World Economy

Profits, Jobs Rising in Australia, But Wage Recovery Gradual

Profits, Jobs Rising in Australia,  But Wage Recovery Gradual Profits, Jobs Rising in Australia,  But Wage Recovery Gradual

Australia’s economy looks like it will dodge the dual risks of a sharp fall in housing prices and a slowing in China, according to the latest Deloitte Access Economics Business Outlook.

“The clouds around Australia’s economy are clearing,” writes Chris Richardson Partner at Deloitte Access Economics. He says most likely path for Australia doesn’t see a triggering of China and/or housing risks, Business Insider reported.

“Rather, it sees both national income and national production growth gradually return to a steadier path, boosting wage growth as they do so, albeit slowly,” he says. He sees a gradual recovery in wages from their current record lows of less than 2% annual growth.

“Profits are up, jobs are up, and the next train to leave the station will be wages,” he says.

 “None of the three big drivers of inflation risk—a strong economy giving businesses pricing power, or wage growth outstripping productivity growth, or rising import prices from a falling $A—currently point to anything like a surge in pricing pressures.

“At best they spell out a very slow burn in which pressures will lift over the next couple of years.” He describes Australian job growth as a thing of beauty.

 “And it looks set to stay beautiful for a while longer, as good global growth lifts the demand for both labor and capital, thereby boosting the outlook for both jobs and business investment,” Richardson says.

The economy is growing by about 1.9% per year, according to the Reserve Bank. In 2012, that figure was 3.7%. Weaker growth means that pay packets are shrinking for many workers when adjusted for the rising cost of living, and near-record levels of underemployment are stifling wage increases.

In August, retail sales posted their biggest retreat in about four-and-a-half years, falling by 0.6%, with cafes and restaurants reporting declining turnovers.

“Better global growth has finally flowed through to the national tax take. Official expectations are being bettered as profits boost company tax, jobs lift personal tax, spending boosts the GST, and house prices sprinkle fairy dust on stamp duties.

“New taxes on banks plus a bigger medicare levy add to that, extending a long running revenue recovery since it troughed as a share of national income back in 2011.”

Add new comment

Read our comment policy before posting your viewpoints