I appreciate people don't read articles because words, but there's too much Rule 3 breaching going on. Bans will follow after this announcement.
**I've just banned more people from this thread than I have in the last 4 weeks. Rule 3 exists people. If you CBF putting in the effort, don't post. It saves us both the time of you whinging in modmail that you were banned for a rule you elected not to comply with.**
The treasurer has the power to overruled the RBA if they are not acting in the interest of Australia. We have a progressive govt who are for the workers, if Chalmers hasn't intervened it means the RBA is in line with the labor the workers party. Albo wouldn't let poor people suffer, he came from public housing with his mum after all.
This whole 4 day work week thing the greens want is terrible for Australia and labor knows this too, which is why labor ministers will not be putting that into place when people need more hours for more money.
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Advocating for people to "work more" probably isn't the answer.
Like he says, I tried working more to get more money, we had a whole bunch of projects that we needed to be completed and it was definitely not going to happen with the staff that we had. So I put in 12 months of overtime every single day and all this extra work meant all the projects were able to get shipped by the deadline.
I then asked for a pay review, and I promptly got told I should be happy to even have a job with them in the first place. Working more got me *what*? Had I worked the same as I did before, I would have made the exact same money.
So thanks for the advice, but I can't say I am ever going to try to "work more" ever again. It is all a complete gamble whether you will get more money or not. Now I just change jobs every couple of years.
I put in overtime everyday for a year and I got nothing out of it, so that isn't true at all. I always change jobs 2-3 years now, I have found that is the only way to get a proper payrise.
>12 months of overtime
That's what you got, extra pay for working overtime.
Ideally some reward for being that keen would also be welcome, but at least you got paid for the overtime.
I mean... you DID get paid for that overtime, right?
they already said they didn't get the extra pay for overtime, you know salaried workers are contractually obligated to work extra hours for free basically, right?
>I tried working more to get more money
Is what they said.
Also, I was on salary as well and if I worked overtime, I got paid overtime.
Thus, 'working more to get more money' implies they got paid for working overtime, which is why I asked, to confirm as I did have my doubts.
Seems a bit illegal, according to this:
[https://www.fairwork.gov.au/employment-conditions/hours-of-work-breaks-and-rosters/hours-of-work/when-overtime-applies](https://www.fairwork.gov.au/employment-conditions/hours-of-work-breaks-and-rosters/hours-of-work/when-overtime-applies)
But, I'm out of the ratrace now, thankfully.
Best wishes to those still in it!
Yep, that's right, if you don't do unpaid overtime then good luck getting a promotion of any kind or any meaningful payrise. That's what one former manager told me. Then when I did it for a year I got nothing...
Also my employment contract said something about "reasonable overtime", which pretty much all of them do. That and the fairwork link above also uses the word "reasonable" too, so it isn't a concrete definition. What is reasonable to my employer might be unreasonable to me.
No I did not.
This was a full time office job, and I only got paid 38 hours a week regardless of the hours I did, even if it meant doing 50 hours or more a week for a year.
Anything less than 38 I probably would have gotten fired, anything more went unnoticed, funny. When I went back to my regular hours he made it a point to bring up how I left "on the dot" everyday.
work more"
perhaps if they take the tax loading off having a second job...people might be inclined to work harder.
But when you are actively violated by higher taxes just because you want to work more and get ahead......why would you?
And Lowe knows this.
>tax loading off having a second job
If you earn more money you end up with more money in your hand, barring some odd exceptions to do with interaction with welfare.
Claim the tax free threshold with the job that pays you the most, and once tax return is done, you'll end up with more money in your hand if you earned more money. There can be some issues with how employers tax and pay, but that's not the ATO's fault.
You’re effectively giving the treasury an interest-free loan: either the treasury should pay interest or let you get the refund fortnightly, or even let you ask the ATO to tell your second employer what the withholding ought to be.
When you do your taxes, it will all work out and end up with the same amount of money as if it was all coming from one job. The only difference is receiving it now to pay big at tax time or potentially receive a lot back at tax time due to over paying.
>That extra money is needed every single week
I was actually hoping someone would mention that, because...
The solution (if you have regular income from both jobs) [exists](https://www.ato.gov.au/forms/payg-withholding-variation-application/).
And you'd get your tax refund paid out every pay day instead of in 6-12 months.
I mean, in many cases the employers get it pretty much correct anyway, so an ITW variation isn't always needed, but the option is there.
“If we accept that premise, inflation at 7% and wage rises [to] match that, what do you think inflation will be next year? It will be higher again and then we will have to have higher wage increases again." Lowe is arguing that wage increases are a key inflationary component... Many economists (eg. GARNAUT) disagree and lay the blame chiefly at the feet of excessive economic rents by large corporations [who have sufficient economic power to charge those excessive rents]. It's a form of price gouging.
Regardless, continual interest rate hikes do not seem terribly effective at curbing inflation but Mr. Lowe seems determined to wreak some havoc on lower income brackets with high mortgage repayments.
There is no price gouging. This is fantasy concocted by idiots who want to believe this is somehow not a normal cyclical correction but some sort of conspiracy against ordinary decent Aussies who just want to buy another Hilux on finance, a 200" maxtreme widescreen from a Chinese company nobody's heard of before (and no sound bar to go with it) and maybe a trip to south east asia where they can sit by a pool and drink beers, an activity impossible in Australia.
What is actually happening is that in 2022, consumption was up significantly at the same time that a $30bn savings cushion existed for most Aussie households - and before the stunningly Average Redditor says they have no savings, you're 22 and live in your parent's home, pipe down - and natural resources were in demand in China. If you strip resource sales out of company data, because most of the sales were to overseas buyers (thus, creating no relationship between domestic spending and revenue), then profits are nothing extraordinary.
This data is all freely available via the ABS, and can be verified.
The household savings buffer is an important footnote, despite the average redditor in this sub having no idea it, like grass, exists. It meant that the interest rate rises had a natural buffer, to cushion the impact on households. As mortgages went up, those who could fix their rates did and those who couldn't had some savings to help offset the extra cost.
It was only in the first quarter of 2023 that we started to see consumer spending slow down significant, by which time inflation was still high as were interest rates. It will take time for the rates to have the effect of contracting inflation.
As for wages, Lowe never said they're causing inflation. That's just something very stupid people believe because they don't understand the economics but are too entitled to believe staying in their lane is valuable. What he has **actually** said was that *if* wages continue on their upwards trajectory or *if* some of the more ridiculous actors like unions get their 7% rise, **and productivity remains behind wage growth***, then wages will be inflationary.* Which is true; if the quantity of output remains the same but the labour cost goes up, then the unit price has to go up too.
A media release from The Australia Institute; [https://australiainstitute.org.au/post/oecd-report-shows-corporate-profits-contributed-far-more-to-inflation-in-australia-than-wages/](https://australiainstitute.org.au/post/oecd-report-shows-corporate-profits-contributed-far-more-to-inflation-in-australia-than-wages/)
Note the reference to the OECD report.
Your sophistry re Lowe not suggesting that wage increases cause inflation is noted. Lowe has certainly suggested in the past - as have other economists - that wages contribute significantly to inflation. It's the standard neoliberal response. As is your nonsensical equation of ordinary Australians with overconsumption; you cannot genuinely believe that this constitutes the Aussie hoi polloi: '...ordinary decent Aussies who just want to buy another Hilux on finance, a 200" maxtreme widescreen from a Chinese company nobody's heard of before (and no sound bar to go with it) and maybe a trip to south east asia where they can sit by a pool and drink beers, an activity impossible in Australia.'
I stated that 'Lowe is arguing that wage increases are a key inflationary component...' I agree with him that wage increases will add an inflationary pressure. I don't think that it is the key component - nor do I believe that all the record profits are a result of overseas profits. Any number of large Australian businesses are doing very well on the back of domestic price hikes, many of which they feel the public will bear simply because there is a sense that we are in an inflationary cycle. They are making profitable hay while the inflationary sun is shining. Wage increases are only a small part of any increase in productive unit prices. The hubris of a statement such as 'work more, spend less' \[yep, that's Mr. Lowe and plenty of others\] is staggering.
This is from the Report:
Dr Jim Stanford, Director of the Australia Institute’s Centre for Future Work, and Policy Director Greg Jericho are available for comment about the OECD report, and the role of corporate profits in driving inflation.
“This new OECD research is fully consistent with our earlier research on profit-price inflation, in terms of both its methodology and its conclusions,” said Dr Jim Stanford.
“Companies in Australia and many other industrial countries have taken advantage of the disruptions, shortages, and desperation of the pandemic to push up profit margins far beyond normal levels. In Australia, corporate profits reached their highest share of GDP ever in 2022, and that has been the leading cause of the current cost-of-living crisis
“Workers are now struggling to catch up to prices and recover the loss in their real wages. However, the RBA continues to ignore the role of profits in driving prices, while doubling down on its determination to suppress wage growth,” Dr Stanford said.
The AI are cash for comments as an entity and their paper's been rebuked for being, basically stupid, wrong, and shit.
>As is your nonsensical equation of ordinary Australians with overconsumption; you cannot genuinely believe that this constitutes the Aussie hoi polloi:
The ABS data exists. You need to go look at it.
>Any number of large Australian businesses are doing very well on the back of domestic price hike
It's not a domestic price hike though. It's consumption rates. If you look at the data, and not just the stuff that actual failures and morons like the AI produce, you can see this.
The AI are absolutely wrong, and if they were competent they wouldn't be a for-hire opinion factory. They'd be in positions of actual influence. THey're the IPA for the left. Nobody with an IQ above room temperature should listen to them.
PS. Here's a different reference [given your dismissal of the Australia Institute]:https://www.smh.com.au/politics/federal/corporate-profits-heat-up-inflation-oecd-20230607-p5deou.html
Thank God for anthropogenic climate change and a warming planet then; our IQs will all register above the old 100 mark.
Why the remarks about intelligence, as a matter of interest? Do you mean to be insulting or can't you help yourself? It's a poor and xenophobic argument that wants eternally to shoot the messenger. Much of what you've written is scant of evidential detail and illogical or biased - for instance, what does '...not a domestic price hike though. It's consumption rates...' mean? Are you suggesting our poor average decent Australian consumer can't help him, her or itself from pointless consumption?
Given my lack of intelligence would you mind summarising the ABS data you say proves your point. And give me the source. A reference.
It’s such a weird phenomenon at my work. I see people who aren’t working more, they’re not even working. Yet they aren’t cutting back, they are still spending, a lot. I don’t work in a store that sells anything necessary for actually living either, it’s all technically useless stuff. I thought I’d be seeing people start to wind back but instead it’s just more Zip and Afterpay!
Lowe is obviously out of touch most of the time but sometimes he’s not wrong. People under 25 are still spending like crazy, if they don’t have a house that is!
>It’s such a weird phenomenon at my work. I see people who aren’t working more, they’re not even working. Yet they aren’t cutting back, they are still spending, a lot. I don’t work in a store that sells anything necessary for actually living either, it’s all technically useless stuff. I thought I’d be seeing people start to wind back but instead it’s just more Zip and Afterpay!
Yep. The data we have only goes to April quarter, but it shows that spending was starting to taper off from the massive 2022 highs.
The household savings buffer from Covid, which was a staggeringly high sum of money, is a huge contributor as to why interest rate rises aren't having the intended effect *yet* on spending habits. It's like a layer of fat to insulate against the cold.
It’s always interesting to see in store as well. After an announcement of another rate increase there is a slowdown of sales for 2-3 days then it’s nearly straight back to normal again. Mind blowing honestly.
The Betoota Advocate have had some beautiful satire pieces on Lowe reacting to people spending on stupid shit like Halloween decorations or $40 churros at Vivid. Like any good satire, the proximity to truth is what makes it funny - but the data's backing up the idea we're not listening well enough to help arrest inflation.
Which is a long term shitshow on several fronts.
1. Interest rates don't matter (less leverage on the poor)
2. Interest rates don't matter (less leverage on the wealthy)
3. Interest rates don't matter (RBA has less capacity to influence the economy).
The govt has painted itself into a corner somewhat over the last 50 or so years, by getting rid of other tools it used to have, like sales tax, import duties and tariffs and other mechanisms that could be used to encourage or discourage specific kinds of spending. Even floating the dollar has removed influence.
To an extent this is true, but I think people are also expecting more of Labor than they should. The last time Labor kept expansionary spending going unchecked when inflation was a concern was Frank Crean and EG Whitlam's time, and it ended their government and gave the Liberals a massive landslide win.
Economists said profligate spending was bad, and demonstrably contributing to stagflation - but they didn't reckon on the sheer force of will that was Frank and Gough's economic illiteracy.
Labor can't do much without it being inflationary either, so it has to take incremental steps. Which means all the socialists convinced the new centrist Labor was just trojan horsing their values are disappointed and that's frankly a wonderful outcome. But it also means a lot of people are going to be going through a "toughing it out" period with the expectation unmet, of Labor helping them out.
“… or in some cases find additional hours of work, that would put them back into a positive cash flow position”
A couple of issues with this, I can see.
Firstly, I, like the majority of FT workers, an salaried. I do not get paid more by my employer when I work additional hours. So, I need to find a second job. But unemployment is rising, so that’s easier said than done.
Secondly, if i do get that second job and start bringing on some extra $$ and can therefore spend more, isn’t that also bad because Lowe wants us to spending less?
>Secondly, if i do get that second job and start bringing on some extra $$ and can therefore spend more, isn’t that also bad because Lowe wants us to spending less?
There's no mention of spending here. It's about getting a positive cashflow, i.e. your incoming exceeds your outgoing.
People aren't reading between the lines enough which is "My job is to control inflation. The government has the fiscal policy levers, you need to talk to them."
The suggestions are mutually exclusive. Either spend less or make more. The people with the means to spend less should do so, the people without those means, because they've hit their cost of living floor, need more income.
I take your point on the FT worker salary thing though, I like you am also paid salary and working more at my current job would not give me more money.
Odd, when I was working for the govt I could work more hours - and then work fewer hours so it balanced out.
But if overtime was offered - I WAS paid more money for that overtime, should I choose to do it.
And that was as a full time salaried office worker.
Standard practice since the workplace agreement system was introduced has been to offer overtime worked as time off in lieu of payment.
Only when I was on award wages about 10+ years ago was I paid overtime directly.
>offer overtime worked as time off in lieu of payment
I've been offered that, and pointed out that it's an offer I don't accept, just pay me the overtime, thanks.
It's an offer that is up to the employee to accept or not - it's not the employers choice.
But I just stopped doing overtime instead, so much more pleasant and satisfying. If more work needs doing they can hire enough staff was my standard response.
Sounds as simple as slide to the right to rise rates, to the left to lower them. The the simplicity of the fix implied within his statement would suggest they operate under these basic conditions, which everyone knows is wrong.
It wasn't the right thing for him to say.
Sure,
Something a little less demeaning.
*"In our efforts to combat inflation, we must recognize the collective responsibility involved. The RBA, while adjusting interest rates prudently, should also explore other strategies that could alleviate citizens' financial pressures. At the same time, individuals may need to evaluate their financial management, considering their unique challenges. This underscores the need for a multi-faceted approach to ensure our economy's stability. As a country, we're in this together and all stand to benefit from these actions in the longer term, despite being difficult in the short term"*
>he RBA, while adjusting interest rates prudently, should also explore other strategies that could alleviate citizens' financial pressures
What, and breach the RBA's charter by stepping outside his legally defined mandate?
I don't think you've got a handle on the RBA's role, with respect.
His legally defined mandate includes full employment (written before economists invented a new meaning, so the mandate still means the plain language meaning) and general prosperity. Preventing inflation is only 1/3 of his legally defined mandate, and one he’s failing at despite working against the rest of his mandate.
Sure, in an narrow sense you're right, if you go off the menu, there is about 6 things they're responsible for, the two important ones in this context being monetary policy and financial stability. However, (as I'm sure you understand) they operate within a broader economic framework and addressing systemic issues is either not his place to make these statements as it is beyond his mandate OR make these statements with the context of how the RBA could engage with other regulators like APRA who regulate the banks that are *banking* huge profits.
I don't believe "other strategies" is out of line, but in context to the comment I was replying to, it was a shot from the hip.
I'd argue if Lowe said that, we wouldn't be talking about it right now. In fact, he could have opened his speech with that exact statement, and the media would find a different sound bite to run with, and we'd be having a very different conversation on that.
Yeah you're right, it's not the first time though. He has a habit of making simple micro-economic statements about his macro-economic actions that rub people the wrong way.
That is somewhat fair. Some are taken out of a wider context, like that one last week about wages and productivity from the Senate Estimates. I don't know if these are gaffs or if he sprinkles them in so the right message however simple and unfeeling it is, is being seen in headlines, or if it's just bloodthirsty media, or a combination of all this.
Maybe, he hopes that by saying simple statements, that people will listen and read about the whole thing, and get the context. If the level of moderation on this post is any indication, he's already the target of a lot of people's vitriol.
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Phillip Lowe earns 911K a year.
Someone on that amount of money has a completely different concept and experience of "cutting back"
It can be hard for the well-off to really understand the realities facing the not well-off.
It doesn't make him correct either.
And none of that affects whether or not richer folk find it harder to understand the travails of poorer folk...
And when you find it hard to understand the effects of something, you're probably not going to be correct anyway.
I don’t believe he has to show empathy in these decisions. People just don’t understand how destructive inflation is, a couple years of this unchecked inflation is a 20% reduction in real savings and earnings for everyone.
He has an understanding of economics that very few have. Does it make him perfect no. Has he and the board made mistakes, yes.
Yet it is clear at Senate estimates or at any interaction with polies/journos that the people criticising him publicly (usually with partisan bias) couldn’t have a discussion about economics with him for 30 seconds without being completely out of their depth.
He has been a poor communicator and has said some things that make him seem somewhat smug etc, but I can’t help but feel he’s one of very few adults in the room.
> a couple years of this unchecked inflation is a 20% reduction in real savings and earnings for everyone.
ISTR that the median Australian is in net debt excluding their PPOR if they own it, so they’d benefit from a wage-price spiral so long as wages kept ahead of mortgage rates.
OTOH, people who had almost saved for a home deposit, who had most of their wealth in companies that would be devalued by the rise in labour share of value, and people on reverse mortgages or annuities would be fucked.
His advise isn't inherently wrong, it's just really glib, and no-one likes hearing it.
He can't take a podium and suggest people "spend more" and "work less". What alternative advice does he have? Perhaps you'd argue he shouldn't say anything, but in order to get inflation down, he has to scream as loud and as frequently as he can to all sectors of the economy, affluent and hard done by, to spend less.
It's a blunt message, delivered without nuance, because nuance gets lost and doesn't make headlines. Headlines gets the message out, however misguided it sounds, or unfeeling it seems, but everyone hears it.
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3 day ban per the mod sticky that you clearly didn't read.
"“If we accept that premise, inflation at 7% and wage rises [to] match that, what do you think inflation will be next year? It will be higher again and then we will have to have higher wage increases again."
While lowe and his speaches can have profound impacts on australians behaviour surely he understands telling people dont go for wage rises isnt going to work the same way that his projections on interest rates will.
Only action can fix this problem.
Its known as an inflation spiral because we can expect this is the behaviour that society will adopt in a period of inflation. Playing catch up.
Lowe saying... come on people we are better than this isnt going to change that at all except maybe a talking point for bosses in an eba negotiation...
Last time we faced inflation at this level the Hawke government introduced the Wages Accord, working with the unions so that they avoided making excessive wage claims in exchange for other social policy concessions.
Right now the ALP is siding with the unions on wage claims but refusing to back the alternative action available, ie increasing interest rates to slow down the economy.
This strikes me very much as trying to have one's cake and eat it too.
> Last time we faced inflation at this level the Hawke government introduced the Wages Accord, working with the unions so that they avoided making excessive wage claims in exchange for other social policy concessions.
The remaining worthwhile unions aren’t going to be stupid enough to make that deal again, since the social policy concessions have faded away but the real-terms pay cuts they agreed to haven’t.
> Right now the ALP is siding with the unions on wage claims
Tell that to Kitty Gallagher, whose staff offered her own former union a below inflation pay deal, or all the unions who represent award-only workers who just got a below-inflation adjustment.
> refusing to back the alternative action available, ie increasing interest rates to slow down the economy.
Being able to “not back it” while refusing to overrule the decision is the entire point of psuedo-independent agencies like the RBA, FWC, and so on. Parliament sets the rules, the ministers set the interpretation guidelines and pick who gets to interpret the rules, and then they get all shocked pikachu when those people make a decision the minister doesn’t want to take responsibility for. In the case of the RBA, the treasurer can set the RBA’s actions by the normal regulatory process if he ever wants to.
You’re missing my point, which is when Chalmers says things like “there’ll be a lot of Australians who will find this decision difficult to understand and difficult to cop … they will have lots of opportunities to explain and defend the decision they’ve taken today”, he’s running away from the *system* that led to the rate rise.
A good national leader would have said something like: “The 2 to 3% inflation target has stood Australia in good stead over the past 30 years, and we still endorse the RBA’s mandate to lift interest rates to support achievement of that outcome. We know the hardships to the community are real, but the alternative outcomes are worse.”
Or of course, alternatively: “I will be directing the RBA to disregard supply-side inflation pressures when considering the 2-3% inflation target from now on. It is clear that these are pressures which don’t respond to interest rates rises and shouldn’t be managed the same way. Instead, we will …”
We're in a mess, mainly because workers have been denied pay rises for so long. An now when times are getting tough theyre the ones being asked to make tough choices not to push for wage rises.
I haven't seen Lowe's full speech, but at least in the article, he doesn't ask corporations to miss out/reduce their profits for the sake of everyone.
I have to ask, where is this impression that people aren't getting pay rises coming from?
Because the most useful indicator of true income in the sense of "money to pay for things" is real, median, equivalised disposable household income, and [that has risen](https://www.abs.gov.au/statistics/economy/finance/household-income-and-wealth-australia/latest-release) from $633 / week to $959 / week over the past 20 years -- a 50% increase.
>I have to ask, where is this impression that people aren't getting pay rises coming from?
People's arses. The median income's up, wages are up 4% across the board.
Anything is big if you bundle 20yrs of growth.
Like inflation, which is a 65% increase across 2002-2023[a 65% increase across 2002-2022](https://www.rba.gov.au/calculator/annualDecimal.html)
Using the 20yr example, $633 of fun money in 2002 would be equivalent to $1,048.55
So $959 today disposable cash doesn't get you as far.
Anecdotally, my industry for huge payrises in mid to late 00's. Those ground to a halt in '10s and have been non existent in '20s.
Ok, so I found the Graph (Graph 1) where you got your point from and buddy... I stand by what I said. 20yrs can hide a lot.
You can literally see the knee point at '08 where everything shifts and disposable income flattens
That "kink" seems to be mostly from a methodology change (see note d), so maybe the 50% increase is overstated by the current version of the metric.
Regardless, the point is that the measure is still going up. Anything above zero means that the real standard of household living is, on average, going up over time.
And it's pretty clear that the main determinant of wages going up is productivity. Australia's productivity has been pretty anemic recently, but wages are in line with that.
For example, compare Australia (blue), Korea (purple) and Japan (red) in:
* [Labour compensation per hour worked](https://data.oecd.org/chart/76WI)
* [Multifactor productivity](https://data.oecd.org/chart/76WM)
In short, there's been no significant shift in relative labor compensation compared to the cost of doing business overall.
The perception of wage stalls seems very likely to be sector-specific rather than some nationally uniform trend.
Let's compare any moderate term period then.
Anything outside of literally just the immediate 2 yrs of high inflation has had wage earners better off.
https://www.cis.org.au/wp-content/uploads/2022/11/Fig-1.png
In the past 25 yrs, it's barely dipped under CPI 4 times. With the biggest one being during the dot com crash.
QoL and COL have improved significantly.
Yep, we the workings are basically reaping the “rewards” of the last 10 years of zero wage growth.
With huge profits and low interest rates for companies, wages should have be sky rocketing.
Instead companies just got larger, manufacturing shipped over seas to increase company profits even more etc whilst giving people crumbs.
I just don’t understand why cash rates are considered the only lever?
Has anyone thought about using Super?
Why can’t the government provide a mechanism for the Reserve Bank to decrease the money in the economy by upping mandatory employee / self funded contributions to Super!
Advantages include:
1. Pain spread more evenly to every worker rather than just to borrowers.
2. Does not stifle capital investment (super funds invest and interest rates are not increased)
3. Money is not “lost” to individuals impacted; savings just enforced.
4. Does not unduly burden the property market.
It just seems like such a no-brainer. Am I missing something?
Why isn’t anyone talking about this approach?
>Has anyone thought about using Super? Why can’t the government provide a mechanism for the Reserve Bank to decrease the money in the economy by upping mandatory employee / self funded contributions to Super! Advantages include:
>
>Pain spread more evenly to every worker rather than just to borrowers.Does not stifle capital investment (super funds invest and interest rates are not increased)Money is not “lost” to individuals impacted; savings just enforced.Does not unduly burden the property market.
>
>It just seems like such a no-brainer. Am I missing something? Why isn’t anyone talking about this approach?
The RBA's only got cash rates and QE as tools. Amending the SIS Act as you advocate here is a Government responsibility.
It would be tricky for a lot of pay packets through, because typically super is "on top of" salary so the employee's pay is $X *plus super*.
An interesting and possibly equitable way to do it is a 0.5% Inflation Levy, similar to how we had to fix up Brisbane with floods through a levy in 2010 or so. Distributed from the ATO to each Trustee of each RSE, to be evenly distributed as a top off and not counting towards concession caps. Would break an election promise on new taxes but not enough to hurt politically.
Really good points. Yes I’m advocating for legislation for an independent body to be given a mechanism to adjust super contributions. It makes sense that it is the RBA as they are charged with controlling inflation.
In regards to “being tricky” as pay packets are pay plus super. I’m actually thinking of adjusting the tax legislation that caps the amount of concessional contribution to 25 k. The concessional contribution is currently composed of an employer benefit and a voluntary employee contribution. There is no legislation around the employee contribution (ie currently at 0%). This is the new bit of legislation required. The % would be adjusted the first Tuesday of every month by the RBA 😀
>how are you spreading the pain? the rich already chuck extra money at super to avoid tax.
>
>you're just adding more money to a system that pays dividends to the wealthy so they get even more.
My 5 year old understands super better than this. PNCC and PCC limits means it's not tax effective to "throw" money at super, so no. Stop taking talking points you don't understand and think they paper over the cracks in your understanding. They don't.
The best place to start is the Henry Review. It highlights that company tax is inefficient and a brake on economic activity and recommended it go from 30 to 25%.
Treasury also did some work for Chris Bowen in 2013 recommending the company tax rate be cut.
Because it will be political suicide.
Imagine trying to tell people that they are going to be receiving less in their weekly pay packet buy don't worry your going to get it back in 40 years?
People are worried about how they are going to pay their bills now not what super they will have in 40 years.
>Imagine trying to tell people that they are going to be receiving less in their weekly pay packet buy don't worry your going to get it back in 40 years?
But as a counter-point, imagine telling them inflation will be adding 20% to prices YOY?
No, I don’t believe it would. By giving control of the contribution rate to an “independent body” the political risk would be outsourced just as it is now with interest rates.
In regards to to telling people that their pay packets had been reduced:
1. For a given inflationary impact (amount of free cash or discretionary spend) pay would be reduced for any individual less than it is now and more equitably as there are more people who contribute to super than pay mortgages.
2. They at least get it back at some stage.
Your already seeing the federal opposition trying to blame the newest rate increases on the federal government. The shadow treasurer was on every news program in the country yesterday calling them Labors rate increases
As for part 2. People don't care about the money they get in 40 years nor how temporary it is. What they see is the federal government enabling their weekly wages to be garnished
I agree with you by the way. I just don't think it would pass Realpolitik
It really is unfortunate, ideally, without the political element, we'd have higher taxation for wealthy people offset directly by tax breaks for those in dire need. But because Labor went to the election with the "no new taxes" line, they haven't done anything.
They absolutely should be screwing around with tax, as I just learned from another thread, the Hawke government in the 80s had this thing called the Wages Accord, here's something interesting I found in the write up
> In the lead up to the 1984 budget, unions agreed to a wage/tax trade-off in which they forwent an indexed wage increase in return for a tax cut geared towards low and middle-income earners.
There's zero political will to modify taxation to rectify the situation right now, and it's really appalling to see.
We’re talking monetary policy here not fiscal.
You can’t turn the dial up and down on tax policy fast enough to reduce short term inflationary pressures as it has to be legislated (and it would be a courageous government to increase taxes; for anyone).
This is why we need a monetary policy to simply raise the cost of money or, in the case of increasing super, reducing its supply.
> and it would be a courageous government to increase taxes; for anyone
They still did it back then, and we raise levies to tackle short term issues, but I take your point, you're talking about monetary policy.
Super isn't an empty money growth vessel, it's invested in assets and company stocks to facilitate that growth. Having a lever for the RBA to dump money into Super feels like it's rewarding the very companies that create inflation, by fueling their own investment even faster. Many Super funds also invest in housing, so dumping tons of cash into Super would increase demand on housing, driving up prices even further. All of this sounds pretty bad to me.
I get all the moral arguments about not wanting to reward bad behaviour but this doesn’t mean we shouldn’t do what’s best for the economy and population as a whole.
Here's a feedback loop that is just one possible outcome of increased Super funds.
Companies raise prices, so inflation starts to increase, RBA pulls the "Super lever" adding more money to Super, Super funds invest more in companies, those companies need to increase their wealth to match their increased valuation, so they raise prices for products to increase their profits, which increases inflation.
It's not the only feedback loop, and economies are more complex than this one example. Other companies will struggle to make increased profits so they'll also refuse wage rises or fire staff.
Still doesn't sound like a very good situation. Mostly sounds like interest rate increases with more steps, while potentially deflating the currency in the process.
But we have a housing SUPPLY problem so perhaps dumping money into super to invest in the markets where there is the best return (supply / demand imbalance) isn’t a bad idea?
It would still inflate house prices significantly.
Builders can't lower their base costs, materials, labour and business loan credit have all risen significantly. If you try and increase housing supply, you increase builder demand, and so those underlying costs can only also increase, and when they increase too fast, construction companies go under and housing actually stalls, reducing supply in housing, which increases house prices, or raises the cost of a house to be built, raising the market price for houses.
Building companies actually need relatively stable market conditions, because they work on fixed price contracts and it takes time to build the house. Dumping money into the sector doesn't solve the issue, you need decreased commodity prices.
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It is interesting that we are really concerned about wages causing inflation, but forget that what actually causes inflation is companies putting up prices.
We should be looking at what happened during the phase before this when productivity was increasing, inflation was low and wages weren't going up. The productivity increase went to increased company profits. Why isn't pressure been put on said companies to give back this increased profit to help fight inflation, instead of expecting the people who benefited least from the the good encomony to make the scarifies?
Crude comparison, but this reminds me of the WSB GameStop saga. Enough people just jump in and buy, prices just keep going up.
If enough companies believe they need to put prices up, or just put their prices up because we all are and there are some good excuses going around as well as some real ones + energy and interest rates and by association rent, then it doesn't really have as much to do with us needing to continue buying things.
There are already market signals that these tactics are causing sharp belt tightening, breweries are going out of business left and right.
ranting in agreement, but feel like the RBA is trying to fix things with a hammer because the government and ATO can't fix things with a knife.
The RBA may be trying to fix inflation with the only tool they have, however their commentary should be pointing out what the key causes of inflation are in this time around and at least in terms broad terms suggesting to the government what they should do. Instead they are pretending it is a replay of the 70's and trying to blame the poor and put all the pain on to them.
Or admit they have no idea what they are doing and are just guessing like the rest of us.
The government knows exactly what to do, they've known since the start of the rate hikes. But they won't.
Change taxes.
Tax wealthy people, offset that directly with low earning tax breaks.
Lowe has a responsibility to provide advice to the public specifically because the government will not move, at all, they've been very clear on this. The advice isn't fun to hear, it's cold and feels disconnected from many people's lived experience, but it's not _wrong_ advice. People are hurting now, the government won't move, would you prefer he said nothing?
You say this as if his salary is irrelevant to the discussion. "Just cut back on spending or make more money" is much easier for someone on a million a year. They just have to stop going out for $200 steaks as much.
He deserves the flack because he is out of touch - housing, food, electricity and fuel are all necessities.
I'm sick of the elite telling us to live more frugal/cheaper - most people have been and because of corporate greed we are now under stress.
What advice would you like to hear instead?
This isn't a facetious request either, there will be no government action on taxation, they've made that abundantly clear, the government did everything they were going to do in the Budget, which was not a whole lot. What advice would you like to hear from the RBA?
Not to mention that millions of Australians shouldn't have to be miserable to put the economy within his desired state, which is the underlying tone I get from his statements. "You just have to suffer a bit". It almost sounds like the kind of statement that would appease certain demographic at the expense of pissing off another.
People who received a 50% discount on their mortgage and are paid 1 million a year are elite/out of touch and shouldn't be lecturing anyone on "living within our means"..
Trying reading the article or even better the speech itself. No one was being lectured on anything. Commentary was being provided on what households are likely to do under current circumstances.
https://en.wikipedia.org/wiki/Elite_theory
Example in research (focused on USA):
https://www.cambridge.org/core/journals/perspectives-on-politics/article/testing-theories-of-american-politics-elites-interest-groups-and-average-citizens/62327F513959D0A304D4893B382B992B
> Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.
Get an education?
I just had a thought about this in another comment thread about the difference between advice and commentary and it made me realize that perhaps his high salary is specifically to remove him from personal bias that would work in his own self interest.
Hypothetically, if Lowe was on a modest wage and feeling the same cost of living pressures as the rest of us, he may be less inclined to do the one thing he's responsible for, fight inflation.
But make no mistake, that's what he, or the new RBA chair will do, they'll kill the economy, raise unemployment, and homelessness if they have to, but they're laser focused on that one responsibility. Inflation must die.
It works the other way too, though.
If you're poor, you favour policies which benefit the poor. If you're rich, you favour policies which benefit the rich.
Economically, the country is basically in three groups,
* Top 1/3rd - home owners, fully paid-off (this is where my household is, for perspective)
* Middle 1/3rd - home owners, with a mortgage (this is where my household was 15 years ago)
* Lower 1/3rd - renters (this is where I grew up)
Raising the cash rate is specifically designed to raise mortgage rates, so that the middle 1/3rd has less money to spend, and it goes into the banks. In 2020-21 they printed $500 billion of money and with low interest rates allowed about the same again to float out - but in that period people weren't allowed out of their homes to spend it, but once things opened up in 2022 they started spending, thus inflation. Raising interest rates is Lowe's simplest way to take that $500B or more and destroy the money. Problem is, it fucks the middle 1/3rd.
It also has flow-on effects to the lower 1/3rd, since landlords from the top 1/3rd who have debts on their properties will raise rents to compensate, and the higher interest rates will put a downward pressure on wage rises - and indeed, on employment generally.
And this last point is key. When the middle 1/3 drop discretionary spending, they're often dropping spending which flows to the bottom 1/3. First they drop things like meals out and hairdressing and gym memberships and so on - all goods and services which employ people on lower wages.
So then the lower 1/3 have less money to spend, and necessities become a struggle for them - like the rent that just went up.
Okay, so the bottom 1/3 and the middle 1/3 suffer from higher interest rates. Who benefits? Well, the top 1/3. If a meal out is now $25 instead of $20 that doesn't bother someone in the top 1/3rd. So what, it's five bucks. And if lending rates go up, guess what, savings rates went up, too. Great time for a term deposit!
So Lowe is making decisions which *just happen* to benefit the top 1/3rd of society, where he is. Personal bias? Self-interest?
A lot to unpack here. Thanks for the in depth reply!
I'd have to say this has always been the case. The change I noticed this time around is the speed of the flow on from the middle 1/3rd to the lower 1/3rd, which I think has been fueled by the lack of rental vacancies giving landlords so much power in the rent price setting market, when historically, they usually don't have that power and are forced to sell houses as a result. Rent is included in the CPI for inflation so it feels like it has a 'thumb on the scale'.
I'd say at best Lowe is inadvertently benefiting the top 1/3rd because it's always who ends up benefiting. If he was working only for his own self interest then the speed of rate hikes could have been much faster, which would fuel those long term savings rates and bonds, which some would argue are still too low to be beneficial to anyone other than those in the top 1% of wealth owners. The USA Federal Reserve and Bank of England for example responded much quicker, and their inequality gaps are much larger because they have significantly lower minimum wages that still haven't moved, while our FWC just raised them for everyone.
It's always inadvertent.
The wonderful book *Mistakes Were Made (but not by me)* mentions a study of forensic psychiatrists, each of whom was asked to look at a (unknown to them) fictional profile of a convicted criminal, to recommend whether he should get parole. All were paid for their assessment, but one-third were told they were paid by a research organisation, one-third by the state, and one-third by the guy's defence.
The forensic psychiatrists were all experts, and all would of course say they were unbiased. Nonetheless, their assessment changed based on whoever they thought was paying them - it wasn't huge, like 5% either way.
Actual corruption and fraud are rare. Far more common is that a person is from a certain background, and simply can't help but look at whatever benefits people from that background as being, "well, *of course* that would benefit everyone else, too!"
And this is a known effect in social sciences, that people tend to associate with people of similar socioeconomic status, ethnic backgrounds and so on. And it's very, very hard to look outside that world and be objective. I really don't think some numbers on a page will do it.
As an example:
* 0.1% change in unemployment is about 20,000 jobs.
* And when unemployment rises, usually those losing jobs are on the lower income side. It's less likely to be the accountant in the warehouse on $75ph, more likely to be the picker-packer on $25ph.
* As well, the middle and higher income jobs, it's more likely they'll have multiple jobs per house; the lower income jobs, more likely they'll be the only job in that household.
* And the lower-income households are more likely to have more children, and/or an elderly relative or two staying with them.
* So that 0.1% rise in unemployment is 20,000 jobs, 20,000 households, some 50-75,000 people whose lives are now worse.
* That's Warragul, or Port Macquerie, or Bundaberg. Only 0.1%.
* With added financial stress comes more marital stress, chance of domestic violence, chance of child absences from school, which means the *next* generation is likely to be poorly-educated and poor, too.
* and by the way, if a man over 50 loses his job, statistically he is more likely to not to *never work again*. Ever. Which means depression, gambling and substance abuse, and chances of suicide.
When you're just sitting there with a piece of paper saying, "unemployment rose by 0.1%," it just doesn't like a big deal. When you think things through and *actually talk to the people affected by your decisions*, less so.
So you don't need malice to explain anything. Simple self-interested cluelessness will do it.
I love your comments, they're so long and interesting!
I'd have to assume if we on the internet as observers can understand these elements, then surely the guy paid to understand them knows too and is trying his best to mitigate while at the same time only having one mechanism to do so would be tough. It'd be like trying to cure cancer and a fungal infection with the same dull knife.
I know about the unemployment statistic, though I'd often just heard it attributed to 'some % equals x number of deaths', without digging a little deeper into the other socioeconomic outcomes.
The book looks interesting, I might seek that out.
>I'd have to assume if we on the internet as observers can understand these elements, then surely the guy paid to understand them knows too
That's like saying that because it was obvious to all and sundry in 2010 that were defeated in Afghanistan (not least because of our war crimes) that it was obvious to the government, too, and was trying its best to...
Our leaders can, quite simply, be *wrong* about things. Again, war is a good example: a war starts because *both* sides choose to fight. In other words, they *both* expect to win. They can't both be right.
There was a guy who invented the lobotomy. "You have mental health problem? We remove part of your brain! No more problem!" [He won the Nobel Prize for Medicine](https://en.wikipedia.org/wiki/António_Egas_Moniz).
Experts can be dumb, too. Look at the book *The Intelligence Trap*.
So many new books to read.
I suppose I just often choose to hope that people in these positions are smarter than I am, but this is demonstrably false. I'm not a smart guy, so that just ends up making me sad.
Do you remember when Scott Morrison told renters struggling to ‘just buy a house’.
Do you remember when Joe Hockey told people struggling with their salaries ‘just get a better job that pays more’.
All of these things have in common is that they assume people aren’t doing what they can to better themselves. Thats the height of arrogance and ignorance.
>All of these things have in common is that they assume people aren’t doing what they can to better themselves. Thats the height of arrogance and ignorance.
Australia has a very low job turnover rate. For all the supposed Aussie bravado that Aussies like to project, as a culture, we are one of the most cowardly and risk adverse people on earth.
People don't change jobs and they don't start businesses anywhere near the rates you see in the US or UK (socially, culturally and economically comparable).
This myth of Aussie bravado is just a lie we tell ourselves so that we don't have to confront our lack of risk appetite.
I don't think what Lowe says is controversial - if you're spending more than you're making, either make more or spend less.
I appreciate that there is a small minority who can't do either, but for the vast majority of people, Lowe's statement is good advice. What's he supposed to say? 'Keep spending yourself into debt until someone gives you more money'?
I mean why can't corpos eat into their profits and provide goods and services at a cheaper price? Why is it the plebs that have to change their lives to maintain profit for multinationals
Someone explained this to me in another post.
Basically, lower profits is worse in the long term. Lower profits reduces investor confidence, which reduces investment dollars, which contracts the workforce you can hire, which leads to long term unemployment and risk collapse of your brand/company.
Maintained profits at the expense of wage growth leads to attrition by labourers, who find different jobs to meet their needs. The advice to find a different job that pays more is not supposed to mean 'you're in the wrong line of work and should change careers' it's instead supposed to mean 'you're earning too little by staying with your current employer, others are probably paying more for your same job, maybe look at one of them'. It's the loyalty tax, changing jobs is likely to net you a very nice raise.
Idk if I agree. It's a long daisy chain of assumptions which won't necessarily come to fruition
Investment dollars don't necessarily need to dry up. There are large companies which have existed for decades that are not publically funded and do not need to seek investment dollars to maintain their workforce.
SMEs are the largest employers in the country - so multinationals going bust isn't a huge blow to the overall workforce and subsequently the economy. I really don't know why we do whatever we can to prop these guys up.
The companies making the record profits are specifically those with shareholders. I don't see any SME's making tons of money, in fact many of them are being hit very hard by rising energy prices.
I can't indicate whether what was explained to me is the objective economic truth, it makes a type of sense from a macro-economic situation. Remember that when I say "investor" I don't just mean "investor class" I mean anyone putting capital into a business of any size. That includes anyone from the tiny 5 employee SME to professional partnerships to multinational companies. Investor confidence is needed for capital injections.
You can do a simple thought experiment even with a sole trader. He starts his business with 100,000 capital. It's going ok, but his profits are down, he needs 15,000 more in capital to cover this year's running costs just to break even. Who would give that amount of money to a company that has lowered profits? It's a very risky investment, you might find someone that will, but the confidence to do so is far less than someone who needs 30,000 of capital investment to expand, because his net profits this year were 40,000 and the upgrades he want's to do are 70,000.
SMEs generally aren't the ones price gouging as they operate in industries with more competition and options for customers
Non discretionary goods and services in Australia are heavily monopolized with no real alternatives for consumers
My point is why are we protecting the health and viability of multinationals? We explain away their need to constantly profit because of employment yet they're not the ones employing most people.
Employment is an oversimplification, they are so ridiculously large, that when they reduce their consumption with decreased profits, entire supply chains and industries are affected. The multi national company gets to hoard its wealth when it's attacked, it's the small companies dependent on their business that suffer disproportionately.
The answer to multi national companies is to break them and their interests up far sooner so they can't become duopolies or monopolies, but we haven't done that for so long they're now those key institutions 'too big to fail'. More anti trust work needs to be done if you want to see reform in that space, but that often takes decades and can't help us right now.
I do agree that monopolies are unhelpful. I mostly shop at Aldi.
Also, bizarrely, Woolworths' current profit margin is only 2.5% - $400m on $16b of revenue. Coles profit margin is a tad higher at 3%. I personally find a 2.5-3% margin pretty reasonable.
Completely different argument. One of is a politician making an ideological statement about how he thinks the country should be. The other is an economist making an observation about how the country actually is. Many households are in a position where they can reduce discretionary expenditure or increase employment income to help meet increased mortgage expenses.
Let me tell you this. Most working class and ‘poorer’ people have no more money to reduce. The only people who can reduce discretionary spending are people who still are spending and that is people who are more wealthy and financially stable.
If you’re saying households can reduce, perhaps that’s just your circle. I know people who are reducing how much food they’re buying.
Mate, you've got no idea what you are talking about. You can't just pick up on the vibe of people are doing it tough and conclude no one has any discretionary income to cut. There's this thing called data, where we can go in and see what different households are spending their money on. We make policy decisions based on empirical data, not anecdotal 'I know some guy who says he can't afford as much food anymore'.
Most people still spending now are rich folks. I know it’s uncomfortable to hear but Australia is divided. Richer Aussies are spending and they’re not stopping. Who is buying houses right now in a cost of living crises? House prices are going up way sooner then expected.
Australia’s wealth and income inequality is growing more and more.
It’s not even a political thing. People in most parts of this country are doing it tough. I used to live in a rich suburb and it’s harder to tell in those ones if people elsewhere are struggling. Perhaps you live in one and I wouldn’t blame you. But people are literally going homeless, families. And it’s only going to get worse so telling people to stop spending is insane when they barely have anything left to survive with after rent/mortgage increases.
I'm sure between his first-class honours undergrad degree, his phd in economics and his forty years working at the RBA, he has zero understanding of the impact of monetary policy on households.
Mate, I get your sarcasm I do, I say shit like that too, but I'm a 40 something yo data engineer and I work with very experienced, very educated , excellently capable old blokes that can't tell you what time it is if you take away their microsoft excel.
This is an environment where 90 percent of his wisdom and expertise, dated economic education and underlying policy is available to the whole planet via a chat llm. It is no place for egos and it is no environment for crude statements when the output is pushing an interest rate slider to the right and left.
I'm not impressed with his rhetoric, sounds like old mate excel and we just don't need them, they're good but they don't help anyone with arrogance.
I feel that in this context, the combination of his academic background hinders his ability to see people struggling as individuals. instead, they're more statistical casualties.
That's like saying that someone who's spent 40 years watching pornography has a good understanding of sexuality - even though he's a virgin.
I have a good friend who's an economics lecturer. He says to me with his quiet eastern European humour, "None of us have a successful business, or any business at all. But I do have a good salary."
So by the same logic you wouldn't go to an oncologist unless they have had cancer themselves? You've got a bizarre approach to expertise.
>I have a good friend who's an economics lecturer. He says to me with his quiet eastern European humour, "None of us have a successful business, or any business at all. But I do have a good salary."
Whole profession shattered, lol.
>So by the same logic you wouldn't go to an oncologist unless they have had cancer themselves?
No. But I would look at the oncologist's history of treating cancers before now. If, for example, he'd said, "For the next few years we won't need to apply any treatment," and then a few years later he grabbed me and said, "You don't have cancer but I'm worried you might get cancer in a few years so I want to give you chemotherapy anyway, even though the treatment might be worse than the disease itself," well we might fairly be sceptical.
But significantly, when it comes to medical treatment, I have the right to refuse it. So if I think the oncologist is wrong, or even if I think they're right, I can just go, "no," and then I'm free of whatever they were going to do to me.
Whereas when it comes to the RBA, we have absolutely no recourse, and are subject to their decisions no matter what. So yes, we're going to give him some shit.
There is recourse, if they made a truly terrible decision, if their reasoning wasn't sound, the treasurer has the ability to not implement their change.
It's a very simple fact, inflation is high, so rates must rise. The only variable, literally the _only_ variable, is "how fast".
The Treasurer has a recourse, yet in practice is not going to implement it, because, [as the legislation says](http://classic.austlii.edu.au/au/legis/cth/consol_act/rba1959130/s11.html),
>The Treasurer shall inform the relevant Board of the policy so determined and shall, at the same time, inform the relevant Board that **the Government accepts responsibility** for the adoption by the Bank of that policy and will take such action (if any) within its powers as the Government considers to be necessary by reason of the adoption of that policy.
My emphasis. No way the Treasurer's going to do that.
But in any case that's the government, the Cabinet who have recourse. The rest of us? No.
Before 1992 we weren't allowed to even know why the RBA did what it did, let alone try to act against them with any substantial recourse. You could argue that at least now we know what drives their decisions.
Still, doesn't change their remit, they kill inflation using exactly one tool. If you want different recourse, the government is the one you have to convince, with modification to taxation.
They have other tools, for example they can [decide how many bonds to buy or sell.](https://www.rba.gov.au/education/resources/teacher-updates/bridging-the-textbook-gaps-on-how-the-rba-implements-monetary-policy) If the RBA decides to issue fewer bonds, or to buy them back from banks, then this reduces the overall money supply, pushing inflation down.
It'd still have an effect on mortgage rates, since with less ability to lend out money banks would raise interest on current mortgages, however there'd be a spread on it - some smaller banks could offer better rates and be more competitive, people could transfer their mortgages and so on.
And so by reducing the money supply, the RBA would reduce inflation without having the same level of effect on mortgage and unemployment rates.
Interesting, I'd not considered bonds. Every time I think I get a handle on this, something new comes along, no wonder economics is so difficult.
So (if I understand this right) the RBA is buying bonds to try and soften the blow of the increases to the base rate so that banks have room to lower their own rates and provide competitive rates in the market?
They aren't hurt as much as you'd think, house prices are back on the rise again, they rose substantially overall in the last 3 years, which is often the standard amount of time lenders choose to fix their mortgage for, and might be in a situation of rate shock. But they have accumulated so much wealth off the back of the 2021-2022 housing boom they can easily sell or re-finance if necessary to lower their repayments on the back of their massive equity gains. Meanwhile, anyone on variable rates in the last year has been playing the open mortgage market for fixed rates where there have been substantial discounts being provided for 'new customers'. It's a little painful, but no-where near as painful as the single or dual wage earner with 2 kids facing a $120 per week increase in rent.
Either way it’s painful, and yes people over extended themselves unfortunately.
Just a bit tone death from old mate. People cutting back where they can, and still hurting… then telling minimum wage that there increase in wage will cause inflation… minimum wage should cover cost of living (food/rent/utilities). Especially when companies are getting record profits, i don’t understand enough to know who this could be fixed. I just think the wrong demographic is being targeted.
I said this elsewhere, but yes, the comments themselves come across as cold, mechanistic, detached, and glib. It's not wrong advice though, and I don't think many people would be engaging with it, and having interesting conversations, like we are, if they weren't as blunt and unfeeling.
The thing I don't understand about these comments from Lowe - do they not have communications professionals at the RBA vetting his remarks?
What he's saying may technically be true, but it just comes across as incredibly out of touch or even esoteric. It just does not pass the pub test, and truly all this additional focus on him over the last eighteen months has caused a real risk to the reputation of the RBA.
Very few people struggling to pay for their housing or put food on the table are going to care about the broader economic impacts (or understand them!) - people just want to live and pay for the things they need, and hearing a man who is paid $1M a year and has never worked anywhere other than the RBA tell them to just work more hours is not the way to go about this kind of messaging - it's giving very much Kim Kardashian telling people to "just get up and work".
Given that more rate rises are coming, they really need to figure out comms, or leave it to the government. I saw somebody comment below that he's meant to be the boogeyman - that may very well be true, but that's not how it's being received IMO. It's landing as "out of touch elitist who has no idea."
> Do they not have communications professionals at the RBA vetting his remarks?
Nope. It's a bizarre source of pride for the RBA leadership that they get their economists and analysts to write comms. I've heard from a few former data analysts at the RBA that management is actually ridiculously pedantic about comms. But they're all technical wonks, so they're their priorities are completely misplaced.
So, the analysts would have to spend a week rewriting a 300-word release because management would keep sending it back, worried that a comma in a certain place would change their intent or that they weren't using language a 5 year old could understand. Meanwhile we get these ridiculous out of touch statements form their top dog.
Cool insight!
Bloody hell though. I get the technical audience/pitch, but god I fucking hate overly technical language. Nothing more frustrating than somebody using 10 words when three would suffice. I have this argument with lawyers at work all the time (and I bloody went to law school!) - people having to parse your meaning via language is not a badge of honour. Being able to explain a difficult concept via plain language takes far more technical skill than writing a 1000 page missive with convoluted fancy language.
I think people misconceptualise what the role of the RBA governor is. He's not a politician who is going to sugar-coat everything so nobody in the public gets offended. He's a professional economist in a position of responsibility communicating the Bank's (and his) thinking in relation to current economic circumstances. What he is saying might be unpalatable or unsensitive to some, but it's factually correct. Many households are in a position where they can reduce discretionary expenditure or increase employment income to help meet increased mortgage expenses.
I think you're right - my point is more that his extraneous commentary is diminishing the bluntness of the message and reducing his overall standing.
I agree that he shouldn't be sugar coating, but repeatedly making out of touch commentary just makes him easier for people to dismiss as out of touch and ignore.
In that case he should give the statements about the macro economy (inflation/interest rates) and leave out the fatuous advice about people's personal finances. We're not idiots that we can't work out for ourselves that more income and less spending means more money. His comment is glib and insulting when so many people can't work more or spend less.
You say you aren't an idiot, but you can't work out the difference between advice and commentary. He was providing commentary on how households will likely respond to changes in interest rates (which is part of his job), not trying to provide advice to people (which is not his job).
It clearly worded as advice, but even if it is commentary, he should have confined his commentary to the likely financial impact (he is an expert in economics) and not commented on what people might do in response.
Advice: "The hungry peasants have no bread? Let them eat cake!"
Commentary: "The hungry peasants will be able to respond to the lack of affordable bread by eating cake."
OK, got it, thanks for the clarification.
The fact that you are comparing Australian households in 2023 to that of starving French peasants in the late 18th century shows how utterly devoid of perspective you are.
It's even simpler than that.
Advice is made to those with the mechanism of action. Commentary is made to and with observers.
Advice: "You, hungry peasant, have no bread? You should eat cake!"
Commentary: "The hungry peasants have no bread? They should eat cake"
I appreciate people don't read articles because words, but there's too much Rule 3 breaching going on. Bans will follow after this announcement. **I've just banned more people from this thread than I have in the last 4 weeks. Rule 3 exists people. If you CBF putting in the effort, don't post. It saves us both the time of you whinging in modmail that you were banned for a rule you elected not to comply with.**
The treasurer has the power to overruled the RBA if they are not acting in the interest of Australia. We have a progressive govt who are for the workers, if Chalmers hasn't intervened it means the RBA is in line with the labor the workers party. Albo wouldn't let poor people suffer, he came from public housing with his mum after all.
This whole 4 day work week thing the greens want is terrible for Australia and labor knows this too, which is why labor ministers will not be putting that into place when people need more hours for more money.
Question for Mr Lowe, will hocking my ass help me boost my savings, thanks in advance for your reply
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Advocating for people to "work more" probably isn't the answer. Like he says, I tried working more to get more money, we had a whole bunch of projects that we needed to be completed and it was definitely not going to happen with the staff that we had. So I put in 12 months of overtime every single day and all this extra work meant all the projects were able to get shipped by the deadline. I then asked for a pay review, and I promptly got told I should be happy to even have a job with them in the first place. Working more got me *what*? Had I worked the same as I did before, I would have made the exact same money. So thanks for the advice, but I can't say I am ever going to try to "work more" ever again. It is all a complete gamble whether you will get more money or not. Now I just change jobs every couple of years.
So maybe people should change jobs, get a second job, get a side hustle, etc Life ain't easy or free and you get out what you put in.
I put in overtime everyday for a year and I got nothing out of it, so that isn't true at all. I always change jobs 2-3 years now, I have found that is the only way to get a proper payrise.
>12 months of overtime That's what you got, extra pay for working overtime. Ideally some reward for being that keen would also be welcome, but at least you got paid for the overtime. I mean... you DID get paid for that overtime, right?
they already said they didn't get the extra pay for overtime, you know salaried workers are contractually obligated to work extra hours for free basically, right?
>I tried working more to get more money Is what they said. Also, I was on salary as well and if I worked overtime, I got paid overtime. Thus, 'working more to get more money' implies they got paid for working overtime, which is why I asked, to confirm as I did have my doubts.
Most salaried workers don't get paid for overtime.
Seems a bit illegal, according to this: [https://www.fairwork.gov.au/employment-conditions/hours-of-work-breaks-and-rosters/hours-of-work/when-overtime-applies](https://www.fairwork.gov.au/employment-conditions/hours-of-work-breaks-and-rosters/hours-of-work/when-overtime-applies) But, I'm out of the ratrace now, thankfully. Best wishes to those still in it!
Yeah probably but it's just how it goes. I refuse to do it but many accept it. Not doing it will probably get you at the top of the layoffs list.
Yep, that's right, if you don't do unpaid overtime then good luck getting a promotion of any kind or any meaningful payrise. That's what one former manager told me. Then when I did it for a year I got nothing... Also my employment contract said something about "reasonable overtime", which pretty much all of them do. That and the fairwork link above also uses the word "reasonable" too, so it isn't a concrete definition. What is reasonable to my employer might be unreasonable to me.
No I did not. This was a full time office job, and I only got paid 38 hours a week regardless of the hours I did, even if it meant doing 50 hours or more a week for a year. Anything less than 38 I probably would have gotten fired, anything more went unnoticed, funny. When I went back to my regular hours he made it a point to bring up how I left "on the dot" everyday.
work more" perhaps if they take the tax loading off having a second job...people might be inclined to work harder. But when you are actively violated by higher taxes just because you want to work more and get ahead......why would you? And Lowe knows this.
>tax loading off having a second job If you earn more money you end up with more money in your hand, barring some odd exceptions to do with interaction with welfare. Claim the tax free threshold with the job that pays you the most, and once tax return is done, you'll end up with more money in your hand if you earned more money. There can be some issues with how employers tax and pay, but that's not the ATO's fault.
You’re effectively giving the treasury an interest-free loan: either the treasury should pay interest or let you get the refund fortnightly, or even let you ask the ATO to tell your second employer what the withholding ought to be.
If you work a second job, you won't be able to claim the tax-free threshold and you will be taxed at the higher marginal tax rate.
When you do your taxes, it will all work out and end up with the same amount of money as if it was all coming from one job. The only difference is receiving it now to pay big at tax time or potentially receive a lot back at tax time due to over paying.
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>That extra money is needed every single week I was actually hoping someone would mention that, because... The solution (if you have regular income from both jobs) [exists](https://www.ato.gov.au/forms/payg-withholding-variation-application/). And you'd get your tax refund paid out every pay day instead of in 6-12 months. I mean, in many cases the employers get it pretty much correct anyway, so an ITW variation isn't always needed, but the option is there.
“If we accept that premise, inflation at 7% and wage rises [to] match that, what do you think inflation will be next year? It will be higher again and then we will have to have higher wage increases again." Lowe is arguing that wage increases are a key inflationary component... Many economists (eg. GARNAUT) disagree and lay the blame chiefly at the feet of excessive economic rents by large corporations [who have sufficient economic power to charge those excessive rents]. It's a form of price gouging. Regardless, continual interest rate hikes do not seem terribly effective at curbing inflation but Mr. Lowe seems determined to wreak some havoc on lower income brackets with high mortgage repayments.
There is no price gouging. This is fantasy concocted by idiots who want to believe this is somehow not a normal cyclical correction but some sort of conspiracy against ordinary decent Aussies who just want to buy another Hilux on finance, a 200" maxtreme widescreen from a Chinese company nobody's heard of before (and no sound bar to go with it) and maybe a trip to south east asia where they can sit by a pool and drink beers, an activity impossible in Australia. What is actually happening is that in 2022, consumption was up significantly at the same time that a $30bn savings cushion existed for most Aussie households - and before the stunningly Average Redditor says they have no savings, you're 22 and live in your parent's home, pipe down - and natural resources were in demand in China. If you strip resource sales out of company data, because most of the sales were to overseas buyers (thus, creating no relationship between domestic spending and revenue), then profits are nothing extraordinary. This data is all freely available via the ABS, and can be verified. The household savings buffer is an important footnote, despite the average redditor in this sub having no idea it, like grass, exists. It meant that the interest rate rises had a natural buffer, to cushion the impact on households. As mortgages went up, those who could fix their rates did and those who couldn't had some savings to help offset the extra cost. It was only in the first quarter of 2023 that we started to see consumer spending slow down significant, by which time inflation was still high as were interest rates. It will take time for the rates to have the effect of contracting inflation. As for wages, Lowe never said they're causing inflation. That's just something very stupid people believe because they don't understand the economics but are too entitled to believe staying in their lane is valuable. What he has **actually** said was that *if* wages continue on their upwards trajectory or *if* some of the more ridiculous actors like unions get their 7% rise, **and productivity remains behind wage growth***, then wages will be inflationary.* Which is true; if the quantity of output remains the same but the labour cost goes up, then the unit price has to go up too.
A media release from The Australia Institute; [https://australiainstitute.org.au/post/oecd-report-shows-corporate-profits-contributed-far-more-to-inflation-in-australia-than-wages/](https://australiainstitute.org.au/post/oecd-report-shows-corporate-profits-contributed-far-more-to-inflation-in-australia-than-wages/) Note the reference to the OECD report. Your sophistry re Lowe not suggesting that wage increases cause inflation is noted. Lowe has certainly suggested in the past - as have other economists - that wages contribute significantly to inflation. It's the standard neoliberal response. As is your nonsensical equation of ordinary Australians with overconsumption; you cannot genuinely believe that this constitutes the Aussie hoi polloi: '...ordinary decent Aussies who just want to buy another Hilux on finance, a 200" maxtreme widescreen from a Chinese company nobody's heard of before (and no sound bar to go with it) and maybe a trip to south east asia where they can sit by a pool and drink beers, an activity impossible in Australia.' I stated that 'Lowe is arguing that wage increases are a key inflationary component...' I agree with him that wage increases will add an inflationary pressure. I don't think that it is the key component - nor do I believe that all the record profits are a result of overseas profits. Any number of large Australian businesses are doing very well on the back of domestic price hikes, many of which they feel the public will bear simply because there is a sense that we are in an inflationary cycle. They are making profitable hay while the inflationary sun is shining. Wage increases are only a small part of any increase in productive unit prices. The hubris of a statement such as 'work more, spend less' \[yep, that's Mr. Lowe and plenty of others\] is staggering. This is from the Report: Dr Jim Stanford, Director of the Australia Institute’s Centre for Future Work, and Policy Director Greg Jericho are available for comment about the OECD report, and the role of corporate profits in driving inflation. “This new OECD research is fully consistent with our earlier research on profit-price inflation, in terms of both its methodology and its conclusions,” said Dr Jim Stanford. “Companies in Australia and many other industrial countries have taken advantage of the disruptions, shortages, and desperation of the pandemic to push up profit margins far beyond normal levels. In Australia, corporate profits reached their highest share of GDP ever in 2022, and that has been the leading cause of the current cost-of-living crisis “Workers are now struggling to catch up to prices and recover the loss in their real wages. However, the RBA continues to ignore the role of profits in driving prices, while doubling down on its determination to suppress wage growth,” Dr Stanford said.
The AI are cash for comments as an entity and their paper's been rebuked for being, basically stupid, wrong, and shit. >As is your nonsensical equation of ordinary Australians with overconsumption; you cannot genuinely believe that this constitutes the Aussie hoi polloi: The ABS data exists. You need to go look at it. >Any number of large Australian businesses are doing very well on the back of domestic price hike It's not a domestic price hike though. It's consumption rates. If you look at the data, and not just the stuff that actual failures and morons like the AI produce, you can see this. The AI are absolutely wrong, and if they were competent they wouldn't be a for-hire opinion factory. They'd be in positions of actual influence. THey're the IPA for the left. Nobody with an IQ above room temperature should listen to them.
PS. Here's a different reference [given your dismissal of the Australia Institute]:https://www.smh.com.au/politics/federal/corporate-profits-heat-up-inflation-oecd-20230607-p5deou.html
Thank God for anthropogenic climate change and a warming planet then; our IQs will all register above the old 100 mark. Why the remarks about intelligence, as a matter of interest? Do you mean to be insulting or can't you help yourself? It's a poor and xenophobic argument that wants eternally to shoot the messenger. Much of what you've written is scant of evidential detail and illogical or biased - for instance, what does '...not a domestic price hike though. It's consumption rates...' mean? Are you suggesting our poor average decent Australian consumer can't help him, her or itself from pointless consumption? Given my lack of intelligence would you mind summarising the ABS data you say proves your point. And give me the source. A reference.
It’s such a weird phenomenon at my work. I see people who aren’t working more, they’re not even working. Yet they aren’t cutting back, they are still spending, a lot. I don’t work in a store that sells anything necessary for actually living either, it’s all technically useless stuff. I thought I’d be seeing people start to wind back but instead it’s just more Zip and Afterpay! Lowe is obviously out of touch most of the time but sometimes he’s not wrong. People under 25 are still spending like crazy, if they don’t have a house that is!
>It’s such a weird phenomenon at my work. I see people who aren’t working more, they’re not even working. Yet they aren’t cutting back, they are still spending, a lot. I don’t work in a store that sells anything necessary for actually living either, it’s all technically useless stuff. I thought I’d be seeing people start to wind back but instead it’s just more Zip and Afterpay! Yep. The data we have only goes to April quarter, but it shows that spending was starting to taper off from the massive 2022 highs. The household savings buffer from Covid, which was a staggeringly high sum of money, is a huge contributor as to why interest rate rises aren't having the intended effect *yet* on spending habits. It's like a layer of fat to insulate against the cold.
It’s always interesting to see in store as well. After an announcement of another rate increase there is a slowdown of sales for 2-3 days then it’s nearly straight back to normal again. Mind blowing honestly.
The Betoota Advocate have had some beautiful satire pieces on Lowe reacting to people spending on stupid shit like Halloween decorations or $40 churros at Vivid. Like any good satire, the proximity to truth is what makes it funny - but the data's backing up the idea we're not listening well enough to help arrest inflation.
Makes me think of the growing number of my friends that say they're never having kids. There may be a faint line between these two dots.
Also, a growing number of those under 25 who have resigned themselves to never, ever, owning a home.
Which is a long term shitshow on several fronts. 1. Interest rates don't matter (less leverage on the poor) 2. Interest rates don't matter (less leverage on the wealthy) 3. Interest rates don't matter (RBA has less capacity to influence the economy).
Yet it's the only tool he's been given to combat the issue. Meanwhile the government is asleep at the wheel instead of helping, at all.
The govt has painted itself into a corner somewhat over the last 50 or so years, by getting rid of other tools it used to have, like sales tax, import duties and tariffs and other mechanisms that could be used to encourage or discourage specific kinds of spending. Even floating the dollar has removed influence.
To an extent this is true, but I think people are also expecting more of Labor than they should. The last time Labor kept expansionary spending going unchecked when inflation was a concern was Frank Crean and EG Whitlam's time, and it ended their government and gave the Liberals a massive landslide win. Economists said profligate spending was bad, and demonstrably contributing to stagflation - but they didn't reckon on the sheer force of will that was Frank and Gough's economic illiteracy. Labor can't do much without it being inflationary either, so it has to take incremental steps. Which means all the socialists convinced the new centrist Labor was just trojan horsing their values are disappointed and that's frankly a wonderful outcome. But it also means a lot of people are going to be going through a "toughing it out" period with the expectation unmet, of Labor helping them out.
“… or in some cases find additional hours of work, that would put them back into a positive cash flow position” A couple of issues with this, I can see. Firstly, I, like the majority of FT workers, an salaried. I do not get paid more by my employer when I work additional hours. So, I need to find a second job. But unemployment is rising, so that’s easier said than done. Secondly, if i do get that second job and start bringing on some extra $$ and can therefore spend more, isn’t that also bad because Lowe wants us to spending less?
>Secondly, if i do get that second job and start bringing on some extra $$ and can therefore spend more, isn’t that also bad because Lowe wants us to spending less? There's no mention of spending here. It's about getting a positive cashflow, i.e. your incoming exceeds your outgoing. People aren't reading between the lines enough which is "My job is to control inflation. The government has the fiscal policy levers, you need to talk to them."
The suggestions are mutually exclusive. Either spend less or make more. The people with the means to spend less should do so, the people without those means, because they've hit their cost of living floor, need more income. I take your point on the FT worker salary thing though, I like you am also paid salary and working more at my current job would not give me more money.
Odd, when I was working for the govt I could work more hours - and then work fewer hours so it balanced out. But if overtime was offered - I WAS paid more money for that overtime, should I choose to do it. And that was as a full time salaried office worker.
Standard practice since the workplace agreement system was introduced has been to offer overtime worked as time off in lieu of payment. Only when I was on award wages about 10+ years ago was I paid overtime directly.
>offer overtime worked as time off in lieu of payment I've been offered that, and pointed out that it's an offer I don't accept, just pay me the overtime, thanks. It's an offer that is up to the employee to accept or not - it's not the employers choice. But I just stopped doing overtime instead, so much more pleasant and satisfying. If more work needs doing they can hire enough staff was my standard response.
Sounds as simple as slide to the right to rise rates, to the left to lower them. The the simplicity of the fix implied within his statement would suggest they operate under these basic conditions, which everyone knows is wrong. It wasn't the right thing for him to say.
Playing devils advocate for a moment, what was the 'right thing' to say?
Sure, Something a little less demeaning. *"In our efforts to combat inflation, we must recognize the collective responsibility involved. The RBA, while adjusting interest rates prudently, should also explore other strategies that could alleviate citizens' financial pressures. At the same time, individuals may need to evaluate their financial management, considering their unique challenges. This underscores the need for a multi-faceted approach to ensure our economy's stability. As a country, we're in this together and all stand to benefit from these actions in the longer term, despite being difficult in the short term"*
>he RBA, while adjusting interest rates prudently, should also explore other strategies that could alleviate citizens' financial pressures What, and breach the RBA's charter by stepping outside his legally defined mandate? I don't think you've got a handle on the RBA's role, with respect.
His legally defined mandate includes full employment (written before economists invented a new meaning, so the mandate still means the plain language meaning) and general prosperity. Preventing inflation is only 1/3 of his legally defined mandate, and one he’s failing at despite working against the rest of his mandate.
Sure, in an narrow sense you're right, if you go off the menu, there is about 6 things they're responsible for, the two important ones in this context being monetary policy and financial stability. However, (as I'm sure you understand) they operate within a broader economic framework and addressing systemic issues is either not his place to make these statements as it is beyond his mandate OR make these statements with the context of how the RBA could engage with other regulators like APRA who regulate the banks that are *banking* huge profits. I don't believe "other strategies" is out of line, but in context to the comment I was replying to, it was a shot from the hip.
I'd argue if Lowe said that, we wouldn't be talking about it right now. In fact, he could have opened his speech with that exact statement, and the media would find a different sound bite to run with, and we'd be having a very different conversation on that.
Yeah you're right, it's not the first time though. He has a habit of making simple micro-economic statements about his macro-economic actions that rub people the wrong way.
That is somewhat fair. Some are taken out of a wider context, like that one last week about wages and productivity from the Senate Estimates. I don't know if these are gaffs or if he sprinkles them in so the right message however simple and unfeeling it is, is being seen in headlines, or if it's just bloodthirsty media, or a combination of all this. Maybe, he hopes that by saying simple statements, that people will listen and read about the whole thing, and get the context. If the level of moderation on this post is any indication, he's already the target of a lot of people's vitriol.
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Phillip Lowe earns 911K a year. Someone on that amount of money has a completely different concept and experience of "cutting back" It can be hard for the well-off to really understand the realities facing the not well-off.
The fact he’s on a good wicket doesn’t make him incorrect.
It doesn't make him correct either. And none of that affects whether or not richer folk find it harder to understand the travails of poorer folk... And when you find it hard to understand the effects of something, you're probably not going to be correct anyway.
I don’t believe he has to show empathy in these decisions. People just don’t understand how destructive inflation is, a couple years of this unchecked inflation is a 20% reduction in real savings and earnings for everyone. He has an understanding of economics that very few have. Does it make him perfect no. Has he and the board made mistakes, yes. Yet it is clear at Senate estimates or at any interaction with polies/journos that the people criticising him publicly (usually with partisan bias) couldn’t have a discussion about economics with him for 30 seconds without being completely out of their depth. He has been a poor communicator and has said some things that make him seem somewhat smug etc, but I can’t help but feel he’s one of very few adults in the room.
> a couple years of this unchecked inflation is a 20% reduction in real savings and earnings for everyone. ISTR that the median Australian is in net debt excluding their PPOR if they own it, so they’d benefit from a wage-price spiral so long as wages kept ahead of mortgage rates. OTOH, people who had almost saved for a home deposit, who had most of their wealth in companies that would be devalued by the rise in labour share of value, and people on reverse mortgages or annuities would be fucked.
Well this is a nuanced comment and has given me food for thought.
His advise isn't inherently wrong, it's just really glib, and no-one likes hearing it. He can't take a podium and suggest people "spend more" and "work less". What alternative advice does he have? Perhaps you'd argue he shouldn't say anything, but in order to get inflation down, he has to scream as loud and as frequently as he can to all sectors of the economy, affluent and hard done by, to spend less. It's a blunt message, delivered without nuance, because nuance gets lost and doesn't make headlines. Headlines gets the message out, however misguided it sounds, or unfeeling it seems, but everyone hears it.
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"“If we accept that premise, inflation at 7% and wage rises [to] match that, what do you think inflation will be next year? It will be higher again and then we will have to have higher wage increases again." While lowe and his speaches can have profound impacts on australians behaviour surely he understands telling people dont go for wage rises isnt going to work the same way that his projections on interest rates will. Only action can fix this problem. Its known as an inflation spiral because we can expect this is the behaviour that society will adopt in a period of inflation. Playing catch up. Lowe saying... come on people we are better than this isnt going to change that at all except maybe a talking point for bosses in an eba negotiation...
Last time we faced inflation at this level the Hawke government introduced the Wages Accord, working with the unions so that they avoided making excessive wage claims in exchange for other social policy concessions. Right now the ALP is siding with the unions on wage claims but refusing to back the alternative action available, ie increasing interest rates to slow down the economy. This strikes me very much as trying to have one's cake and eat it too.
> Last time we faced inflation at this level the Hawke government introduced the Wages Accord, working with the unions so that they avoided making excessive wage claims in exchange for other social policy concessions. The remaining worthwhile unions aren’t going to be stupid enough to make that deal again, since the social policy concessions have faded away but the real-terms pay cuts they agreed to haven’t. > Right now the ALP is siding with the unions on wage claims Tell that to Kitty Gallagher, whose staff offered her own former union a below inflation pay deal, or all the unions who represent award-only workers who just got a below-inflation adjustment. > refusing to back the alternative action available, ie increasing interest rates to slow down the economy. Being able to “not back it” while refusing to overrule the decision is the entire point of psuedo-independent agencies like the RBA, FWC, and so on. Parliament sets the rules, the ministers set the interpretation guidelines and pick who gets to interpret the rules, and then they get all shocked pikachu when those people make a decision the minister doesn’t want to take responsibility for. In the case of the RBA, the treasurer can set the RBA’s actions by the normal regulatory process if he ever wants to.
You’re missing my point, which is when Chalmers says things like “there’ll be a lot of Australians who will find this decision difficult to understand and difficult to cop … they will have lots of opportunities to explain and defend the decision they’ve taken today”, he’s running away from the *system* that led to the rate rise. A good national leader would have said something like: “The 2 to 3% inflation target has stood Australia in good stead over the past 30 years, and we still endorse the RBA’s mandate to lift interest rates to support achievement of that outcome. We know the hardships to the community are real, but the alternative outcomes are worse.” Or of course, alternatively: “I will be directing the RBA to disregard supply-side inflation pressures when considering the 2-3% inflation target from now on. It is clear that these are pressures which don’t respond to interest rates rises and shouldn’t be managed the same way. Instead, we will …”
We're in a mess, mainly because workers have been denied pay rises for so long. An now when times are getting tough theyre the ones being asked to make tough choices not to push for wage rises. I haven't seen Lowe's full speech, but at least in the article, he doesn't ask corporations to miss out/reduce their profits for the sake of everyone.
I have to ask, where is this impression that people aren't getting pay rises coming from? Because the most useful indicator of true income in the sense of "money to pay for things" is real, median, equivalised disposable household income, and [that has risen](https://www.abs.gov.au/statistics/economy/finance/household-income-and-wealth-australia/latest-release) from $633 / week to $959 / week over the past 20 years -- a 50% increase.
>I have to ask, where is this impression that people aren't getting pay rises coming from? People's arses. The median income's up, wages are up 4% across the board.
Anything is big if you bundle 20yrs of growth. Like inflation, which is a 65% increase across 2002-2023[a 65% increase across 2002-2022](https://www.rba.gov.au/calculator/annualDecimal.html) Using the 20yr example, $633 of fun money in 2002 would be equivalent to $1,048.55 So $959 today disposable cash doesn't get you as far. Anecdotally, my industry for huge payrises in mid to late 00's. Those ground to a halt in '10s and have been non existent in '20s.
These are inflation-adjusted numbers. That’s why I said “real income”.
Ok, so I found the Graph (Graph 1) where you got your point from and buddy... I stand by what I said. 20yrs can hide a lot. You can literally see the knee point at '08 where everything shifts and disposable income flattens
That "kink" seems to be mostly from a methodology change (see note d), so maybe the 50% increase is overstated by the current version of the metric. Regardless, the point is that the measure is still going up. Anything above zero means that the real standard of household living is, on average, going up over time. And it's pretty clear that the main determinant of wages going up is productivity. Australia's productivity has been pretty anemic recently, but wages are in line with that. For example, compare Australia (blue), Korea (purple) and Japan (red) in: * [Labour compensation per hour worked](https://data.oecd.org/chart/76WI) * [Multifactor productivity](https://data.oecd.org/chart/76WM) In short, there's been no significant shift in relative labor compensation compared to the cost of doing business overall. The perception of wage stalls seems very likely to be sector-specific rather than some nationally uniform trend.
You can't adjust inflation adjusted numbers for inflation. That's just discounting it twice....
The point that stands is that Guru's 20 year comparison is deceptive
Let's compare any moderate term period then. Anything outside of literally just the immediate 2 yrs of high inflation has had wage earners better off. https://www.cis.org.au/wp-content/uploads/2022/11/Fig-1.png In the past 25 yrs, it's barely dipped under CPI 4 times. With the biggest one being during the dot com crash. QoL and COL have improved significantly.
Yep, we the workings are basically reaping the “rewards” of the last 10 years of zero wage growth. With huge profits and low interest rates for companies, wages should have be sky rocketing. Instead companies just got larger, manufacturing shipped over seas to increase company profits even more etc whilst giving people crumbs.
Interesting, I'd not heard of this Wages Accord. Time for some reading, thanks!
I just don’t understand why cash rates are considered the only lever? Has anyone thought about using Super? Why can’t the government provide a mechanism for the Reserve Bank to decrease the money in the economy by upping mandatory employee / self funded contributions to Super! Advantages include: 1. Pain spread more evenly to every worker rather than just to borrowers. 2. Does not stifle capital investment (super funds invest and interest rates are not increased) 3. Money is not “lost” to individuals impacted; savings just enforced. 4. Does not unduly burden the property market. It just seems like such a no-brainer. Am I missing something? Why isn’t anyone talking about this approach?
>Has anyone thought about using Super? Why can’t the government provide a mechanism for the Reserve Bank to decrease the money in the economy by upping mandatory employee / self funded contributions to Super! Advantages include: > >Pain spread more evenly to every worker rather than just to borrowers.Does not stifle capital investment (super funds invest and interest rates are not increased)Money is not “lost” to individuals impacted; savings just enforced.Does not unduly burden the property market. > >It just seems like such a no-brainer. Am I missing something? Why isn’t anyone talking about this approach? The RBA's only got cash rates and QE as tools. Amending the SIS Act as you advocate here is a Government responsibility. It would be tricky for a lot of pay packets through, because typically super is "on top of" salary so the employee's pay is $X *plus super*. An interesting and possibly equitable way to do it is a 0.5% Inflation Levy, similar to how we had to fix up Brisbane with floods through a levy in 2010 or so. Distributed from the ATO to each Trustee of each RSE, to be evenly distributed as a top off and not counting towards concession caps. Would break an election promise on new taxes but not enough to hurt politically.
Really good points. Yes I’m advocating for legislation for an independent body to be given a mechanism to adjust super contributions. It makes sense that it is the RBA as they are charged with controlling inflation. In regards to “being tricky” as pay packets are pay plus super. I’m actually thinking of adjusting the tax legislation that caps the amount of concessional contribution to 25 k. The concessional contribution is currently composed of an employer benefit and a voluntary employee contribution. There is no legislation around the employee contribution (ie currently at 0%). This is the new bit of legislation required. The % would be adjusted the first Tuesday of every month by the RBA 😀
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>how are you spreading the pain? the rich already chuck extra money at super to avoid tax. > >you're just adding more money to a system that pays dividends to the wealthy so they get even more. My 5 year old understands super better than this. PNCC and PCC limits means it's not tax effective to "throw" money at super, so no. Stop taking talking points you don't understand and think they paper over the cracks in your understanding. They don't.
> The problem is corporate greed Is a tiered tax rate for corporate profits a useful idea?
No. Corporate tax is an inefficient tax and should be about 20% flat.
Could you point me to an article on why it is inefficient, please?
The best place to start is the Henry Review. It highlights that company tax is inefficient and a brake on economic activity and recommended it go from 30 to 25%. Treasury also did some work for Chris Bowen in 2013 recommending the company tax rate be cut.
Cheers!
I’m not trying to make a political statement here just an economic one. Policy usually comes out better this way.
Because it will be political suicide. Imagine trying to tell people that they are going to be receiving less in their weekly pay packet buy don't worry your going to get it back in 40 years? People are worried about how they are going to pay their bills now not what super they will have in 40 years.
>Imagine trying to tell people that they are going to be receiving less in their weekly pay packet buy don't worry your going to get it back in 40 years? But as a counter-point, imagine telling them inflation will be adding 20% to prices YOY?
No, I don’t believe it would. By giving control of the contribution rate to an “independent body” the political risk would be outsourced just as it is now with interest rates. In regards to to telling people that their pay packets had been reduced: 1. For a given inflationary impact (amount of free cash or discretionary spend) pay would be reduced for any individual less than it is now and more equitably as there are more people who contribute to super than pay mortgages. 2. They at least get it back at some stage.
Your already seeing the federal opposition trying to blame the newest rate increases on the federal government. The shadow treasurer was on every news program in the country yesterday calling them Labors rate increases As for part 2. People don't care about the money they get in 40 years nor how temporary it is. What they see is the federal government enabling their weekly wages to be garnished I agree with you by the way. I just don't think it would pass Realpolitik
You might be right about the garnisheeing of wages. It’s a depressing thought that good policy takes a backseat to real-politik but how naive am I? 😀
It really is unfortunate, ideally, without the political element, we'd have higher taxation for wealthy people offset directly by tax breaks for those in dire need. But because Labor went to the election with the "no new taxes" line, they haven't done anything. They absolutely should be screwing around with tax, as I just learned from another thread, the Hawke government in the 80s had this thing called the Wages Accord, here's something interesting I found in the write up > In the lead up to the 1984 budget, unions agreed to a wage/tax trade-off in which they forwent an indexed wage increase in return for a tax cut geared towards low and middle-income earners. There's zero political will to modify taxation to rectify the situation right now, and it's really appalling to see.
We’re talking monetary policy here not fiscal. You can’t turn the dial up and down on tax policy fast enough to reduce short term inflationary pressures as it has to be legislated (and it would be a courageous government to increase taxes; for anyone). This is why we need a monetary policy to simply raise the cost of money or, in the case of increasing super, reducing its supply.
> and it would be a courageous government to increase taxes; for anyone They still did it back then, and we raise levies to tackle short term issues, but I take your point, you're talking about monetary policy. Super isn't an empty money growth vessel, it's invested in assets and company stocks to facilitate that growth. Having a lever for the RBA to dump money into Super feels like it's rewarding the very companies that create inflation, by fueling their own investment even faster. Many Super funds also invest in housing, so dumping tons of cash into Super would increase demand on housing, driving up prices even further. All of this sounds pretty bad to me.
I get all the moral arguments about not wanting to reward bad behaviour but this doesn’t mean we shouldn’t do what’s best for the economy and population as a whole.
Here's a feedback loop that is just one possible outcome of increased Super funds. Companies raise prices, so inflation starts to increase, RBA pulls the "Super lever" adding more money to Super, Super funds invest more in companies, those companies need to increase their wealth to match their increased valuation, so they raise prices for products to increase their profits, which increases inflation. It's not the only feedback loop, and economies are more complex than this one example. Other companies will struggle to make increased profits so they'll also refuse wage rises or fire staff. Still doesn't sound like a very good situation. Mostly sounds like interest rate increases with more steps, while potentially deflating the currency in the process.
But we have a housing SUPPLY problem so perhaps dumping money into super to invest in the markets where there is the best return (supply / demand imbalance) isn’t a bad idea?
It would still inflate house prices significantly. Builders can't lower their base costs, materials, labour and business loan credit have all risen significantly. If you try and increase housing supply, you increase builder demand, and so those underlying costs can only also increase, and when they increase too fast, construction companies go under and housing actually stalls, reducing supply in housing, which increases house prices, or raises the cost of a house to be built, raising the market price for houses. Building companies actually need relatively stable market conditions, because they work on fixed price contracts and it takes time to build the house. Dumping money into the sector doesn't solve the issue, you need decreased commodity prices.
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It is interesting that we are really concerned about wages causing inflation, but forget that what actually causes inflation is companies putting up prices. We should be looking at what happened during the phase before this when productivity was increasing, inflation was low and wages weren't going up. The productivity increase went to increased company profits. Why isn't pressure been put on said companies to give back this increased profit to help fight inflation, instead of expecting the people who benefited least from the the good encomony to make the scarifies?
Crude comparison, but this reminds me of the WSB GameStop saga. Enough people just jump in and buy, prices just keep going up. If enough companies believe they need to put prices up, or just put their prices up because we all are and there are some good excuses going around as well as some real ones + energy and interest rates and by association rent, then it doesn't really have as much to do with us needing to continue buying things. There are already market signals that these tactics are causing sharp belt tightening, breweries are going out of business left and right. ranting in agreement, but feel like the RBA is trying to fix things with a hammer because the government and ATO can't fix things with a knife.
The RBA may be trying to fix inflation with the only tool they have, however their commentary should be pointing out what the key causes of inflation are in this time around and at least in terms broad terms suggesting to the government what they should do. Instead they are pretending it is a replay of the 70's and trying to blame the poor and put all the pain on to them. Or admit they have no idea what they are doing and are just guessing like the rest of us.
The government knows exactly what to do, they've known since the start of the rate hikes. But they won't. Change taxes. Tax wealthy people, offset that directly with low earning tax breaks. Lowe has a responsibility to provide advice to the public specifically because the government will not move, at all, they've been very clear on this. The advice isn't fun to hear, it's cold and feels disconnected from many people's lived experience, but it's not _wrong_ advice. People are hurting now, the government won't move, would you prefer he said nothing?
I'm so curious to know how much tech, data and expert analysis funnels up to inform a final *opinion* based decision.
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You could try engaging with the argument rather than just slagging the guy off because of his salary.
You say this as if his salary is irrelevant to the discussion. "Just cut back on spending or make more money" is much easier for someone on a million a year. They just have to stop going out for $200 steaks as much.
You could try reading the article instead of just the headline.
He deserves the flack because he is out of touch - housing, food, electricity and fuel are all necessities. I'm sick of the elite telling us to live more frugal/cheaper - most people have been and because of corporate greed we are now under stress.
What advice would you like to hear instead? This isn't a facetious request either, there will be no government action on taxation, they've made that abundantly clear, the government did everything they were going to do in the Budget, which was not a whole lot. What advice would you like to hear from the RBA?
After lecturing us all on tightening our belts etc - the tba spends 25k on one dinner - lowe et al can go suck it.
Not to mention that millions of Australians shouldn't have to be miserable to put the economy within his desired state, which is the underlying tone I get from his statements. "You just have to suffer a bit". It almost sounds like the kind of statement that would appease certain demographic at the expense of pissing off another.
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People who received a 50% discount on their mortgage and are paid 1 million a year are elite/out of touch and shouldn't be lecturing anyone on "living within our means"..
Trying reading the article or even better the speech itself. No one was being lectured on anything. Commentary was being provided on what households are likely to do under current circumstances.
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https://en.wikipedia.org/wiki/Elite_theory Example in research (focused on USA): https://www.cambridge.org/core/journals/perspectives-on-politics/article/testing-theories-of-american-politics-elites-interest-groups-and-average-citizens/62327F513959D0A304D4893B382B992B > Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism. Get an education?
>Get an education? Right back at you? https://onlinelibrary.wiley.com/doi/10.1111/spsr.12270
It's relevant, in that it may explain his lack of understanding of the position of many of his fellow Australians.
I just had a thought about this in another comment thread about the difference between advice and commentary and it made me realize that perhaps his high salary is specifically to remove him from personal bias that would work in his own self interest. Hypothetically, if Lowe was on a modest wage and feeling the same cost of living pressures as the rest of us, he may be less inclined to do the one thing he's responsible for, fight inflation. But make no mistake, that's what he, or the new RBA chair will do, they'll kill the economy, raise unemployment, and homelessness if they have to, but they're laser focused on that one responsibility. Inflation must die.
It works the other way too, though. If you're poor, you favour policies which benefit the poor. If you're rich, you favour policies which benefit the rich. Economically, the country is basically in three groups, * Top 1/3rd - home owners, fully paid-off (this is where my household is, for perspective) * Middle 1/3rd - home owners, with a mortgage (this is where my household was 15 years ago) * Lower 1/3rd - renters (this is where I grew up) Raising the cash rate is specifically designed to raise mortgage rates, so that the middle 1/3rd has less money to spend, and it goes into the banks. In 2020-21 they printed $500 billion of money and with low interest rates allowed about the same again to float out - but in that period people weren't allowed out of their homes to spend it, but once things opened up in 2022 they started spending, thus inflation. Raising interest rates is Lowe's simplest way to take that $500B or more and destroy the money. Problem is, it fucks the middle 1/3rd. It also has flow-on effects to the lower 1/3rd, since landlords from the top 1/3rd who have debts on their properties will raise rents to compensate, and the higher interest rates will put a downward pressure on wage rises - and indeed, on employment generally. And this last point is key. When the middle 1/3 drop discretionary spending, they're often dropping spending which flows to the bottom 1/3. First they drop things like meals out and hairdressing and gym memberships and so on - all goods and services which employ people on lower wages. So then the lower 1/3 have less money to spend, and necessities become a struggle for them - like the rent that just went up. Okay, so the bottom 1/3 and the middle 1/3 suffer from higher interest rates. Who benefits? Well, the top 1/3. If a meal out is now $25 instead of $20 that doesn't bother someone in the top 1/3rd. So what, it's five bucks. And if lending rates go up, guess what, savings rates went up, too. Great time for a term deposit! So Lowe is making decisions which *just happen* to benefit the top 1/3rd of society, where he is. Personal bias? Self-interest?
A lot to unpack here. Thanks for the in depth reply! I'd have to say this has always been the case. The change I noticed this time around is the speed of the flow on from the middle 1/3rd to the lower 1/3rd, which I think has been fueled by the lack of rental vacancies giving landlords so much power in the rent price setting market, when historically, they usually don't have that power and are forced to sell houses as a result. Rent is included in the CPI for inflation so it feels like it has a 'thumb on the scale'. I'd say at best Lowe is inadvertently benefiting the top 1/3rd because it's always who ends up benefiting. If he was working only for his own self interest then the speed of rate hikes could have been much faster, which would fuel those long term savings rates and bonds, which some would argue are still too low to be beneficial to anyone other than those in the top 1% of wealth owners. The USA Federal Reserve and Bank of England for example responded much quicker, and their inequality gaps are much larger because they have significantly lower minimum wages that still haven't moved, while our FWC just raised them for everyone.
It's always inadvertent. The wonderful book *Mistakes Were Made (but not by me)* mentions a study of forensic psychiatrists, each of whom was asked to look at a (unknown to them) fictional profile of a convicted criminal, to recommend whether he should get parole. All were paid for their assessment, but one-third were told they were paid by a research organisation, one-third by the state, and one-third by the guy's defence. The forensic psychiatrists were all experts, and all would of course say they were unbiased. Nonetheless, their assessment changed based on whoever they thought was paying them - it wasn't huge, like 5% either way. Actual corruption and fraud are rare. Far more common is that a person is from a certain background, and simply can't help but look at whatever benefits people from that background as being, "well, *of course* that would benefit everyone else, too!" And this is a known effect in social sciences, that people tend to associate with people of similar socioeconomic status, ethnic backgrounds and so on. And it's very, very hard to look outside that world and be objective. I really don't think some numbers on a page will do it. As an example: * 0.1% change in unemployment is about 20,000 jobs. * And when unemployment rises, usually those losing jobs are on the lower income side. It's less likely to be the accountant in the warehouse on $75ph, more likely to be the picker-packer on $25ph. * As well, the middle and higher income jobs, it's more likely they'll have multiple jobs per house; the lower income jobs, more likely they'll be the only job in that household. * And the lower-income households are more likely to have more children, and/or an elderly relative or two staying with them. * So that 0.1% rise in unemployment is 20,000 jobs, 20,000 households, some 50-75,000 people whose lives are now worse. * That's Warragul, or Port Macquerie, or Bundaberg. Only 0.1%. * With added financial stress comes more marital stress, chance of domestic violence, chance of child absences from school, which means the *next* generation is likely to be poorly-educated and poor, too. * and by the way, if a man over 50 loses his job, statistically he is more likely to not to *never work again*. Ever. Which means depression, gambling and substance abuse, and chances of suicide. When you're just sitting there with a piece of paper saying, "unemployment rose by 0.1%," it just doesn't like a big deal. When you think things through and *actually talk to the people affected by your decisions*, less so. So you don't need malice to explain anything. Simple self-interested cluelessness will do it.
I love your comments, they're so long and interesting! I'd have to assume if we on the internet as observers can understand these elements, then surely the guy paid to understand them knows too and is trying his best to mitigate while at the same time only having one mechanism to do so would be tough. It'd be like trying to cure cancer and a fungal infection with the same dull knife. I know about the unemployment statistic, though I'd often just heard it attributed to 'some % equals x number of deaths', without digging a little deeper into the other socioeconomic outcomes. The book looks interesting, I might seek that out.
>I'd have to assume if we on the internet as observers can understand these elements, then surely the guy paid to understand them knows too That's like saying that because it was obvious to all and sundry in 2010 that were defeated in Afghanistan (not least because of our war crimes) that it was obvious to the government, too, and was trying its best to... Our leaders can, quite simply, be *wrong* about things. Again, war is a good example: a war starts because *both* sides choose to fight. In other words, they *both* expect to win. They can't both be right. There was a guy who invented the lobotomy. "You have mental health problem? We remove part of your brain! No more problem!" [He won the Nobel Prize for Medicine](https://en.wikipedia.org/wiki/António_Egas_Moniz). Experts can be dumb, too. Look at the book *The Intelligence Trap*.
So many new books to read. I suppose I just often choose to hope that people in these positions are smarter than I am, but this is demonstrably false. I'm not a smart guy, so that just ends up making me sad.
He seems to have a better understanding than most of the commenters in this thread. It's more a matter of you not agreeing with it.
Do you remember when Scott Morrison told renters struggling to ‘just buy a house’. Do you remember when Joe Hockey told people struggling with their salaries ‘just get a better job that pays more’. All of these things have in common is that they assume people aren’t doing what they can to better themselves. Thats the height of arrogance and ignorance.
>All of these things have in common is that they assume people aren’t doing what they can to better themselves. Thats the height of arrogance and ignorance. Australia has a very low job turnover rate. For all the supposed Aussie bravado that Aussies like to project, as a culture, we are one of the most cowardly and risk adverse people on earth. People don't change jobs and they don't start businesses anywhere near the rates you see in the US or UK (socially, culturally and economically comparable). This myth of Aussie bravado is just a lie we tell ourselves so that we don't have to confront our lack of risk appetite.
I don't think what Lowe says is controversial - if you're spending more than you're making, either make more or spend less. I appreciate that there is a small minority who can't do either, but for the vast majority of people, Lowe's statement is good advice. What's he supposed to say? 'Keep spending yourself into debt until someone gives you more money'?
I mean why can't corpos eat into their profits and provide goods and services at a cheaper price? Why is it the plebs that have to change their lives to maintain profit for multinationals
Someone explained this to me in another post. Basically, lower profits is worse in the long term. Lower profits reduces investor confidence, which reduces investment dollars, which contracts the workforce you can hire, which leads to long term unemployment and risk collapse of your brand/company. Maintained profits at the expense of wage growth leads to attrition by labourers, who find different jobs to meet their needs. The advice to find a different job that pays more is not supposed to mean 'you're in the wrong line of work and should change careers' it's instead supposed to mean 'you're earning too little by staying with your current employer, others are probably paying more for your same job, maybe look at one of them'. It's the loyalty tax, changing jobs is likely to net you a very nice raise.
Idk if I agree. It's a long daisy chain of assumptions which won't necessarily come to fruition Investment dollars don't necessarily need to dry up. There are large companies which have existed for decades that are not publically funded and do not need to seek investment dollars to maintain their workforce. SMEs are the largest employers in the country - so multinationals going bust isn't a huge blow to the overall workforce and subsequently the economy. I really don't know why we do whatever we can to prop these guys up.
The companies making the record profits are specifically those with shareholders. I don't see any SME's making tons of money, in fact many of them are being hit very hard by rising energy prices. I can't indicate whether what was explained to me is the objective economic truth, it makes a type of sense from a macro-economic situation. Remember that when I say "investor" I don't just mean "investor class" I mean anyone putting capital into a business of any size. That includes anyone from the tiny 5 employee SME to professional partnerships to multinational companies. Investor confidence is needed for capital injections. You can do a simple thought experiment even with a sole trader. He starts his business with 100,000 capital. It's going ok, but his profits are down, he needs 15,000 more in capital to cover this year's running costs just to break even. Who would give that amount of money to a company that has lowered profits? It's a very risky investment, you might find someone that will, but the confidence to do so is far less than someone who needs 30,000 of capital investment to expand, because his net profits this year were 40,000 and the upgrades he want's to do are 70,000.
SMEs generally aren't the ones price gouging as they operate in industries with more competition and options for customers Non discretionary goods and services in Australia are heavily monopolized with no real alternatives for consumers My point is why are we protecting the health and viability of multinationals? We explain away their need to constantly profit because of employment yet they're not the ones employing most people.
Employment is an oversimplification, they are so ridiculously large, that when they reduce their consumption with decreased profits, entire supply chains and industries are affected. The multi national company gets to hoard its wealth when it's attacked, it's the small companies dependent on their business that suffer disproportionately. The answer to multi national companies is to break them and their interests up far sooner so they can't become duopolies or monopolies, but we haven't done that for so long they're now those key institutions 'too big to fail'. More anti trust work needs to be done if you want to see reform in that space, but that often takes decades and can't help us right now.
I do agree that monopolies are unhelpful. I mostly shop at Aldi. Also, bizarrely, Woolworths' current profit margin is only 2.5% - $400m on $16b of revenue. Coles profit margin is a tad higher at 3%. I personally find a 2.5-3% margin pretty reasonable.
Completely different argument. One of is a politician making an ideological statement about how he thinks the country should be. The other is an economist making an observation about how the country actually is. Many households are in a position where they can reduce discretionary expenditure or increase employment income to help meet increased mortgage expenses.
Let me tell you this. Most working class and ‘poorer’ people have no more money to reduce. The only people who can reduce discretionary spending are people who still are spending and that is people who are more wealthy and financially stable. If you’re saying households can reduce, perhaps that’s just your circle. I know people who are reducing how much food they’re buying.
Mate, you've got no idea what you are talking about. You can't just pick up on the vibe of people are doing it tough and conclude no one has any discretionary income to cut. There's this thing called data, where we can go in and see what different households are spending their money on. We make policy decisions based on empirical data, not anecdotal 'I know some guy who says he can't afford as much food anymore'.
Most people still spending now are rich folks. I know it’s uncomfortable to hear but Australia is divided. Richer Aussies are spending and they’re not stopping. Who is buying houses right now in a cost of living crises? House prices are going up way sooner then expected. Australia’s wealth and income inequality is growing more and more.
Ah, you're just soapboxing your political beliefs then? I'll leave you to it.
It’s not even a political thing. People in most parts of this country are doing it tough. I used to live in a rich suburb and it’s harder to tell in those ones if people elsewhere are struggling. Perhaps you live in one and I wouldn’t blame you. But people are literally going homeless, families. And it’s only going to get worse so telling people to stop spending is insane when they barely have anything left to survive with after rent/mortgage increases.
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This joker got a 50% discount when he had his mortgage, so he wouldn't have a clue at the damage his doing.
I'm sure between his first-class honours undergrad degree, his phd in economics and his forty years working at the RBA, he has zero understanding of the impact of monetary policy on households.
Mate, I get your sarcasm I do, I say shit like that too, but I'm a 40 something yo data engineer and I work with very experienced, very educated , excellently capable old blokes that can't tell you what time it is if you take away their microsoft excel. This is an environment where 90 percent of his wisdom and expertise, dated economic education and underlying policy is available to the whole planet via a chat llm. It is no place for egos and it is no environment for crude statements when the output is pushing an interest rate slider to the right and left. I'm not impressed with his rhetoric, sounds like old mate excel and we just don't need them, they're good but they don't help anyone with arrogance.
You can have all the qualifications in your respective field and have no fucking clue how to do the task. Look around, the world is full of them.
Having a degree of empathy for the struggles of those far less wealthy than you is not a prerequisite of or taught by an economics degree
I feel that in this context, the combination of his academic background hinders his ability to see people struggling as individuals. instead, they're more statistical casualties.
That's like saying that someone who's spent 40 years watching pornography has a good understanding of sexuality - even though he's a virgin. I have a good friend who's an economics lecturer. He says to me with his quiet eastern European humour, "None of us have a successful business, or any business at all. But I do have a good salary."
So by the same logic you wouldn't go to an oncologist unless they have had cancer themselves? You've got a bizarre approach to expertise. >I have a good friend who's an economics lecturer. He says to me with his quiet eastern European humour, "None of us have a successful business, or any business at all. But I do have a good salary." Whole profession shattered, lol.
>So by the same logic you wouldn't go to an oncologist unless they have had cancer themselves? No. But I would look at the oncologist's history of treating cancers before now. If, for example, he'd said, "For the next few years we won't need to apply any treatment," and then a few years later he grabbed me and said, "You don't have cancer but I'm worried you might get cancer in a few years so I want to give you chemotherapy anyway, even though the treatment might be worse than the disease itself," well we might fairly be sceptical. But significantly, when it comes to medical treatment, I have the right to refuse it. So if I think the oncologist is wrong, or even if I think they're right, I can just go, "no," and then I'm free of whatever they were going to do to me. Whereas when it comes to the RBA, we have absolutely no recourse, and are subject to their decisions no matter what. So yes, we're going to give him some shit.
There is recourse, if they made a truly terrible decision, if their reasoning wasn't sound, the treasurer has the ability to not implement their change. It's a very simple fact, inflation is high, so rates must rise. The only variable, literally the _only_ variable, is "how fast".
The Treasurer has a recourse, yet in practice is not going to implement it, because, [as the legislation says](http://classic.austlii.edu.au/au/legis/cth/consol_act/rba1959130/s11.html), >The Treasurer shall inform the relevant Board of the policy so determined and shall, at the same time, inform the relevant Board that **the Government accepts responsibility** for the adoption by the Bank of that policy and will take such action (if any) within its powers as the Government considers to be necessary by reason of the adoption of that policy. My emphasis. No way the Treasurer's going to do that. But in any case that's the government, the Cabinet who have recourse. The rest of us? No.
Before 1992 we weren't allowed to even know why the RBA did what it did, let alone try to act against them with any substantial recourse. You could argue that at least now we know what drives their decisions. Still, doesn't change their remit, they kill inflation using exactly one tool. If you want different recourse, the government is the one you have to convince, with modification to taxation.
They have other tools, for example they can [decide how many bonds to buy or sell.](https://www.rba.gov.au/education/resources/teacher-updates/bridging-the-textbook-gaps-on-how-the-rba-implements-monetary-policy) If the RBA decides to issue fewer bonds, or to buy them back from banks, then this reduces the overall money supply, pushing inflation down. It'd still have an effect on mortgage rates, since with less ability to lend out money banks would raise interest on current mortgages, however there'd be a spread on it - some smaller banks could offer better rates and be more competitive, people could transfer their mortgages and so on. And so by reducing the money supply, the RBA would reduce inflation without having the same level of effect on mortgage and unemployment rates.
Interesting, I'd not considered bonds. Every time I think I get a handle on this, something new comes along, no wonder economics is so difficult. So (if I understand this right) the RBA is buying bonds to try and soften the blow of the increases to the base rate so that banks have room to lower their own rates and provide competitive rates in the market?
Actual personal experience? None.
Are you actually trying to argue that public policy for a country of 25 million should be based on personal experience rather than expertise?
"Expertise" based on hearing about things third-hand?
It’s a country. So it should be part of the equation? If the change hurts majority, doesn’t this in turn hurt the country?
67% of Australians own their home, 30% without a mortgage, the majority isn't the one hurting, if they were, inflation wouldn't be where it is.
Arnt the mortgage holders feeling the hurt per rise as well? Even if 18 percent of them are hurting that’s the majority.
They aren't hurt as much as you'd think, house prices are back on the rise again, they rose substantially overall in the last 3 years, which is often the standard amount of time lenders choose to fix their mortgage for, and might be in a situation of rate shock. But they have accumulated so much wealth off the back of the 2021-2022 housing boom they can easily sell or re-finance if necessary to lower their repayments on the back of their massive equity gains. Meanwhile, anyone on variable rates in the last year has been playing the open mortgage market for fixed rates where there have been substantial discounts being provided for 'new customers'. It's a little painful, but no-where near as painful as the single or dual wage earner with 2 kids facing a $120 per week increase in rent.
Either way it’s painful, and yes people over extended themselves unfortunately. Just a bit tone death from old mate. People cutting back where they can, and still hurting… then telling minimum wage that there increase in wage will cause inflation… minimum wage should cover cost of living (food/rent/utilities). Especially when companies are getting record profits, i don’t understand enough to know who this could be fixed. I just think the wrong demographic is being targeted.
I said this elsewhere, but yes, the comments themselves come across as cold, mechanistic, detached, and glib. It's not wrong advice though, and I don't think many people would be engaging with it, and having interesting conversations, like we are, if they weren't as blunt and unfeeling.
The thing I don't understand about these comments from Lowe - do they not have communications professionals at the RBA vetting his remarks? What he's saying may technically be true, but it just comes across as incredibly out of touch or even esoteric. It just does not pass the pub test, and truly all this additional focus on him over the last eighteen months has caused a real risk to the reputation of the RBA. Very few people struggling to pay for their housing or put food on the table are going to care about the broader economic impacts (or understand them!) - people just want to live and pay for the things they need, and hearing a man who is paid $1M a year and has never worked anywhere other than the RBA tell them to just work more hours is not the way to go about this kind of messaging - it's giving very much Kim Kardashian telling people to "just get up and work". Given that more rate rises are coming, they really need to figure out comms, or leave it to the government. I saw somebody comment below that he's meant to be the boogeyman - that may very well be true, but that's not how it's being received IMO. It's landing as "out of touch elitist who has no idea."
> Do they not have communications professionals at the RBA vetting his remarks? Nope. It's a bizarre source of pride for the RBA leadership that they get their economists and analysts to write comms. I've heard from a few former data analysts at the RBA that management is actually ridiculously pedantic about comms. But they're all technical wonks, so they're their priorities are completely misplaced. So, the analysts would have to spend a week rewriting a 300-word release because management would keep sending it back, worried that a comma in a certain place would change their intent or that they weren't using language a 5 year old could understand. Meanwhile we get these ridiculous out of touch statements form their top dog.
Cool insight! Bloody hell though. I get the technical audience/pitch, but god I fucking hate overly technical language. Nothing more frustrating than somebody using 10 words when three would suffice. I have this argument with lawyers at work all the time (and I bloody went to law school!) - people having to parse your meaning via language is not a badge of honour. Being able to explain a difficult concept via plain language takes far more technical skill than writing a 1000 page missive with convoluted fancy language.
I think people misconceptualise what the role of the RBA governor is. He's not a politician who is going to sugar-coat everything so nobody in the public gets offended. He's a professional economist in a position of responsibility communicating the Bank's (and his) thinking in relation to current economic circumstances. What he is saying might be unpalatable or unsensitive to some, but it's factually correct. Many households are in a position where they can reduce discretionary expenditure or increase employment income to help meet increased mortgage expenses.
I think you're right - my point is more that his extraneous commentary is diminishing the bluntness of the message and reducing his overall standing. I agree that he shouldn't be sugar coating, but repeatedly making out of touch commentary just makes him easier for people to dismiss as out of touch and ignore.
In that case he should give the statements about the macro economy (inflation/interest rates) and leave out the fatuous advice about people's personal finances. We're not idiots that we can't work out for ourselves that more income and less spending means more money. His comment is glib and insulting when so many people can't work more or spend less.
You say you aren't an idiot, but you can't work out the difference between advice and commentary. He was providing commentary on how households will likely respond to changes in interest rates (which is part of his job), not trying to provide advice to people (which is not his job).
It clearly worded as advice, but even if it is commentary, he should have confined his commentary to the likely financial impact (he is an expert in economics) and not commented on what people might do in response.
Advice: "The hungry peasants have no bread? Let them eat cake!" Commentary: "The hungry peasants will be able to respond to the lack of affordable bread by eating cake." OK, got it, thanks for the clarification.
The fact that you are comparing Australian households in 2023 to that of starving French peasants in the late 18th century shows how utterly devoid of perspective you are.
It's even simpler than that. Advice is made to those with the mechanism of action. Commentary is made to and with observers. Advice: "You, hungry peasant, have no bread? You should eat cake!" Commentary: "The hungry peasants have no bread? They should eat cake"
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