In the middle of last month, the Federal Government released the Mid-Year Economic and Fiscal Outlook (MYEFO), putting pressure on the government to further rein in spending in order to maintain a budget surplus, their signature position for responsible fiscal management as they see it.
Reflecting on low wage growth over the last several years, local Federal Member for Nichols, Damian Drum stressed the importance of maintaining it, “Wage growth is a problem,” he said.
While the latest figures show Shepparton region has a respectable 4.66 % unemployment rate compared to the rest of Australia, according to research conducted by the Australia Institute, macroeconomic policy has been based on the assumption that unemployment must be maintained at a certain minimum level in order to restrain wages and prevent an outbreak of accelerating inflation.
Australian Bureau of Statistics indicate that Shepparton currently has around 1,670 unemployed people in the community of 35,800 workers. According to Australia Institute senior research fellow, David Richardson, officially recorded unemployment is only the tip of the iceberg of total underutilised labour in Australia.
Counting underemployment, discouraged workers, and “marginally attached” workers, extrapolating his national figures to Shepparton, there are more likely to be around four to five times that number, around 8,000 to 10,000, who are in that group, people who would like to work more but can’t find it.
The options to suppressing wages to maintain a surplus is to increase taxes, particularly in the higher tax brackets. In recent years, the Federal Government has lowered the tax rates for the higher end of the tax scale.
In his speech following the June rate cut, Reserve Bank of Australia governor, Philip Lowe again called on the government to lift its game in terms of fiscal stimulus. “While cutting rates had some effect the benefits are not evenly distributed across the community and that there are some downsides to monetary easing”.
He called – again – for the fast tracking of infrastructure spending with increased borrowing, and structural policies that support firms expanding, investing, innovating and employing people.
Perhaps with high levels of underemployment and the RBA cutting interest rates to stimulate spending, the government obsession with maintaining a budget surplus is not the best fiscal strategy that might be taken for the community at large, particularly for Shepparton’s un- and underemployed or wage earners in general who are struggling on the lower end of the salary scale.
