612 ABC Brisbane Drive 6/6/18

06 June 2018




SUBJECT/S: National Accounts; stagnant wages growth; China’s economy


STEVE AUSTIN: Let me go to Labor's Member for Rankin, also the Shadow Minister for Finance, Jim Chalmers. Jim Chalmers, is the Australian economy stronger?


JIM CHALMERS, SHADOW MINISTER FOR FINANCE: G'day, Steve. Well certainly the headline figure that we got today - the one per cent GDP growth - is a welcome figure, and also the investment number that Scott Morrison was just referring to. That's obviously good news as well. But I think more broadly, if you go beyond that headline figure, the Australian economy's a real mixed bag at the moment, really in three different ways.




CHALMERS: Firstly, the main reason we have this reasonable number today is because the global economy's in the best nick it's been in for probably a decade or so, and that's why we've got that strong export number that you referred to a few minutes ago - because the global economy is going so well. 120 countries are growing simultaneously for the first time in a long time. Obviously, that helps us substantially. That's not necessarily about the Government’s management of the economy. We're just starting to finally see some good global conditions. That's one thing. The second thing is, these numbers are relative to the quarter before, and we had quite a weak quarter before this one - so a fair bit of it is just what economists would call some kind of "catch up".


AUSTIN: Coming from a low base, in other words?


CHALMERS: Yeah, exactly right. But the most important thing to understand, and I think the main reason why people don't necessarily rush to congratulate the Treasurer like he was rushing to congratulate himself a moment ago is because in the parts of the economy that the people feel the most acutely, we've still got some really significant challenges. A lot of households, a lot of families, have got the triple whammy of low consumption, low savings and high household debt. And the reason they've got that is because wages growth is at historic lows. In these numbers we saw today, and one of the reasons why people are not necessarily happy out there in middle Australia, is because profits in this country are growing five times faster than wages. Five times faster than wages, profits are growing in this country! That means that people, no matter how hard they work, they're not necessarily getting ahead; they're not spending in the economy, that number for consumption was very weak; the wages number was very weak; and people have got high household debt.


AUSTIN: Is that about to improve? The Treasurer told me there is some evidence of labour market tightening. That should mean wages start to creep up.


CHALMERS: Yeah, he's been saying that for some time, and that's the sort of economic orthodoxy. But there's been a real decoupling, I think, of changes in the labour market and changes in wages. We've had stagnant wage growth for quite a long time now, Steve, and people are really starting to feel the pinch from that. That's not just an opinion; that's why we've got that weak consumption number. It's why we've got the weak household savings number. It's why people are taking on so much debt, because their wages are barely keeping up with living costs. That's the real story, I think, about the Australian economy at the moment, despite all of these good pressures we're getting from overseas for the first time in a decade.


AUSTIN: Jim Chalmers is the Member for Rankin, the federal electorate here in Queensland. He's also Federal Labor's Shadow Minister for Finance. This is ABC Radio Brisbane. The rate of savings growth in households is slowing down slightly. Is this because of the squeeze or because of a lack of wages growth, or something else?


CHALMERS: I think it's largely a wages story. Ordinarily there'd be some sort of a trade-off between consumption and saving, but what we've got is, as I said before, is this sort of triple whammy where people aren't spending, people aren't saving, and they're still racking up debt. I think that really is a function of the fact that people aren't getting the kind of wages growth that they need and deserve to provide for their families, and we don't hear enough about that. In the broader conversation, sure, the one per cent GDP growth number is a welcome number and a lot of people will focus on that. But, as always, there's a story underneath that headline number and this is the main story out of today's numbers: wages growth.


AUSTIN: I asked about the downside risk. Is Labor worried about the opaque nature of Chinese Government debt, given how important they are to Australia as a trading partner?


CHALMERS: We are. We are generally optimistic about China's economic growth trajectory, partly because as the Treasurer rightly said, the Chinese are cognisant and aware of this being a major threat to their economy. So we are alive to it, we're aware of it. It is definitely a risk to the global economy, and especially our economy. But it's not a new concern. It's something that they are working through. but I think more broadly, there's a whole range of economic and political risks around the world, on the Korean Peninsula; the East and South China Seas; all of these sorts of things. But the global economy, so far at least, touch wood, has proven remarkably resilient to these sorts of pressures. The real economy is going quite well. We've had some share market volatility, we've had some big geopolitical volatility, but the real economy globally has been chugging away and that's really the main reason why we've got a fairly welcome headline GDP growth number today.


AUSTIN: Thanks for your time.


CHALMERS: Thank you, Steve.