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  • With household incomes set to fall, we need to think about what matters in the economy

    With household incomes set to fall, we need to think about what matters in the economy

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on November 10, 2022

    The current tightening of monetary policy is undoubtedly having an impact. While it may take some time for the slowing of inflation to flow through to the official CPI figures – especially given the level of inflation that is being imported – the economy is set to slow drastically.

    As Labor Market and Fiscal Policy Director Greg Jericho notes in his Guardian Australia column the Reserve Bank in last week’s Statement on Monetary Policy, has forecast GDP growth to slow to levels normally associated with recessions – even if the RBA is not actually forecasting a recession.

    However, in one area the RBA is not hedging at all – that of real household disposable income. This measure, which essentially examines the living standards of the average household, is forecast to decline at a pace as bad as any experienced in the past 60 years.

    While a fall in household incomes was always expected given the abnormal level of stimulus that occurred during the pandemic, the fall is predicted to be much greater than just going back to where we were. The Reserve Bank predict incomes will fall well below the pre-pandemic trend level.

    That such a drastic fall has received little coverage highlights that the orthodox commentary and debate around the economy largely focuses on aspects that minimise workers and households in place of corporations and the “broader” economy of GDP.

    The cost of taming inflation is too often discussed in terms of whether it will send the economy into a recession, without examining if that measure misses the real-life experience of most people.

    If the RBA forecast comes true, inflation will have been brought back to the RBA target, GDP will have kept growing, but household living standards will have plunged.


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  • Would further interest rate rises do more harm than good?

    Would further interest rate rises do more harm than good?

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on November 3, 2022

    In the past 7 months, the Reserve Bank has increased the cash rate by 275 basis points. That is as fast as any time since the RBA became independent. Given the pace of inflation growth, the rises are not wholly without cause, but as policy director, Greg Jericho notes in his Guardian Australia column the main drivers of inflation are now easing, and wages are yet to take off. In that case, should the RBA continue to raise rates given it will only slow the economy further?

    Over the past year, the main driver of inflation has been house prices accounting for a quarter of the 7.3% rise in the CPI. And yet we know that house price growth is now either slowing dramatically or even falling in some areas. The RBA has also noted that commodity prices are falling and supply-side issues are being dealt with and that these aspects, which are not influenced by interest rates, will reduce inflation next year.

    At the same time, the Reserve Bank continues to sound warnings of a wage-price spiral despite any evidence of such a thing occurring. Indeed the latest CPI figures show that overwhelmingly inflation is driven by the price rises of goods rather than services. This is important because service prices and wages are strongly linked.

    More rate rises will certainly continue to reduce demand in the economy as the cost of servicing a mortgage rises. But to what end? The main factors driving inflation are easing, wages have not risen above 3% yet, let alone to a rate anywhere near inflation.

    Even if wages were to rise in line with the historical link with service prices, in September they would have risen 3.5% – a level very much consistent with inflation growth of between 2% and 3%. And yet we know that wages are unlikely to rise that fast. The most recent estimates have it closer to 2.8%.

    The great risk now is that further rate rises will only hurt the economy for little gain and see wages growth stunted before they even get to a level that would see real wages rising.


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    Centre For Future Work to evolve into standalone entity

    The Centre for Future Work was established by the Australia Institute in 2016 to conduct and publish progressive economic research on work, employment, and labour markets. Supported by the Australian Union movement, the centre produced cutting edge research and led the national conversation on economic issues facing working people: including the future of jobs, wages

  • The October 2022-23 Commonwealth Budget: A Good Start… But Rocky Times Ahead

    Tax, Spending & the Budget

    The October 2022-23 Commonwealth Budget: A Good Start… But Rocky Times Ahead

    by Greg Jericho, Eliza Littleton, Fiona Macdonald, Lily Raynes and Jim Stanford

    Authors

    Greg Jericho

    Chief Economist

    Eliza Littleton

    Senior Economist

    Fiona Macdonald

    Acting Director, Centre for Future Work

    Lily Raynes

    Anne Kantor Fellow

    Jim Stanford

    The new Albanese Labor government has tabled a revised budget for the 2022-23 fiscal year, revising revenue and spending forecasts originally contained in the March budget (from the previous Morrison government), and providing new funding to support several new programs and policies.

    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.



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  • Job Opening: Carmichael Distinguished Research Fellow

    Job Opening: Carmichael Distinguished Research Fellow

    by Jim Stanford

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    The Carmichael Centre at the Centre for Future Work invites applications for the Laurie Carmichael Distinguished Research Fellow position. It’s a three-year posting, with awesome potential to explore a range of progressive issues related to unions, collective bargaining, industrial policy, and workers’ education.

    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!


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    Dutton’s nuclear push will cost renewable jobs

    by Charlie Joyce

    Dutton’s nuclear push will cost renewable jobs As Australia’s federal election campaign has finally begun, opposition leader Peter Dutton’s proposal to spend hundreds of billions in public money to build seven nuclear power plants across the country has been carefully scrutinized. The technological unfeasibility, staggering cost, and scant detail of the Coalition’s nuclear proposal have

  • Families change but the same problems remain

    Families change but the same problems remain

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on October 20, 2022

    The latest data from the Bureau of Statistics on families shows that more than ever before couples with dependants are both working.

    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.


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    Centre For Future Work to evolve into standalone entity

    The Centre for Future Work was established by the Australia Institute in 2016 to conduct and publish progressive economic research on work, employment, and labour markets. Supported by the Australian Union movement, the centre produced cutting edge research and led the national conversation on economic issues facing working people: including the future of jobs, wages

  • War gains: LNG Windfall Profits 2022

    Energy from Fossil Fuels, Tax, Spending & the Budget

    War gains: LNG Windfall Profits 2022

    by Mark Ogge

    Author

    Mark Ogge

    Principal Advisor

    Energy prices spiked worldwide following Russia’s invasion of Ukraine and the resulting restrictions on Russia’s gas exports. This has in turn increased the value of Australian LNG exports and the profits of LNG companies. We estimate the war related windfall gain to LNG companies in 2021-22 at between $26 billion and $40 billion.

    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



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  • Webinar on Wages, Prices, and Power

    Webinar on Wages, Prices, and Power

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    The Australian Council of Trade Unions is sponsoring a series of webinars for union members, delegates, officials, and leaders on the current crisis in the cost of living in Australia. The surge in inflation since economic re-opening after COVID lockdowns has obviously intensified that crisis. But the seeds for it were planted long ago: by a decade of historically weak wage growth, a speculative property price bubble, and a systematic efforts to weaken collective bargaining and unionisation.

    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)


    Related research



    An Economy That Works for People



    Full report



    The Wages Crisis Revisited



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    Dutton’s nuclear push will cost renewable jobs

    by Charlie Joyce

    Dutton’s nuclear push will cost renewable jobs As Australia’s federal election campaign has finally begun, opposition leader Peter Dutton’s proposal to spend hundreds of billions in public money to build seven nuclear power plants across the country has been carefully scrutinized. The technological unfeasibility, staggering cost, and scant detail of the Coalition’s nuclear proposal have

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

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

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on October 13, 2022

    This week the IMF released its latest World Economic Outlook. And the outlook is dire. Economic growth around the world was downgraded with recession-like conditions being predicted for many advanced economies including the USA, UK and much of the EU.

    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.


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    Dutton’s nuclear push will cost renewable jobs

    by Charlie Joyce

    Dutton’s nuclear push will cost renewable jobs As Australia’s federal election campaign has finally begun, opposition leader Peter Dutton’s proposal to spend hundreds of billions in public money to build seven nuclear power plants across the country has been carefully scrutinized. The technological unfeasibility, staggering cost, and scant detail of the Coalition’s nuclear proposal have

  • The UK shows how bad the Stage 3 tax cuts will be

    The UK shows how bad the Stage 3 tax cuts will be

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on September 29, 2022

    This week the UK government introduced massive high-income tax cuts – cuts that are not even as bad as the Stage 3 tax cuts here in Australia. And the reaction by the market was brutal. Investors saw the tax cuts for what they were – a redistribution of national income from the poorest to the wealthiest, that provided no economic growth. As a result the value of the UK Pound plunged.

    Fiscal Policy Director, Greg Jericho, notes in his Guardian Australia column that there are big lessons for Australia.

    The Stage 3 tax cuts are a case of terrible economics masquerading as a growth strategy. Trickledown economics does not work, never has, and this week we have discovered that even the markets agree.

    Rather than destroy your tax base, governments need to care about sustaining a broad revenue base that works to reduce inequality and fund services and investments that drives productivity and helps those who most need it.

    Trickledown economics has never worked and was always just fraudulent spin designed to hide its real aim of giving rich and powerful people tax cuts at the expense of others.

    This week has shown that no one even believes the lie anymore.


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    Centre For Future Work to evolve into standalone entity

    The Centre for Future Work was established by the Australia Institute in 2016 to conduct and publish progressive economic research on work, employment, and labour markets. Supported by the Australian Union movement, the centre produced cutting edge research and led the national conversation on economic issues facing working people: including the future of jobs, wages

  • Robbed at Sea

    Industry & Sector Policies, Wages & Entitlements

    Robbed at Sea

    Endemic Wage Theft from Seafarers in Australian Waters
    by Rod Pickette, Lily Raynes and Jim Stanford

    Authors

    Rod Pickette

    Lily Raynes

    Anne Kantor Fellow

    Jim Stanford

    Media release



    International Seafarers Suffer $65 Million in Wage Theft Annually in Australian Waters

    Seafarers perform difficult, often dangerous work that is essential to the operation of global supply chains, delivering all the merchandise we take for granted in modern life. Yet because of the legal vacuum governing international marine traffic, a lack of resources and attention for enforcement by national regulators, and the corporate strategies of shipping companies and their customers, seafarers are subject to some of the worst exploitation and abuse of any occupation in the world economy.

    As a developed, high-income economy that participates heavily in international freight trade, Australia has a special responsibility to protect and lift labour standards in this vital industry. Australia’s current approach is sadly inadequate in that regard. Our laws tolerate the blatant use of legal loopholes to evade the application of domestic standards, and our regulatory agencies have not made adequate commitments to oversee, inspection, enforcement, and remediation.

    The policy recommendations made in this report would constitute initial and long overdue steps in addressing both the economic and the moral dimensions of wage theft and other forms of exploitation in freight shipping.



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