Economists: Don’t expect Aussie standard of living to improve

By Leith van Onselen

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.

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Comments

  1. reusachtigeMEMBER

    It’s definitely always improving for those of us who had the guts and drive to invest in property! Life is great!!

      • Luckily our politicians and the RBA will never let that happen in Melbourne or Sydney, because that’s where they own houses.

        Rates will be lowered, first home buyers will be given money and immigration floodgates will be opened to keep prices rising.

      • What a fabulous story. People borrowing huge amounts for houses, then price falls eat all their capital and they’re underwater and stuffed. I feel a tiny bit sorry for the families, but this story about David the Mebourne based property speculator made me chortle

        The dud Gladstone investment has seen David sell off the rest of his property portfolio, move into a sharehouse, and his relationship has broken down under the stress.

        “I don’t expect much sympathy. I took a risk and it didn’t pay off. The reason I’m sharing my story is in the hope somebody can learn from my experience if they’re over-extending their investments,” he said.

        He won’t get any sympathy at all from me, just scornful laughter. There’s gonna be a lot more specufestors moving into share houses in the next few years as their marriages break down under the stress. Sux to be them.

      • I like that David at least owned his bad decision. If there were more Davids the pain would fall where it should. Sadly there aren’t many.

      • @LSWCHP, at least Mr Whitten acknowledges his double or nothing play fizzled and has taken responsibility for the outcome.

        I knew a few broke former millionaires who got greedy after their first million and took big risks to join the multi-millionaire club and when their stupidity ended in bankruptcy they spent the rest of their lives ranting about the government, dole bludgers, delinquent kids and all manner of people who “refuse to take responsibility for their own actions”. All three of these men died as penniless, sad old people who had little relationship with their families.

      • I have lived in Gladstone all my life and during the LNG boom, property investors behaved with shocking, unconscionable greed. Lower income families were booted so rents could be hiked through the roof to exploit the number of high-paid workers and companies willing to cough up anything to house their contractors.

        Some small businesses managed to tap in but other were harmed as they lost staff who could no longer afford to live here and were forced out.

        Property investors (speculators) raped this town in a mad orgy of greed and I have not the slightest sympathy for the substantial number of them who have been caught out when the boom ended.

      • St JacquesMEMBER

        Agree McPaddy. And if there were had been many more Davids, we’d probably have never gone so far down the rabbit hole. But there we are.

  2. JUst some notes: 800 million odd people to lose their jobs due to the impact of new technology, /CS
    CS says US GDP will grow at 2.7% this year and another 2 rate rises are expected, bringing the Fed funds rate to 2.5%, The USD is expected to weaken, AUD to lift.
    The Donald stamping on China for knocking off IP has widespread support,
    As I was saying about liars, some say Australian companies have their boards filled from a narrow gene pool, more interested in saving their own backsides than creating value, and investors with too short a time horizon who treat investing a bit like a day at the races.

    CSsays the next three years will settle how we live for the next 100 years.
    AI & Robots are taking over: CS says the world is at a tipping point for robotics, in part because the price of computers has fallen and their power has increased.
    At the AIC conference this week Deloitte figures show in 2003 one gigabyte of data would cost $US569, the analytics would cost another $US222 and the network costs to share the data would cost $US1197. The same today costs 3c, 2c and $US11, respectively.
    Intel’s computer chip in 1973 consisted of 2300 transistors; today your iPhone has 4.3 billion.
    McKinsey figures show the productivity impact of the steam engine from 1850 was around 0.3 per cent a year, early robotics from 1993 0.4 per cent, the IT boom from 1995 to 2005 0.6 per cent and a combination of robotics, artificial intelligence and big data 0.8 to 1.4 per cent.

    • Wiley, I respect you but … Politics will eventually catch up with things to some extent. It is simply not going to happen that we will live in a world where robots do all the work. Tax plans will eventually have to tax companies that use robots more. The social cost is too great of expensive robot use. Its simply a fantasy of the top 1% who can afford to build companies to use robots and it contributes to huge inequality. Sorry, in my opinion it will not last long.

      • that reminds me of the 2 explorers getting ready for an expedition into the Kruger park in SA
        1 x plorer and old hand had army gp boots and puttees to protect his legs
        the other, a more knowledgeable chap had a pair of Nike Sprint Specials on.
        X plorer 1 says, those shoes of yours will never last should you have to run away from Lion.
        X lorer2 says, no matter, I have to only run faster than you.

        WW so when the CSIRO tells us that 40% of the workforce will be on the footpath in 10 years time they are probably correct, but it will take only 2 or 3% increase in unemployment to bring down the ponzi which relies on the velocity of money for survival.
        Now I was just up in Surfers and the military was zooming around in helicopters. the echoing sound of those choppers scared half the punters witless. my call is the games committee has already lost the support of the public: eg.
        ORGANISERS have a last-minute plea for people to snap up Commonwealth Games tickets, amid fears inflated (gouging by) hotel prices have kept people away.???
        About 200,000 tickets remain unsold and Games chairman Peter Beattie has appealed (pleaded) for buyers to come forward.
        “We do say to all our friends in Sydney and Melbourne, here’s an opportunity to buy these tickets,” he said.

        WW Like the Dambusters proved, you dont have to take out the whole dam wall, just put a hole in it to be successful.
        As I illustrated with Churchill, social cost doesnt come into it.
        there will be casualties, many casualties.

  3. Jumping jack flash

    “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.”

    Indeed they are correct, but in my opinion these forces are the mountains of debt that everyone currently has, or (still) aspires to have.
    When you’re on the hook for the best part of a million debt dollars, you can’t very well take advantage when spare employment and wage capacity arises. Instead, that capacity goes to whoever gets the first grab at it so they can repay their debt and live at the standard proportional to the number of debt dollars they own.

    One such scenario might be:
    “Hey, we have an opening on the production floor for another packer, but I think I’ll do that job instead and ask for a wage increase. I might get 1% if I show them I’m doing more”.

    So we have “productivity” through the roof, as existing employees volunteer to cover that spare employment capacity themselves. They don’t mind of course.

    But the trade-off is, we all do half-arsed jobs and make more mistakes than ever because there is suddenly no need to put extra people on, because those already working there need the extra money to service their unfathomably huge debt mountains. Kind of “forced capitalism” or in other words, debt slavery.

    It is simply ridiculous the amount of debt that everyone just happily agrees to take on so they can buy a house. Utter madness. If you stop and have a good think about it.

    • And due in part to seriously rising household costs (that don’t seem to be measured by MSM data), no-one has a savings capacity.
      Hence if things roll, there is no safety net for most.

      • You’ve really hit the nail on the head there 8mil. The data is apparently saying things are moving along nicely, but the punters in the real world are finding that it’s never been harder to scrape a few bob together; previously they’d just load up on more credit to fill the gap, whoops!

    • Was up at the Northcliffe surf club for brekky this am, beaches are closed here, plus i get to see how the Jewell is going, still stalled!
      At the next table to me were a couple of club manager types talking to a couple of types in jeans and sport coats
      I overheard this
      “we have this radio announcer person coming to have a talk to the chaps.
      Mediocrity is the new normal here
      and we want him to say a few words”

      • I think the mood is people have been working hard over the last 5-10 years, been asked to take on more and more, but the gain from that has not flowed to the worker. It is now starting to roll over. The fact that a couple of club managers were arranging a talk by a shock jock (at god knows what overinflated hourly rate) is illustrative of the problem.