Although the value of the goods and services produced in Australia and sold in this country or overseas continues to expand, the income that flows to Australians from that is shrinking. And people are feeling it. This contraction is now officially an income recession, because it has happened for two consecutive quarters. So, while gross domestic product expanded by 0.3 per cent in the three months to September 30, real net disposable income shrank 0.3 per cent, after a 0.2 per cent contraction in the June quarter. The anomaly, Dr McGovern said, reflected the difference between the value of everything Australians do and make domestically, and how much of that stays in the country. The critical difference is between domestic production, which has to do with everything that goes on in the territories of Australia - whether owned by locals or internationals - and national income, which is the income accruing to those who call themselves Australians, whether they are operating in Australia or overseas, he said. This national income recession can be linked partly to the countrys declining terms of trade, which is the ratio of export prices to import prices. These fell 3.5 per cent in the quarter, and 8.9 per cent over the past 12 months. The more Australia-based companies and their workers have to produce to buy the same amount of imported consumer goods, capital equipment, energy inputs and foreign holidays and education, the more of our national income flows out of the country. Similarly, because Australian interest rates are still high relative to most of the advanced world, foreign portfolio investors are earning more on their investments in this country than Australians are earning on their investments overseas. Although grossly simplified, the same applies to global companies invested in Australia, some of which, it has been argued, are not paying their fair share of tax before repatriating profits to their head offices. All of this affects government revenue, reflected in a widening budget deficit, which means fewer concessions and benefits flowing to households and less spending on job-creating projects. It also has an impact on company profits, which means lower real wages and investor returns. Read more: smh.au/business/the-economy/doing-more-with-less-as-incomes-shrink-20141205-120so4.html
Posted on: Sat, 06 Dec 2014 06:07:49 +0000
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