Business fear of wage rise 'has no economic logic' after record profit, expert says
The corporate sector appears to still be in rude health, while the growth in workers' remuneration continues to fall well short of the cost of living.
The latest data from the Bureau of Statistics show, in the three months to June, company gross operating profits rose 7.6 per cent, seasonally adjusted.
If you account for inventories (stock still sitting on the shelf), company profits rose by 8.6 per cent in the quarter, to be 26.2 per cent higher over the year.
It is the biggest lift in corporate profits in five years, based on Commsec analysis.
Mining profits were up 14.3 per cent, thanks to higher commodities prices.
Manufacturing profits rose 10 per cent, accommodation and food services profits increased 48.8 per cent, and total profits for the transport sector gained 23.8 per cent over the quarter.
Construction profits fell by 5.7 per cent.
"As we highlighted in the wrap-up of the recent profit-reporting season, Aussie companies are in good shape, weathering a storm of challenges such as supply chain issues, tight job market, rising inflation and higher interest rates," Commsec noted in a research report.
"The 17.8 per cent lift in 2021/22 profits was the biggest annual gain in five years."
Workers or employees, however, continue to struggle for decent pay rises.
Wages and salaries rose 3.3 per cent, seasonally adjusted, according to the ABS.
"The strongest gains in wages and salaries were concentrated in sectors still recovering post-COVID."
"These were accommodation and food services — 12.3 per cent — and arts and recreation — up 8.1 per cent," the Commonwealth Bank's economics team noted.
"These two sectors are just 1.8 per cent and 3 per cent above pre-COVID levels."
There is one sector of the finance industry where workers have maintained an above-average share of earnings.
Inflation is currently 6.1 per cent.
"The large lift [in wages] reflects both changes in hours worked (including via additional headcount) as well as changes in the rate of pay and bonuses," the CBA noted.
In other words, while pay rates increased, higher wages were also a result of more people working, and those in work doing many more hours.
"Headcount rose by 0.9 per cent in [the second quarter] and hours worked by 4.6 per cent," the CBA said.
Senior economic lecturer at RMIT University Leonora Risse said the increases in take home-pay might be largely to do with workers who were not entitled to sick leave returning from COVID-19 isolation.
But she said this latest data exposed an often-trumpeted line by business that they simply cannot afford to hand out bigger pay rises at present as misleading.
"There's no strict tie there – there's no economic logic there [that higher profits lead to higher wages]," Dr Risse said.
"Wages are determined by supply and demand in the labour market."
But Dr Risse said corporate margins were "quite healthy".
"It's not consistent with the rationale that [they] can't afford to pay workers more," she said.
More data on profits and wages will be released on Wednesday with the latest National Accounts figures, including gross domestic product for the June quarter.
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