Australias Cinderella economy

Still more good news. Productivity growth has almost doubled in the last 10 years. Like America's in the 1990s under the Clinton administration, Australia's productivity growth seems genuine this time round. Yet you wouldn't think so if you read the whingeing by Australia's powerful business lobby, the Australian Chamber of Commerce and Industry, the Howard government, and editorials in Australia's major newspapers. On May 5 the Australian Industrial Relations Court awarded 1.6 million lowest-paid Australian workers a pay rise of A$19 a week. Cacophony protests rang out loud.

Take The Australian newspaper. On May 6 it editorialised the AIRC's decision as an act of "economic vandalism". It's the kind of malarkey that used to make frequent rounds among the rich, the powerful and the influential more than a decade ago when Australia's union-regulated workforce was routinely accused of not pulling its weight to register even a positive shiver on the productivity-growth Richter scale. Now that it has, workers' entitlements for a fair and decent living wage are being decried by those who'd whine far less about business executives milking multi-million dollar salaries and other perks and living the good life even if many of them are less than competent at running a business. But such shortcomings are easily hidden as Australians continue on a credit-card binge of mass consumerism while business barefacedly rakes in record profits.

That's the side of the Cinderella story none of the rich and the powerful and the influential will want to acknowledge. In Australia's good-news story, the dark underbelly is hidden from full view. For starters, the Cinderella economy's current-account deficit has swollen to 6 percent of GDP. That's bigger than America's. But it doesn't seem to be registering among Australians, who are spending more than they are earning. Household savings have plunged to zero percent or less, in real terms. For all the money that sloshes around in share markets, pension funds and other financial instruments that Australia's financial writers will have you believe, the Cinderella economy is in fact hoarding a nation of net dis-savers. That's no laughing matter.

Australian household debt has skyrocketed to over A$230 billion, and rising twice as fast as Americans' over the last decade thanks to historically low interest rates. But business editors, in their infinite wisdom, claim most of the loan-borrowings have been to buy homes, to live in as well as investment properties. Last year 45 percent of all new mortgage borrowings weren't by owner-occupiers but investors desperately looking for capital gains. Irrational exuberance or not, who'd blame them when faced with paltry and uncertain returns from equity markets, lousy bank-deposit interest rates, on top of sleazy banks profiteering by slugging customers scandalously hefty fees and charges, and an Australian tax regime which, by world standards, is one of the highest and the most viciously unfair.

Once Australian workers earn A$6000 a year they start paying a tax rate of at least 30 percent. When income reaches A$62,000, the tax rate is 48.5 percent (compared to 40 percent in Britain). That's as ridiculously steep as government claims that the average annual income of Australians is A$47,000 today. That's not all. The more overtime Australians work, the greater the tax bracket creep. So much so it's hardly worth anybody's while to work paid extra-time. Still, with soaring household debt, every cent counts, even if almost half of all overtime earnings end up in government coffers. With an unemployment rate currently at 5.5 percent if the official data from the Australian Bureau of Statistics can be believed it adds weight to the Cinderella economy story. But ask social workers and other analysts and they'll say the real jobless figure is twice that number, with youth unemployment at over 30 percent.

That's something else the financial and business writers won't say. True, more full-time jobs have been created, but most are in the services sector, and what's more, more and more are either short-term contract or casual jobs. Which means older people who have been long-term unemployed will probably remain unemployed well into their retirement ages. Those lucky enough to secure jobs will have to fight for each one. And just to make ends meet they'll have to have two or three casual jobs a day thanks to a government that's quick to promise one-off tax cuts, as an election sweetener, but won't recognise the fallout from its economic reforms. It'll probably pay the tax-cuts (the budget's due May 11) from the A$8 billion budget surplus. That'll mean Canberra will likely slash more funding for health, education and other essential services. Not that these sectors haven't already been brutalised by the Howard government since taking office in 1996.

Yet The Australian editorial of May 6 had the hide to suggest that the award by the AIRC to Australia's 1.6 million lowest-paid workers was criminal, that it would put undue pressure on business (meaning it'll affect profits), while reducing job opportunities by some 50,000 a figure it readily used from the constantly moaning Australian Chamber of Commerce and Industry. It even claimed that pay rises for the lowest-paid workers be linked to productivity increases by these people. And there was the usual caveat, of course: that pay increases be made if and when businesses can afford them. More, it says these peoples' wages shouldn't be increased since it'll make them too expensive to be employed or remain employed in the future.

Newspaper editors, business leaders and politicians must have embraced the hypocritical oath. Because you can bet your bottom dollar that when these editors get their pay rises, they're usually fat ones, and the last person they'll be thinking of is the lowest-paid worker. They'll laugh all the way to the bank, caress their fat pension funds, and become joyous lifetime members of the high-society set.