This week two surveys on the economy showed very different views. The first on business confidence suggests a booming economy, the second on consumer confidence suggests an ongoing level of pessimism. Rather than realise that consumers might be feeling the pinch of declining real wages, business leaders blamed the divergent views on government uncertainty, while business groups argued for changes to industrial relations that will only serve to keep the divergence in place.
For businesses, things are looking pretty schmick.
The July NAB Business survey released this week saw its business confidence index increase by four points in July, to be at +12 index points, which, the report noted “is twice the long-run average and similar to its pre-GFC levels.”
On the measure of business conditions, things were equally as shiny and happy. That measure rose by 1 point in June to hit +15 index points, which is three times the long-run average and the highest level observed since early 2008.
For consumers, the shininess is less evident.
The results of the Westpac-Melbourne Institute’s measure of consumer sentiment released this week showed that July recorded a level of 95.5 – where 100 is the point where the number of pessimistic consumers is equal with the number of optimists. It marked the ninth straight month where pessimists outnumbers optimists.
Such an outcome should not be a surprise to anyone who has been paying attention.
Whether it be record low wages growth, record levels of debt, the prices of essentials rising faster than wages, housing affordability falling, or household incomes remaining flat for six years, there is little around at the moment to suggest consumers should feel like breaking out the wallets is a smart thing to do.
Yes, employment has been growing solidly – with even full-time employment growing after disappearing in 2016. But the very strong impression is that this employment growth is mostly off the back of ongoing – and likely to continue – low wages growth.
Low wages growth is not surprising when the economy is weak. No one expects record wages growth at a time when unemployment is rising.
The experience over the past decade has also been that our industrial relations system is such that when economic conditions are weak, employers will now cut back hours rather than sack workers – certainly a better outcome than in the past.
However, what we have now is a period where business conditions are kicking along nicely but workers – to quote the governor of the Reserve Bank, Philip Lowe, in his statement to the House economics committee on Friday – are “getting used to lower growth in their real wages”. Lowe suggested that “many now see this as more than just a temporary development, with wage increases of two point something per cent now the norm”.
And you wonder why consumers are not feeling as optimistic as businesses?
But while for most people this difference of sentiment is easily understood, for some business leaders the fault lies with the government.
Virgin chief executive John Borghetti and the chief executive of Orora, Nigel Garrard, told the Australian Financial Review the problem was “uncertainty”. Borghetti suggested “uncertain leadership always causes instability” while Garrard suggested “there’s uncertainty on a whole lot of levels in an economy where there’s a lot of political uncertainty”.
There is almost nothing more certain than business leaders blaming things on government uncertainty.
Whenever an election rolls around, there’s always a line of business representatives ready to bemoan that the democratic electoral system of our country is creating uncertainty, because, perish the thought, there might be a change of government.
And while there is a case to be made that we do need some certainly on areas such as energy policy – that is something businesses care about more than consumers. Consumers care more that the price they pay for energy is rising by more than their wages than any uncertainty over the government’s policy over the energy market.
But too often when business leaders talk about uncertainty from the government, what they really are complaining about is the lack of certainty that worker’s rights will be curtailed.
This week the Minerals Council of Australia released a discussion paper arguing for, among other things, a reduction the ability for workers to strike because apparently the Fair Work Act had swung the pendulum too far in unions’ favour. This is despite the most recent figures showing that in past 12 months the 122,200 working days lost to industrial action is lower than the average of 134,000 lost during the Work Choices period.
Low wages growth, low levels of industrial disputes, business conditions that are as good as they have been for nearly a decade. And yet the continued response from businesses are for more changes that will only serve to reduce the bargaining power of workers, keep wages growth down, and as a result keep consumer confidence low.
And all the while you can be certain they’ll blame everyone else and complain that they need more changes to keep that situation entrenched.