A short-term budget with no vision or coherency

The 2022-23 budget is one of the most shameless election year budgets in memory. 

With the opportunity to use windfall gains in revenue to begin the fix of structural issues in the economy dealing with the low paid and essential services, the government instead has thrown money at voters in the hopes of re-election.

The Centre's Fiscal Director, Greg Jericho, goes through the budget numbers and finds that despite predictions of once again strong wage growth, the underlying assumptions are overly optimistic and would even still leave workers worse off than they were in the middle of 2019 until 2025.

The budget forecasts are for strong growth now, while the money is being pumped out, but once that ends we find yourself back with the same middling growth we had prior to the pandemic. 

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In next week's budget watch out for the tax cut that won't cut your tax

Next Tuesday, Treasurer Josh Frydenberg will deliver the 2022-23 budget. As it is only 2 months from the next federal election, the budget will be even more politically charged than usual.

And while there will be the usual attempts to suggest better wages growth is just around the corner and those on low-to-middle income earners are benefitting the most, we should watch out for the almost guaranteed spin around tax cuts. 

The Centre's Fiscal Policy director, Greg Jericho, notes in his Guardian Australia column that the low-to-middle income tax offset (LMITO) was meant to be discarded when the Stage 2 tax cuts were introduced. However because doing so would have delivered no net benefit to people earning below $90,000 the government extended the offset in the 2020 budget. 

It extended the offset again last year claiming it was providing tax relief to "10 million low-and-middle income earners" despite it actually doing nothing other than keeping the tax rate of those workers at the same level.

We can expect the same to occur next week. 

Budget spin is always a sight to behold, but we are now at the point where income earners are being told they are getting a tax cut that does not actually see them pay any less tax.

Meanwhile the Stage 3 tax cut that will deliver a cut of up to 4.5% for those earning $200,000 remains in place.

Spin and imaginary tax cuts for some; truly excessive tax cuts for others. 


Australia’s Skills System Continues to Crumble After COVID

A new report by Centre for Future Work offers a comprehensive review of vocational education and training (VET) in Australia, confirming Australia’s VET system shows growing signs of erosion, fragmentation and dysfunction. Several high-profile government announcements during the pandemic designed to address skilled labour shortages have not altered the VET system’s worrying trajectory.

Fragmentation & Photo-Ops: The Failures of Australian Skills Policy Through COVID by Senior Economist Alison Pennington reviews official data on VET funding, enrolments, and apprenticeships. The statistics paint a grim picture of a VET system starved of consistent funding or focus, fragmenting into scattered offerings of non-accredited and ‘micro-credential’ courses, mostly provided by private for-profit training companies.

“Continued decline in enrolments and eight years of declining apprenticeship completions make it very clear: Australia’s domestic skills pipeline is in disarray,” said Alison Pennington, Senior Economist at Centre for Future Work and the report's author.

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Flat wages and booming house prices cause housing affordability to plunge

Since the stimulus measures introduced in 2020 to prop up the housing market during the pandemic, house prices have exploded. In 2021 property prices across Australia's capital cities rose an astonishing 24%. Combined with the stagnant wages growth of the past 8 years, housing affordability has fallen dramatically. 

A decade ago the medium-priced house in Sydney was equivalent to 5.8 times the annual income of a median household; now it is 10.8 times that income. 

Greg Jericho examines the issue in his column in Guardian Australia and drills down to look at the affordability of housing across the nation and finds a shocking, yet unsurprising tale - and one that deserves a much greater focus in the coming election campaign than is currently the case 

https://www.datawrapper.de/_/GmaeJ/

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Sustainable Energy Critical to Australia's Aluminium Future

New research from the Centre for Future Work shows that the rapid transformation of Australia's aluminium facilities to sustainable sources of electricity would spark substantial economic benefits: for the aluminium industry, its supply chain, and for the burgeoning renewable energy sector (which would achieve greater critical mass from major new power supply contracts).

The report, by Jim Stanford (the Centre's Director) and Alia Armistead, looks in detail at the Tomago aluminium smelter in the Hunter region of NSW. It is Australia's largest smelter, and is currently powered through electricity mostly sourced from coal-fired generation. The facility has pledged to move to renewable power sources by 2030 -- and the new report confirms that this would underpin long-term industrial and economic benefits felt in all parts of the country.

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Record number of people working multiple jobs reveals the problems for workers

The latest Labour Account figures from the Bureau of Statistics reveal that at the end of last year a record percent of people were working more than one job.

The Centre for Future Work's Greg Jericho has analysed the figures and found an abnormally large number of new jobs since the pandemic have been in secondary jobs.

In the December quarter of 2021 a record 6.4% of employees were working multiple jobs

This unfortunately is not a pandemic-led one-off but part of a now 6-7 year trend that finds workers who are facing fewer hours, more insecure work, and getting pay rises that barely keep up with the cost of living being forced to seek another job to pay the bills. 

See Greg's full commentary in The Guardian: "Rise in hours worked signals post-lockdown recovery, but more people have multiple jobs than ever"


Australia's Lopsided Economic Recovery

While the headline news of 3.4% GDP growth in the December quarter of 2021 might suggest the economy is bouncing back, Greg Jericho, Policy Director for the Centre for Future Work, has found that the national accounts reveal just how badly workers are missing out.

In the last three months of last year, households in NSW, Victoria and the ACT came out of lockdowns and spent money propelling almost all of the economy growth in the economy.

But while households are providing all the growth, workers are missing out on the rewards. The share of GDP going to employees hit a record low in 2021 and as government stimulus begins to be withdrawn the picture is not as optimistic as the (erratic) quarterly growth figures might suggest.

Please see Greg's full commentary in The Guardian: "Don’t get too excited by Australia’s rebounding economy – it’s a distorted snapshot of the true picture."


International Collective Bargaining Experts Explore Future System Reform

Multiple negative economic and social consequences have emerged across Anglophone industrial countries from the retrenchment of collective bargaining systems, including slowing wages growth, rising insecure work, inequality, and declining productivity and growth - bringing urgency to proposals for collective bargaining reform.

On 10 February, Centre for Future Work hosted an exciting timely panel discussion between international collective bargaining experts titled “Beyond the Enterprise: Building Sectoral Collective Bargaining Systems in the Anglophone World”. The panel, delivered for the Association of Industrial Relations Academics of Australia and New Zealand (AIRAANZ) 2022 Conference, explored proposals across Australia, New Zealand, Britain and the US for widening bargaining scope to the multi-employer, industry-wide, or occupational level. Panelists and their presentation links are below:

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Loss of Bargaining Power Explains Wage Stagnation

The latest wages data from the Bureau of Statistics shows that in 2021 real wages plummeted, with inflation raising by 3.5%, while wages increased just 2.3%.

Our Policy Director Greg Jericho writes in Guardian Australia that claims of a “wages breakout” remain purely a scare campaign from employer groups determined to keep wages low. He finds that once again real wages are failing to keep pace with productivity and that as a result no pressure on inflation is coming from wage claims, but instead workers are missing out. With levels of unemployment now associated with much lower wage growth than in the past, it is clear the power imbalance in wage negotiations has shifted drastically away from workers.


Interest Rates and the Federal Election

For the first time in a decade the coming election will be at a time of increasing inflation and talk of rising interest rate. And while it is clear interest rates are always a political hot potato, Greg Jericho writes in his latest Guardian Australia column that we should not lose sight of the need for government support.

Inflation is occurring off the back of the largest government intervention and the lowest interest rates in post-WWII history. But while the economy is performing better than might have been expected when the pandemic first occurred it would be a mistake now to quickly reduce economic support from the public sector.

After the global financial crisis, worries about debt and deficit took precedence over the strength of the economy. At a time when government borrowing rates still remain historically low, the need to improve productivity through infrastructure and support in areas such as education and health, as well as equality improvements through high a higher Jobseeker rate, should take precedence in the upcoming federal budget.



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