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The corporate sector still looks unhealthy, with employee wage growth slowing along with the cost of living.
Main points:
- Corporate profits have increased to the highest level in five years – 17.8 percent
- But wages increased by 3.3 per cent in the last financial year.
- A leading economist says the argument that businesses can’t afford to pay more is “incoherent”.
The latest data from the Bureau of Statistics showed that in the three months to June, company gross profit rose by 7.6 percent, seasonally adjusted.
If you account for innovative products (the stock is still sitting on the shelf), the company’s profit grew by 8.6 percent in the quarter, which is 26.2 percent higher in the year.
It’s the biggest lift in corporate profits in five years, based on Comsec analysis.
Mining profits rose 14.3 percent, driven by higher commodity prices.
Manufacturing profit increased by 10 percent, accommodation and food service profit increased by 48.8 percent, and overall transportation sector profit increased by 23.8 percent over the quarter.
Construction profit decreased by 5.7 percent.
“As we noted at the conclusion of the most recent earnings reporting season, Australian companies are in good shape, weathering challenges such as supply chain issues, a tight labor market, inflation and high interest rates,” Comsec said. Research report.
The 17.8% rise in profits in 2021/22 is the biggest annual gain in five years.
Salary increase is only 3.3%.
Workers or workers, however, continue to fight for wage increases.
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 recovering post-Covid.
“These increased accommodation and food services – 12.3 percent – and arts and entertainment – 8.1 percent,” said the Commonwealth Bank Economics Group.
“These two sectors are 1.8 percent and 3 percent higher than before Covid.
Inflation is currently 6.1 percent.
“Big lift [in wages] It reflects both changes in hours worked (plus headcount) as well as changes in pay and bonus rates,” the CBA said.
In other words, when the wage rate increases, the increase in wages is because more people are working and those who are working are working more hours.
Head count increased by 0.9 percent. [the second quarter] and hours worked at 4.6 percent,” CBA said.
“There is no economic logic here.”
Leonora Reese, a senior economics lecturer at RMIT University, said the increase in take-home pay could be largely due to workers without sick leave returning from COVID-19 isolation.
But she said the latest data exposes an oft-touted line in business that these days, they can’t easily pass off a big pay rise as an illusion.
“There’s no tight bond there – there’s no economic logic there [that higher profits lead to higher wages]” said Dr. Rees.
“Wages are determined by supply and demand in the labor market.”
But Dr. Rees said corporate margins are “very healthy.”
“It doesn’t fit the reason [they] I can’t pay more to the workers,” she said.
More data on profits and wages, including gross domestic product in the June quarter, will be released on Wednesday in the National Accounts Bureau.
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