Australia's low wage growth confirmed by the ABS again today - smashing the budget forecasts according to Business Insider:

“This low wages growth reflects, in part, ongoing spare capacity in the labour market,” said Bruce Hockman, chief economist at the ABS. “Underemployment, in particular, is an indicator of labour market spare capacity and a key contributor to ongoing low wages growth.”

The ABS said that private-sector wages, employing the vast majority of the Australian workers, grew by just 1.78% over the year, the slowest pace on record, undershooting the 1.79% pace reported in the year to march this year.

Over the quarter, private wages grew by 0.4%, the weakest result since the September quarter of 2009. That’s GFC territory.

It's hard to imagine that our economy is doing so well when there's a chronic lack of demand for labour?

"Underemployment".  Let's unpack that a bit more.  Dare I say that a reason for this is parents desiring to spend more time with their kids (i.e. Tag-team parenting and work duties which is now very common as workplaces try to be more flexible).  And with a service-based economy this would be more prevalent as well?

Another factor could be the "keep your job but cut back the hours" request from the boss...

There's also an underclass developing that want work 5 days a week but due to the businesses not doing well are getting 1 to 2 days a fortnight.  These are people that want to work and often have relevant qualifications but the offshoring and 457 visas along with international dumping are putting the companies in positions where they can't hire.

EG Murray-Goulburn's closure of the Rochester plant due to the 'unavailability of milk supply' (which appears to have been caused by their price to farmers dropping below the cost of production and MG wanting the difference they had already paid repaid) has already caused house prices to drop and a couple of businesses to close.  Those moving to other areas are finding it hard to get any jobs in their new locations and what are available are casual - meaning no holiday pay, sick leave, unable to get loans to purchase property, hard to get rental property due to the inconsistent income etc.  

I wish it was a choice to cut back but a lot of people can't afford it and are living week-to-week

EG Murray-Goulburn's closure of the Rochester plant due to the 'unavailability of milk supply' (which appears to have been caused by their price to farmers dropping below the cost of production and MG wanting the difference they had already paid repaid) has already caused house prices to drop and a couple of businesses to close.  Those moving to other areas are finding it hard to get any jobs in their new locations and what are available are casual - meaning no holiday pay, sick leave, unable to get loans to purchase property, hard to get rental property due to the inconsistent income etc.  

It's the enormous decline in the quality of jobs that's at the core of this problem and it affects all sorts of things like the credit-worthiness of people. Not that it stops people from getting loans - I have friends in a small town near Ballarat and a house near them sold for $400,000 with the new owners some total ferals from the other end of town being the new owners. Being a small town the word is that said ferals financed their new purchase with a $10,000 deposit - their only income being (apparently?) Centrelink. I guess those mortgage brokers can work wonders with your true financial position!

The Aussie mortgage market is probably loaded to the gills with people like that; the Big Four are still exposed to most of that market as we discussed recently.

Anyway... in other news today I saw that the Chinese Central Bank is spending big on trying to work out how to operate a purely crypto-currency system in anticipation of interest rates having to go negative at some stage in the future - as they already have in various other countries (QZ Media). I guess if people get wind that cash will be abolished then their first instinct is to hoard heaps of it - the other interesting thing I was reading recently was that many Aussie $100 notes are actually being hoarded by elderly migrants who don't trust banks, both here and in China (News.com.au). I guess it's only a matter of time before they try and abolish cash here in the interests of bolstering the financial system?

Jessica Irvine in the Fairfax papers today telling us that we just need to suck up the ultra-low growth in wages because it's a natural consequence of adjusting out of the mining boom:

Most of the mining booms in our history have ended in periods of rapid inflation and sharply rising unemployment.

We have avoided that fate. Our problem is, in fact, the reverse. Inflation is lower than expected and the jobless rate is falling.

The pain of adjustment is being felt almost entirely in pay packets.

Is that such a bad thing?

I would probably argue that the actual jobless rate per se isn't a useful measure of unemployment any longer because it's under-employment which is really the economic problem of the twenty-first century. As HardWorkingMan discusses above, there's an army of people out there who need more work/better conditions but are simply unable to secure it. Since the GFC they're been hit with the double-whammy of falling real wages and in some industries such as IT, hospitality and care-work the rates of pay have fallen through the floor.

Dense inner city apartment living in Sydney and Melbourne is putting profit before people warns Bill Randolph on The Conversation:

Town centres like Liverpool, Fairfield, Auburn, Bankstown and Blacktown in Sydney point the way. The cracks in the density juggernaut are already showing in many of the more recently built blocks in these areas – literally, in many cases.

This inexorable logic of the market will create suburban concentrations of lower-income households on a scale hitherto experienced only in the legacy inner-city high-rise public housing estates.

With the latter being systematically cleared away, the formation of vertical slums of the future owned by the massed ranks of unaccountable, profit-driven investor landlords is a racing certainty. The consequences are all too easy to imagine.

I've noticed on recent visits to Melbourne that some apartments built 10-15 years ago are ageing terribly and may need to be pulled down eventually. There's a large block of flats on the corner of Williamstown Rd & Francis St in Yarraville near where I used to live and I noticed recently that in addition to the fittings all rusting there are also large cracks everywhere - maybe because of the heavy truck traffic on Francis St?

Dense inner city apartment living in Sydney and Melbourne is putting profit before people warns Bill Randolph on The Conversation:

Town centres like Liverpool, Fairfield, Auburn, Bankstown and Blacktown in Sydney point the way. The cracks in the density juggernaut are already showing in many of the more recently built blocks in these areas – literally, in many cases.

This inexorable logic of the market will create suburban concentrations of lower-income households on a scale hitherto experienced only in the legacy inner-city high-rise public housing estates.

With the latter being systematically cleared away, the formation of vertical slums of the future owned by the massed ranks of unaccountable, profit-driven investor landlords is a racing certainty. The consequences are all too easy to imagine.

I've noticed on recent visits to Melbourne that some apartments built 10-15 years ago are ageing terribly and may need to be pulled down eventually. There's a large block of flats on the corner of Williamstown Rd & Francis St in Yarraville near where I used to live and I noticed recently that in addition to the fittings all rusting there are also large cracks everywhere - maybe because of the heavy truck traffic on Francis St?

I've seen 4 to 5 year-old dog-box townhouses in Bayswater in Melbourne requiring major repairs due to wood rot and other structural defects.  I keep hearing horror stories about the poor quality of imported building materials and fittings from those in the various building trades.

It's a case of one derelict or rundown house replaced with a dozen poor quality townhouse apartments on the one block.  That'll bite insurance companies and banks hard in the coming years.

Don, properties are built to a price not a stardard.  The Building Code Australia, has little relevance. Going through the same process. Have done a knock down rebuild. First time I've ever engaged legal action, and you need to. There must be some legit and hourable builders about, unfortunately have met not any, as yet.
Home owners warranty insurance is so complicated, and requires a miriad of boxes to checked it's basically useless.
Caveat emptor, I tried really hard and still got bit.
My advice.
DO NOT BUILD.
DO NOT BUY A NEW PROPERTY. WOTHOUT DUE DILIGENCE.
BUY AN EXISTING PROPERTY.

I would probably argue that the actual jobless rate per se isn't a useful measure of unemployment any longer because it's under-employment which is really the economic problem of the twenty-first century. As HardWorkingMan discusses above, there's an army of people out there who need more work/better conditions but are simply unable to secure it. Since the GFC they're been hit with the double-whammy of falling real wages and in some industries such as IT, hospitality and care-work the rates of pay have fallen through the floor.

Gittins' estimates the of rate of underemployment at 7.5%. He bases this on the hours (that is, the volume of working time) that people are looking to work. Therefore part-timers needing a full time job count for much more than those just wanting a few more hours.

For his reasoning, see
http://www.smh.com.au/business/the-economy/the-truth-of-the-matter-about-the-extent-of-our-unemployment-problem-20170818-gxz7yc.html

I've seen 4 to 5 year-old dog-box townhouses in Bayswater in Melbourne requiring major repairs due to wood rot and other structural defects.  I keep hearing horror stories about the poor quality of imported building materials and fittings from those in the various building trades.

It's a case of one derelict or rundown house replaced with a dozen poor quality townhouse apartments on the one block.  That'll bite insurance companies and banks hard in the coming years.

Could see a major revamp of how apartments are viewed - as money pits rather than as money-making investments. As with those apartment owners in the Docklands fire you can get stung retrospectively if its found that the defective materials/workmanship is not covered by the standard warranty or insurance. I have a friend in the VIC construction trade who tells me that these kinds of warranties are not worth the paper they're written on anyway but they're required by the state government so effectively people are forced to pay for junk insurance. If you ever try and claim on them you'll find that if the builder has gone broke and started up somewhere else (which is usually the case with these shoddy constructions) that you don't have any comeback anyway.

Melbourne has been blanketed with these kinds of apartments over the years but I'd say Footscray, Kensington and Carlton have a concentration of cheap, small apartments in massive buildings rushed up for the student/immigrant market and they will probably need some nice new euphemism for "slum-clearance" in about another twenty years...

Buy an existing property.

Good advice - I was once told never buy anything constructed during a boom, I think that still holds true today.

Yet another "get rich quick from real estate" story from News.com.au about a former McDonald's worker who has a property portfolio that is worth (so he says) $2 million with just six years of work.  Easy innit - just be a property millionaire and leave the rat race behind...?

Eddie Dilleen's hard luck rags-to-riches story is not quite as it seems - in the first place he is actually spruiking his own brand of property investment advice as per this website here and this disclosure didn't appear once in the News Ltd article. In the second place, Eddie's hard luck story of starting out impoverished in Mt Druitt sounded a bit too familiar and you don't have to Google very far to find that he's been telling the same story to Domain, Smart Property Investment and Property Investor Story - so really there wasn't anything very new in the article except that the News Ltd reporter asked Eddie some pertinent questions that he seemed to struggle to answer:

He said his current rental yields were sitting at about 10 per cent, so even if interest rates went as high as 8 per cent, he would still be okay.
“I always always have landlord insurance in case any of my properties are ever vacant for longer periods of time to cover myself in that aspect too,” he said. “Although I’ve never had any vacant for more than a few days.”

Correct me if I'm wrong here but I'm pretty sure that landlord's insurance policies only cover you for tenant damage not for economic loss from a property being vacant. And I'm sorry but I really don't believe he has a 100% occupancy rate all the time - that is simply not the experience of people I know who are in the property game, not even in boom times can you always get 100% occupancy. And then there's this:

He currently earns a salary of $65,000 a year working in sales, and his debt is about $1.3 million. His properties bring in $130,000 a year in rental, and after expenses including mortgage payments, rates, insurance and maintenance, he nets about $20,000.
Mr Dilleen is not fazed by tightening lending environment or talks of a housing bubble. His goal is at least 50 investment properties and a passive income of at least $200,000 a year. “I definitely know finance will be hard,” he said. “There are always options. [There will be] more rules they put in place, you’ve got to find ways around.”

There's a lot of 'what-if's in that equation but in the event of it going pear-shaped it won't be his problem anyway - it will be the Big Four's issue and then ultimately the government's problem as the financial guarantor of the Big Four.

News Ltd tells us that the top twenty most advertised jobs in Australia that are still vacant after sixty days are things like "crew member", "shift manager" and "pizza cook". I'm a bit perplexed as to why those generic kinds of occupations are on the 'shortages' list given they're not exactly skilled - perhaps it has to do with the fact that they're so badly paid and/or part of the advertising requirements before filling them with a 457 visa applicant? Maybe I'm just being cynical.

Perhaps we could import some taxi and Uber drivers who know how to use the toilet; as this WA Today article about a driver getting banned from the airport for defecating in public seems to indicate part of a growing trend across the nation with Sydney taxi drivers also being filmed regularly using lane-ways as an outdoor plopper ... Hmmm!

Staying in Sydney right now, same apartment as 3 yearscback so we are familar with the talkative Russian immigrant manager.

A few comments

Won't employ "Australian" cleaners. Don't turn up and too lazy

Won't employee "Asian" Australians cleaners. Do the job ok for a few times then problems start.

Friend of mine from Dubai got a job in Adelaide that was listed for 9mths as no suitable candidate. Job pays 90k total package. Not a job you need to go to uni for.

The job market is clearly strong in many sectors. The issue is finding suitable candidates and not referring to lower income earners as I have friends and relatives say it's often hard to fill middle income jobs.

RTT! Russian manager won't employe XYZ. As you stated, then who will he employ?

Whoever will work for the lowest wage?????

She targets Eastern Europeans.

Another one. Another friend who left Dubai and is Supervisor of steel fabrication workshop in southern Sydney. They have permanent job listing for steel workers, ie welders and fitters. But through lack of interest they have to fill from Asia on 457. Despite what many think there are significant costs and risk to employing 457.

RTT! Russian manager won't employe XYZ. As you stated, then who will he employ?

She targets Eastern Europeans.

I was wondering the same thing when I read this; she probably only wants people of her own ethnicity who are prepared to work for $15 p/h or less and who live somewhere nearby (not 30 or 40km out where it's more affordable to reside) in one of the most expensive cities on earth. She is almost certainly asking for too much in 21st century Sydney which is why she can't find workers.

While you're there you should experiment by catching a train to Blacktown or Liverpool (the theoretically more affordable bits) during peak hour to see what the long commute in from the suburbs is like for hundreds of thousands... you'll start to get a quality of life picture for the average Sydney resident that is not flattering.

Another one. Another friend who left Dubai and is Supervisor of steel fabrication workshop in southern Sydney. They have permanent job listing for steel workers, ie welders and fitters. But through lack of interest they have to fill from Asia on 457. Despite what many think there are significant costs and risk to employing 457.

I don't believe its reasonable to expect to pay highly skilled tradies ordinary wages for living in the Sydney Basin, they will obviously have to pay more if they want to attract the exact right staff.

Again - Sydney is one of the most expensive cities in the world in which to live - wages paid have to reflect that.

I used to commute by train to Gosford for 8 years for school and later work plus 30min bus and walk on end. I know what a real commute about.  Liverpool is nothing. Anyone out there thinking city is too far doesn't want to work.

The Russian workers she chases is only something they switched too by accident in last few years after years of issues and expetiments. Know idea on wages.

I used to commute by train to Gosford for 8 years for school and later work plus 30min bus and walk on end. I know what a real commute about.  Liverpool is nothing. Anyone out there thinking city is too far doesn't want to work.

The Russian workers she chases is only something they switched too by accident in last few years after years of issues and expetiments. Know idea on wages.

It would be very rude to ask either the host or the workers - so don't. But yeah, I'd imagine they wouldn't want to pay more than $15 p/h, the problem for them is probably in getting people in inner Sydney who are reliable and thorough at that price regardless of ethnicity.

Anyway, welcome back to Aussie, Shane, hope you enjoy your stay and I'm sure we'd all be interested to hear you observations on how the place has changed etc.

He said his current rental yields were sitting at about 10 per cent, so even if interest rates went as high as 8 per cent, he would still be okay.
“I always always have landlord insurance in case any of my properties are ever vacant for longer periods of time to cover myself in that aspect too,” he said. “Although I’ve never had any vacant for more than a few days.”

Correct me if I'm wrong here but I'm pretty sure that landlord's insurance policies only cover you for tenant damage not for economic loss from a property being vacant. And I'm sorry but I really don't believe he has a 100% occupancy rate all the time - that is simply not the experience of people I know who are in the property game, not even in boom times can you always get 100% occupancy. And then there's this:

He currently earns a salary of $65,000 a year working in sales, and his debt is about $1.3 million. His properties bring in $130,000 a year in rental, and after expenses including mortgage payments, rates, insurance and maintenance, he nets about $20,000.
Mr Dilleen is not fazed by tightening lending environment or talks of a housing bubble. His goal is at least 50 investment properties and a passive income of at least $200,000 a year. “I definitely know finance will be hard,” he said. “There are always options. [There will be] more rules they put in place, you’ve got to find ways around.”

There's a lot of 'what-if's in that equation but in the event of it going pear-shaped it won't be his problem anyway - it will be the Big Four's issue and then ultimately the government's problem as the financial guarantor of the Big Four.

Ten percent yield sounds a bit high for Sydney nowadays, doesn't it? Especially with rising lending rates on investment loans and low rent growth.

I'm not sure if you can get an insurance policy to cover lost revenue from a simple vacancy, but it is a tax deduction anyway.

A debt of $1.3M for $20k nett annually. I think he'd be better off just getting a job that paid a bit more, because like someone at Deloitte said, "this thing's gonna blow".

Also, I recently heard people with mortgage offset accounts could have a problem in the event of crisis relating to the government's debt guarantee. Something about not all of it being covered because the guarantee is only for $250,000 per person. With million dollar mortgages, this will be a problem.

For me at least, the bank guarantee is justification enough for the proposed bank tax/levy.

For me at least, the bank guarantee is justification enough for the proposed bank tax/levy.

Except it is not the banks that pay in the end - it is the customers.   Same thing with the "Carbon" Tax aimed at the high end producers.   They just passed the costs on to the customers, US.    Just another tax on the low/middle income workers, not the groups that the tax/levy was supposed to hit.

Ten percent yield sounds a bit high for Sydney nowadays, doesn't it? Especially with rising lending rates on investment loans and low rent growth.

I have read his story before in Domain I seem to recall most of his properties are in regional areas, Brisbane and Adelaide. Still, ten percent after costs is very high now-days, I'm guessing if he actually threw his books open for scrutiny it wouldn't be that high. And that's an important point too - you're taking his word for what he says - at no time does he actually show the reporter the figures or allow independent verification.

I'm not sure if you can get an insurance policy to cover lost revenue from a simple vacancy, but it is a tax deduction anyway. A debt of $1.3M for $20k nett annually. I think he'd be better off just getting a job that paid a bit more, because like someone at Deloitte said, "this thing's gonna blow". Also, I recently heard people with mortgage offset accounts could have a problem in the event of crisis relating to the government's debt guarantee. Something about not all of it being covered because the guarantee is only for $250,000 per person. With million dollar mortgages, this will be a problem.

Absolutely right, he's in an incredibly high-risk strategy for $20,000 p/a with the possibility of (maybe) being able to grind down that debt into some reasonable equity over time and become a paid-up interstate absentee landlord. A couple of long-term vacancies could ruin him if he doesn't have the financial reserves to cover the loss of rent.

The part of the article that is the most alarming is the fact that he recognises his high-risk acquisition strategies are going to be crimped by tougher financial rules in the future but that he'll well prepared for that and he is going to work around it:

His goal is at least 50 investment properties and a passive income of at least $200,000 a year. “I definitely know finance will be hard,” he said. “There are always options. [There will be] more rules they put in place, you’ve got to find ways around.”

For me at least, the bank guarantee is justification enough for the proposed bank tax/levy.

I agree, although I don't believe in the government bank guarantee to begin with. I'd rather a Glass-Steagall type arrangement to provide some protection against risky investments by other banks. The government guarantee and bail-out, too big to fail, too big to gaol phenomenon only encourages more irresponsible activity on the part of the banks.

MILW! Not familiar with Glass-Steagall arrangement. Will google. Without the bank guarantee, could you just imagine the run on the banks, if thinss went totally tits up? I seriously considered taking my cash and hiding it under the bed, it was, repeat was at that time substantially more than 250K.
Donald, yeah the banks will pass on the price, cost of doing business. They have been provided with a service/product from the tax payer they nave not paid for.

MILW! Not familiar with Glass-Steagall arrangement. Will google. Without the bank guarantee, could you just imagine the run on the banks, if thinss went totally tits up? I seriously considered taking my cash and hiding it under the bed, it was, repeat was at that time substantially more than 250K.
Donald, yeah the banks will pass on the price, cost of doing business. They have been provided with a service/product from the tax payer they nave not paid for.

Yes, I can imagine the mayhem that would ensue. However, I think there is always supposed to be some risk associated with money and the markets. The idea of government guaranteed investment banks just encourages the banks to take bigger risks than they otherwise would have, because they know big daddy corporate fascist state will come to the resuce, courtesy of "John Q. Taxpayer".

If the government is on the hook for so many billions, it should split the banks under Glass -Steagall and create a new state-owned institution into which we can deposit our savings - a new Commonwealth Savings Bank of Australia. The private investment banks could then go off and take as much risk as they want in the stock markets, with derivatives and god knows what other financial products they can get their hands on, but they would not be covered by any sort of government insurance, and there would be no bail outs by the taxpayers.

I think it's very interesting that the guarantee was reduced from $1M to $250k, and some time ago, too. To me, it suggests that the risk of actually having to pay out on that insurance policy has gone up. It was fine to say a million when they didn't think they'd have to use it, but we see an air of caution slowly creeping in.

Ten percent yield sounds a bit high for Sydney nowadays, doesn't it? Especially with rising lending rates on investment loans and low rent growth.

I have read his story before in Domain I seem to recall most of his properties are in regional areas, Brisbane and Adelaide. Still, ten percent after costs is very high now-days, I'm guessing if he actually threw his books open for scrutiny it wouldn't be that high. And that's an important point too - you're taking his word for what he says - at no time does he actually show the reporter the figures or allow independent verification.

I'm not sure if you can get an insurance policy to cover lost revenue from a simple vacancy, but it is a tax deduction anyway. A debt of $1.3M for $20k nett annually. I think he'd be better off just getting a job that paid a bit more, because like someone at Deloitte said, "this thing's gonna blow". Also, I recently heard people with mortgage offset accounts could have a problem in the event of crisis relating to the government's debt guarantee. Something about not all of it being covered because the guarantee is only for $250,000 per person. With million dollar mortgages, this will be a problem.

Absolutely right, he's in an incredibly high-risk strategy for $20,000 p/a with the possibility of (maybe) being able to grind down that debt into some reasonable equity over time and become a paid-up interstate absentee landlord. A couple of long-term vacancies could ruin him if he doesn't have the financial reserves to cover the loss of rent.

The part of the article that is the most alarming is the fact that he recognises his high-risk acquisition strategies are going to be crimped by tougher financial rules in the future but that he'll well prepared for that and he is going to work around it:

His goal is at least 50 investment properties and a passive income of at least $200,000 a year. “I definitely know finance will be hard,” he said. “There are always options. [There will be] more rules they put in place, you’ve got to find ways around.”

Looking where I live, I'd say investors would be lucky to get 5% return on their rental properties - more like 3.9% or so. Outside capital cities, yeah, I can see they would be higher.

I read recently that rising mortgage stress in Sydney in particular is being masked by the fact that people just sell their houses and take the capital gain when they can't afford to pay the mortgage anymore. They can pretend that they sold for other reasons, and no-one's the wiser because everyone seems happy. Unfortunately, that approach may not remain viable long term, and there may come a time where an increasing number of people are still in debt after selling.

Up until recently, low wages growth was offset by huge capital gains. Where will people go to "get ahead" if the capital gains also dry up? Looking elsewhere, there is always a celebration when consumer spending goes up, but it's still rising pretty slowly, and we have to factor in inflation and population growth. I suspect in many cases per capita spending is actually falling. If the floodgates of immigration remain open, a surplus of labour in an environment of depressed wages is only going to put more downward pressure on wages. The only ones who benefit are retailers, banks, property developers etc. because the pool of consumers has increased, and all employers, because increased competition for jobs means they don't need to give anyone a payrise. There's really not much to celebrate here.