Taleb and Spitznagel remind us ‘that bailouts come with printed money, which effectively deflate the wages of the middle class in relation to asset values such as ultra-luxury apartments in New York City’.
It has become clear the Australian government’s bail out and stimulus packages involve the printing of money and in part has focused on keeping businesses going so they can be there ‘on the other side’.
As of February 2020 ABS listed about 13 million people in work, a number prior to the economic effects of COVID-19. In Australia the proportion of full time employees being ~60% and casual being ~20% and self employed being ~11%. Which means there were about 7.8 million full time employees and 2.6 million casual employees.
As a result of the economic effects of COVID-19 in Australia there are massive job cuts every day, some corporations standing down the majority of their workforce which include full time and casual staff. It’s predicted that in excess of 1 million extra people (which include the middle class workers) will lose their job in 2020.
In 2019 ABS reported 2.2% wage growth for both private and public sector. Whilst the inflation was 1.9% in 2019. Since 2015 inflation has steadily been rising form 1.5% to 1.9% in 2019, whilst wage growth has stagnated relative to inflation hovering around 2% to 2.4%. Thus we can say since 2015 wages for both private and public sectors have struggled to counter the effects of rising inflation over the last few years in Australia.
The impact of the COVID-19 on the labour market has in effect removed hundreds of thousands of both permanent and casual jobs from the market as well as the the mix of jobs types available. This restructuring of the labour market means that there will be more individuals offering hours of work to the market, thus a massive increase in under-employment.
Taleb and Spitznagel touch on increased connectivity and over optimization as pointed out their comment ‘Such acute pandemic is unavoidable, the result of the structure of the modern world; and its economic consequences would be compounded because of the increased connectivity and overoptimization’, which leads to the question of how long will the Coronavirus shut down take?, which Taleb has offered advise, but his advise fell on deaf ears How long will the Coronavirus shutdown take
Australian government announces a second set of economic responses of $66 billion dollars which, combined with previous actions, total $189 billion across the forward estimates, representing 9.7 per cent of annual GDP.
A range of measures addressing the financial assistance to Australians. This assistance includes income support payments, payments to support households and temporary early releases of superannuation, minimum drawdown rates, source Treasury.
RBA on 19 March 2020 reduces interest rate to 0.25%.
Australian Government stimulus packaged for Australian business to counter the effects of the coronavirus COVID-19 in Australia has introduced a $15 billion dollar stimulus package, which mainly consists of low interest loans.
Australian Government on 19 March 2020 introduces travel bans for non Australian entering Australia to stop further cases of the coronavirus COVID-19 entering Australia.
ABS Preliminary retail turnover increases by 0.4% for February 2020, mainly driven by food sales as a result of individuals buying more than usual as a result of hoarding due to the out break of coronavirus COVID-19 in Australia .
ABS outlines additional products to help measure the economic impact of the coronavirus COVID-19 in Australia. In particular 1. Preliminary retail turnover data, 2. Additional information on business impacts, 3. Additional analysis of short term overseas visitors and international students, 4. Additional monthly and quarterly hours worked information and 5. Interactive employment maps. Source ABS 16 March 2020.
Retail turnover fall 0.3% in January 2020.
Seasonally adjusted Australian retail turnover fell 0.3 per cent in January 2020, source (ABS). Reasons put forward are listed as
Bush fires in January negatively impacted on customer numbers, including interruptions to trading hours and tourism. Source Ben James Director of Quarterly Economy Wide Surveys
This follows a fall of 0.7 per cent in December 2019.
In seasonally adjusted terms, the fall in South Australia (0.1 per cent) rose in seasonally adjusted terms in January 2020.
Australian economy grew 0.5% in December quarter.
The ABS media release 4 March 2020 quoted ‘The Australian economy grew 0.5 per cent in seasonally adjusted chain volume terms in the December quarter 2019 and 2.2 per cent through the year’.
Chief Economist for the ABS, Bruce Hockman, said: “… rate of growth remains below the long run average.”
There was a 0.1 % growth in domestic demand in the December quarter.
Reserve Bank of Australia (RBA) on lowers the cash rate to 0.50 per cent.
Reserve Bank of Australia Board (RBA) at its meeting today , decided to lower the cash rate by 25 basis points to 0.50 per cent. Philip Lowe, Governor: Monetary Policy Decision media release outlined the RBA ‘took this decision to support the economy as it responds to the global coronavirus outbreak’, more details from RBA.
Dwelling approvals continue to trend downwards for 2019
Since March 2018 dwelling approvals have been trending downwards for the last 18 months. For August 2019, the trend estimate for total dwellings approved fell 3.9%. A subset of the dwellings approved is the private sector houses approvals, which have also been trending downwards with a 1.0% fall in August 2019 or just over 8,000 approvals, source ABS.
The Consumer Price Index (CPI) or inflation rose by 0.5% in March 2017 quarter.
The main contributors were automotive fuel up 5.7% and medical hospital services up by 1.6%, while there were falls in furnishings, household equipment and services by 1.0% and a fall in recreation and culture by 0.7%.
Putting vegetables on the table has proven difficult for Australian families as the CPI rose 2.1 % through the year to March quarter 2017.
Through the year to March quarter 2017, vegetable prices have risen by 13.1 % . This has seen some budget fruit shops in Adelaide struggling with supply issues, to the effect of seeing at least one shop close down for months, prior to it starting again after a quick refurbished and with new staff and management.
ABS reported that ‘Adverse weather conditions in major growing areas over previous periods continue to impact supply for particular vegetables (potatoes, salad vegetables, cabbages and cauliflower). Offsetting these rises are price falls for capsicums and broccoli. ‘ (Source ABS Media release, and ABS 6401.0)
SA’s employed persons (seasonally adjusted) were less for March 2017.
In March 2017, there were approximately 2,100 less employed persons as compared to February 2017 (Seasonally adjusted). This was made up of approximately 1,200 extra males being employed in March 2017 and approximately 3,300 fewer females being employed in March 2017. We can see that there were approximately 9,000 more persons employed in March 2017 as compared to March 2016(Seasonally adjusted). (Derived from ABS 6202)
SA’s Renewable sector FTE rate falls in 2015-16.
There was 160 fewer FTE jobs in the renewables sector in South Australia. The majority of losses were; 90 fewer FTE in the wind sector and then 60 fewer FTE in the solar sector. There has been a downward trend from 2011-12 when there was 2360 FTE jobs as compared to 2015-16 where there is currently 710 FTE. (Derived from source ABS 4631)
SA’s unemployment rate rose for February 2017
The South Australian unemployment rate for individuals looking for full time work rose from 7.7% in January 2017 to 7.8% for February 2017. This was the result of the unemployment rates for males falling to 6.8% and the unemployment rate of females rising to 9.6%. (source ABS 6202)
There was a 1.0 % (Trend) fall in sales of new motor vehicles in February 2017 as compared to the previous month in SA. For Australia as a whole it has been listed as ‘the largest downward movement across all states and territories’, on a trend basis. (source ABS 9314)
SA’s Premier announces 100 megawatts grid-connected battery. The Premier of SA has proposed a new energy plan for SA which the construction of 100 megawatts grid-connected battery in SA will form part of the plan. The plan is in response to the uncertainty in supply of electricity has become apparent in the last few years. This new energy plan may be an attempt to ‘Future proof’ SA electricity supply. We will review the plan and highlight the key points shortly.
The number of visitor movements to SA rose for Jan 2017
The number of visitor movements to SA for January 2017 was 30,600, which was an increase of 3,300 when compared to Jan 2016 of 27,300. Even though the number of visitor movements for SA increased for January 2017 SA is currently the 5th most visited state with only 3.2% of visitor movements, while NSW is leading with 385,100 visitor movements or ~ 40.5%. (Source ABS 3401.0)
Australian dollar drops below 80 US cents
The Australian dollar was hovering around 92 US cents from April 2014 to early September 2014 after which it has been trending downward. On 23rd February 2015 it dipped below 80 US cents to 79.87 US cents, see the graph below (data source RBA). South Australians who conduct transactions in the US currency, will be impacted. As the exchange rate dips it will impact on exporters of raw materials like the mining sector and exporters of goods like wine. Local manufacturers who import raw materials like in the chemical sector will certainly have been impacted by the downward trend of the Australian dollar. This means that we should expect prices rises of products that have a largely imported component. Imported personal retail clothing, footwear and food stuffs again will be more expensive along with imports of cars and car parts, with South Australian buyers either forced to consider local supplies if at all available or to suppress their demand, that is ‘with draw themselves from the market altogether’ ! Of course there is no escaping Australia on a tight budget as over seas holidays will be more expensive due to the low Australian dollar and to Airlines not prepared to lower their air fares even though world fuel prices have fallen significantly.
SA’s 2014-15 Mid-Year Budget Review
Treasurer Tom Koutsantonis today handed down the 2014-15 Mid-Year Budget Review (MYBR). “The 2014-15 MYBR has met all the State Government’s fiscal targets and is forecasting a surplus for 2015-16 with growing surpluses across the forward estimates,” The Treasurer said. “The final outcome for the 2013-14 fiscal outlook was a net operating deficit of $1.07 billion,which was an improvement of $161 million compared to the $1.23 billion estimated result.
“For 2014-15, the net operating balance has also improved by almost $300 million, and is nowa net operating deficit of $185 million compared to $479 million in the 2014-15 State Budget.” The MYBR also shows: A surplus of $265 million in 2015-16, increasing to $699 million 2016-17 and $872 million in 2017-18. An improvement of $521 million in net debt in 2014-15. It is now $3.99 billion compared to $4.51 billion in the 2014-15 State Budget. A 3.8% reduction in the net debt to revenue ratio in 2014-15. It is now 24.2% compared to 28.1%, well below the maximum 35% ratio target set by the State Government.
The Treasurer said the State Government’s focus remains delivering first-class education and health services that South Australians need and deserve, while reducing government expenditure overall. “Real expenditure fell in both 2012-13 and 2013-14 and Revenue and Expenditure as a percentage of Gross State Product is forecast to fall further over the forward estimates,” he said. “By 2017-18, the MYBR forecasts a real terms decline in expenditure of 5 per cent since 2011-12. “The State Government has proven it can rein in spending through past and current savings measures and general expenditure restraint, while continuing to deliver first-class front line services, with more doctors, teachers, police and nurses.” The Treasurer said since the 2008-09 MYBR, substantial savings measures have already been delivered. Source Media release SA Treasurer Tom Koutsantonis 23rd December 2014.
South Australia’s unemployment rate higher than the national average.
The latest ABS figures show South Australia’s unemployment rate (seasonally adjusted) decreased by 0.1% from 6.7% to 6.6%, which is still above the national average of 6.3%. This is the second time in 2014 that the South Australian Female unemployment rate at 6.9% is greater than the the male unemployment rate of 6.4%, see the figure below. South Australia’s unemployment rate at 6.6 % is the third lowest after Western Australia with 5.2% and NSW with 6.0% (not including NT and ACT).
South Australian women find more full time work in June 2014
The latest ABS figures show there was an increase of 15,900 to 11,578,200 in June 2014 (seasonally adjusted), of the number of people employed as reported in the ABS report 6202.0 – Labour Force, Australia, June 2014. The figure below shows the seasonally adjusted May 2014 to June 2014 for the national and South Australia for full time and part time employment for male and females. For South Australia full time employment rose by 1.4% due to an increase of 4.75% in female full-time employment and a 0.26% fall in male full time employment. This shows South Australian females are above the national average of 0.23% in gaining full time work, while the men were below the national average which fell 0.20%. For part time work the male national average increased by 1.4% compared to a 1.0% increase for South Australia males. For females the national average for part time work increased by 0.2% compared to a fall of 1.25% for South Australian females. In summary South Australian male’s are moving away from full time employment and following the national trend into part time employment, while South Australian females are above the national average when obtaining permanent jobs and are not seeking more part time work. (The part time values for South Australia were not in the ABS data set and were derived from the total and full time values).
Regional South Australia to get a 194 million dollar boost in Capital Works
Treasurer Tom Koutsantonis in his ‘Growing Our Regional Economy’ 2014-15 State Budget news release, outlines a renewed commitment and support for South Australia’s regional communities. The key features are that he proposes to increase by 194 million dollars on some current projects. Some examples where the money will be spent are a proposed extra ‘$10 million towards the $39.2 million Port Lincoln Health Service redevelopment’, an extra ‘$15.2 million for Phase 1 of the $24.77 million Riverine Recovery project’ [a water quality project] and an extra ‘$17.47 million towards the $25.42 million construction of a medium security accommodation unit at Mt Gambier’ and an extra ‘$6.25 million towards $9.25 million new teaching and learning facilities at Eastern Fleurieu R-12 School’. We can see the treasurer’s emphasis in the figure below with highest priority on Planning Transport and Infrastructure, which is partly similar to the Federal Governments priority. Then followed by Health and Aging, Correctional services, Housing, Environment, Emergency services, Education and Primary Industry. Source SA Government ‘Growing Our Regional Economy’ 2014-15 State Budget news release.
South Australian State Budget 2014-15:
It was never going to be an easy South Australian 2014-15 budget for Treasurer Tom Koutsantonis, as he is trying to counter 898 million in Commonwealth government funding cuts, which are aimed at health and education. The Treasurer has conveyed his response in six parts which are 1. Commitments to Regional SA, 2. Delivering surpluses from 2015-16, 3. Response to Commonwealth cuts of $898 million, 4. Delivering on Government’s Fiscal targets, 5. Delivering on South Australia’s share of Gonski, 6. Protecting pensioners and the vulnerable. Over the next few days we will look at the budget documents in detail to get a clear picture of how the budget will impact on South Australians. Treasurer’s commitments to regional South Australia will be examined first. Then we will look at the how he will be delivering on South Australia’s share of Gonski, then his strategy for protecting pensioners and the vulnerable, then his response to the Commonwealth cuts of $898 million.
Federal Budget 2014:
On the fourth paragraph of The Report of the National Commission of Audit Phase One February 2014, the following statement is made “The Commission has focused on the fifteen largest and fastest growing programs which have driven the unsustainable increases in expenditure commitments.” Is this a summary statement after all the data was examined? Is there a direct correlation that the fifteen largest programs are also the fastest growing programs? So are we led to believe that some of the largest programs but slow growing have missed on the Audit? The definition of unsustainable increases in expenditure means what? Does it mean that the size of the increases is unsustainable or the rate of increases or does it mean both. The Commission’s conclusion was that it felt that the audit will assist in “Reforming the Federation is a matter of fundamental importance. We have made recommendations to this effect which will strengthen the Federation which has served us so well.”
The Treasurer Joe Hockey delivers his first Federal Budget speech; How closely the treasurer will follow the recommendations of the Audit reports. Phase one of the Audit report recommends the rationalisation of 99 Commonwealth bodies, authorities and agencies. The effect on Australia and Australians in the short term will be painful, let’s see what picture the Treasurer will paint for us for the long term of the Federation [economy].
The Reserve Bank of Australia announced as of 7 August 2013 it will reduce the cash rate to 2.5%.
Every family unit is faced with the decision as to which market skills (market human capital) each member of the family can invest in. The family unit even at this early planning stage would be making assumptions about wage policy and looking at maximizing the return on investment or utility through the division of labour between the market and household activities. These decisions have been explored in great depth by author Gary S.Becker in his books A Treatise on the Family and Human Capital. In Australia, and in particular South Australia it was common for newspapers like The Adelaide Times in 1848 to publish immigrant ship arrival notices, which included the occupation of the travelers for example a few hundred laborers have landed and were available for work.
Professor Keith Hancock in his new book Australian Wage Policy: Infancy and Adolescence, reviews the emergence of wage policy in Australia via the South Australian Factories Act of 1894, and the 1896 Victoria wage boards where he details the formation of the national federation courts of arbitration in 1900 having the power to institute chosen models of conciliation and arbitration for the prevention and settlement of interstate industrial disputes. The book covers events up to 1939 with an economic critique for the period.