Tag Archives: Australian Bureau of Statistics

Record low wage growth gives lie to Abbott’s IR obsession

The ridiculousness of the Abbott Government’s industrial relations obsession has been thrown into stark relief by figures showing wages are growing at their slowest rate since at least 1997.

The Wage Price Index measured by the Australian Bureau of Statistics rose by 0.7 per cent in the December quarter, taking annual growth to 2.6 per cent – the lowest rate in the 16-year history of the series.

The result gives a lie to the inflated rhetoric about out-of-control wage claims blasted out by the Government in recent weeks as it has tried to pin the blame for a succession of high-profile factory closures such as SPC, Holden, Toyota and Alcoa on workers.

It is hard to have much confidence in the economic grasp of the Government while they carry on with their IR sideshow.

Sure, wages are part of Australia’s relatively high (by international comparison) cost base, but so are energy and other utility charges, transport costs, regulatory fees and so on.

Relatively high wages, by themselves, should not be automatically seen or portrayed as something bad and undesirable, as many IR obsessives try to make out. Just ask any merchant banker.

They become a concern where they are not supported by similarly high productivity, and that can be due to a combination of factors that include (but are not limited to) work practices, such as management and investment.

The recent mining investment boom provided a prime example. Resource companies, rushing to cash in on sky-high global commodity prices, threw enormous resources of labour and capital at the task of boosting production. Price was virtually no object. This had the effect of pushing up the cost of labour (wages) and the prices of goods and services.

In the short term, this helped push up labour casts and killed productivity. But as labour-intensive construction has ended and expanded mines and upgraded ports, roads and rail links have come into operation, export volumes have boomed.

In productivity terms, the amount of value produced by each worker left in the mining sector after the building crews have moved out has surged.

Across the economy, there is a need to lift productivity, but the tired old thinking of many in Government and business who automatically equate this with screwing down on wages and conditions needs to end.

Obviously, business models built solely on competing directly with low-cost manufacturers internationally are becoming increasingly unsustainable.

But the answer isn’t to attack wages and conditions.

By many measures, Australia has a highly skilled, flexible and productive workforce.

Employers in both the public and private sectors get an enormous, they rarely acknowledged, subsidy from employees who regularly work many more hours than they are paid for.

Crude calculations using ABS employment and aggregate hours worked figures show that each employee worked an average of 35.5 hours a week in January. Take into account that around a third of these workers were part-time, and that January is traditionally a holiday period, and it suggests that a substantial proportion of the workforce work longer than the ‘standard’ 37.5 hour week, and many are likely to do so without paid overtime.

Another measure is time lost to industrial disputes. Official figures show that in the 12 months to the September 2013 quarter, an average of just 3 working days were lost to industrial disputes for every 1000 workers. These are not the numbers you would expect to see from a habitually disruptive workforce.

As was discussed in an earlier blog, Time to curb outrageous salaries – or lift investment?, labour is losing out to capital in grabbing a share of earnings. The Economist cited figures from the Organisation of Economic Cooperation and Development showing that labour captured 62 per cent of all income in the 2000s, down from more than 66 per cent in the early 1990s.

Yes, the nation has a productivity challenge. And yes, workers have a role to play in lifting productivity.

But maybe employers and managers should cast a critical eye over their own remuneration and ways of operating, rather than simply pencilling in cuts to the pay and conditions of their employees.

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Highest unemployment rate in 11 years doesn’t equal interest rate cut

A lift in the unemployment rate to 6 per cent – its highest point in almost 11 years – will surprise no-one.
In fact, the real surprise has probably been that it has taken this long.
In keeping with the trend of previous jobs reports, the Australian Bureau of Statistics has revealed that a further decline in full-time employment occurred in January, this time by 7100 positions, taking the number of Australians employed full-time to 7.95 million – the lowest number in almost two years.
The reason the unemployment rate has jumped to 6 per cent after spending the latter half of 2013 stubbornly stuck around 5.7 and 5.8 per cent is because, perversely, because the number of discouraged job seekers has stabilised.
The participation rate, the proportion of the working age population in the labour force (ie with a job or actively seeking employment), held steady last month at 64.5 per cent.
Amid all the high-profile announcements about factory closures (most notably and immediately, the SPC cannery in Shepparton), few people will be shocked by confirmation that the unemployment rate has increased.
The number of Australians who want to work but haven’t got a job now stands at 728,600 – a jump of almost 17,000 from last December.
But does this mean the Reserve Bank of Australia will put a rate cut back on its agenda?
That appears unlikely.
The central bank had anticipated that the unemployment rate would at some point reach above 6 per cent, so the fact that it has now done so will not be “new news”.
Additionally, inflation has turned out to be stronger than the RBA had anticipated, making it wary about adding further stimulus to the economy.
As noted in a previous post, RBA Governor Glenn Stevens was unusually explicit following the central bank’s February 4 Board meeting about the future course of interest rates.
Usually, like many central banks, the RBA shies away from being too definitive about the future of monetary policy, which is not unreasonable given the fluidity of global economic and financial conditions.
So when Mr Stevens said the most prudent course for the RBA was “a period of stability in interest rates”, it was a clear message to markets not to expect rate cuts – or hikes – any time soon.
An unemployment rate with a ‘6’ in front of it would not appear to change that message.

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A good week for the RBA

Every now and then you have a week when things seem to go right – your baby son suddenly begins sleeping soundly and copiously, you get the perfect park at work – twice! – and your bank gets in touch to say it has made a $100 mistake in your favour, and lets you keep it (ok, so that last one never happens, it is just a dream).

The Reserve Bank of Australia has just had such a week.

When the RBA Board sits down tomorrow for its monthly monetary policy meeting, it will see little reason to move the official cash rate.

All the signs are that the economy is behaving in ways that it has anticipated, and that are broadly in keeping with its monetary policy stance.

Low interest rates appear to be working to encourage activity in non-mining parts of the economy, particularly housing, while the dollar is depreciating and worrying price pressures are yet to appear.

Though there was a slip in building approvals last month (down 1.8 per cent), much of this was due to the volatile apartments segment of the market, and annual growth remains a healthy 23.1 per cent.

Of course, holding interest rates at historically low levels for an extended period carries with it risk, and some have started to fret that a bubble in the housing market, particularly in Sydney, is developing.

But the overblown talk of an over-heating property market, never well-founded, looks increasingly silly. Sure, house prices have surged in the major cities – most notably Sydney and Melbourne – but there are at least three good reasons to dismiss talk of a bubble at this stage. Firstly, there are signs that the market in established housing is losing some of its heat and price growth is easing. Secondly, and perhaps most importantly, credit growth remains modest – borrowing for housing grew by 0.5 per cent in each of September and October to be up 5 per cent from a year earlier, which is hardly what could be described as “bubble-like”. Thirdly, the nation’s population is growing at a solid rate of around 1.8 per cent, and the easing dollar makes Australian property an increasingly attractive proposition for foreign investors.

There are also encouraging signs that manufacturers and other businesses are starting to pick up the pace of their investment – a development that is coming none too soon, given the rapid deceleration in mining investment.

Official figures show that in the September quarter, mining companies cut their spending on plant and equipment by 7.1 per cent (while expenditure on buildings and structures increased 5.6 per cent). In the same period, manufacturers spent an extra 3 per cent on plant and equipment, and increased funds for buildings by 1.5 per cent.

Any investment plans should be well supported by healthy balance sheets. The Australian Bureau of Statistics confirmed today that business profits grew almost 4 per cent in the September quarter and are up almost 9 per cent in the past year. In the same period, wages have grown 3.1 per cent.

While GDP figures out on Wednesday are likely to show the economy was just ticking over in the September quarter, evidence that non-mining activity is building should push consideration of more rate cuts further into the background.

Instead, the RBA Board may soon begin to consider the timing of a rate hike.

Though it is unlikely to make such a move tomorrow, the central bank will be heartened by the dollar’s slide in recent days. Governor Glenn Stevens made it clear again last week that he thought its sustained strength against the greenback has been increasingly difficult to justify.

Inflation and wages appear well contained for now, but the longer the cash rate is kept at 2.5 per cent, the greater the risk prices could accelerate, which would in turn increase pressure for wage hikes.

As ever for a central bank, the trick is in the timing. Push up rates too soon or too fast, and the dollar could rebound, but leave them low for too long and potentially destabilising price pressures could accumulate.

 

 

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A shortage of jobs, but no shortage of work

In contemporary Australia there might be a (relative) shortage of jobs, but it seems there is no shortage of work.
While the unemployment rate hovers just below 6 per cent (it held steady at 5.7 per cent last month according to the latest official labour force figures), just about anyone with a job will tell you that their work demands are rising relentlessly.
So what is going on?
The latest official employment figures are consistent with a trend that emerged in the middle of last year in which employment growth is slowing but hours worked is accelerating (see Reserve Bank of Australia chart of labour input growth below).

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According to the Australian Bureau of Statistics, aggregate hours worked increased marginally in both trend and seasonally adjusted terms last month, while employment and unemployment were flat (a net 1100 jobs were created, while an additional 9000 job seekers joined the labour market).

The increase in pressure on those still with a job has been accentuated by the inclination of employers to take on part-timers over full-time staff – in the 12 months to October, 53,000 full-time jobs were lost, while during the same period 145,000 part-time positions were added.

Business surveys and the latest job ads report from the Australia and New Zealand Banking Group suggest wary employers are reluctant to take on extra staff.  According to the ANZ, the number of job ads has bottomed in the last two months after falling for most of the year, while an Australian Chamber of Commerce and Industry index of labour market conditions reached a four-year low of 43.6 points in the September quarter.

It is not hard to see why: though low interest rates have injected some vigour into the housing sector, the economy remains sluggish.

As RBA Governor Glenn Stevens observed earlier this week, the economy is still fumbling its way forward as the mining investment boom rapidly dissipates and other sources of growth are yet to establish themselves.

Couple this with the continued strength of the dollar and tepid global growth, and it is little wonder businesses are reluctant to take on extra staff.

Instead, as the data indicate, employers are choosing to use their existing workforce to cope with any increase in demand.

This is why those who have a job feel like they are working twice as hard, even as hundreds of thousands are banging on the door looking for employment.

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