12 May 2021

Greg Jericho reckons Morrison is planning for years of frozen wages: “The wild fluctuations of the pandemic make it is difficult to discern what is going on when looking at the growth figures. For example, the budget predicts our economy to grow by 4.5% in 2021-22 — a stonkingly good result. But given that it comes off the back of two years where our GDP shrank and then grew by just 1.25%, it’s not a real shock… [T]he tale of this budget for me is mostly in the following three years — for there we see a return to the weak growth of the past decade.Yes, some of it has to do with lower population growth, but even by 2022-23 the government estimates our population will grow by 0.8% — marginally down on the 1.2% growth of 2019-20 but massively above the 0.1% growth this year. Yet our economy is expected to still grow below the long-term trend of 2.75% to 3%. Worse, the news remains ever-dismal for workers. There are some good signs — the government is predicting unemployment will go below 5%. By June 2024 it expects 4.5% unemployment — the lowest since the global financial crisis. And yet wages growth is expected to be dire. … Over the past five years an unemployment rate of 5% — as occurred in December 2018 — would see wages growing by about 2.3% each year. Now, however, the budget predicts an unemployment rate of 5% in June next year, but wages growth of just 1.5% … [T]he budget only forecasts wages growth increasing to 2.5% at best. That is well below the level the governor of the reserve bank, Philip Lowe, suggests is needed to get inflation consistently within the RBA’s 2% to 3% target band. Despite this the government predicts inflation will grow by 2.5% in both 2024 and 2025 — effectively meaning wages growth will be negligible for years to come”.