With Aussie standards of living sliding for several years on the back of falling real incomes, rising congestion pressure, and from living in smaller and more expensive housing, several senior economists have warned Australians not to expect an improvement in living standards anytime soon. From The ABC [my emphasis]:
JP Morgan and NAB argue the economic forces holding wage growth and better working conditions back are currently too strong, and the standard of living experienced by the majority of Australians now is as good as it is going to get for many years.
“There’s not a lot you can do,” NAB chief economist Alan Oster laments.
“People are not going to have one job forever. They’re not going to feel as secure.
“The banks are going to look at people, you know, if you’ve got a couple of part-time jobs, it’s more difficult to get a loan.
“It’s a struggle… wages should be picking up now, and they’re not”…
The unemployment rate may be relatively low, but the underutilisation rate, he pointed out — which includes Australians who’ve given up on looking for a job, and those who want more work — at roughly 14 per cent, is too high.
Mr Oster says it demonstrates vast numbers of Australians are no position to bargain for a pay rise.
The economics team at investment bank JP Morgan back the NAB research.
Despite the creation of hundreds of thousands of new jobs over the past 12 months, JP Morgan’s Tom Kennedy concedes, for most Australians, a decent pay rise is many years away.
“So for us, wage pressure is something that won’t really eventuate over the next one, two, or even three years perhaps, given the fact that you need to see a lot of movement in that jobless rate,” he says.
“And given the fact that all the employment growth we’re getting is coming from a very strong supply-side, it seems like that story is not one for this year, and maybe not one for next year either.”
He admits the work he has done reveals right now is as good as economic life’s going to get for the foreseeable future.
“It seems like a story of the Australian economy moving sideways [and] the slack that exists persisting, and as a consequence, you don’t see much relief on things like wages,” Mr Kennedy tells RN Breakfast…
Economist and director of the Centre for Future Work Jim Stanford says improving the working conditions is a matter of urgency.
“And I think all of the politicians are going to be following because they don’t want to get on the wrong side of a mass concern among Australians that the prosperity that we came to take for granted is slipping through our fingers,” he says…
“For young people, the prospect of getting a regular job where you know what you’re going to make, you know you’ll get a wage increase every year, you’ll get superannuation — that prospect seems increasingly remote,” Mr Stanford says…
This is the “lost decade” that MB has warned about since the terms-of-trade peaked in late-2011. Part of it was inevitable given the slide in national income emanating from falling commodity prices. However, it has also been made worse by running a turbo-charged immigration program into an already over-supplied labour market – a point implicitly acknowledged by JP Morgan’s Tom Kennedy above. That is, it’s hard to negotiate a pay rise or to push the unemployment rate down when hundreds of thousands of new workers are added to the economy each and every year.