Michael Janda, www.abc.net.au, 27 February 2017
Official data show wages going backwards while company profits surged at the end of last year, with mining and construction leading the trend.
Bureau of Statistics business indicators data for the December quarter show a massive 20.1 per cent surge in profits over the quarter, while wages fell 0.5 per cent.
The mining sector led the profit surge, with earnings up 50 per cent on a massive rebound in commodity prices.
Mining accounted for nearly $9 billion of the $13 billion increase in profits over the quarter.
However, it was not alone in seeing strong earnings increases, with construction profits up 32 per cent ($1.1 billion) and professional up 31 per cent.
Beyond the resources sector, workers seem to be underwriting at least part of the profit surge.
“Outside of the terms of trade rebound, some of the support for profits in the non-mining economy seems to be from weaker wage payments, which fell 0.5 per cent quarter-on-quarter (annual run rate slowed further to 1 per cent year-on-year) on the precarious combination of weaker wage growth, fewer hours, and elevated underemployment,” observed JP Morgan economist Tom Kennedy.
Economists had been expecting wages to increase, with Citi tipping a 0.7 per cent gain, with the December quarter fall the first in almost two years.
Perhaps not coincidentally, the two sectors with the strongest profits growth also had some of the biggest wages falls.
“By industry, declines were recorded across mining and construction, the two industries with the largest profits growth, as well as finance and insurance, admin, manufacturing, wholesale trade and hospitality,” Citi’s economics team wrote in a note.
“Sectors of strength included public services, such as education and health care.”
Wages have been in the spotlight, with the Fair Work Commission last week handing down a cut in Sunday penalty rates for a range of retail and hospitality workers, the day after the ABS wage price index recorded its lowest reading on records that go back to the late-1990s.
Citi’s economists added that this weak income growth is unlikely to foster consumption.
“Market exposed sectors continue to show weak wages growth, which argues against a pick-up in consumer spending,” they wrote.
As far as Wednesday’s national accounts go, economists said today’s inventory numbers have made the biggest difference to their forecasts, with a slower than expected build-up in business inventories set to subtract 0.2 percentage points from the GDP number.