Showing posts with label income. Show all posts
Showing posts with label income. Show all posts

We Have Never Had It So Good - Maybe

According to the Household, Income and Labour Dynamics in Australia survey we have never been able to buy so much with our income. Over the last decade income inequality has hardly changed, Wages have risen faster than inflation. Of course, we know that announced inflation is lower than real price rises.

Although Australia's debt is low compared to other developed countries, less than half of Australians believe this. Despite the good times, many are feeling down and depressed feeling that the country is not doing well economically. This is probably due to the negative political arena at the moment with any bad news being blown out of proportion, with political blame and counter denials being kept uppermost in people's minds.

We should be happy but the minority, politicians, are pulling us down. Things are certainly changing now with Chinese demand for primary products falling as well as prices producers receive. The new government, in September, will have to deal with rising unemployment. There isn't much doubt about this. Pressure to reign in national debt will mean job cuts in the public sector, and reduced government spending will push up unemployment.

The job market has structurally changed over the last 10 years. More people are in part-time and casual employment, good for business bad for job security. Welfare is being cut and will fall further as politicians take larger income rises for themselves and a "couldn't care less" attitude to the poor. Charities are feeding more of the less well off than they ever did before.

While incomes have remained the same, wealth inequality has risen. This continues as wealth is solidly held and increased by a few. The top 1 per cent have assets of $5 million. The bottom 10 per cent enjoy less that $10,000. Some of these have no assets at all.

Good times are not for everyone apparently.  We should be laughing or at least smiling.  If you are poor and without a job or assets you have to grin or grimace and bear it.  No help for you mate either today or in the future.
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Conservation
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High Wage Rate a Problem for Australia

The overseas economic crisis is changing the perception of wage rates in Australia. Over recent months the Aussie dollar has fallen in value.  It helps exporters. The retail sector has also been calling for the dollar to be intentionally weakened. This is odd considering Australian consumers are heavily "addicted' to imports, so prices will probably rise in the shops.

There will be an election in September. Any color of government will have to cut back on spending. This will mean higher unemployment. Therefore, despite inflation steadily rising there will be downward pressure on wages. There is already a glut of people seeking employment in the vegetable and fruit picking industry.

When you go shopping a distinct feel of recession is in the air. With many buying online, the shops are almost devoid of shoppers. The lowest income earners have just been given a 2.6 per cent pay rise. This was done to redistribute income. Higher unemployment will prevent future artificial tinkering with the economy.

Australian wages are already too high when compared internationally. We have the highest rates of any developed country. The minimum wage is more than twice that of the US. Within Australia things have been much worse. The minimum wage today is 44 per cent of average full-time earnings. This compares to 50 per cent a decade ago. However, it is still very high.

It has been claimed that letting wages fall and redistributing wealth via welfare payments is a better idea. This of course depends on whether government can collect enough in taxes to have the money to do this. Even this though has been "damned" by some saying welfare reduces the drive to find work.
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History
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The Tax Working Group Makes Predictable Recommendations

The Tax Working Group (TWG) has reached the conclusion that there should be a corporate tax cut. This finding was not surprising considering it was set up for this purpose. It is said that this will bring more investment money into Australia. Considering the Australia currency is already far too strong and is slowing down exports because they are too expensive on the world market, the last thing we need is more money flowing in.

This can be funded by reducing tax offsets for R&D development, it says. What a silly idea this is. Reduce R&D and we will have nothing new to sell. This is like robbing Peter to pay Paul. These are the same companies who will enjoy the corporate tax cut. By cutting back on gas, oil, agriculture and transport tax write offs, there will no overall benefit. Furthermore, ending tax deductions for multinationals will slow foreign investment not improve it.

These inquiries are often a waste of public money. They make recommendations that are usually only the "moving of furniture around the room". Nothing fresh and forward looking is ever suggested by them. The TWG even says the government will collect more revenue by these changes, so it can lower the general tax rate. Great, everyone pays less tax.

What a wonderful state of affairs this will be. Of course, we will pay the "same" tax to government, whether it is direct tax or indirect tax. The TWG are in dreamland.
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Economics
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High Rents Put Pressure on Low-Income Earners and the Poor

A fall in house prices is a good thing for first home buyers, but it puts a squeeze on the rental market. With lower property values investors invest in other things, the bank or the share market. You would think that rents would move up and down with the price of housing, believing that monthly rents are tied to monthly mortgage repayments. This is a generality that is not always true.

The reality is that as house prices fall, rents go up as investment to built more rental properties declines. In Canberra rents increased by 2.2 per cent last year. Perth continues to experience a drain of money to mining areas from Perth city itself. Consequently, new rental properties have not been built and rents have also increased.

Those on low incomes who do not earn enough to get a mortgage are at the mercy of the rental market. As rents rise they have to pay more. Furthermore, students from poor families cannot afford to pay high rents.

Despite the mining boom in Australia, many are doing it tough. Unemployment in the non-mining sectors is starting to rise. A high Aussie dollars makes it difficult for manufacturing to compete. The big question is: Should Government support non-mining industries?" Economic rationalist would say no. The market should determine who should survive and who should go under. Nonetheless, pensioners have rents subsidized. Should this support be taken away?
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Society
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A Rethink Is Needed on the Elderly

Those involved in the aged care industry call for more money from government. Despite money being ploughed in and the rate of pension being increased it still isn't enough. But we need to take a close look at what is going on in the world. European countries are cutting back on pensions and health care, saying that governments cannot afford it. Perhaps residential aged care will always be unsustainable. Indexing of current payments will only keep up with inflation, and it appears the Government will not even do that.

In ages passed the family cared for the elderly. Aged parents spent their day sat in the armchair by an open fire. They got bread and cheese if they were lucky and they certainly didn't enjoy an income. Too infirm to work their daily tasks involved caring for the toddlers in the family. They were seen as assets not liabilities.

Society has changed. Many adult children today do not even visit their parents. Child care is sourced privately. But these same children do not take kindly to parents mortgaging the family home and living better in old age. This is unfortunate. Perhaps the Government is too paternal. It seems in Europe that reality has put a check on welfare. Maybe a return to old ways will be forced on us.
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