Productivity State of Play September Quarter 2023: Australia has been running hard just to stand still this year - but the fault doesn't lie with the workforce

 

“Australia experienced a large decrease in labour productivity for the whole economy (-2.0%) and the market sector (-1.7%) in the June 2023 quarter, resulting in an expected 3.2% fall in annual productivity from 2021-22 to 2022-23. This is largely because hours worked increased more than output.” [PC productivity insights: Quarterly productivity bulletin — September 2023]

There’s been a decrease in labour productivity reported in the Productivity Commission’s Bulletin of September Quarter 2023, but the villains of the piece are not workers per se.

The June quarter covering 1 April to 30 June 2023 saw a convergence of factors influencing productivity which were outside the influence of the Australian workforce.

Generally, a tighter labour market reaching an historically high employment level in that quarter meant that more hours were being worked. However hiring practices do not necessarily mean businesses were taking on highly skilled labour or that there was always a large pool of highly skilled workers available to particular businesses - which when combined with a weakening retail demand for certain goods due to high cost of living pressures continuing to limit household purchasing choices - meant that productivity slowed.

At industry level the Productivity Commission made no mention of wages or days lost to industrial action as being factors in June Quarter 2023 productivity decline.

Adverse weather combined with planned maintenance were the principal reasons leading to a decrease in iron ore mining and oil and gas extraction which saw that sector report 15.3% of the overall Australian productivity decline. 

The mining industry reportedly began to stagnant during the first two years of the COVID-19 pandemic and 2021-2022 & 2022-2023 saw heavy rain and floods disrupted mining operations as well as the transportation network for coal movement and mining workers.

Productivity declines in electricity, gas, water and waste water services sector, combined with declines in the information, media and telecommunications sector, accounted for another 30.6% of the total productivity loss recorded in the June quarter.

Electricity, gas, water and waste water services sector apparently continuing an average negative annual productivity growth established in 2020-21 and, Information, media and telecommunications seemingly heading towards falling short of the productivity level recorded in 2021-22.

One has to suspect one of these three sectors – electricity, gas, water & waste water services – may be suffering less from environmental factors and more from boardrooms in that sector displaying both an overattachment to legacy infrastructure and a lack of appetite for genuine innovation.

Australian Government Productivity Commission, Quarterly Production Bulletin – September 2023, released 10:30pm AEST, 10 October 2023:

Productivity decreased by 2% in the June 2023 quarter, as record-high growth in hours worked outpaced output growth, according to the Productivity Commission’s latest Productivity Bulletin.

“Our unemployment rate remains low. Australians worked more in the June quarter as cost-of-living pressures continue to bite. But even though hours worked rose, the rise in output was more modest, and that shows up as a reduction in labour productivity,” Acting Chair Alex Robson said.

The report finds that while output was up 0.4%, hours worked for the whole economy and the market sector increased by 2.4% and 2.2% respectively – the largest quarterly increase on record outside the COVID-19 pandemic.

“Productivity growth is about working smarter, not working longer or working harder. Negative productive growth means that on average, Australians worked more hours just to produce and buy the same amount of goods and services. In other words, Australians have been running to stand still.”

The report suggests that while demand for labour may taper off as interest rates rise and the economy slows, we can’t rely on short term fluctuations in hours worked as a source of long-term productivity growth.

“Our productivity challenge has been urgent for many years. We will only see sustainable, long-term productivity growth if we increase investment and innovation,” Dr Robson said.

The research finds that 15 out of 19 industries experienced a decline in labour productivity over the 2023 June quarter.

The arts and recreation services industry saw the largest decline in productivity (-7.6%), as hours worked increased by 9.3% while output rose only 0.9%.

However, three industries drove about 46% of the overall labour productivity decline: mining; electricity, gas, water and waste services; and information, media and telecommunications.

The mining industry alone made up around one-third of the total labour productivity decline, as hours worked increased while output significantly declined. The decline in mining output was mainly driven by a decrease in iron ore mining and oil and gas extraction, as adverse weather and planned maintenance reduced production capacity.

[END]

Everyone is hoping that the Reserve Bank of Australia continues to restrain the urge to raise interest rates today

IMAGE: Depositphotos

By late August 2023 mainstream media was reporting that in the 2022-23 financial year supermarket giants Coles and Woolworths recorded profits in excess of $1 billion representing around a 5% increase on the previous year - withy Woolworth’s recording a nearly 20% rise in grocery sector earnings while Coles recorded a 2.9% rise.

These grocery earnings being an almost direct cash transfer from dwindling household piggy banks to supermarket chain bank accounts.

In August the major banks were also reporting fat financial year profits, with the Commonwealth Bank coming in with a personal record breaking best of $10.2 billion in 2022-23.

None of the big banks being slow in coming forward to pass on increasing Reserve Bank of Australia cash rates onto customers, including those with home mortgages.

According to the ABS latest monthly consumer price index indicator, rent prices increased 7.6% in the twelve months to July 2023, up from 7.3% in June, reflecting strong demand for rental properties and tight rental markets.

Electricity prices rose 15.7% in the twelve months to July 2023, reflecting annual price reviews in July.

Annual prices for food and non-alcoholic beverages rose 5.6%, down from the rise of 7.0% in June, with dairy and related products rising12.7% and bread & cereal products rising 9.9% even if fruit & vegetables fell by -2.9%.

The actual pain of cost of living pressures are of course rarely mentioned by the Reserve Bank of Australia or the statisticians.

Australian Bureau of Statistics (ABS), media release, 4 September 2023:

Household spending was 0.7 per cent lower when compared to July last year, according to figures released today by the Australian Bureau of Statistics (ABS).

Robert Ewing, ABS head of business statistics, said households have curbed their spending over the past 12 months amid higher interest rates and inflation.

“This is the first time since February 2021 that the spending indicator has fallen.

“Spending on discretionary goods and services was down for the fourth straight month. It fell 3.3 per cent over the year, as households adapt to cost of living pressures.

“Non-discretionary spending rose 1.7 per cent, which is the lowest growth rate since early 2021.”

The Sydney Morning Herald, 4 September 2023:

The largest fall in spending on goods including clothing, footwear and home furnishings since the start of the Delta wave of the pandemic has bolstered the case for the Reserve Bank to hold interest rates steady for a third consecutive month.

Outgoing RBA governor Philip Lowe will on Tuesday helm his last meeting of the board, which is widely expected by economists to keep the official cash rate at 4.1 per cent as the economy continues to show signs of slowing and inflation pressures ease.

Because someone has to say it: By Dec 2023 it's likely converging & merging weather and climatic conditions will see not only cost of fruit, vege, eggs, dairy products, meat & basic foodstuffs rising - it will see availability & supply become issue to varying degrees across Oz.

— no_filter_Yamba (@no_filter_Yamba) September 1, 2023

 

Tweets of the Week

 

Interest on student debts generates more money for the Federal Gov than royalties from coal and gas 😱

— Sue Higginson (@SueHigginson_) April 26, 2023

 

STATUS: political comment.

To make your Sunday better.😇 pic.twitter.com/brF4v7MpHP

— Perorationer- A Recovering Copyright Delinquent 🤭 (@Perorationer) April 22, 2023

 

STATUS: humour.

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Cartoons of the Week

 

Jon Kudelka

Fiona Katauskas

Consumer Price Inflation now stands at 6.1% in the 12 months to end of June 2022 in Australia - rising 1.8% in the June Quarter

 

Australian Bureau of Statistics (ABS), media release, 27 July 2022:

SOURCE: Consumer Price Index, Australia, June 2022

The Consumer Price Index (CPI) rose 1.8 per cent in the June 2022 quarter and 6.1 per cent annually, according to the latest data from the Australian Bureau of Statistics (ABS).

Head of Prices Statistics at the ABS, Michelle Marquardt, said "The quarterly increase of 1.8 per cent was the second highest since the introduction of the Goods and Services Tax (GST), following on from a 2.1 per cent increase last quarter."

The most significant contributors to the rise in the June quarter CPI were new dwellings (+5.6 per cent) and automotive fuel (+4.2 per cent).

"Shortages of building supplies and labour, high freight costs and ongoing high levels of construction activity continued to contribute to price rises for newly built dwellings. Fewer grant payments made this quarter from the Federal Government's HomeBuilder program and similar state-based housing construction programs also contributed to the rise," said Ms Marquardt.

"The CPI's automotive fuel series reached a record level for the fourth consecutive quarter. Fuel prices rose strongly over May and June, following a fall in April due to the fuel excise cut."

The price of goods (+2.6 per cent) continued to rise more strongly than that of services (+0.6 per cent). Notable rises were recorded across the food group (+2.0 per cent) and the furnishings, household equipment and services group (+2.5 per cent). Main contributors to the rise in food prices included vegetables (+7.3 per cent), meals out and takeaway foods (+1.4 per cent), and fruit (+3.7 per cent). Supply chain disruptions due to flooding events, labour shortages, and rising freight costs contributed to higher prices. Furniture prices rose (+7.0 per cent) due to increased transport and material costs, and stock shortages.

Services recorded a smaller rise compared with goods. Financial services (+1.2 per cent) and holiday travel and accommodation (+2.3 per cent) rose. Child care (-7.3 per cent) fell as the full effect of additional child care subsidies for families with two or more children under the age of 6, which commenced on 7 March, flowed through into this quarter. Before and after school care vouchers offered by the NSW Government also contributed to the fall in child care costs. Urban transport fares (-4.4 per cent) fell due to free travel periods introduced by the NSW and Tasmanian State Governments within the quarter.

Annually, the CPI rose 6.1 per cent, with new dwellings (+20.3 per cent) and automotive fuel (+32.1 per cent) the most significant contributors.

"The annual rise in the CPI is the largest since the introduction of the goods and services tax (GST)."

"Annual price inflation for new dwellings was the strongest recorded since the series commenced in 1999," said Ms Marquardt.

Underlying inflation measures reduce the impact of irregular or temporary price changes in the CPI. Trimmed mean inflation increased to 1.5 per cent over the quarter and 4.9 per cent over the year. The price of goods (+8.4 per cent) continued to rise more strongly through the year than that of services (+3.3 per cent).

"Annual trimmed mean inflation was the highest since the series commenced in 2003 and annual goods inflation was the highest since 1987, as the impacts of supply disruptions, rising shipping costs and other global and domestic inflationary factors flowed through the economy," said Ms Marquardt.

~~~~~~~~~~~~~~~~~~~~~~~~

https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/jun-2022

Australian Federal Election 2022: National Minimum Wage and the Gig Economy

 

Attempting to add a little context to the mention of wages during the current federal election campaign.......

According to the Fair Work Ombudsman:

The National Minimum Wage applies to employees not covered by an award or registered agreement. This is the minimum pay rate provided by the Fair Work Act 2009 and is reviewed each year.

As of 1 July 2021 the National Minimum Wage is $20.33 per hour or $772.60 per week.

Employees covered by an award or registered agreement are entitled to the minimum pay rates, including penalty rates and allowances in their award or agreement. These pay rates may be higher than the National Minimum Wage.

The National Minimum Wage is varied for Apprentice and Trainee pay rates, Junior pay rates and Employees with disability pay rates.

The National Minimum Wage is set by the Fair Work Commission. The federal government of the day appoints Fair Work presidents, vice-presidents, deputy presidents and commissioners, of whom there are generally 42 in number. Since December 2018 it has been the Morrison Government making appointments to the Commission and allegations have persisted that it is now an employer dominated agency.

In June 2021 the National Minimum Wage increase represented a rise in remuneration of 2.5% before tax – rising from $19.24 to $20.84 an hour. That increase was a lordly 49 cents per hour worked.

At that time the Australian Attorney-General’s Department estimated that around 180,200 Australian employees (or 1.7% of the paid workforce) were being paid the national minimum wage rate. Though I rather suspect that that figure may have been years out of date when it was presented to the Commission.

Now during its annual wage reviews, the Fair Work Commission receives a number of submissions from government, industry groups, unions and other interested parties.

During the Fair Work Commission Annual Wage Review 2021 the  Morrison Government submitted its position on any change to the National Minimum Wage, which took 102 pages to say low or moderate increases are better than larger increases – if increases have to happen at all. Along with a somewhat novel argument from an ordinary citizen’s perspective, that there was no urgent need for a rise in the minimum wage because government supports low income households in other ways and it expects future minimum wage rate increases to be eaten away by government taxes.

This was the same basic approach taken previously by the Morrison Government during the Annual Wage Review 2020 and Annual Wage Review 2019. To which had been added in both those submissions, the argument that previous minimum wages allowed workers sufficient purchasing power. I note that it was in this period that the National Minimum Wage rose by 56 cents an hour in 2019 and by 35 cents an hour in 2020.

The next annual review of the national wage will announce its decision in the months after the 21 May federal general election – sometime in June-July 2022.

I think North Coast Voices readers would be safe in assuming that if re-elected the Morrison Government will be submitting arguments which resist decent National Minimum Wage increases for the next four financial years.

The last quarterly Cost Price Index was issued in December 2021 and showed a 3.5% overall increase - primarily driven by rises in the cost of transport, housing, household goods & services and health. While 2022 sees reports of sharply rising costs ahead of the first quarter Cost Price Index due to be released on 27 April.

There is another issue concerning the National Minimum Wage. It appears that workers in what is known as the “gig economy”, ie., individuals providing services to consumers for a fee via digital platforms or marketplaces, are outside the protection of the National Minimum Wage.

According to the Fair Work Ombudsman; Individuals working in the gig economy often perform work as independent contractors. This means they may have a commercial relationship with the company that hosts the digital platform or the consumers who receive their services.

This month, April 2022, the NSW Legislative Council Select Committee On The Impact Of Technological And Other Change On The Future Of Work And Workers In New South Wales released its first report titled The gig economy.

The report stated in part:

Food delivery workers and rideshare drivers typify the on-demand workforce. These workers' legal status under Commonwealth legislation as 'independent contractors' as opposed to 'employees' means they have few workplace entitlements. While the committee has noted the positive impact of on-demand work on the New South Wales economy, and some benefits that can flow for workers from flexible arrangements, our primary focus has been on the many significant disadvantages attached: the absence of guaranteed minimum wages and working hours, and of paid leave provisions; poor safety standards; and the lack of a fair dispute system in the event of workplace injury.

In short, the cyclist who delivers our Friday night takeaway receives next to none of the conditions long considered fair and decent across Australia. The job itself also puts workers in very real danger of injury, abuse and harassment. Late 2020 was marked by the deaths of no less than five food delivery riders, all while this inquiry was underway. These deaths, and the high potential for further tragedy, underscore the need for immediate action by the NSW Government.

From extensive evidence over eight hearings to date, the committee has concluded that current laws perpetuate the overwhelming power imbalance between lone 'contractors' and multinational platform companies, rather than mitigating it. Correspondingly, we have made four key findings: that New South Wales is falling behind other states and comparable nations in developing laws that establish decent working conditions in the gig economy; that the failure to provide gig workers with a minimum wage, paid leave and other basic workplace entitlements is increasing inequality in New South Wales; that gig workers currently lack the power to interact and negotiate with on-demand platforms as equals in New South Wales; and that the failure to provide gig workers with access to a low-cost independent tribunal empowered to hear and decide disputes is leading to injustice in New South Wales.

This was Leader of the Opposition & MP for Grayndler Anthony Albanese on Twitter, 26 February 2021, concerning the "gig economy":

Every Australian worker deserves the safety net of the Australian minimum wage. That’s the whole point. It’s the bare minimum. The reality is that workers in the gig economy aren’t getting a fair deal. We've got people earning $10 an hour with no sick leave and no security. We can do better. That’s why a Labor Government I lead will extend the powers of the Fair Work Commission to create minimum standards for gig economy workers – such as super, collective bargaining, and unfair dismissal protections. Labor is on your side.

While this was Australian Attorney-General & Minister for Industrial Relations Senator Michaelia Cash on behalf of the Morrison Government, Canberra Times, 1 June 2021:

Industrial Relations Minister Michaelia Cash said she was wary of reforms that could stifle innovation, limit flexible work and raise prices in the gig economy.

Scott Morrison on the subject of the gig economy workforce, The Australian 13 April 2022, p.12:

Mr Morrison says it [size of the gig economy workforce] has changed little in 20 years.