In what is likely result in more job losses and business failures, the ACTU plans to lodge a submission to the Fair Work Commission on Friday calling for a rise in the minimum wage because of Australia’s unprecedented housing bubble.
The Sydney Morning Herald reports:
While the minimum wage was equivalent to 14 per cent of the mean house price in 1993, it is now at less than 7.5 per cent.
ACTU secretary Dave Oliver said a 250 per cent increase in average house prices in the past 20 years had made it impossible for those earning minimum wages to buy a home.
“For those on a low wage, home ownership is a now pipedream,” he said. “Someone on a minimum wage of $622 per week has enough to cover their basic costs and that’s about it. These workers tell us it’s impossible to save up a deposit, let alone afford the weekly repayments.”
Mr Oliver said the minimum wage had increased by 91.2 per cent from 1993 to last year, and would have needed to rise by 254.7 per cent – $1154.42 a week or $60,029.84 a year – to keep up with house prices.
Maybe the ACTU should be lobbing for the government on behalf of their members to do something about the cost of shelter in Australia, rather than trying to make Australia even more uncompetitive?
In February, we reported real wages have started to fall in Australia.
In January, Paul Howes, National secretary of the Australian Workers Union vented his frustrations about the housing bubble in an article in the Australian Financial Review saying:
“The housing rent-seekers’ constant squawking, and exploitation of the peculiarly Australian obsession with property, means reforms of the sector has become the third rail of Australian politics.”
“Yet if we continue kicking the can further down this particular road, it is tough to see how economic disaster can be avoided.”
“There are those using their SMSFs to invest in property debt today who will enjoy the swelling of the bubble during their retirement and die before it bursts.”
“Good Luck to them. But the job of government is to prioritise the long-term future of the majority ahead of the self-interested, short term gains of a minority.”
Howes announced his resignation yesterday.
» ACTU to seek rise in minimum wages as home ownership becomes a pipedream – The Sydney Morning Herald, 25th March 2014.
“Good Luck to them. But the job of government is to prioritise the long-term future of the majority ahead of the self-interested, short term gains of a minority.”
Where did he get that idea?
Union demands pay rises, Gov demands tax rises, Landlord demands rent rises……good luck to all small business owners and their employees.
It’s not a bubble, it’s just plain bull.
I reckon in a real bubble, a site like this wouldn’t have so much activity.
The fact that so many people know things are overpriced, yet continue to purchase, is just plain stupidity (and/or having so much money you just don’t care… which seems to be the case for o/s buyers anyway).
Good luck to the people who get the short end when this comes to a head.
http://www.abc.net.au/news/2014-03-26/rba-warns-banks-not-to-fuel-real-estate-bubble/5346342
Anyway, let it continue. All you need in the end is some smart rich guy to make a town where homes cost half, and everyone will go there, and the big guys will be screwed. I’m thinking the “Amazon” and “ebay” of real estate. It will happen.
Don’t worry very soon many people will be able to afford to buy their home as the bubble is going to pop. This will happen when the Chinese buyers from China start unloading. When this happens it will be another sub prime Australian style. It will happen sometime this year.
Chinese hot money came into Australia fast and they will leave as fast when China is slowing down.
Good Luck to those who bought at the peak. The Australian people can’t match the Chinese when come to speculation in the property market.
When Canada closed the door more Chinese are going to have to go elsewhere.
Since the spotlight is on the FIRB it will be interesting to see what gets done when the floodgates open and more Chinese pile in.
Probably nothing!
http://money.cnn.com/2014/03/25/news/economy/china-us-immigrant-visa/index.html?hpt=hp_t3
Who crashed the property market in Australia? The Chinese.
When the RBA warns of a housing bubble it beggars belief. It is them who are providing all this cheap credit with artificially low interest rates, and they think it’s not going to cause bubbles?
Can anyone tell me why we never floated interest rates so that the markets can decide instead of a select group of people?
I don’t know if you can put all the blame on the RBA. If you look at the data, it seems only Sydney is out of control. Many states have failed to keep house prices abreast of inflation.
The RBA was dropping rates to help businesses, the dollar and contain job losses. How were they to know the Real Estate data firms were going to mislead the public by leaving action results out:
Lies, damned lies and auction clearance rates – 18th November 2013.
If auction clearance rates were correctly reported in the 40%, rather than the hot ‘massaged’ 80%, would all the investors have jumped in?
The RBA has no jurisdiction over real estate marketing and its accuracy.
“The RBA has no jurisdiction over real estate marketing and its accuracy.”
… but they all go to the same brothels and talk to each other in the waiting rooms.
@chockolate –
if interest rates were floated, this would not serve the rich and the banks. it is about control.
@Pete: “The RBA was dropping rates to help businesses, the dollar and contain job losses.”
The RBA knows darn well it has no control over where that credit will go, and they clearly know well it’s likely going to end up in real estate. As such they cannot claim it’s designed to help business or contain job losses – that would be a lie.
You give kids $50 and send them to the shop, do you think they’ll buy vegetables?
Of course when it does go pop we’ll have the likes of Glenn Stevens saying “we had no idea things would turn out like this!” – a la Greenspan. Most central bankers either don’t have a clue or are intentionally misleading. My guess is that it is the latter of those two.
Then you’ll get the academic economist claim that this is somehow a “black swan” event. Yes, because doing things like giving negatively amortising loans to the unemployed or those on minimum wage was going to work out, wasn’t it.
We have a plethora of equally idiotic ideas supporting the Australian bubble. Let me just list some:
1. Negatively gearing (because rent is not high enough to support the property investor)
2. Rent assistance (becuase rent is too high for lower income earners – see point 1).
3. First home owners grants (because housing costs too much for first time buyers).
4. SMSF investing (because leaving your money in the bank just isn’t worth it – see point 1)
5. High population growth (because we wouldn’t have enough demand otherwise)
The RBA and governements at all levels in Australia have snookered themselves.
Paul Howes has a right to be frustrated, even with the ALP. They’re just LNP Lite. He knows that becoming a politician in either of the major political parties at this time is not a good idea.
Just to clarify. My point about rent assistance is not that those who need it shouldn’t get some support but that in a well run economy there should be enough affordable housing for everyone without the need for the governement to prop up speculators. The fact that both point 1 and point 2 occur at the same time would suggest that property prices are too high for both the investor and the renter. The investor has to be subsidised twice.
Also my point about black swan events is not that things that haven’t been observed before don’t occur, but that somehow they cannot be predicted. Real science predicts things that haven’t been observed before all the time.
@DX “good luck to all small business owners”
Exactly right. Everyone forgets about small business. They don’t make the news.
If wages become too high the multinationals can shut up shop and move their businesses off shore. AMP will announce next week the closure of 4 of 5 floors at Docklands. Hundreds of these jobs will move to India. No doubt this will make the news.
But for the small business, they can only bleed to death. They can’t move their businesses off shore to try to reduce costs and remain competitive.
Matt…bang on the money. I reckon it’s already started. Notice all the for lease signs around buisness parks. Small buisness bleeds to death and nobody even notices their departure…until a critical mass. When the national economy shits it’s self…too late then. Wages are too high compared to global standards. Can somebody explain to me how one friend of mine working as a CPA equivalent accountant earns $18 p/h in New York, yet another earns up to $45 p/h as a labourer on Canberra construction sites? The real problem is our cost of housing, living and having a cake and eating it too. It has become a joke…and the puchline has yet to land.
@Matty
“Everyone forgets about small business.” I always wonder WHY?
There are about 2m small business in Australia, which provides almost half of our total private sector industry employment(5m out of 10m). But nobody never ever cares about them.
Everybody talks about Qantas firing a couple of thousands people, Holden is moving overseas, Toyota shutting down. However, nobody talks about small business are closing down, because of increasing salary, higher and higher tax, rising electricity bills(also water and gas), greedy landlord……etc
Well said,
Note:
The for lease signs have been steadily going up for more then 2 years in industrial areas. Now we are also seeing this steady creep onto main street, available office space is increasing.
The little bloke rarely gets a voice because the larger companies have direct access to the political system.
prepper
Bang on the nails head all the comments.
We’re not far from the collective thought of “huh?
What’s going on? How did we get here?”
What happens then? I don’t know,wish I did.
Holding a big loan for some “investment” or flash car would be the worst place to be.
Unfortunately I think you’ll find that many small business owners want a magic pudding economy too – where wages are suppressed but asset prices are inflated. I’m afraid that you cannot have both without social and political ramifications.
I haven’t been on much: Far too busy keeping above mentioned small business a float: I push (and always have) all my rep’s for info regarding the industry, bad debtors, supply drama’s etc. etc. Then I push my accounting friends (who are all for debt and minimal repayments BTW) regarding the business profits they are seeing. I even have a few ATO contacts that I push for info.
It is dire out there: small business has been stuffed for years: One accountant told me “If you’re a small business not piling on debt to keep the doors open, then your a rare case indeed.”
Unfortunately, there is a culture of pride in small business that distorts reality for a lot of owner/operators. Many, many owners accept the fact that staff will ALWAYS earn more than the owner/managers….And I’m talking about bottom of the food chain labourers here, not rocket scientists. Many owners will mortgage the house, their PARENTS house, sign their life away, rather than close the doors. I know of people who have worked for years, sold the business to retire (age induced) and the sale of the business doesn’t even clear the debt on the business.
I recently changed banks with one of my businesses….The poor girl handling the paper work didn’t understand how my business could exist, let alone function with out a line of credit, loan or over draft! The accountant must have the calculations all wrong lol.
So yes, small business will bleed and bleed and bleed. Often taking on debts that have no hope of being repayed. It’s insanity….In fact the entire economy is insanity.
From governments slugging motorists $2,500 dollars for driving unregistered vehicles, to state premiers media office having 1,800 employees, to business owners having to pay staff 12.5% above their actual wage to some suit and tie to ‘look after’ for the employees retirement, to local businesses collecting the consumer tax as well as employees tax, and then having the cheek to force them to use the greatest con-men in Australian society ( AKA accountants) to comply with ASIC regulations, which fail to protect the people that it’s meant too.
I could go on for hours (I’ve offended more people than I care to talk to). I once believed that when the housing market corrected, that some people would hurt, but Australia would be on it’s merry way back to prosperity.
But I now believe it is too far gone. There are too many stupid laws, too many ‘norms’ and ‘rights’ that would need to be dismantled, that this is no longer possible. We will (are?) become an elitist country.
I repeat like a broken record: When this credit cycle collapses, DO NOT be on the wrong side of it.
When it does pop (and I keep wondering if it ever will, despite logic telling me otherwise) I truly hope we don’t go down the Japanese route of a few ‘lost decades’. This wrecks a generation. Surely a bad year and then healing would be better than this. What say you all?
Pretty much if you’re a single income trying to raise a family you got no chance. Zero. Of having any money to do anything or own a house ever. Funny thing is, if I was taxed less id spend more but losing 50% of my income is shit. All I hear when I’m at work is pays at the bottom level are fked. But if we raise our rates some competitor will take the jobs. So basically we can fire 500 staff keep 1000 of them. freeze all their wages and that’s it. The youngest people in the company are fked. Super fked. All the old farts who have been with us 15+ years all bought when it was 1/3 your income to service a 4 bed house. Now they have 2-4 homes each while those coming into the company can’t even afford rent. It’s bs but we are stuck between a rock and a hard place. I can’t offer a new employee a wage to buy a house because that would mean the old workers will also demand a 50% wage hike to cover the 8x loan size you need to buy a family home. The old farts won’t retire because they need to pay off their 5th mortgage on their negatively geared property. It astounds me that one generation is basically working hard yes but in the process stomping their successors, the people who will look after them in old age, the people who will keep their streets clean and build them their retirement homes, paying them nothing. It’s teaching them a very very bad lesson. To be greedy, selfish, oppresses as many people as you can. Don’t give them the opportunity to expand and grow. Make them feel like they are indebted to you for life for simply giving birth to you. It’s despicable. I’m glad my parents are dead because everyone I meet is simply ‘hanging in there’ for their parents to die so they can get their property. As a result they don’t take risks. They don’t look for better jobs or higher pay or improve conditions. It’s as if all the spirit and life has been sucked out of them. They do menial jobs cleaning or service just so at the end of the day their parents don’t think they are lazy. I’ve never met an Australian gen Y who liked their parents. Every single one has always said to me they hate them. They promote tax breaks for themselves but keep minimum wage set instead of keeping it in line with inflation of property. Wages should be double what they are now to support a family instead they are capped. You’re going to get a collapse soon enough or you’ll have a generation of 20-something’s simply living out of home eating migoreng and potatoes till they are 40 then the medical bills to look after their overweight arses.
Australia. The unlucky country.
Sometimes I don’t think refugees realise what they are getting themselves into. Our oppression and slavery is the same as theirs only the cage looks nicer.
BAD policy got us here.
Negative GEARING MUST STOP
CASH for citizen ship MUST STOP. It attracts chinese who themselves only earn about 20,000 a year back in China but have 3o properties in China and Hong Kong all leveraged up to the hilt and waiting to come tumbling down bring Australian Property with it.
STUPID BAD POLICY.
Stop cash for citizenship. WE DONT NEED THE CASH THE AUSSIE DOLLAR IS TOO HIGH ANYWAY!!!
And STOP negative gearing.
BLINDINGLY SMIPLE