Let’s recall what the Budget said was going to happen to wages:
The entire Budget repair agenda hangs on this recovery. Yet the same day, the Government announced:
Australia’s permanent migration programme for 2017-18 will remain at a ceiling of 190,000 places.
This was announced by Department of Immigration and Border Protection Minister Peter Dutton on budget day.
After recent announcements of abolishing the 457 visas and strengthening the requirement to gain Australia’s citizenship, all eyes were on government to see if the skilled migrant intake would be reduced or would it be maintained…
Anyone see the contradiction here? If not, let me illustrate it for you. Here’s the picture of employee compensation painted by yesterday’s national accounts:
Have wages collapsed owing to poor productivity? Why no, also from the national accounts:
Wage growth has progressively collapsed as the mining boom went bust. Of course it did. All of that labour demand building huge projects disappeared and there was not enough activity elsewhere to offset it. The falls have had some benefit, helping increase Australian competitiveness post-boom so that other tradable sectors can rebound.
But there’s a balancing act here. Labour is delivering on its part of the bargain raising productivity to boost income. Yet wages are still collapsing. This points to a very obvious lack of pricing power in the labour market. The unprecedented nature of the collapse – the lowest compensation growth (actually shrinking now even in nominal terms) in forty years – goes way beyond usual the cyclical and structural reasons for such weakness.
There is one overwhelmingly important factor at work that we have not seen before in a down cycle and it is this: immigration is running full bore into a labour market bust, with hours worked completely stalled, flooding it with supply and killing worker pricing power. Look at the per capita wage deflation going on here:
What should have happened was a ramping down of immigration after 2011 when it was clear that the mining boom was over and there was no more need to contain inflation. Wages would still have deflated but not so calamitously. Moreover, it would have taken a lot of pressure off house prices allowing interest rates and the currency to fall much deeper.
Sure this would have hit capital owners more. That’s the point. It would have shared the burden of adjustment instead of heaping it all upon labour. It would also have achieved the eminently sensible end of channeling as much of the adjustment into currency falls as possible.
Instead, Canberra and its supporting cast in the RBA unleashed a housing bubble that they have ever since sought to protect via roaring immigration that has now crushed wages. Whether they admit it or not, they’ve covered their own sorry arses at the price of unleashing the greatest class war in modern Australian history.
Coming full circle and answering my original question then, sadly for the Government, immigration-driven wages destruction is now so widespread that it’s own crack-smoking forecasts for Budget repair are toast before we even reach the EOFY.
Believe it or not, today there are actually a few signs that the imbeciles have realised their error. There is the fluff around 457 reform and citizenship test changes. This week’s Fair Work Commission decision to raise the minimum wage by a healthy 3.3% came out of the blue and, to put it bluntly, stank of political massaging. MB is also hearing through its sources that the past few weeks have seen a material tightening in student visa applications with rejections skyrocketing.
But all of these are still fiddling around the edges. The labour market needs to tighten materially to produce income growth and it ain’t going to happen with 200k desperate permanent foreign workers pouring into the country per annum.
Immigration must be cut and cut hard or this government may as well sack itself today, and save us all the trouble of slaughtering it at the ballot box.
As for the so-called “Labor Party”, it started this great betrayal and it’s bloody well time that it finished it.
