Household incomes dropping in Australia as economy slides toward recession

Mike Head

With wages stagnating, and 2.5 million workers either jobless or “under-employed,” working class living standards are continuing a seven-year fall in Australia as an economic slump deepens.

Official figures released last week show that average household incomes per capita decreased in real terms by more than 1 percent over the past year, taking them to the post-global financial crisis level of 2010. Even these results camouflage the severity of the impact on the working class, because the “average” figure is distorted upward by the soaring incomes of the wealthiest households.

Treasurer Josh Frydenberg sought to hide the reality. “Living standards continue to increase with real net disposable income per capita rising 1 percent to be 2.7 percent higher through the year,” he claimed. His carefully-selected statistic, however, includes corporate profits as well as wages. During the June quarter alone, mining sector profits soared by 10.6 percent.

Since barely surviving the May 18 federal election, the Liberal-National government has tried to maintain the myth of a strong economy, which the opposition Labor Party also peddled throughout the election campaign.

The truth is that workers and their families are bearing the brunt of a skid toward recession. Even though the Reserve Bank has already cut official interest rates to a record low of 1 percent, economic production grew at just 0.5 percent during the final three months of the 2019 financial year, leaving annual growth at 1.4 percent.

Frydenberg and Prime Minister Scott Morrison actually hailed the low growth rates as a success, because Britain, Germany and Singapore contracted in the June quarter. However, Australian capitalism is extremely vulnerable to the global recessionary trend, which is being exacerbated by the Trump administration’s aggressive “America First” offensive, including its worsening tariff war with China.

The main immediate factors in Australia’s June quarter results were depressed consumer spending and a sharp decline in residential construction following the implosion of a six-year property bubble that filled the pockets of the developers and real estate operators.

Car sales, a barometer of living standards, as well as economic trends, fell for the 17th month in a row in August. Sales were down 10 percent on the same month last year, which in turn was down on 2017. Year-to-date sales of 786,294 are down 8 percent on 2018.

Corporate and income tax cuts that began on July 1 have failed to halt the slide in consumer spending, especially for supposed “discretionary” goods and services.