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Category: Media Release

  • With interest rates set to rise another 3 times, no wonder consumers are feeling grim

    With interest rates set to rise another 3 times, no wonder consumers are feeling grim

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on February 16, 2023

    The Reserve Bank now forecasts real household incomes will take longer to recover than they did during the 1990s recession and is also projecting economic growth at historical lows. Australian consumers are right to feel worried about the future.

    Right now Australian consumers have less confidence than they did in April 2020 when the entire world was locked down and the pandemic was raging without any prospect of a vaccine.

    That might suggest that Australians are overly pessimistic, especially given unemployment is at generational lows of 3.5%, but when you look at the statements of the Reserve Bank and its projections for the next 2 years, it is little wonder Australians are worried.

    Last week the RBA not only lifted the cash rate for the 9th straight time, it signalled that there would be a plural number of rises to come. In response, the market now anticipates at least three more rate rises, with a slight chance of 4 more. That would be easily the fastest and largest raising of interest rates since the late 1980s. And Australians are well aware of what occurred after the 1980s rate rises.

    Indeed even the Reserve Bank is anticipating a sharp slowing of the economy. While not suggesting a recession is imminent, in its latest Statement on Monetary Policy the RBA forecast 2 straight years of GDP growth of less than 1.8%. That would equal the record length of less than 2% growth during the 1990s recession. In reality, anytime Australia’s economy has grown by less than 2% for just one year there has been either a recession or near recession conditions such as during the GFC.

    Australians are right to be wary especially as their standard of living has suffered a sharp decline in the past year as incomes fail to keep up with inflation.

    The Reserve Bank of course does need to be concerned about inflation but given the expectations of recessions of slight contractions in the UK, USA and Europe the risk of a recession should be weighed much higher than they currently are.


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  • The Reserve Bank is betting that monetary policy is not powerful

    The Reserve Bank is betting that monetary policy is not powerful

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on February 9, 2023

    The signs are already evident that household consumption is falling despite most mortgage holders yet to feel the full effects of the rate rises. The Reserve Bank however believes more pain is needed.

    On Tuesday the Reserve Bank lifted the cash rate to 3.35%, making for a total increase of 325 basis points since May last year. That rise is the fastest since the rises prior to the 1990s recession. And yet, as policy director Greg Jericho, notes in his Guardian Australia column, the Reserve Bank still think more is needed.

    The Governor’s statement concluded that “the Board expects that further increases in interest rates will be needed over the months ahead”. The use of the plural “increases” was a change from the language used in December. This is despite the bank and most economists acknowledging that inflation peaked in December and that global inflation is now falling.

    The RBA acknowledges that the full impact of the rate rises has yet to flow through, and how remains wedded to the policy that the economy is running too hot, despite wage growth likely still in the low 3% range. Most households have yet to feel the impact of around a third of the total amount of the rate rises thus far. With more rate rises forecast to come, that suggests a further increase of around $400 a month in mortgage repayments on a $500,000 loan even before any more rate rises occur. That would suggest a 45% increase in mortgage repayments since April.

    This drastic raising in rates will serve to slow an already slowing economy. The December quarter retail trade figures showed that retail turnover volume was down for the fourth straight quarter, and forecasts for GDP growth estimate very weak growth for two years.

    That the Reserve Bank continue to hike rates without pause suggests a lack of faith in its biggest weapon to reduce inflation, and also that it can finesse rate rises and economic growth. There is no need to keep hurting households without relief or pause – especially given so much of the rate rises remain yet to be felt.


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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

  • As interest rate rises bite, the Reserve Bank should not raise rates next week

    As interest rate rises bite, the Reserve Bank should not raise rates next week

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on February 2, 2023

    The cost of mortgages is soaring and households are spending less in the shops – the Reserve Bank should hold off on raising rates again next week

    Since May last year, the Reserve Bank has increased the cash rate from 0.1% to 3.1%. The latest cost of living data released this week reveals that this has incurred a 61% rise in mortgage repayments for the typical employee household.

    As policy director, Greg Jericho notes in his Guardian Australia column, this increase has had a dramatic effect on people’s ability to spend money elsewhere.  The latest retail trade data released on Tuesday showed a dramatic fall in retail spending in December. The 3.9% fall in the nominal amount spent is increased once you consider the inflation. Even if you account for the tendency for monthly figures to be erratic, the last three months of 2022 saw a stalling of retail spending and a decline in real terms.

    Clearly, the rate rises are forcing people to spend less on retail items and other discretionary purchases. This of course is the intended impact. Raising interest rates increases the cost of borrowing and reduces the level of demand in the economy. But the danger is that the Reserve Bank increases interest rates so fast and so greatly that it slows demand by more than is needed.

    Given the impact of the 300 basis points rises has yet to fully flow through as current mortgage holders typically see their interest rates rise only a month or two after each increase by the Reserve Bank we can expect the cost of mortgage repayment to keep rising in the first quarter of this year.

    With the data already showing the pain of rate rises is causing changes in household spending. The Reserve Bank shod not raise the cash rate when it meets next week, but wait to see the full impact flow through to the economy. After a 300 basis points rise in 8 months no one can suggest the Reserve Bank has been too timid. The fast increase now gives them room to wait and observe rather than keep slamming on the brakes.


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  • Inflation looks to have peaked but the RBA set to keep raising rates

    Inflation looks to have peaked but the RBA set to keep raising rates

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on January 26, 2023

    Most economists believe inflation has peaked and yet the Reserve Bank is still expected to raise rates next month despite real wages falling by more than 4% last year.

    The latest inflation figures showed that in 2022 prices rose faster on average than they have for 32 years. But while this speed might suggest inflation remains out of control, as policy director Greg Jericho notes in his Guardian Australia column, the data suggests that inflation likely has peaked.

    Jericho notes that inflation in the December quarter was driven by abnormal jumps in the prices of holidays. Rather than being a sign of prosperity and an overabunance of demand in the economy, more this is a sign of a return to some sort of normality after the lockdown in previous years due to the pandemic.

    Similarly a jump in the cost of restaurant meals and takeaway food reflects the ongoing strength in that sector as it fully recovers from the pandemic rather than a sign that eocnmic demand is surging.

    The belief that inflation has peaked is also driven by the fact that the prices of goods – especially those driven by international prices – have begun to stabilise. While they continue to grow at paces well above 3%, no longer is the growth rising.

    That inflation may be peaking however does not mean there is no pain for householders. Grocery prices mostly rose faster than overall inflation with milk and bread rising 18% and 13% respectively. The increases in rental prices are also now showing up in the data. Rents in all capital cities are rising sharply, and in Adelaide and Brisbane they grew faster in 2022 than they have since 2009.

    Amid all this pain, and with economists believing the peak has been reached, the Reserve Bank is still expected to raise rates again next month. This greatly risks slowing the economy more than it needs to and will certainly increase the cost of living for many households.

    This latter aspect is most important given the latest inflation figures suggest that real wages have plummeted by more than 4% in 2022. If we assume wage growth in 2022 of 3.25% (slightly above expectations), real wages will now be back at the level they were in June 2009.

    This period of rising inflaiton has been terrible for workers.


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  • The Reserve Bank needs to wait before raising rates again

    The Reserve Bank needs to wait before raising rates again

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on January 19, 2023

    Home loans have fallen sharply in the past year, and the rate rises are clearly having a major impact. As such the Reserve Bank needs to wait before raising them again.

    In 8 months the Reserve Bank raised the cash rate from 0.1% to 3.1% in an effort to slow inflation growth which has been increasing around the world. But while many things in the economy remain affected by the pandemic and its ructions, the impact of interest rate rises remains the same.

    As policy director, Greg Jericho notes in his column in Guardian Australia, the latest lending data reveals that home loan numbers have fallen by 25% over the past year. The cost of repaying an average new mortgage in Sydney or $750,000 has increased by more than third and as a result fewer people are taking out loans and house prices are falling.

    This fall in the price of the item most directly affected by interest rates however is not reflected in the official CPI figures. Rather than measure house prices, the CPI measures the cost of “new dwelling purchases by owner-occupiers”. This is actually the cost of building a new home. In the year to September 2022 (the most recent CPI figures) this item accounted for a quarter of the total growth of inflation. And yet while “new dwelling purchases” rose by 21% the price of dwellings across Australia rose by just 1%.

    This means that inflation is not truly reflecting the impact of interest rates. Rising interest rates do slow the economy, they do reduce the level of money available to mortgage holders to spend on other item and thus reduce demand. That the official CPI figures are not fully showing this does not mean the Reserve Bank needs to keep raising rates.

    The Reserve Bank has already raised rates at a historically fast pace. They have slammed on the brakes as hard as they have at any time in the past 30 years. Given economists around the world are predicting a slowdown in the global economy and here in Australia, the RBA needs to pause its rate rises and not keep hitting the brakes on an already slowing economy.


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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

  • A new tool reveals how badly the Stage 3 cuts mismanage the budget

    A new tool reveals how badly the Stage 3 cuts mismanage the budget

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on January 12, 2023

    The Stage 3 tax cuts will cost $300bn in their first 9 years. A new tool shows how we can spend the money better

    Just before Christmas last month the Parliamentary Budget Office released a “Build Your Own Budget” tool that reveals the interactions of taxes, spending and economic conditions that go into determining the budget balance.

    While the tool is an invaluable device for economists, its real value as noted by Labour Market and Fiscal Policy Director Greg Jericho, is how it highlights the massive cost of the Stage 3 tax cuts.

    In his Guardian Australian column, Jericho notes that the Stage 3 tax debate has become about all-or-nothing rather than realising the $300bn cost of the tax cuts over 9 years provides an opportunity for the Albanese government to amend the tax cuts and also increase support for benefits and government services.

    The Stage 3 tax cuts are so expensive that the PBO’s budget tool reveals you could raise Jobseeker from its current rate of $668 a fortnight to $1,925 and the budget deficit in 2032-33 would still be lower than it is currently predicted to be with the Stage 3 tax cuts.

    The Stage 3 tax cuts could be amended to reduce the 32.5% tax rate for earnings between $45,000 to $120,000 to 30% and still raise the top tax threshold from $180,000 to $200,000. These still very large tax cuts would cost $120bn less over the first 9 years than would the Stage 3 cuts. That would enable the government to, for example, increase Jobseeker to $1,025 and still have a better budget position than current predicted with the Stage 3 cuts.

    This highlights just how many options are available to the government.

    Budget are about choices, government is about choices. The Albanese government has a massive choice to make – either continue with the Stage 3 tax cuts that massive hit the budget for little reason other than to hand wealthy people a huge tax cut, or it can take this opportunity to create a fairer economy and society.


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    Commonwealth Budget 2025-2026: Our analysis

    by Fiona Macdonald

    The Centre for Future Work’s research team has analysed the Commonwealth Government’s budget, focusing on key areas for workers, working lives, and labour markets. As expected with a Federal election looming, the budget is not a horror one of austerity. However, the 2025-2026 budget is characterised by the absence of any significant initiatives. There is

  • Inequality and poverty is a policy choice – and the Stage 3 tax cuts will make both worse

    Inequality and poverty is a policy choice – and the Stage 3 tax cuts will make both worse

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on December 15, 2022

    When you reduce the revenue available to fund government services, you inevitably increase inequality

    Much has been made in the debate around the Stage 3 Tax Cut that the cuts themselves massively favour the wealthy and make our income tax system less progressive. But as Policy Director, Greg Jericho, notes in his Guardian Australia column the latest survey of Household Income Distribution reveals that is only the beginning of the problem.

    Taxation works to redistribute the national income, but taxes alone play only a small part. The real work in lowering inequality and raising people out of poverty comes from government benefits and crucially the provision of government services like public health and education.

    The poorest 20% of households have just 4.1% of all private household income in Australia. After taxes, this rises to 4.7%. Once you include government benefits it rises even more to 8.1%. But when you also include the dollar value of public education, health and other government services it rises to 12.1%.

    Without properly funded broad government services, Australia’s society would be much less equal as low t middle income households would be forced to battle the private sector for access to vital services.

    Given the massive cost of the Stage 3 tax cuts, which in their initial year cost $17.7bn – roughly the same as the cost of the PBS, and $6.2bn more than the federal government will spend that year on public schools – the policy threatens to not just make the tax system less fair, it will also significantly affect the ability of the government to provide the necessary services that create a better and fairer society.


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    Commonwealth Budget 2025-2026: Our analysis

    by Fiona Macdonald

    The Centre for Future Work’s research team has analysed the Commonwealth Government’s budget, focusing on key areas for workers, working lives, and labour markets. As expected with a Federal election looming, the budget is not a horror one of austerity. However, the 2025-2026 budget is characterised by the absence of any significant initiatives. There is

    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

  • Jailing climate protestor Violet Coco shows anti-protest laws have gone too far

    Jailing climate protestor Violet Coco shows anti-protest laws have gone too far

    by Ebony Bennett in The Canberra Times

    Ebony Bennett

    Deputy Director

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    Originally published in The Canberra Times on December 11, 2022

    The anti-protest laws that have swept the country are a threat to us all, even if you’ve never attended a protest in your life. Governments are writing and passing laws which authorise companies to legally cause harm to our community and environment, while jailing individuals seeking to stop such harm through non-violent protest.

    The draconian jail sentence handed down to climate protestor Violet Coco is grossly disproportionate and should ring alarm bells for anyone concerned about living in a free and fair democracy.

    Coco was part of a protest that stopped one lane of traffic on the Sydney Harbour Bridge for 28 minutes and she has been sentenced to jail for 15 months and refused bail. Jail is supposed to be a last resort, but this is a harsh sentence that would usually be reserved for breaching an AVO, or for serious and repeated property and theft offences. For comparison, a Canberra man was recently sentenced to 15 months jail for his role in kidnapping, beating and waterboarding another man over a dispute about missing drugs. Violet Coco was peaceful and didn’t physically harm anyone yet received a similar sentence. Are we really content to be a country that doles out prison sentences for the crime of mildly inconveniencing people?

    No matter if you support or oppose their methods, non-violent protest can be an act of community service. Like the pain signals our brain sends us when we are injured – protest is one way we know there is an injury to our community or to our natural environment that needs to be stopped or repaired.

    Draconian anti-protest laws have now been passed in several states including New South Wales, Victoria and more recently Tasmania. The laws have passed with the support of both the Labor and Liberal parties and are mainly targeted at environmental and climate protestors, though you can bet that governments won’t stop with environmental protestors.

    The purpose of these anti-protest laws is not to protect the community, but to limit the right to protest and to protect business interests above democratic interests. In its submission on Tasmania’s new anti-protest laws, the Australia Institute Tasmania, said: “[The law] continues to preference businesses’ ability to carry out work over the right of people to protest by giving broad powers to police to arrest peaceful protestors and imposing harsh penalties”.

    Tasmania’s laws could see a community member protesting the destruction of old growth forests on a forestry site face a penalty of over $13,000 or two years in prison. Obstructing a business while trespassing risks one year imprisonment. These are similar penalties to those  who trespass while holding a gun, drug another person or perpetrate aggravated assault. Under Tasmania’s new laws, holding a placard will be treated roughly the same as holding a gun.

    We know these laws aren’t passed to protect the interests of the Australian community because while Violet Coco is going to jail for causing a temporary traffic jam, companies that cause real and lasting damage to the environment and the community get away virtually scot free.

    For example, no executive from Rio Tinto went to jail for permanently destroying 46,000 years of world history and heritage in the Juukan Gorge rock shelters.. No coal company executive has ever been jailed for helping to cause climate change, which is turbo-charging the extreme weather events wreaking havoc and billions of dollars in damages upon communities across the country every year. Australia has one of the worst extinction rates for mammals, yet for decades we have chosen to exempt native forest logging from our national environmental laws that are supposed to protect threatened species, something the federal Labor government is now seeking to rectify. Companies are routinely authorised by governments to cause harm to community and to our natural environment while individuals are punished for peacefully protesting to stop such harms.

    Often it is governments that impose harms on the community. Until the Freedom Rides of the 1960s, public pools were still segregated in parts of Australia, prohibiting Aboriginal people from swimming with white people. Homosexuality was a crime in Tasmania until 1997 when years of protest resulted in gay law reforms, and let us not forget equal marriage has only been legal for five years. And former Greens Leader Bob Brown was once shot at during protests against logging at Tasmania’s Farmhouse Creek and he was arrested again this year, fighting the same fight to protect Australia’s forests.

    Whether it be the struggle for basic human rights, like the abolition of slavery, women’s suffrage and the fight for equal marriage, or to struggle to protect our natural world from destruction, like the battle to end whaling in the Southern Ocean, or to stop the destruction of the Amazon rainforest—many just causes are radical until they become inevitable.

    The Franklin River blockade saw around 1500 people arrested and 600 jailed, including Bob Brown who spent 19 days in Risdon Prison. But the day after his release in 1983, he was elected as the first Green in Tasmania’s Parliament. The Franklin River flows freely today thanks to those protestors. Australians owe a debt of gratitude to all those protestors who have been willing to risk jail to stand up for what’s right. But just because protestors are willing to risk jail, does not make harsh jail sentences for protests any less draconian or anti-democratic.

    Some people may not agreewith the methods of climate protestors, but causing a traffic jam is hardly a reason to send someone to jail for more than a year. Especially not when climate change is fuelling extreme weather events that are severely impacting Australians across the country. It is imperative that all of us fight to repeal the anti-democratic laws that have been passed by state governments around the country. Because the reality is that the right to peacefully protest is as fundamental to a healthy democracy as free and fair elections.


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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

    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 economy is slowing as the Reserve Bank hits the brake

    The economy is slowing as the Reserve Bank hits the brake

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on December 8, 2022

    The build up of savings during the pandemic is over – now we need strong income growth to keep the economy going as the Reserve Bank tries to slow it.

    The September quarter GDP figures reinforced the precarious nature of Australia’s economy.

    The annual GDP growth of 5.6% is extremely strong, but as Fiscal and Labour market policy director, Greg Jericho notes in his Guardian Australia column, the past three quarters have seen a slowing of growth with the economy growing just 0.6% in the September quarter.

    Largely the economy has been supported by household spending, and yet even here we see a slowing as household disposable income fails to keep pace with inflation.

    All of this comes at a period when the Reserve Bank is slamming on the brakes. Since the end of the September quarter the Reserve Bank has raised the cash rate by 75 basis points. And given that the impact of the rate rises in August and September would not be fully realised in the September quarter GDP figures, the economy is likely to keep slowing for some time more.

    The national accounts reveal that much of the inflation in the economy is in areas outside of the influence of the RBA – imports and energy costs – while areas such as house prices that are affected by rate rises have already slowed sharply.

    Given that household saving levels are back where they were prior to the pandemic, this means household spending must come from real growth in incomes. That will be hard to sustain if the economy slows further.

    The rate rises have already slowed the economy and with more rises and more slowing on the way, that makes 2023 a worrying year ahead.


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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 Reserve Bank needs to watch that it doesn’t push the economy off a cliff

    The Reserve Bank needs to watch that it doesn’t push the economy off a cliff

    by Greg Jericho in The Guardian

    Greg Jericho

    Chief Economist

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    Originally published in The Guardian on December 1, 2022

    For most of this year, the warnings and news about inflation have been one of hope for the best but experience the worst. Predictions of future inflation growth have continually been revised upwards and with it has been the suggestion that interest rates need to keep rising.

    But as Labour Market and Fiscal Policy Director, Greg Jericho, notes in his Guardian Australia column, the latest monthly inflation figures out yesterday suggest that maybe the peak could be lower than anticipated.

    While the monthly figures can be a little erratic, they do closely align with the quarterly “official” CPI figures and in October the ABS estimates that annual inflation growth fell from 7.3% to 6.9%. Better still this makes 4 months in a row where inflation has remained around 7%, rather than increasing quickly as it has since the middle of last year.

    Combined with the latest Retail Trade figures released this week which showed the dollar amount spent in the shops fell in October, and the volume of spending falling even faster, there are solid signs that the interest rate rises are having an impact.

    This means the Reserve Bank needs to be very cautious as much of the impact of the rate rises from September October and November has yet to flow through into the data. And because the rates of existing mortgages take longer to rise than do rates for new home loans this also means that even were the RBA to halt rate rises, for most mortgage holders rates will still be about to rise over the next few months.

    The IMF, OECD, Treasury and the RBA itself all forecast a sharp slowing of Australia’s economy next year and into 2024. The rationale has been that this is the cost of needing to reduce inflation, but the central bank needs to be very careful that it does not commit overkill. With the economy and consumer spending already slowing, and inflation showing some good signs that growth is no longer increasing at a rapid rate, the RBA should strongly consider not increasing the rate next week in its final board meeting of the year.


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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