Australia's economy grew strongly earlier this year, but at risk of a 'cliff-like slowing'
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Australia's economy grew strongly in the three months to June, but it was business owners who benefited more than workers.
National output, as measured by gross domestic product (GDP), grew 0.9 per cent in the June quarter and 3.6 per cent through the year, according to the Australian Bureau of Statistics.
Moira Linton's Melbourne-based demolition business was one of those that benefited from the increase in activity, even though the construction sector was one of the few to decline.
"Business was crazy, we had so many jobs booked in ready to go," she told The Business.
Despite strong demand for work to be done, the construction sector, including Ms Linton's business, saw a pullback in work being completed, mainly due to staff shortages.
"Our impact this year has been staff having COVID," she said.
"Just say our excavator operator had COVID and we don't have a backup, that will put our jobs out by week. But while that job is delayed, it's also pushing back all our other jobs as well."
However, on the whole, the economy was less affected by time off for COVID than it was in the first quarter, or is likely to be in the current quarter, when the latest wave peaked during July and August.
However, there is still mixed evidence that the shortage in staff, evidenced by the lowest unemployment rate in nearly 50 years, is having much widespread effect on wages.
Employees did see a large 2.4 per cent increase in their total pay packets over the quarter, but more people worked more hours to get that money, with Australians spending 2.9 per cent more time at work as Omicron and flood-related absenteeism declined.
That saw the key measure of real unit labour costs fall again by 1.6 per cent, now down 4.8 per cent over the past year, meaning that employers got much more back in output for every extra dollar they spent on wages.
Moreover, the National Accounts measure of price rises jumped 3.3 per cent in the quarter, easily outpacing any income gains for the average worker.
Treasurer Jim Chalmers said that meant real incomes fell again.
"While there are some welcome and encouraging science that wages are starting to pick up, there is no significant measure of wages growth that tells us anything other than real wages are still falling given the high and rising inflation that we confront in our economy," he said.
"We saw company profits reach record highs as a percentage of GDP, but real household disposal incomes fell for the third consecutive quarter by 0.5 per cent in the June quarter."
Workers are getting a record low share of Australia's national income, while company profits surge.
Almost a third of national income went to profits (32.9 per cent) while a record low share went to wages (48.5 per cent).
However, these figures are being skewed by the unprecedented boom in mining profits, which surged nearly 17 per cent to $83 billion for the quarter on high commodity prices.
The ABS said without this mining profit boom the share of income between employees and employers would be closer to recent averages.
Although, even before the latest mining boom, the wages share of national income had fallen well below its peak level seen from the late 1960s through to the early 1980s.
ACTU secretary Sally McManus cited the data to strengthen her calls for a dramatic industrial relations overhaul.
"Workers have the lowest share of GDP on record because productivity growth continues to outpace wages, while businesses are raking in billion-dollar profits," she argued.
"If we want to stop living standards going backwards in this country, then we need to give power back to workers and reform the bargaining system.
"Today's ABS data reveals that businesses can easily afford fair wage increases that would stop further real wage cuts, and address the cost-of-living crisis."
Falling real wages have, so far, not been enough to stop Australian households spending.
"Rises in household spending and exports drove growth in the June quarter," the bureau's head of National Accounts Sean Crick said.
"This is the third consecutive quarter of economic growth, following a contraction in the September quarter 2021, which was impacted by the Delta outbreak."
Mr Crick said reopened borders and a gap between COVID waves saw household spending jump 2.2 per cent in the quarter.
That rise was driven by a 37.3 per cent surge in transport services, an 8.8 per cent rise in spending at hotels, cafes and restaurants, as well as a 3.6 per cent increase in recreation and culture.
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"Households increased spending on domestic and international travel as COVID restrictions further eased and international borders remained open," he observed.
Some of the growth in spending on transport ended up subtracting from growth, as Australians spent money on overseas holidays.
However, that was partly offset by the biggest boom in services exports since the Sydney Olympics in the September quarter of 2000, mainly due to spending by inbound international students and tourists.
Australians' increased spending was largely funded by a decrease in the savings rate, which dropped from 11.1 to 8.7 per cent.
A decline in the savings rate cannot continue forever, and many more cautious consumers are already cutting back due to rising prices.
Elio D'Angelo is one of them.
"You have to because you know, you can't survive the way the things are," he told The Business.
"I went there [to the supermarket] last week, and I bought soft drink: last week it was $1.50, I went on Monday and it was $2.50 for the same item.
"I won't be buying it now."
The June quarter boom in hospitality also looks unsustainable if Mr D'Angelo is a reliable sample.
"Probably before I used to go maybe twice a week, now, maybe lucky if I go once a fortnight," he said, noting that many of his friends had done the same.
UBS economist George Tharenou said, while spending still looks reasonably strong in the current quarter, he cannot see it continuing too much longer.
"Once this 'reopening' phase of spending is done and rate hikes bite, the slump in house prices and confidence indicates a 'cliff-like' slowing," he warned.
The Treasurer was also cautious in his outlook for the economy.
"A number of the pressures on the economy have grown since the June quarter so they're not captured in the data the ABS has collected," Mr Chalmers said.
The ABS figures capture the period from April 1 to June 30, much of which was when the Reserve Bank's benchmark interest rate was still at 0.1 per cent.
The Reserve Bank raises interest rates for the fifth month in a row.
Consumers have also faced a raft of big price increases since July 1, notably electricity.
Marcel Thieliant from Capital Economics was equally cautious about the outlook for Australia.
"We expect GDP growth to soften over the second half of the year before slowing to a crawl in the first half of 2023 as the reopening boom fades and the housing downturn becomes a mounting drag," he warned.
ANZ senior economist Felicity Emmett was a little more optimistic, even though she said the Reserve Bank's interest rate rises will only really start to hit the economy over the second half of this year.
"We think Australia will avoid a recession given how strong a position households and businesses are going into this rate hike cycle," she told the ABC News Channel.
"It will really depend on how weak the global economy does become and we are seeing some of those challenges increase, particularly around energy in Europe.
"So time will tell, but fingers crossed I think that Australia might be able to avoid a recession."
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