Households across Australia are feeling the squeeze while the bosses continue to rake it in.
For the first time since the deep recession of the early 1990s, when unemployment topped 10 percent, most household incomes have fallen.
In September, household incomes were 2 percent lower than they were 12 months previously. This is not a blip. Household disposable incomes are now lower than they were in 2012. And average employee wages in real terms are lower than in 2010.
The bosses, by contrast, are doing very nicely.
Profits in the finance and insurance sector in the 12 months to September were more than double those of the year before.
Mining profits were up by two-thirds to $109 billion – their highest since the peak of the mining boom in 2011. The wealth of the mining bosses has soared. Gina Rinehart’s personal fortune nearly doubled, from around $11 billion to more than $21 billion, according to the Forbes Rich List.
This despite a court ordering her to hand over $5 billion to a trust shared equally between her four children, who now collectively enter the Rich List at number five. The wealth of the Rinehart clan jumped last year without them having to lift a finger: they enjoyed a bumper year courtesy of a surge in iron ore prices.
In manufacturing, long regarded as a laggard, profits were up 12 percent to more than $30 billion. The retail and food and accommodation sectors are crying poor because households are economising. And construction companies’ profits are being wound back in the aftermath of the boom in apartment building.
Company profits overall, however, were up by a whopping 27 percent, the biggest annual increase since 2001. They now stand at $319 billion.
The result of the wages squeeze and the profits bonanza is that workers’ share of national income is at the lowest level since records began in 1959. The bosses have been getting a bigger and bigger slice of the national pie.
But just as the bosses were watching the dollars pile up, they carefully avoided paying much of it to the Treasury. In the September quarter, companies paid just $23.6 billion in tax, significantly below the $26-27 billion they were paying during the 2011-13 upturn after the global financial crisis, despite profits being much higher today.
And the Turnbull government keeps banging on about the need for company tax cuts, despite the fact that more than one-third of the country’s largest companies paid no tax in 2016, according to the Tax Office.
This is all part of a world pattern. Credit Suisse reported at the end of last year that the world’s richest 500 people increased their wealth by US$1 trillion, or 23 percent, due to red hot stock markets.
The concentration of wealth on a global scale is at its highest since the Gilded Age at the turn of last century when families such as the Carnegies, Rockefellers and Vanderbilts in the United States controlled vast fortunes.
The World Inequality Report, published by French economist Thomas Piketty just before Christmas, revealed that the wealth held by the richest 1 percent in the US grew from 22 percent of the total in 1980 to 39 percent in 2014. In the UK, the share of the 1 percent rose from 15 percent in 1984 to 22 percent today. The bottom half of the British population hold less than 5 percent.
In both the US and UK, these increases in the share of the rich hide the stupendous growth in wealth of the top 0.1 percent and the top 0.01 percent. Collectively, the world’s five richest people – Amazon’s Jeff Bezos, Microsoft founder Bill Gates, hedge fund manager Warren Buffett, Spanish tycoon Amancio Ortega and Facebook founder Mark Zuckerberg – hold US$425 billion in assets, equivalent to one-third of Australia’s entire GDP.
None of this results from some inevitable economic law.
Growing inequality is the product of a weakened union movement and more aggressive cost-cutting employers, backed by governments determined to make national businesses “more competitive” on the world stage.
In Australia, the Turnbull government has made things easier for the bosses, with the cuts to penalty rates and a raft of anti-union laws. In other words, class war.
In 2018 we must fight back to end the squeeze on our living standards and claw back some of the wealth that the bosses have been stealing from us.