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Curb your whingeing about slow wage rises

Sumo wrestlers hold up crying babies during a “Baby-cry Sumo” event at the Irugi Shrine in Tokyo on September 20, 2015. Japanese parents believe that sumo wrestlers can help make babies cry out a wish to grow up with good health. AFP PHOTO / KAZUHIRO NOGI (Photo credit should read KAZUHIRO NOGI/AFP/Getty Images)
Sumo wrestlers hold up crying babies during a “Baby-cry Sumo” event at the Irugi Shrine in Tokyo on September 20, 2015. Japanese parents believe that sumo wrestlers can help make babies cry out a wish to grow up with good health. AFP PHOTO / KAZUHIRO NOGI (Photo credit should read KAZUHIRO NOGI/AFP/Getty Images)

By Peter Switzer

If there’s one thing I hate it’s the eternal whingeing and bleating by right-wing reactionaries and left-wing bleeding hearts about what’s wrong with the Australian economy.

And of course, I shouldn’t leave out my media mates, who are always looking at what’s wrong with the place.

The Italian affair

Being currently in Italy and listening to a number of Italian friends listing what’s wrong with the place over here, I started reflecting on our great country/economy. Maybe I’m homesick or maybe I’m sick of being lectured to by negative no ones, who achieved a lot less than someone like Malcolm Turnbull and who are undermining the potential of the Aussie economy by always telling us what’s wrong with us, rather than praising us for what’s right with us!

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Also read: How to ask for a pay rise

One area of concern

One area of concern has been the slow pace of wage rises. Let me assure you, this isn’t a local problem but has been a persistent characteristic of most Western economies since the GFC.

Funny that!

But while this is clearly something to be concerned about, there have been some post-GFC pluses that hardly get cheered about loudly enough, such as historically low home loan interest rates. As I’m in Italy, I did a quick check of what rates we are offering with our Switzer Home Loans and they’re still at 3.89% for both the headline and comparison rates. And there are others that can be lower, so that has to be something to be positive about.

And even while worrying on one level, low wages growth has happened as jobs growth has spiked this year and unemployment has fallen to 5.5%. You know 18 months ago, it was 6.4% and doomsday merchants were saying it was going higher!


A list of sweet positives

Let me list some of the positives we should be happy about just to get our too often media-publicised negatives into perspective. Consider these:

  1. Interest rates are historically low, so anyone with a mortgage really is living in a real wage bonus land. And anyone who has lived through 8-9% rates we saw not that many years after the GFC (and 17% in the 1980s) would have to agree with me on this point.

  2. This low-wages story hasn’t been helped by the end of the mining boom, which pushed up mining wages and also national average wages.

  3. We’ve seen tax cuts over the past decade, which means our after-tax incomes are miles better than those of yesteryear.

  4. While we know power bills are expensive because of the Internet and globalisation (which has brought the likes of Zara, H&M, Amazon, discount airlines, etc. to local consumers), the real wage (what you can buy with your dollars) is still OK, without being fantastic. For the record, CommSec’s Craig James has this to say on the subject: “Wages grew by around 2% over the past year, with underlying inflation up around 1.7%. And while wage growth is modest, it’s still running faster than inflation and thus represents real wage growth. Some analysts will use headline inflation as a gauge on real wages, however that’s boosted by a temporary lift in fuel prices, which should be more subdued in the coming quarter.”

  5. We’re actually creating a lot of jobs and I wonder if the low wages growth could be helping. Do you think? In case you missed it, this is what happened with our job numbers: “Employment rose by 42,000 in May after rising by 46,200 in April (previously reported as a rise of 37,400 jobs). Full-time jobs rose by 52,000, while part-time jobs fell by 10,100. Economists had tipped a near 10,000 increase in jobs.” (CommSec)

Hours worked rose by 1.9% in May (the biggest rise in 11 years) and were up by 2.3% over the year (strongest annual growth in 17 months). The unemployment rate fell from 5.7% to 5.5%, which is a four-year low!

How real are these numbers?

But I hear you ask — can we trust these numbers from the Australian Bureau of Statistics (ABS)? Well, this is what Craig James says and I agree: “One strong economic result is viewed with suspicion. Two strong results are viewed with cautious optimism. Three strong job results are viewed as confirmation of a very positive trend.”

Also read: 9 ways to get rich

More positives
Business confidence and conditions readings have been well over their long-term averages lately and job ads have been sensational and are at 6-year highs!


Don’t let inflation climb!

Sure, it would be great if wages were rising more quickly but inflation would take off and then interest rates as well. And then our doomsday merchants would be worrying about rising inflation as well as spiking interest rates, mortgage stress and then a possible recession and rising joblessness.
Maybe what we have is not great but it’s OK, and let’s hope economic growth picks up over the next couple of years to help wages trend higher.

Curb your whingeing!
So for the moment, put a lid on your wage whingeing because they won’t be rising slowly forever. And start talking up our positives and, who knows, some greater positives just might come out of it all.

Peter Switzer is the founder of the Switzer Super Report, a newsletter and website for self-managed super funds. www.switzersuperreport.com.au