Consumers and Russians revive the economy, but it can't last

Consumers and Russians revive the economy, but it can’t last

And then there is what happened to the construction of houses. Despite a large pipeline of homes waiting to be built, construction activity actually fell 2.9% in the quarter and 4.6% over the year.

Huh? How could it That to happen? Well, the builders say they couldn’t find enough building materials and crafts. This hasn’t stopped them from taking advantage of the opportunity to raise prices. (I think this is called “capitalism”.)


So as we listen to lectures from business managers on the evil of inflation and how it leaves them no choice but to slow everything down by raising interest rates, let’s not forget that the big jump in the cost of new homes and renovations was caused by … them.

They are the ones who, at the beginning of the pandemic and the lockdown, decided it would be a great idea to boost the real estate sector by offering incentives to people buying new homes and reducing the official interest rate close to zero. Well done guys.

Speaking of higher interest rates used to slow the growth in demand for goods and services, the first two of the five hikes we have had so far would have had little influence on what happened in the economy in the three months to June.


But don’t worry, in due course they will have the expected effect. This is the first reason why the strong consumer-led growth we saw last quarter won’t last, even if we see more of it in the current quarter.

Another reason is that families partly use what a cook would call stored heat. During the first national bloc, the percentage of household (after-tax) disposable income that we saved rather than spent jumped to nearly 24%.

We have since reduced our savings rate and now it has dropped to 8.7%. This is not much higher than it was before the pandemic. And with rising house prices making people feel less wealthy, it wouldn’t surprise me to see people feel they shouldn’t cut their savings rate any further.

And this, of course, before we get to the other major source of pressure on household budgets: consumer prices are rising faster than workers’ wages. This undoubtedly explains why our households’ real disposable income has actually fallen for three consecutive quarters.

With companies raising prices, but not adequately compensating their workers for the higher cost of living, it is not surprising that many people care more about what national accounts tell us about how the nation’s income is divided between capital. and jobs, profits and wages.

ACTU chief Sally McManus complains that workers now have the lowest share of GDP on record. It follows that the profit share of national income is the highest ever recorded.

What does not follow, however, is that any increase in profits must have come at the expense of workers and their wages. Profits increased this quarter mainly because, as we have seen, our miners’ export prices are very high, as are their profits.

No, the best way to judge whether workers are getting their fair share is to look at what happened to the “real unit labor costs” – the labor costs of employers, after taking into account inflation and labor productivity. work (this is the bit per unit).


It appears that, since the end of 2019, the real unit labor cost of employers has decreased by 8.5%. If the workers got their fair share, that wouldn’t change.

Families that change this way shortly are Not how to keep consumer spending – and company turnover – always rising.

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