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Martyn Goddard’s Column: Mercury July 28.
Talking Point: Long-stalled wages growth for workers shows economy still struggling
Martyn Goddard, The Mercury July 28 2018
INFLATION, we were once told, was the great economic evil to be fought at all costs — — and in the 1980s and early 1990s those costs included mortgage interest rates of 17 per cent and the worst recession in a generation.
Now the opposite is true.
Prices are going up by only about 2 per cent. Now we don’t have enough inflation.
If prices don’t keep going up, there are two dangers.
The first is people will put off buying things because they will cost the same next week, or next year, anyway. If that happens, consumer demand, and the economy, tank.
Which takes us to the second danger. If prices go down across the board, it means we have gone into deflation. And that means recession, or worse — high unemployment, increasing poverty, homelessness.
Although the Tasmanian economy is a lot healthier now than it was five years ago, many problems remain.
Like the rest of the country, inflation is still too low for comfort. And the key to a healthier economy, wage rises, is nowhere in sight.
What matters for most of us is not the overall national number but what’s happening to the prices of things we need right here, right now.
The latest figures tell us that too. In Hobart, overall consumer price inflation rose by 2.3 per cent over the 2017-18 financial year. That’s now within the Reserve Bank’s target range and a bit healthier than the rest of the nation, but it means price rises are now outstripping wage growth.
Most employees are going backwards, with their standard of living now falling. This is particularly true for nurses, teachers, police, paramedics and other state government employees, whose annual wage rises are being capped by the government at 2 per cent.
The price of childcare in Hobart rose 5.1 per cent over the year, a big hit for many households that need both parents to work. And don’t get sick, medical and hospital services rose by 5.1 per cent.
Filling the car with petrol or diesel costs 9.9 per cent more than it did a year ago.
Council rates and charges are up 5.3 per cent. And we know what’s happening to rents and house prices.
On the other side of the ledger, fruit and vegies are down 5.5 per cent. Clothing, particularly for men, is cheaper as are household goods, carpets, appliances.
Power prices, up 0.9 per cent, are rising less quickly than wages. But the massive increases over the past few years are still to be addressed.
The bad news is many of the prices going down reveal the difficulties in the retail and horticultural sectors, both of which employ Tasmanians.
When prices go down in these industries, profit margins, and in some cases business viability, tend to be under threat. Clothing stores have been under serious pressure for years. These figures show no good news for them or their employees.
Although the state’s economy is improving, most people are feeling little personal benefit. And they won’t until their wages start going up faster than prices.
The State Government could kickstart that by improving the wages of its own employees.
Hobart journalist Martyn Goddard specialises in private and public health policy.