It’s Wednesday and I cover a few topics usually in less depth than usual and provide a musical entree. From tomorrow (June 22 to 23), the so-called world leaders are meeting in Paris for the – Summit for a New Global Financing Pact – which is being hosted by the French president. The aim, apparently, is to build a new global architecture to replace the Bretton Woods system (they left it a while!) to ‘address climate change, biodiversity crisis and development challenges’. The solution that is being proposed is to allow the financial markets to create debt and speculative derivative products to fund the new architecture because, apparently, governments do not have the financial capacity. The whole initiative is about replacing defunct financial architecture but it still proposes to rely on the same (defunct) approach to public infrastructure development and the like that has failed dramatically to reduce inequality and poverty. It has certainly massively enriched the top-end-of-town and the same result will come out of this Pact. I also comment on the latest Brexit claims and provide a brief entree into some Covid research that I found interesting. Then some music.
Sometimes, one thinks that the intellectual world should evolve as intelligent people take account of the dissonance between their ideas and the facts before them and adapt their views. I know that doesn’t happen much but it should. I have studied the philosophy of science deeply enough over my student and postgrad days and beyond into my career to know that intelligent people have the capacity to completely fool themselves and hang onto defunct ideas as part of a paradigm-resistance to change. We know why that happens: senior professors have their reputations and legacy at stake, they control appointments, promotions, access to research grants, publication success for junior academics, and continuity of lucrative consulting empires. But sometimes I still am amazed when I read some research paper that I know has taken months to research and write up and which has been presented and talked about in seminars and conferences, and after dinner drinks and all the rest of it, but which bears no correspondence with the underlying reality. That was the situation when I read a research paper from three economists who were claiming that taxes have to rise and pensions cut if governments are to escape insolvency in the face of ageing societies. This continues, obviously, to be a powerful framework for proselyting the neoliberal mantra and a narrative that most people cannot see their way through to a conclusion that is all a fiction.
The Australian Bureau of Statistics (ABS) released of the latest labour force data today (June 15, 2023) – Labour Force, Australia – for May 2023. The May result reverses two consecutive months of weaker results from the Labour Force survey. Employment rose by 75.9 thousand (a strong monthly result), participation rose by 0.1 point to a record high, and unemployment fell by 16,500. But one month is not a trend and it should be emphasised that there are 10 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed. That extent of idle labour means Australia is not really close to full employment despite the claims by the mainstream commentators. I am waiting for the RBA governor to claim the fall in the unemployment rate justifies further interest rate increases. It doesn’t but since when has logic and facts got in the road of his agenda.
It’s Wednesday and as usual I consider a few topics in less depth than a single blog post, as a precursor to the music segment. Yesterday’s US inflation data from the Bureau of Labor Statistics (June 13, 2023) – Consumer Price Index Summary – May 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers continue to abate. All the data is pointing to the fact that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. Today, I also discuss the latest data on remuneration from Australia which shows that while corporate bosses have been urging wage setting processes in Australia to suppress the growth in wages for workers, an argument also used by the RBA governor recently, the bosses themselves have been getting massive nominal salary growth and increasing their purchasing power by a mutiple of the inflation rate. Modern day capitalism.
On June 2, 2023 Australia’s minimum wage setting authority – the Fair Work Commission (FWC) issued their decision in the – Annual Wage Review 2022-23 – which provides for wage increases for the lowest-paid workers – around 0.7 per cent of employees (around 75 thousand) in Australia. In turn, around 20.5 per cent of all employees, who are on the lowest tier of their pay award (grade) receive a flow-on effect. The FWC determined that sought to protect the real living standards of the lowest-paid workers in the nation after receiving a ‘direction’ from the new Federal Labor Government to do so. While the small number of workers who actually receive the FMW were largely protected from the current inflation-erosion of their purchasing power (although not compensated for losses over the last year), the larger group of workers on statutory awards who earn the minimum award rate went backwards in real terms as a result of the decision. The major employer groups argued for very low nominal rises, while at the same, as they are enjoying booming profits. A scandalous indictment of our system.
The RBA governor had a few ‘Qu’ils mangent de la brioche’ moments in the last week when he responded to criticisms that his manic interest rate increasing behaviour is driving low-income families into crisis by, first, saying that people who couldn’t find cheap housing should move back with their parents. Then he followed that with the recommendation that people should work harder and get second jobs if they couldn’t make ends meet as a consequences of the squeeze on their mortgage payments from the RBA’s monetary policy changes. Nice. This is an extraordinary period of policy chaos – we have an out-of-control central bank pushing rates up and using various ruses (chasing shadows) to justify the hikes, when inflation is falling anyway for reasons unconnected to the monetary policy shifts. All the RBA will succeed in doing is increasing unemployment and misery. The unemployed will ultimately bear the brunt of this chaotic policy period. But then ‘Qu’ils mangent de la brioche’ and they can move back in with their parents!
The Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, March 2023 – today (March 1, 2023), which shows that the Australian economy grew by just 0.2 per cent in the March-quarter 2023 and by 2.3 per cent over the 12 months. If we extend the March result out over the year then GDP will grow by 0.8 per cent, well below the rate required to keep unemployment from rising. Working hours dropped in the March-quarter and I expect that trend to accelerate in the coming quarters given the conduct of the central bank and treasury. The March-quarter result represents a significant decline in growth, Households cut back further on consumption expenditure while at the same time saving less relative to their disposable income in an effort to maintain consumption growth in the face of rising interest rates and temporary inflationary pressures. I expect growth to decline further and we will be left with rising unemployment and declining household wealth as a result of the RBA’s poor judgement.
Last Friday (June 2, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – May 2023 – which revealed that the the US labour market may be at a turning point but is certainly not contracting at a rate consistent with an imminent recession. There was a continuing weakening of net employment growth, even though the payroll and survey data were in conflict. The rate of decline though, is currently consistent with an imminent recession. We will see in the June figures whether the slowdown has become a trend.