would observe that employees benefitted in that period with compensation other than salaries — including superannuation, price restraint, low inflation, affordable housing and the welfare safety net).

Trend over time

From the all-time high of 62.8% in the 1975 second quarter, the workers’ share has fluctuated greatly, but in a long-term downward drift. There was a brief shift in the imbalance back towards workers from 2010 until 2016. This followed significant reforms to the economy effected by Labor Treasurer Wayne Swan.

This was not to last. Changes to the settings made by successive Coalition treasurers saw the workers’ slice steadily nibbled away and handed to the corporations — including the big foreign controllers of the media and Australia’s vast minerals and agricultural exports.

The employees’ share tumbled to 49.4% in the June quarter this year, the lowest on record.

The corporate share reached a new all-time high of 31.4%, smashing the 30% barrier by a fair margin.

Decisions disadvantaging Australia’s workers

In the space of just five years, the slice of the national income pie going to workers has been cut by 5.2% — from 54.6% down to 49.4%.

Coalition decisions which achieved this shift of income and wealth from the poor and middle to the rich include:

  • reducing penalty rates;
  • keeping pensions and benefits far too low;
  • cutting wages in real terms;
  • refusing an adequate increase in the minimum wage;
  • income tax bracket creep;
  • abandoning the minerals resources rent tax;
  • adjusting the tax rates in favour of the rich;
  • refusing to collect taxes from corporations at the required rate; and
  • direct payment of subsidies to business.

Those hurt by this are not just Australia’s working families with diminished spending power, but shopkeepers whose turnover has fallen commensurately — with flow-on from retailers to wholesalers, importers, manufacturers, primary producers, transport and service providers. And then beyond.

Investment in housing and other productive assets is also adversely impacted.

Note, there is an argument that the shift in the income share in the June quarter could be a statistical blip arising from salaries being replaced with government benefits and JobKeeper payments propping up profits. We shall see in future national accounts whether this is so. But we note for now that the June outcomes are consistent with the four-year trend.

Workers complicit in their own impoverishment

Employees have enabled much of the deterioration in their incomes via weakened bargaining power with corporations and governments as a result of abandoning union membership. According to a 2018 parliamentary report, the union member share of all employees fell from 51% in 1976 to 14% in 2016.

Many employees actually voted for the Coalition in recent elections, against their own best interests. They are now reaping what they sowed.

Deep recession confirmed

The headline news, of course, from last week’s national accounts is that Australia is well and truly in recession, with the quarterly growth in gross domestic product (GDP) for the June quarter at negative 7%. Annual GDP growth is now negative 6.3%.

This is precisely what this column feared would happen with the Coalition in charge of the economy when the next global recession occurred. From the developed country with the strongest annual GDP growth through the last global recession, Australia is now among the also-rans.

Australia’s craven mass media

Throughout the last global recession, the mass media continually attacked Labor over its spending and the debt required to fund it. The fact that Australia was then leading the world on GDP annual growth — which never fell below 1.4% – was no excuse.

Today, the annual growth is at minus 6.3% — the lowest on record by a mile and nowhere near the best in the OECD.

So why are there no outraged editorials today?

Simple. Because the foreign-owned media which control the economic narrative want a majority of voters to believe the opposite of the truth about competent economic management.

Australians may well pay dearly for this for years to come.

Alan Austin’s defamation matter is nearly over. You can read an update HERE and help out by contributing to the crowd-funding campaign HERE. Alan Austin is an Independent Australia columnist and freelance journalist. You can follow him on Twitter @AlanAustin001

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