The release of the national accounts the other day provided unexpected good news. GDP was barrelling along at a healthy rate of a 3 per cent increase per annum. Paul Syvret took a look behind the headline figures and discovered the ugly truth. We are in an income recession.
He says, a broader statistical measure for how the economy is faring is the net national disposable income figure rather than the simple GDP figure. National disposable income shrank again for the sixth successive quarter.
At an individual level, real wages are flatlining:
According to the ABS, real wages growth “is now the lowest on record since the series was first published in September quarter 1998”.
Productivity has improved, as companies “do more with less”. So the extra profits must be going to company profits. Oddly, however, this article says that gross operating company profits declined by a larger than expected 2.8 per cent in the December quarter. Something doesn’t line up!
Returning to the beautiful GDP numbers, a closer inspection reveals that half the growth was attributable to government expenditure. After that the biggest item was household expenditure.
Unsurprisingly, then, “the household savings ratio has fallen to just over 7 per cent, down from a peak of 11.6 per cent in the aftermath of the global financial crisis.” This graph shows rising household debt as a percentage of disposable income:
Retrospectively the growth in household debt was strong throughout the Howard-Costello years.
Clearly it’s unsustainable. Both government and household debt are expanding as we relax under Tory management. We’ve got a budget problem, but if either government or household expenditure is constrained the problem will worsen.
Morrison will need to weave some magic in the May budget. Best to go straight to an election campaign with a big scare about negative gearing and the need to control union power.
Meanwhile some capitalists have sought to resolve their problems by paying workers next to nothing. We had the 7-Eleven problem. Now some seasonal farm workers are being paid as little as $9 per week after deductions, and 60% of international students in Sydney are being underpaid.