“It is not obvious to me that we need massive wage increases,” said Christopher Joye on the Mortgage Business Uncut podcast.
According to Mr Joye, an initial look at official statistics does purport to show a rise in the rate of businesses pocketing profits while restraining wages, but these figures are skewed by the incomes generated by property owners.
“What is interesting is that when they look at the corporate profit share of national income, whilst that does look like it increased, apparently most of that is accounted for by something called imputed profits, which are basically the imputed rents that home owners capture that get picked up in the national accounts,” he said.
“The share of wage income on total national income has actually been pretty static [over the past 60 years] and the changes in wage income can sit down and track productivity very closely.
“I guess [the] argument is that wages growth has been tracking productivity growth and people have been capturing wage increases as productivity has improved, but it doesn’t seem to be the case that people are massively underpaid or that there has been some sort of inequitable redistribution away from wages to companies.”
Noting that Australia has “one of the highest minimum wage rates in the world”, Mr Joye said that overall wages will grow once the housing market stabilises and consumer spending improves, such as on the back of interest rate cuts.
“And it is also interesting to note that whilst the RBA argues there was no wealth effect between 2013 and 2017, it wasn’t obvious that rising house prices were supporting consumption,” he said.
“They didn’t know what the counterfactual was, they didn’t know what consumption would have looked like in the absence of those — 50 per cent increase in national house prices.
“So, I think that we will see ongoing improvement based on the assumption in consumption, in spending and in overall income levels and activities if the RBA cuts the cash rate.”
Mr Joye said during the same podcast that business loans for SMEs are likely to become cheaper.