There are fresh calls for big business to rein in their big or “supernormal” profits in order to provide low wage earners some desperately needed household budget relief.
- Big oil and gas companies almost doubled their profits in six months
- An interim report shows the productivity growth that drives real wages is at a 60-year low
- Some experts say the lack of wage growth is symptomatic of a broken industrial relations system
The Australian Council of Trade Unions (ACTU) wants businesses to share a large portion of their profits with their workforce.
The latest national accounts show Australian companies are taking a record share of company earnings in the form of profits.
The latest profit results from Shell, Chevron, Exxon Mobil and BP show record half-year earnings.
Half-yearly profits for all companies together had almost doubled to $US55.2 billion ($79.6 billion), up from $US28.7 billion for the same period last year, the ACTU noted.
“These energy giants are posting staggering profits while fueling our cost-of-living crisis,” ACTU president Michele O’Neil says.
“Their shareholders are pocketing billions while working people are wondering how on Earth they can afford to fill up their car or heat their homes.
“The big oil and gas companies booked super windfall profits while Australian taxpayers have subsidized the bowser price of petroleum.
“It’s time that big businesses do their part to address the cost-of-living crisis gripping Australians right now.
“If the bargaining system was working the way it is supposed to, workers’ standard of living wouldn’t be hit as hard by big increases in power, gas and petrol prices.”
Productivity first, according to businesses
Business groups argue that for real wages to lift, worker productivity needs to lift.
The Productivity Commission’s interim report confirms that the productivity growth that drives real wages is languishing at 60-year lows, Business Council chief executive Jennifer Westacott says.
“This challenge is monumental because it is productivity that has overwhelmingly driven better living standards and higher wages for Australians since the Federation.
But labor market economists say there should be less focus on the trend in the rate of productivity growth and more attention given to the difference between wage growth and productivity.
Figures from the Center for Future Work, part of the progressive think tank The Australia Institute, show productivity growth has beaten wages growth for over a decade.
That should, in theory, mean a higher rate of pay growth for workers.
Impact Economics and Policy lead economist Angela Jackson says stubbornly low wage growth is a symptom of a broken industrial relations system.
She says the basic formula is that inflation plus productivity growth should equal wage growth.
“The system of wage determination and enterprise bargaining hasn’t factored in productivity gains for decades,” she says.
The latest private-sector check on corporate profitability may only add to that frustration.
Double-digit rise in private infrastructure company profits
The big end of town, according to the latest gauge of corporate profitability, is swimming in cash.
Consulting firm Deloitte Access Economics has released its quarterly Investment Monitor.
It examines major engineering and commercial construction projects and their promoters.
The advisory firm markets the report as a “barometer of structural change in the Australian economy, and of the investment climate — now and in the future.”
Deloitte Access Economics partner and report lead author Stephen Smith says the analysis confirms industry more generally is in rude health.
“Business profits grew at double-digit rates over the past year,” he says.
He says big infrastructure firms are pushing the limits of what they are able to achieve in terms of work done, and are also looking to do more.
“Measures of spare capacity — a key leading indicator of investment — continue to tighten, and there is likely a degree of catch-up spending by businesses as supply chain disruptions ease.”
In the June quarter, the value of definite projects (those under construction or committed) increased by $10.1 billion over the quarter, largely due to several infrastructure projects progressing through the planning stages.
A total of $417.1 billion worth of definite projects are currently included in the database.
That is the highest total seen since the end of the gas construction boom in late 2016, according to the report.
Deloitte Access Economics forecasts business investment to grow through 2022 and 2023, but by less than previously expected.
“While it’s a positive outlook, the long list of risks to that outlook has become longer,” Mr Smith says.
“Public sector investment is expected to grow modestly in 2022 before falling in 2023.”
The Bureau of Statistics will publish its latest measure of wage growth on August 17.