My Blog

Tag: Economics

  • Inflation is soaring and real wages are plummeting

    The biggest concerns about the figures are that inflation is rising fastest for items that are non-discretionary, which means people are unable to avoid paying them – things like food, energy bills, transport costs, and health costs. As Labour market and fiscal policy Director, Greg Jericho, notes in his Guardian Australia column low-middle income earners have to spend a greater share of their income on these items than the average, which means they are hurt hardest.

    The inflation figures also show that while house prices are still rising strongly, the rising interest rates are now starting to truly have an impact on rents. Rental prices across every capital city rose by more than 1% in the September quarter – the first time that has happened since 2007.

    But the real damage of inflation is seen in relation to wage growth. The Reserve Bank estimates that wages in the 12 months to September will have grown just 2.85%. This means people’s ability to buy things with their wages has fallen over 4% in the past year. This is a massive drop in real wages and unfortunately, it is expected to continue at least until the middle to end of next year.

    Right now real wages are back where they were 12 years ago. It is a damning indictment of the Industrial Relations system that has been designed to keep wages down. The Government today has introduced the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 which seeks to provide workers with greater power to bargain for better wages. Given the latest figures, it is clear how urgently the changes are needed.

    The post Inflation is soaring and real wages are plummeting appeared first on The Australia Institute's Centre for Future Work.

  • The October 2022-23 Commonwealth Budget

    In this review of the budget, our team of Centre for Future Work researchers evaluates the budget’s assumptions and policy measures, from the perspective of workers and labour markets. The budget marks a clear change of emphasis from budgets over the previous decade: including explicit recognition of the need to strengthen wage growth, new funding for vital care sectors, and important investments in diversifying Australia’s industrial base.

    However, the budget also acknowledges the downside risk of a slowing world economy, which could engulf Australia in another recession — just three years after entering the COVID pandemic. Stronger fiscal measures and income supports will be required if the economy does enter a downturn. And deep problems such as falling real wages, entrenched poverty, and gender inequality will require stronger measures than are included in this first budget. Meanwhile, crucial fiscal decisions (including the regressive Stage 3 tax cuts for high-income Australians) have been deferred for a later date.

    In sum, the budget marks a good start on addressing many of Australia’s key economic, social, and environmental challenges. But much more will be needed – and the risking of looming recession will complicate this progress considerably.

    The post The October 2022-23 Commonwealth Budget: A Good Start… But Rocky Times Ahead appeared first on The Australia Institute's Centre for Future Work.

  • Job Opening: Carmichael Distinguished Research Fellow

    Applications are due at 11:59 pm 21 November 2022. The Melbourne-based position will start in January. Please see job description and application details below. Come and join our team!

    *   *   *   *   *

    The Carmichael Centre is a project housed within the Centre for Future Work at the Australia Institute, to acknowledge the legacy of former union leader Laurie Carmichael. Laurie passed away in 2018 after a lifetime of outstanding service and innovative leadership to the trade union and social justice movements in Australia. His legacy touches on numerous themes that remain relevant and pressing today, including:

    • The importance of active industrial policy to develop Australia’s value-added industries.
    • The importance of skills and vocational education to a strong economy and labour market.
    • The importance of strong union education programs to the development of an effective and vibrant cadre of union leaders and activists.
    • The importance of shorter working hours and superannuation to the quality of life of working people.
    • The importance of actively integrating economic, labour market and social policies, in a multi-dimensional plan for achieving full economic and social equality.
    • The importance of peace and resistance to war.

    The Carmichael Centre is established to:

    • Increase public awareness of Laurie Carmichael’s life, achievements, and ideas.
    • Undertake and publish new research into themes relevant to Laurie’s legacy (including trade unionism, vocational education, and labour and social policy).
    • Contribute to modern efforts to educate trade unionists in political-economy and related subjects.
    • Celebrate the achievements of the union movement and inspire emerging leaders.

    To that end, the Carmichael Centre hosts a 3-year research and public education position, the Laurie Carmichael Distinguished Research Fellow, awarded to a mid-career or senior researcher in labour and industrial relations, political-economy, or a related field.

    The Fellow will undertake and publish new research, and undertake other educational and commentary activities, consistent with the themes and progressive vision expressed by Laurie Carmichael, and the goals of the Centre.

    The Fellow will be employed by the Australia Institute, and would work from our office in Melbourne.

    Compensation for the position will be consistent with experience of the successful candidate (and will include superannuation contributions and related employment expenses).

    Prospective candidates for the Fellow must demonstrate the following attributes:

    • Proven record of high-quality research and publication in fields relevant to the Carmichael Centre’s goals.
    • Demonstrated history of commitment to and engagement in the trade union movement.
    • Capacity and willingness to engage in the range of activities (including research, education, public commentary, and public events) that will be required of the role.

    Applicants are invited for the Carmichael Fellow. Applications must include a cover letter describing the applicant’s interest and experience in trade unionism and the themes relevant to the Carmichael Centre; a full resume (listing relevant experience and publications); and 2 letters of reference.

    Applications should be submitted electronically by 11:59 pm AEDT on Monday 21 November, 2022, to:

    recruitment@australiainstitute.org.au

    Only applicants selected for an interview will be contacted. Online interviews will be held in early December. The successful candidate will commence work in January, 2023.

    Thank you for your interest in the Carmichael Centre!

    The post Job Opening: Carmichael Distinguished Research Fellow appeared first on The Australia Institute's Centre for Future Work.

  • The Reserve Bank needs to acknowledge the failures of the inflation target

    One clear example of the bias of a low-inflation target is the stagnant growth of real household income per capita during the years prior to the pandemic when inflation growth was below the Reserve Bank’s target rate of 2%.

    For a record 33 straight months from September 2016 through May 2019 while real household incomes flatlined, the Reserve Bank kept the cash rate stable at 1.5% despite throughout all this period inflation was below 2%.

    And yet as soon as inflation goes above the target ceiling of 3% the Reserve Bank seeks to increase interest rates quickly to reduce economic activity and also wages growth, even though wages lag well behind inflation.

    “As the Federal Government undertakes its review of the RBA’s mandate and operations, these broad political-economic dimensions of monetary policy must be considered carefully,” said Dr Greg Jericho, Labour Market and Fiscal Policy Director at the Centre for Future Work.

    “There is no evidence at all that a tight labour market, rising wages, or labour costs more generally have anything to do with the surge in inflation since the COVID pandemic. To the contrary, the evidence is clear that wages have had a dampening impact on inflation in this period.

    “The Reserve Bank and the Federal Government need to take a more careful, balanced look at the nature, causes, and consequences of the upsurge in inflation since the pandemic, before leaping to conclusions that are unjustified – and imposing policy responses that do more harm than good.

    “Since the end of 2019 real wages have fallen 3.1% and are expected to fall even further. The inability of wages to keep up with inflation has seen real wages fall back to 2012 levels. This highlights how the real victims of rising inflation have been workers, and the last thing they should be asked to do is suffer even more in the interests of pursuing an arbitrary inflation target.”

    The post The Reserve Bank needs to acknowledge the failures of the inflation target appeared first on The Australia Institute's Centre for Future Work.

  • Families change but the same problems remain

    Labour market policy director, Greg Jericho, notes in his Guardian Australia column that over the past 40 years the make-up of families has shifted dramatically from ones with just one parent working to now more than 70% having both partners in employment.

    While this has mostly come from the great gains made by women since the 1970s that have seen changes to discrimination laws, child care and also societal norms to allow women to participate in paid work even once they have had children, it also highlights the rising cost of living pressures faced by most families.

    The times when a family on one income could be expected to buy a house are long gone. But the decade of weak wage growth and recent falls in real wages make living on one wage even more difficult.

    But the data reveals that men are still more likely to be the sole breadwinner and it confirms the labour force data that shows women remain much less likely than men to work full-time. This is a major reason why women in over 90% of occupations earn on average less than do men. It means that women remain at a heightened risk of income loss in the event of relationship breakdowns that can severely affect their standard of living, especially in retirement.

    The data also reveals that women remain very much the most likely parent in sole-parent families. Given the laws that now see such parents move from the parenting allowance to the lower-paying Jobseeker once their youngest child turns 8, this highlights the precarious nature over 800,000 women face as they attempt to survive as the sole parent.

    The post Families change but the same problems remain appeared first on The Australia Institute's Centre for Future Work.

  • Inflation: A Primer

    The Inflation Primer report investigates the history of Australian inflation and policy choices and provides a counter to the view that low inflation and the current inflation target is an unalloyed good. The period of inflation targeting has coincided with a strong shift of national income away from workers to company profits. It has also seen a tendency of the Reserve Bank to act decisively when inflation grows above the target and be much less active when, as we saw in the years prior to the pandemic, inflation slowed below the target range. The report also reveals that workers’ wages did not cause the current level of inflation and yet workers are being urged to accept historic falls in real wages in order bring inflation back within the Reserve Bank target.

    Our review of the causes of current inflation points to some clear policy conclusions, that should be kept in mind by the government, the Reserve Bank, and other stakeholders as Australia continues to adjust to these new inflationary challenges:

    1. Inflation targeting in Australia since 1993 has not been “neutral”. Inflation missed the target from below, far more often than from above. Moreover, that period of inflation targeting (especially the sustained periods when inflation fell below the target) was associated with a massive transfer of income and economic power from workers to businesses. As the Commonwealth government undertakes its review of the RBA’s mandate and operations, these broad political-economic dimensions of monetary policy must be considered carefully. Monetary policy has not been a technocratic exercise, intended to maximise public welfare in a general sense. It clearly reflects and continues to reflect, value judgments and priorities placed on how the costs and benefits of inflation management are distributed across society.
    2. There is no evidence at all that a tight labour market, rising wages, or labour costs more generally have anything to do with the surge in inflation since the COVID pandemic. To the contrary, the evidence is clear that wages have had a dampening impact on inflation in this period. Recent inflation is clearly associated with a further expansion of business profits in Australia, to their highest share ever. Attacking inflation by aiming deliberately to increase unemployment and restrain wage growth even further, is a “blame-the-victim” policy that will only make workers pay even more for a problem they clearly did not create.
    3. The current surge of inflation reflects a “perfect storm” of unique factors (mostly global in nature) sparked by the COVID pandemic: which has been, after all, the most dramatic and painful event in the world economy since WWII. It should hardly be surprising that after-shocks from those events will be felt for some time, and the surge in global inflation is clearly one of them. Responding to this unique and unprecedented challenge by simply reciting a monetary playbook formulated in a fundamentally different era (the inflation of the 1970s) is not just inappropriate. It will, if pursued, lead to a painful and unnecessary global recession that will almost certainly engulf Australia, too.

    For all these reasons, the Reserve Bank and the Commonwealth government need to take a more careful, balanced look at the nature, causes, and consequences of the upsurge in inflation since the pandemic, before leaping to conclusions that are unjustified – and imposing policy responses that do more harm than good.

    The post Inflation: A Primer appeared first on The Australia Institute's Centre for Future Work.

  • War gains: LNG Windfall Profits 2022

    Despite widespread calls by economists and commentators to tax this windfall gain, the Australian Government is yet to do so. At least $20 billion could be raised by a tax on war related profits. This is enough to fund the Australian Government’s entire $20 billion investment in its Rewiring the Nation initiative to modernize Australia’s electricity grid and would leave funds to compensate Australian households and businesses unfairly impacted by spiralling energy costs, largely because of the behaviour of the LNG producers concerned

    The post War gains: LNG Windfall Profits 2022 appeared first on The Australia Institute's Centre for Future Work.

  • Webinar on Wages, Prices, and Power

    Jim Stanford (Economist and Director) and Greg Jericho (Policy Director, Labour Market and Fiscal) from the Centre for Future Work are providing keynote presentations as part of this series. Below is a recording of the first of these presentations, presented by Jim.

    For other resources on inflation, how it is undermining real living standards for workers, and how to fix it (without throwing the whole economy into recession – an even bigger risk!), please see:

    The Wages Crisis: Revisited (Centre for Future Work overview of falling real wages, by Andrew Stewart, Jim Stanford, and Tess Hardy)

    An Economy That Works for People (ACTU Macroeconomics Discussion Paper)

    “The Cure of Inflation Looks Worse than the Disease“ (latest Guardian Australia column by Greg Jericho)

    The post Webinar on Wages, Prices, and Power appeared first on The Australia Institute's Centre for Future Work.

  • With a global recession looming the cure of inflation looks to be worse than the disease

    As policy director, Greg Jericho, notes in his Guardian Australia column, the outlook is not much better for Australia. The IMF is now predicting that in 2023 and 2024 Australia’s GDP will grow less than 2%. Such meagre growth in the past has been consistent with periods of recession.

    The report should serve as a stark warning to central banks around the world that their efforts to limit inflation by sharply raising interest rates is becoming more and more likely to end with a recession and the resultant massive loss of jobs that will follow. Experience from the 1980s and 1990s where similar recessions followed extreme tightening of monetary policy suggests it can take a long time to reverse the damage.

    While the Reserve Bank is somewhat constrained because it needs to be mindful of the rate rises in the USA that weaken the value of the Australian dollar, the IMF report should cause them to weigh much more the costs of sharply slowing growth through interest rate rises.

    We know that current efforts to limit inflation growth are mostly involving workers taking a real wage hit. Having to endure rising unemployment and a recession after 2 years of already extreme falls in living standards would be disastrous, especially while profits continue to rise.

    The post With a global recession looming the cure of inflation looks to be worse than the disease appeared first on The Australia Institute's Centre for Future Work.

  • Yesterday’s Tomorrow Today – a new podcast from the Carmichael Centre

    Laurie Carmichael believed that a worker-centred agenda for technological change was important to achieving better outcomes for society, with workers and their unions playing a pivotal role in shaping technology and skills for social progress.

    The films reviewed in Yesterday’s Tomorrow Today often depict the opposite of a worker-led future of technological change. It’s the aim of the podcast to break down what this looks like, and to suggest what an alternative future – one that benefits workers and humanity – might look like.

    Listeners of YTT can expect podcast episodes to feature accessible political-economic analysis laced with good humour, reflections on accurate (and not-so-accurate) predictions of a future shaped by the neoliberal surveillance state, and a rotating list of special guests, including Dr Jim Stanford, Lily Raynes (Anne Kantor Fellow at the Centre for Future Work), Matt Grudnoff (Senior Economist at The Australia Institute) and more to come.

    Don’t forget to like and subscribe to Yesterday’s Tomorrow Today wherever you get your podcasts and be sure to leave a review – this is what helps other listeners to find and subscribe to YTT, making sure we can keep reaching working people far and wide.

    Listen to the first episode – a review of 1987’s RoboCop – and what it warned us about deindustrialisation, gentrification, privatisation and police militarisation (also available on Apple Podcasts, Google Podcasts and Spotify).

    The post Yesterday’s Tomorrow Today – a new podcast from the Carmichael Centre at the Centre for Future Work appeared first on The Australia Institute's Centre for Future Work.