While the world is enjoying the current economic recovery, Australians are losing jobs, wages, wealth and income. Economics correspondent Alan Austin updates the gross mismanagement.
ONLY IN Malcolm Turnbull’s Australia. Just bizarre! Business indicators are all highly positive — commodity prices, revenue, profits, confidence, exports. Outcomes for the majority of Australians, however, are terrible. But worse is yet to come.
Here is why. The global economic cycle is now in the phase of strong growth with buoyant local and international trade. Most developed countries are now in budget surplus or reducing their deficits, repaying debt incurred during the recent global financial crisis (GFC) and building infrastructure.
The big corporations are generating increased profits, retiring their debt, expanding their operations, employing more people and paying higher dividends.
Workers in those countries are enjoying more paid work, rising wages and a higher standard of living. Welfare recipients are now having lost benefits restored following some years of hardship.
That is what is happening in most well-managed developed countries.
But in Australia, by contrast, the big corporations are exporting vast volumes of Australia’s resources and profits are at all-time record highs. But the benefits are going straight offshore.
First to the positive news. Here are the facts.
Record profits
Mining profits in the first quarter of this year were a record $29,966 million, up 113%, from the first quarter last year. That’s according to Monday’s Bureau of Statistics (ABS) report on company profits (Table 11).
Finance and insurance first quarter profits were up 170% from the same period last year to the highest in six years. Manufacturing profits in the 2017 first quarter were also the highest in six years. Profits in rental, hiring and real estate services and in transport, postal and warehousing were both best ever.
Total profits – the critical figure – was a thumping $82,628 million, an all-time high, fully $23,496 million – or 39.7% – above the same quarter last year.
tEconomics: #Australia Company Gross Profits QoQ at 6.0% https://t.co/Yv0VWoJTmM pic.twitter.com/WyWEA4BRMF
— Value's Vector (@pulpmarkets) June 5, 2017
Strong trade surpluses
ABS trade figures confirm Australia’s exporters are now selling huge volumes at high prices. Yesterday’s trade balance – the difference between the value of exports and imports – was a sound $555 million. This makes six consecutive monthly surpluses, after a streak of 31 monthly trade deficits. Those six surpluses include the four highest ever.
Economic growth
Australia is no longer the world leader – as it was from 2008 to 2013 – but the quarterly growth in gross domestic product remains positive, as does annual growth.
Now to the problems the Government has made for itself.
Government waste
Federal spending is on track to reach $441.1 billion by year end, up 20.1% on Labor’s 2012-13 outlays of $367.2 billion. Strange. They said they would curb it.
Gross debt deeper
The Office of Financial Management’s figures last Friday showed total gross debt at a record $495.7 billion. The Coalition has now added $225.8 billion in just three-and-a-half years. Odd. They said they would not just reduce the debt, but eliminate it.
Rate of debt increase
Gross borrowings in May were $7.49 billion, bringing the total new debt so far this financial year to $76.9 billion. That’s a monthly average of $6.99 billion. The monthly increase through Labor’s last 11 months was $1.89 billion.
Scott Morrison pointing the way to a $725 billion debt ceiling. A frightening prospect. pic.twitter.com/R0r7XMAgUw
— David Jones (@davidjo555) May 10, 2017
Interest on government debt
Labor paid $8,285 million in net interest in its last financial year, 2012-13. The Coalition will pay $15,984 million this year — an increase of 93%. That’s $43.8 million each day. Every day. Most goes to foreigners.
Infrastructure
Building and engineering construction declined again in the March quarter. That makes 12 declines in the last 14 quarters — the worst result in Australia’s history. They said they would boost that too.
Now to the problems the Government has created for its citizens.
People unemployed
In April, 732,282 people were unemployed. For six months now the total has been at or above 725,000. The last time that happened before the Coalition was elected was in 1997.
Hours worked per adult per month
This indicator – the best measure of real paid work – dropped in April to 83.80, the worst since February 1994. The lowest in the entire Howard period was 84.33 hours per adult per month. The lowest during the Rudd/Gillard period was 85.71.
Underemployment
Workers needing to work more hours are now at a record 1,114,558 workers. That’s up from 7.8% of the labour force when the Coalition took office to an all-time high 8.7%.
Wages
For the last two quarters, annual wages growth has been just 1.9%. This is the lowest since records have been kept, and below the 2.1% inflation rate.
Australia: forecasts of wage growth .. SMP via ABS RBA pic.twitter.com/q27tVgvziy
— redball (@redball2) May 31, 2017
New house approvals
So far this year, January to April, approvals have numbered just 70,432. That is 13.5% below the same period last year and 13.7% below 2015. This is despite a housing shortage, plentiful cheap labour and record low interest rates.
Worse to come
So how is this possible when corporate Australia is booming? Why are workers losing hours, pay and conditions? Why are welfare benefits still being cut? Why no funds for infrastructure? And why is debt still deepening?
The answer is in the monthly accounts under income tax revenue. This shows company tax collections this year at around $68,700 million. That is 5.7% higher than last year’s $65,000. Yet company profits are 39.7% higher!
If company tax were 39.7% higher than last year, instead of 5.7%, the tax office would collect an extra $22.1 billion. Plus another $11 billion or so in fringe benefits tax, superannuation tax and excise and duty. There’s most of the deficit right there.
With its failure to curb rampant tax evasion, the Government is helping the corporations send most of the benefits straight offshore — to tax havens, and in dividends paid to foreign investors.
The tragedy for Australia is that the Turnbull Government announced even further cuts in taxes for big business in its May budget. Even greater harm lies ahead.
You can follow Alan Austin on Twitter @AlanAustin001.
The great profit boom of 2017 is on. Companies now making huge earnings. Time to ask them nicely to pay tax. Please. https://t.co/j8JisaZS0d
— Alan Austin (@alanaustin001) April 7, 2017
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
Monthly Donation
Single Donation
Labor’s gross debt now doubled. Read it here. The Coalition and the media don't want you to know this has happened. https://t.co/CB2VkojnpF
— Alan Austin (@alanaustin001) March 26, 2017
Behind the spin. Subscribe to IA for just $5.
