Figure 1: Unemployment rate - June 2013
No economy is ever perfect. Unions are well aware of the ways in which Australia’s economy falls short of our aspirations – insecure work is too prevalent, inequality too high, and the strong dollar has put some jobs and industries at risk, to name just three concerns. But notwithstanding those very real issues, it’s worth having a look at the way Australia’s economy has performed over the past six years – the period since the beginning of the financial crisis1 and the period in which the Labor Government has been in office. The most important measure of a government’s success for working people is jobs. On this front, Australia has outperformed most of the developed world since the GFC struck. While the unemployment
Spain Portugal Slovak Republic Ireland Italy Euro area (17 countries) Slovenia France Poland Belgium Sweden OECD - Total Finland United Kingdom United States G7 Canada Israel Netherlands Czech Republic Denmark Iceland Luxembourg Australia Germany Mexico Austria Japan Korea
economies in the world. We’ve benefited from strong export demand from China and elsewhere, as well as the prudent interest rate cuts made by the Reserve Bank in 2008-09 and in the past year, but the fiscal stimulus packages also deserve some credit for Australia’s strong performance in recent years. Remember that unemployment can have a ‘scarring’
5.7
0
rate has risen a little to 5.7%, this remains a far lower unemployment rate than most other developed
8.0
5
10 15 20 Per cent
25
30
Source: OECD Stat
Figure 1 shows the latest unemployment rates in the OECD developed countries, while Figure 2 compares Australia’s unemployment rate since mid-2007 with other OECD countries. Figure 2: Unemployment rates Per cent 13
11
Australia
Euro area
USA
UK
Canada
OECD total
effect on the individuals and communities involved – after unemployment rises in a recession, it can take
9
years to get it down again, and it has long-lived effects on wages and people’s health. Avoiding a surge in unemployment is something for which this
7
5
government can and should take credit. 1
The USA went into recession in December 2007. See: http://www.nber.org/cycles.html
3 Jul 07
Jul 08
Source: OECD Stat
ACTU Economic Bulletin - August 2013 – Page 1
Jul 09
Jul 10
Jul 11
Jul 12
Jul 13
Australia’s real economic output – GDP – hasn’t fallen for two consecutive quarters since 1991. That’s 22 years without a recession, an astonishing run for an economy that has historically been prone to booms and busts. Figure 3 shows how Australia’s real GDP has fared in recent years relative to some other English-speaking democracies – our economy grew by around 13% between 2007 and 2012, while the US and New Zealand barely grew at all and the UK, with its sharp cutbacks in government spending, has a smaller economy now than it did in 2007. Figure 3: Real GDP Index (2007=100) 120 115 110
Australia United States United Kingdom New Zealand Canada
Greece Japan Portugal Ireland Italy United States France United Kingdom Belgium Spain Hungary Israel Iceland Germany Austria Mexico Canada Netherlands Korea New Zealand Switzerland Turkey Poland Australia Denmark Estonia Slovenia Slovak Republic Luxembourg Czech Republic Chile Sweden Finland Norway
12.7
-175 -50
105
0
50 100 Per cent
150
200
Source: IMF World Economic Outlook. Figures include sub-national (state and local) governments where applicable.
100
Business groups and the Coalition have also claimed that Australia’s productivity performance has been
95 90 2007
Figure 4: Net government debt in OECD countries
poor in recent years, and have blamed this on the 2008
2009
2010
2011
2012
2013
Fair Work Act and other government policies. This is a
Source: IMF World Economic Outlook. 2013 figures are the IMF forecasts.
baseless claim. Australia’s labour productivity, which The Coalition and others have claimed that Australia has run up too much debt in recent years. But, as has been pointed out by the government, our stock of net government debt (including State and local governments) is equivalent to around 12.7% of our GDP – one the very lowest ratios of any developed country. It’s better for working people that our government took on this modest level of debt to avoid high levels of unemployment and the long-run social and economy problems that can bring.
is the average amount of economic output generated per hour worked, rose strongly in the 1990s. The growth rate then slowed markedly in the early 2000s. The main reasons for this were the mining investment boom (which uses up a lot of capital and labour, without generating output for a number of years) and big investment in utilities such as electricity
transmission
networks
that
haven’t
translated into additional GDP. Productivity growth was sluggish throughout the Work Choices years, though largely for reasons unconnected with industrial relations. Over the past couple of years, labour productivity growth has started to pick up again – 2012 saw the fastest growth in a decade.
ACTU Economic Bulletin - August 2013 – Page 2
Productivity growth can be volatile – to smooth this
workers.2 After falling slowly between the mid-1990s
out a little, Figure 5 shows the amount of growth
and mid-2000s, the gap rose quite sharply in the late
over rolling two-year periods. You can see that the
2000s. The gap remains at this too-high level, but
growth between March 2011 and March 2013 was
since November 2009 it has at least stopped growing
the strongest seen since 2000-2002.
further.
Figure 5: Labour productivity growth in two-year periods Per cent 8%
Figure 7: Gender pay gap - full time workers 19% 18%
6%
17% 16%
4%
15% 14% Seasonally adjusted
2% 13%
Trend 0% Mar 93
Mar 97
Mar 01
Mar 05
Mar 09
Mar 13
12% Aug 94
Aug 98
Aug 02
Aug 06
Aug 10
Source: ACTU calculations based on ABS 6302. Source: ACTU calculations based on ABS 5206, trend.
Average wages for workers have outstripped inflation, meaning that real wages have grown solidly in recent years.
Between 1997 and 2005, under the Australian Industrial Relations Commission, minimum wages generally increased a little bit more than the cost of living each year, delivering a modest real increase in
Figure 6: Real average full-time wage growth
wages for the low paid. Under the Australian Fair Pay
5%
Commission introduced as part of the Work Choices
4%
legislation, this was not the case. Increases barely 3%
compensated for the cost of living, and the real value
2%
of the National Minimum Wage was lower in 2010
1%
than in 2005. The Fair Work Commission has
0%
delivered only modest increases, far from sufficient to stop the gap between the low-paid and other
-1% Overall real AWOTE growth (year-ended) -2% May 03
Long-run average May 05 May 07 May 09
May 11
May 13
Source: ACTU calculations based on ABS 6302 and ABS 6401.
The gender pay gap is one long-running sore spot for
workers from growing further, but the Commission has at least lifted the real value of the National Minimum Wage above its 2005 level for the first time. The low-paid have at least seen some modest
the Australian economy – it’s too high, and research 2
See Cassells, et al. 2009, ‘The Impact of a Sustained Gender Wage Gap on the Australian Economy’, NATSEM accounted for by differences in the skills, experience, paper for FaHCSIA, available from: http://www.fahcsia.gov.au/sites/default/files/documents/ and other job-related attributes of men and women 05_2012/gender_wage_gap.pdf. ACTU Economic Bulletin - August 2013 – Page 3
indicates that the majority of the gap cannot be
improvement in their real wage, something that did
You can see the effect of these changes in Figure 10.
not occur under the AFPC.
This shows the average tax rate of an individual with
Figure 8: Real value of the National Minimum Wage per week
an income equal to average full-time earnings
Real 2012 dollars (LCI deflated) $640
(AWOTE), and the tax rate of people on 25%, 50%,
$620
taxable income equal to a quarter of the average full-
$600
time wage would’ve been liable to pay around 6% of
$580
their income in income tax. Now that person would
and 300% of AWOTE.3 In 2005-06, someone with a
pay no income tax. The cuts in income tax for low-
$560
income earners have been larger than those for $540
middle- and upper-income earners – a reversal of the
$520 $500 2000
trend for the previous three decades or so. 2002
2004
2006
2008
2010
2012
Source: ACTU calculations based on FWC and ABS 6467.
Figure 10: Average personal income tax rate paid by income level ATR 50%
This government has also made the personal income
45%
tax system more progressive. In 2005-06, the
40%
effective tax-free threshold (which takes account of
35%
the low-income tax offset) was reached when a
30%
worker earned just 14% of average full-time earnings. Successive changes since then, most notably the big boost in the statutory threshold in 2012-13, have
20%
50% of AWOTE
15% 10% 5%
full-time earnings – the first time the threshold has
0% 1982-83
Figure 9: Effective tax-free threshold as a proportion of average full-time earnings
AWOTE
25%
lifted the effective threshold above 25% of average
been this high since the early 1980s.
300% of AWOTE
25% of AWOTE 1992-93
2002-03
2012-13
Source: ACTU calculations based on historical tax rates from the ATO and historical wage rates from ABS 6302 and RBA tables.
As a result of the strong jobs performance,
30%
progressive changes to the tax system, and decent 25%
real wage growth, after-tax incomes have grown for people in each part of the income distribution. Unlike
20%
in previous periods, the largest income gains 15%
between 2007-08 and 2011-12 have been at the lower deciles – the lowest income earners have seen
10%
their incomes grow faster in recent years than high 5% 0% 1982-83
income earners. This is partly due to the large 1992-93
2002-03
2012-13
3
The ATR=personal income tax liability as a proportion of gross income. Medicare Levy and LITO are included. It is Source: ACTU calculations based on historical tax rates from the ATO and assumed that there are no deductions. This analysis is from historical wage rates from ABS 6302 and RBA tables. a forthcoming ACTU Working Australia Paper. ACTU Economic Bulletin - August 2013 – Page 4
Figure 12: Income inequality in Australia
increase in the age and disability support pensions, as well as reductions in income tax for low-income earners. Figure 11: Real income growth between 2007-08 and 2011-12 P90
0.33 0.32
1.8%
P80
Gini coefficient 0.34
0.31
2.3%
P70
2.8%
0.30
P60
3.0%
0.29
P50
3.1%
0.28
P40
4.6%
P30
0.27 1994–95
4.1%
1997–98
2002–03
2007–08
2013-14
Source: ABS 6523. Based on equivalised household disposable income.
P20
4.0%
P10
Social and economic policy in recent years has not
8.0%
been perfect. Insecure work and underemployment 0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Source: ABS 6523. Figure shows income after taxes and transfers, adjusted for inflation and household size (ie. equivalised household disposable income).
While those on Newstart and other allowances continue to languish on unacceptably low incomes, and we have too many families living in poverty, the gains of recent years shouldn’t be overlooked either. Inequality, as measured by the commonly-used Gini coefficient, has fallen in recent years. It remains high, but the increases in inequality seen in the early phase of the mining boom (and the latter years of the Howard Government) have been reversed, at least for now.
are too prevalent. The Newstart Allowance is so low that it virtually guarantees that its recipients will live in poverty. The high dollar has led to difficult trading conditions
for
firms
in
some
trade-exposed
industries, which has put pressure on jobs in those areas.
But
there
are
plenty
of
positives.
Unemployment remains low, we’re in our 22nd year of unbroken economic growth, net debt remains low and manageable, wages have outpaced the cost of living, and inequality has fallen. It would be a shame if these gains were to be reversed in the coming years.
Please send any comments, corrections, criticisms or compliments
to
mcowgill@actu.org.au.
ACTU Economic Bulletin - August 2013 – Page 5
Matt
Cowgill
at
Employment and unemployment The tables and charts below summarise the latest available data about the Australian labour market. Table 1: Summary of labour force figures
Employed persons - Full time employment
Level
Monthly change
Yearended change
11653200
-10200
122900
8133900
-6700
37700
Figure 14: Change in employment in the year to July Thousands 140 122.9 120 100
85.3
80 62.360.6 60 40
17.020.7
20 - Part time employment
3519300
-3500
85300
Working age population
18976200
26600
335300
Employment-topopulation ratio
61.4%
-0.1
-0.5
Unemployment rate
5.7%
0
0.5
Unemployed persons
705400
-5700
69000
7.40
0.3
0.1
5.5
65.1%
-0.2
-0.2
5.0
45.4 39.9
37.7
0 Full time Males
Part time Females Persons
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
Figure 15: Unemployment rate
Underemployment rate (quarterly) Participation rate
Source: ABS 6202, seasonally adjusted.
-2 -2.0
-2.2 -4
Per cent 6.5
Unemployment rate
6.0
4.5
Figure 13: Change in employment between June and July Thousands 0
4.0 3.5 3.0 Jul 03
-1.4 -3.5
-3.7
Seasonally adjusted Jul 05
Jul 07
Trend
Jul 09
Jul 11
Jul 13
Source: ABS 6202.
-4.5
Figure 16: Unemployment rates by State/Territory
-6 -8
Total
-6.7
6.9
Tas
-6.5
8.4 5.7
SA
-10
6.4 5.8 6.1 5.5 5.6 5.1 5.6
Qld -10.2 Vic
-12 Full time Males
Part time Females Persons
Total NSW
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
4.0
NT
5.3 3.8
WA
4.8 3.7 3.6
ACT 0
2
4 6 Per cent Jul 2012 Jul 2013
Source: ABS 6202, trend.
ACTU Economic Bulletin - August 2013 – Page 6
8
10
Figure 17: Employment to population ratio
Figure 20: Employment growth in the year to May 2013
Per cent 64
Wholesale Trade
9.2%
Transport, Postal and Warehousing
63
Accommodation and Food Services
62 61
5.7%
Education and Training
4.1%
Public Administration and Safety
3.4%
Health Care and Social Assistance
3.3%
Retail Trade
3.1%
Construction
2.1%
Other Services
1.0%
60
Professional, Scientific and…
59 58 Jul 03
8.4%
Seasonally adjusted Jul 05
Jul 07
-0.8%
Arts and Recreation Services
-1.9%
Financial and Insurance Services
-2.5%
Manufacturing
-2.6%
Mining
-2.7%
Trend
Jul 09
Jul 11
Jul 13
Source: ABS 6202.
Figure 18: Participation rate 15-64 (%) 77.0
Participation rate (trend)
15+ (%) 66.0
0.4%
Administrative and Support Services
Agriculture, Forestry and Fishing
-7.3%
Information Media and…
76.5
65.5
76.0
65.0
75.5
64.5
75.0
64.0
74.5
63.5
-7.7%
Rental, Hiring and Real Estate…
-8.6%
Electricity, Gas, Water and Waste…
-8.9%
-10%
-5%
0%
5%
10%
Yearly change in employment (%) Source: ACTU calculations based on ABS 6202, trend.
Figure 21: Consumers' unemployment expectations
74.0 Jul 03
15-64 (LHS) Jul 05
Jul 07
15+ (RHS) Jul 09
Jul 11
63.0 Jul 13
Index 200 180
Source: ABS 6202.
Figure 19: Underemployment and unemployment rates Per cent 14 12
Percentage points Unemployment expectations (index) (LHS) 3 Change in unemployment rate (year-ended) (RHS) 2
160 1
140
0
120
10 Underemployment
-1
100
8 80 Jul 93
6
Jul 03
Jul 08
-2 Jul 13
Source: ACTU calculations based on Westpac-Melbourne Institute Unemployment Expectations Index and ABS 6202, trend.
4 Unemployment
2 0 May 08
Jul 98
May 09
May 10
May 11
May 12
May 13
Source: ABS 6202, trend.
ACTU Economic Bulletin - August 2013 – Page 7
Output and productivity growth
Source: ABS 5206 and ACTU calculations. Non-farm.
Note: the June quarter National Accounts will be released in early September. The September edition of the ACTU Economic Bulletin will summarise these figures.
Table 2: Summary of March quarter National Accounts
Figure 24: Annual growth in labour productivity (GDP per hour) Year-ended growth 5%
Level
Quarterly change
Yearended change
Real gross domestic product (GDP)
374210
0.6%
2.5%
Real GDP per capita
16069
0.2%
0.7%
1%
-
0.0%
1.6%
0%
-
0.6%
2.0%
Labour productivity (total economy) Labour productivity in the market sector Terms of trade
-
2.6%
-6.2%
Fair Work Act
Work Choices
4% 3% 2%
-1% -2% Mar 03
Seasonally adjusted Mar 05
Mar 07
Trend
Mar 09
Mar 11
Wages share of income Profits share of income
54.0%
-0.7
0.2
26.9%
0.6
-0.8
Source: ABS 5206.
Figure 22: Growth in real GDP per year 6%
Figure 25: Growth in output (gross value added) – year to March 2013 Mining
8.1%
Health care and social…
6.4%
Financial and insurance…
6.1%
Transport, postal and…
4.6%
Rental, hiring and real estate…
4.1%
5%
Retail trade
20-year average, 3.4%
4% 3% 2% 1%
4.0%
Professional, scientific and…
3.4%
Administrative and support…
3.2%
Wholesale trade
2.9%
Education and training
2.5%
Public administration and…
1.5%
Accommodation and food…
0.5%
Arts and recreation services
0% Mar 03
Seasonally adjusted Mar 05
Mar 07
Mar 09
Mar 11
Mar 13
Figure 23: Annual growth in nominal unit labour costs 6%
-0.3%
Manufacturing
-0.7%
Electricity, gas, water and…
-1.5%
Information media and…
-3.3%
Agriculture, forestry and fishing Other services
20-year average, 2.4%
Source: ABS 5206.
0%
Seasonally adjusted Mar 97
Mar 01
-5.9% -9.4%
-15% -10% -5% 0% 5% 10% Annual GVA growth
2%
-2% Mar 93
0.3%
Construction
Trend
Source: ABS 5206 and ACTU calculations.
4%
Mar 13
Source: ABS 5206.
Mar 05
Trend Mar 09
Mar 13
ACTU Economic Bulletin - August 2013 – Page 8
Prices and wages
Figure 27: Headline and underlying CPI inflation Per cent 5%
Table 3: Summary of prices and wages data Latest quarter
Level
Year-ended change
June
-
2.9%
Wage Price Index (WPI)
3%
Full-time average weekly ordinary time earnings (AWOTE)
May
$1,421
5.3%
Real full-time AWOTE
May
$1,421
2.9%
Total average weekly earnings (AWE)
May
$1,105
4.9%
2%
From 1 July
$622
2.6%
Average wage increase in collective agreements
March
-
4.5%
Headline CPI
June
-
2.4%
Trimmed mean (underlying CPI)
June
-
2.2%
Employees’ cost of living (LCI)
June
-
1.4%
Gender pay gap
May
17.5%
-0.1%
0% Jun 03
Underlying CPI Jun 05
Jun 07
Jun 09
Jun 11
Jun 13
Source: ABS 6401.
Figure 28: Wage Price Index growth 4.5%
4.0%
Source: ABS 6345, ABS 6302, FWC, DEEWR Trends in Federal Enterprise Bargaining, ABS 6401, ABS 6467, ACTU calculations.
Figure 26: Annual growth in the CPI and workers’ cost of living (LCI)
6%
3.5%
Long-run average
3.0%
2.5%
2.0% Jun 98
5%
Trend
Seasonally adjusted
Jun 03
Jun 08
Jun 13
Source: ABS 6345.
4%
Figure 29: WPI growth in the public and private sectors
3%
5.0%
2%
4.5% Underlying CPI Employee LCI
4.0%
0% -1% Jun 03
RBA's target band
1%
Headline CPI
National Minimum Wage per 38 hour week
1%
4%
3.5% Jun 05
Jun 07
Source: ABS 6467, ABS 6401.
Jun 09
Jun 11
Jun 13 3.0% 2.5%
Private Public
2.0% Jun 03
Jun 05
Source: ABS 6345.
ACTU Economic Bulletin - August 2013 – Page 9
Jun 07
Jun 09
Jun 11
Jun 13
Figure 30: WPI growth in the year to June by industry 0% 1% 2% 3% 4% Electricity, gas, water and…
3.9%
Mining
3.5%
Health care and social…
Figure 32: WPI growth in the year to June by State 0% 1% 2% 3% 4% WA
3.4%
SA
3.3%
3.4%
Wholesale trade
NT
3.3%
Construction Rental, hiring and real…
3.2%
3.1%
Victoria
3.0%
3.1%
Tas
2.9%
ACT
2.9%
ACT
2.9%
Other services
3.0%
Australia
2.9%
Public administration and…
2.9%
Financial and insurance…
2.9%
NSW
2.8%
Information media and…
2.9%
Qld
2.8%
Arts and recreation services
2.9%
Source: ABS 6345.
Manufacturing
2.9%
Transport, postal and…
2.8%
Professional, scientific and…
2.8%
Retail trade
Figure 33: Average weekly ordinary time earnings for full-time adults $0 $1,000 $2,000 Current level
2.7%
Administrative and…
Mining
2.7%
Accommodation and food… Education and training
Professional, Scientific…
$1,706.60
2.6%
Information Media and…
$1,671.10
2.5%
Financial and Insurance…
$1,645.30
Source: ABS 6345.
Electricity, Gas, Water…
Figure 31: Range of WPI growth rates across industries 7%
Construction Transport, Postal and…
5% 4% 3% 2%
0% Jun 03
Education and Training Public Administration…
6%
1%
Health Care and Social…
$1,354.10
Arts and Recreation…
$1,315.50
Rental, Hiring and Real…
$1,303.80
Administrative and…
$1,276.50
Accommodation and… Jun 13
Source: ABS 6345 and ACTU calculations. Based on a 5-quarter centred moving average.
$1,425.10
$1,417.30
Other Services Jun 11
$1,436.00
Wholesale Trade
Australia Jun 09
$1,485.20
$1,420.90
Manufacturing
Jun 07
$1,622.90 $1,499.00
All Industries
Range of growth rates in all industries
Jun 05
$2,423.50
Retail Trade Source: ABS 6302.
ACTU Economic Bulletin - August 2013 – Page 10
$1,251.40 $1,104.70 $1,049.80 $1,022.00