Cool for Cats

One of the pleasures of contributing to Catallaxy Files is the knowledge that it is the smartest and best informed community in Australia.

To wit, Spartacus would like to pose the following question in the hope that someone can provide an answer.

If, as is constantly repeated, wages are not rising, how is it that the government is collecting squillions of extra tax dollars through bracket creep?

Where is the data supporting the proposition that wages aren’t rising?

Please explain.

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33 Responses to Cool for Cats

  1. Garry

    Wages are rising but not at previous levels and not across the spectrum. Those in higher paid jobs who negotiate a salary are seeing modest rises while those in the service industry and other lower paid jobs not so much. Remember though the public service – for them the pay rise juggernaut continues to roll right along!

  2. Leigh Lowe

    Parts of the private sector are stagnant.
    Pay rises in the public sector continue unabated.

  3. Grunter

    On a side note – Govt is wrong in saying that lower company tax rate will lead to an eventual rise in wages. Wages will rise when competition for staff increases.

  4. Mundi

    The rate at which wages are growing has been in decline since 2007.

    However they are still growing.

    In many parts of these private sector the growth is less than inflation when bracket creep is considered, so people are getting poorer.

    In the public sector there is now a limit of 2% on pay rises, including on government buisness enterprises regardless if they make or loose money (ABC and Aust Post are both under the 2%, same as say centrelink employees).

    Pay rates are now set by a renumeration board.

  5. duncanm

    Oh frabjous joy.. Yassim and the AHRC.

    Meanwhile, Soupman is re-tweeting that old purveyor of love and sunshine,Ozman Faruqi.
    https://twitter.com/timsout/status/961113793140051968

    https://twitter.com/oz_f/status/961103438938624001

  6. Arky

    Over the quarter, private wages grew by 0.4%, the weakest result since the September quarter of 2009. That’s GFC territory.

    In contrast, public sector wages grew at comparatively brisk pace of 2.39% over the year, largely unchanged from the 2.4% level reported previously.

    Over the quarter, public sector wages grew by 0.63%, up from 0.55% in the three months to March.

    By industry, wage growth ranged from 1.1% for the mining industry to 2.6% for health care and social assistance industries, the ABS said.

    The industry figures, along with those for states and territories, are not seasonally adjusted.

    This table shows how wage growth fared by individual industry, both over the June quarter and from a year earlier. The ABS yet again made no adjustment to the scale, providing an unwelcome reminder on how fast wage growth in Australia used to be.

    Source: ABS

    By location, Western Australia recorded the slowest wage growth over the year at 1.4%. At the other end of the spectrum, hourly wage rates in South Australia and Northern Territory grew by 2.1%, the fastest level of all states and territories.

    This chart, also from the ABS, looks at the wage increases recorded for private and public-sector workers by state and territory over the past year.

    Source: ABS

    For private sector workers, the strongest quarterly increase was recorded in the mining sector.

    “Western Australia was the main driver of wage growth in the mining industry in June quarter 2017, with some employees receiving their first wage increases in several years, the ABS said.

    Despite that strong quarterly increase, wages in the sector still grew at the slowest pace of all industries during the year at 1.1%. Health care and social assistance workers in the private sector recorded the the largest increase from a year earlier at 2.3%.

    For public sector workers, the strongest quarterly increase was seen for electricity, gas, water and waste workers at 0.8%. At the other end of the spectrum, those working in professional, scientific and technical services, public administration and safety, and education and training saw their wages lift by just 0.2%, the smallest increase of all industries.

    Over the year, wage growth in the public sector ranged from 1.6% for professional, scientific and technical services to 2.8% for health care and social assistance.

    So while wage growth varied by location and industry over both the quarter and the year, the prevailing theme remains that hourly wage growth remains incredibly weak, especially for private sector workers.

    To Paul Dales, chief Australian and New Zealand economist at Capital Economics, it looks set to remain that way for some time yet.

    “Wage growth will probably nudge up, perhaps to 2.1%, in the third quarter due to the higher-than-usual increase in the minimum wage on 1st July, but that’s hardly a reflection of the health of the economy,” he said immediately following the release.

    “And with the underutilisation rate — the best measure of spare capacity in the labour market — still very high, there isn’t going to be much of a cyclical boost to wage growth over the next year or so.”

    Dales says that structural forces such as increased globalisation and a decline in the bargaining power of workers will also act to constrain wage growth, as has been seen in other advanced nations with far tighter labour market conditions that those seen in Australia at present.

    As such, he remains sceptical that the Reserve Bank of Australia will be hiking rates anytime soon.

    “There are two implications,” Dales says.

    “First, underlying inflation is not going to rise much when wage growth is low.

    “Second, with real wages not increasing at all, the pressures on households’ finances are mounting.

    “(This) supports our view that the low wage, low inflation climate will mean the RBA won’t raise interest rates next year as the markets expect. With households’ real wages having been unchanged over the last year, consumption growth will surely slow soon.”

    In the minutes of its August monetary policy meeting, the RBA acknowledged that its inflation forecasts partly reflect “an expectation of a modest increase in wage growth as labour market conditions tightened further”.

    While the latter is occurring thanks to strong hiring levels in recent months, there’s little in today’s data to suggest that its contributing to a lift in wage pressures yet.

    Upcoming labour and wage data will almost certainly play a key role in determining both whether the RBA’s upbeat forecasts for inflation and GDP growth will be met, as well as whether there’ll be a need to lift interest rates next year as some forecasters currently predict.

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  7. Defender of the faith

    There is a very large bulge in infrastructure investment that is driving wages in related parts of the private sector. Large parts of the finance sector remain strong drivers of wages growth. Low wage jobs have had little wages growth for some years, suppressing average wages growth. Public sector salaries are typically moving with nominal inflation.

  8. Driftforge

    If wages are rising slower than the rate of inflation, then both statements will be true.

  9. DaveR

    Is the actual problem inflation, like elsewhere in the world right now, leading to low or negative real wages growth?

    Are our measures of inflation adequate in this post-GFC era?

  10. Ray

    There are three components to this issue. First, there is a difference between real and nominal wages. Nominal wages have been increasing at a compound annual growth rate of 1.7% over the five years to June 2017, yet inflation over the same period has averaged 1.5%, giving a real increase in average wages of just 0.2% per annum. Nominal wages feed into higher tax receipts and bracket creep while it is real wages which affect standards of living. Thus tax receipts can rise as the average person experiences stagnant real wages.

    Second, average wage increases of 1.7% per annum disguise the uneven nature of these changes such that many families will have seen their real wages drop despite the average figures indicating a minimal increase.

    Third, Federal tax receipts are driven by the level of real wages as well as the number of people in the work force. Over the last five years, the compound annual growth rate of the work force has risen by 1.5%, due mainely to immigration flows. This means that tax receipts will jump 1.5% per annum above the rate of nominal increases in average wages. In other words, whereas average wages are up 1.7% per annum, the taxable incomes base is actually up 3.2% per annum.

    Hopefully this will explain how tax receipts can rise in the face of stangnant average wages.

  11. Pyrmonter

    1 – Employment growth.

    http://www.abs.gov.au/ausstats/[email protected]/mf/6202.0

    (there are more jobs at all wage levels and the employment to population ratio is back to pre-GFC levels: http://www.abs.gov.au/ausstats/[email protected]/Latestproducts/6202.0Main%20Features2Dec%202017?opendocument&tabname=Summary&prodno=6202.0&issue=Dec%202017&num=&view=)

    2 – “Stagnating” wages mean nominal increases of c. 2% pa. Enough to feed bracket-creep.

  12. Jo Smyth

    The public sector is expanding, wages in the public sector continue to rise, very large private sector companies have given rises. As usual it is those in the middle who have been feeling the pinch.

  13. Up The Workers!

    Could it be that taxpayer lactation is booming?

    We seem to have more and more ‘entitled’ freeloaders, parasites, politicians and International Centrelink-Seekers dining on the taxpayers’ teat with every passing month.

  14. Atoms for Peace

    Tax brackets aren’t adjusted annually for CPI. Simples..

  15. Bruce of Newcastle

    Not included in wages and salaries would be tradies’ invoices.

    My impression is that tradies’ charges have risen quite rapidly. This would be logical in view of the residential building boom and the boom in renovation shows on TV.

    My other observation is that newish big houses often have tradies vehicles parked in the driveway. Which suggests they can afford schmick houses.

    Furthermore the ideological push to indoctrinate educate kids in universities suggests supply of tradies is down. The laws of supply and demand still apply despite the Left’s wish they’d go away.

    All those invoices are taxed. Indeed the ATO has targeted tradies recently. That may well therefore be where increased tax revenue is coming from.

  16. Entropy

    If you import 400-500,000 per year and many of them get jobs there will be more tax revenue even if wages aren’t rising. Also, growth in exports. Plus tax increases of diverse nature.
    The beauty of high migration from a government weenie perspective is it also makes the GDP number grow higher than otherwise would be the case, and helps keep the upward squeeze on prices for the asset holding classes.

  17. Roger

    What we need is flat tax rate. More incentive to work and save.

  18. Des Deskperson

    The public sector is expanding, wages in the public sector continue to rise,’

    Wage increases in the APS over the last few years have been modest to the point of almost non-existent.

    In 2015 it was 0.1 per cent. In 2016, it was 0.3 per cent.

    As for size:

    A”t 30 June 2017, there were 152,095 employees in the Australian Public Service. This was a 2.3% decline from 30 June 2016 and the lowest headcount figure since 2006.”

    I realise things are different in the Sates and Territories.

    I am advised that there are petitions circulating among nursing professionals to sign a petition to can the plan to compel nurses to admit white privilege to self identified minority group people prior to doing any of their tasks.

  19. Confused Old Misfit

    the plan to compel nurses to admit white privilege to self identified minority group people prior to doing any of their tasks.

    Seriously? Some cretin conceived this? That cretin is in a place where they have the authority to implement the policy? WHERE ARE THE TAR, THE FEATHERS AND THE RAIL!!!!

  20. Des Deskperson

    Sorry. the stuff at the bottom of my above post was from an earlier cut and paste.

    It’s all over on the Wednesday open thread. The culprits appears to be the new-age Midwives association.

  21. Confused Old Misfit

    New bloody Age!! Idiot that give honest midwifery a bad image.

  22. Confused Old Misfit

    Idiot=Idiots

  23. iain russell

    The inequity in Australia is becoming absolutely clear – fat cats at all levels of government and qangos, and the lifters.

  24. Peter Greagg

    @Ray tax receipts depend on nominal (not real) wages and employment as the withholding tax rates usually don’t change regularly.

  25. egg_

    Parts of the private sector are stagnant.
    Pay rises in the public sector continue unabated.

    +1

    Govt & likely Private can surpass wage caps by reclassifying jerbs – instant pay rise!
    GST fuelled States with overpaid shiny arses are on a spending spree feeding into infastructure Private jerbs.

  26. manalive

    Labour productivity peaked in 2015 and has fallen since, what looks like the first sustained fall since 1980.

  27. struth

    If you borrow a heap of money to pay the public service more money, and grow it, you’ll get more tax back from them.
    Which isn’t revenue at all.

    It’s what we call BULLSHIT.
    The private sector is going backwards.
    Talk all you want about wage growth in the mining industry, but there’s fuck all of it left.

  28. Des Deskperson

    “If you borrow a heap of money to pay the public service more money, and grow it, you’ll get more tax back from them.”

    Struth, the Department of Finance used to estimate that the cost of employing a Commonwealth Public servant – super, leave, training, air conditioning, light, power, rent office, IT etc – was 250% of their basic salary .

    So an APS employee earning $100,000 pa costs the taxpayer $250,000 but he/she only pays back around $20,000 in tax.

    Not much of a return.

  29. JC

    National income looks fine in Australia. That’s all we should be worried about.

    https://tradingeconomics.com/australia/gross-national-product

  30. Jg

    It’s visible on a public service pay scale: wage growth for a level is below 2% per annum. However the move from one pay band to the next is virtually automatic and unreported.

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