EYE-BALL Guru on – Will Price reductions apply across the board?

December 14, 2011
Will Price reductions apply across the board?
T he outcome of a prolonged and deep recession is hurtful to all sectors of an economy.  Yet – in all past examples of recessions I have never heard or read about Public Servants taking a pay cut – Departmental budget cuts happened – but those cuts were retrenchments rather than wage reductions …

With warnings out today about the US Fed Reserve announcing there will be no more stimulus intervention activity in the coming year – whether that be calender or financial year is not clarified – and Europe have already acknowledged a long and economic downturn is coming – and Japan has been in a 20 year recessionary environment – and China announcing and having economic numbers predicting a significant slowdown – the world is bracing for an unknown and uncertain future.

Private sector wage levels above and beyond the Fair Work Australia set wage levels depend on performance – public sector wage rates are a range for level of classification and length of tenure.   Has anybody heard or experienced a Public Sector wage reduction for existing employees?  There have been wage freezes – but Politicians generally seem to be exempt from these procedures. There was an exception in recent times when the Ex-PM Mr Rudd – imposed a freeze on Politician wage index increases during the early phase of the GFC – but as soon as he was ousted the new PM Gillard reinstated the index increases.

The recent Federal Politician salary exchange for travel perks yield has the base salaries of Backbenchers increasing by $100k – and the PM’s salary went up by $200k.   This is wanton greed and can not be explained to the electorate in any justifiable way.  The tribunal who promoted the increase recommendations is as out of touch with workforce practices as any could be.  For example –

  • Employees in all sectors are being asked to work unpaid hours to do their job – no overtime is paid – but to complete the job asked of employees they have to work after hours to get the job done.  These unpaid hours are similar to the reasons offered to the Tribunal that reviewed the Politician’s work ethic that produced 30-50% type base level wage increases.  Does the goose and gander analogy apply?

Through the eyes of this blogger – the world is a sad sad place – yet within all the suffering and poverty – there are pockets of prosperity – they are mostly in Government positions.

Nobody realises or reports on the dreams of students that are being crushed as this recession continues to bite  – this has been evolving for many years and decades – higher education qualifications have gone unrewarded and graduates have had to work or seek further education outside their chosen field to find employment.  These new graduates having spent the money for their education – and the best part of 15 of their 20 odd years  gaining their education – their prospects now rest on a failing global economy.

Growth industries are the aged care, nursing and health related industries – yet that compassionate requirement to work in these areas has escaped the modern youth – the world has become selfish and disassociative in its want to help others who mean nothing to them.  This trait is real and no Government spends any time trying to correct the trend.

Wage expectations are askew – increasing costs of living – i.e. child minding, mortgage, food, electricity, insurance, registrations, bank fees, public transport, and almost every human need – the supply and demand cycle applicable to price calculations seems to have frozen when it comes to wage levels verses cost of living.  The inflation cycle indexation formula no longer works.

A tomato grower and farmers in general have many natural and commercial hazards to navigate – i.e. varied seasonal influences, changing weather, import and currency navigation, and storage issues to deal with before a wage can be determined.  Many other industries face similar challengers – yet public servant wages never have to face these types of exterior influences.

Look and understand the responsibilities of a Centerlink front desk employee – the welfare clientel are more aggressive and demanding – the emotional drain in performing in that job extends and overflows to their emotional wellbeing after hours.  They are offered counselling to help deal with the stress – the point being is employers demand more from employees for the increased workload and emotional investment they are required to outlay to keep their employ.

The cost of goods oscillating with the ‘supply and demand’ equation is the basis for the global economic performance over the last 100 odd years.  Unions have fought hard during those times for wage demands work conditions.  We are now on the backside of those conditions as they are continually eroded by the fear of losing or maintaining employment.

The question is whether the business model for the past 200 years is broken or can still serve the economy of the future?

From reduced education expectations to real employment in a chosen field – to the reality of failing medical and health care everywhere – to the highs and lows of seasonal climate influences – to the forecast budget modelling system as opposed to the economic changes that are happening in real time – what can come from a tunnel vision on budget forecasting when global economic conditions render the past modelling outdated?

The unanswerable questions are random and haywire – they cannot be condensed nor confined – we are all living the change and it is happening before us.

Leaders are unable to deal with the reality these changes represent – they are not qualified to deal with the ‘new order’ where sovereign debt cannot be serviced without cutbacks that reduce wages and reduces the quality of life and reduced Government services.  The end of an era is upon us and the future us as clouded as it has ever been.

Perhaps a start point should be that Politicians should work for free – that their easy earn should be taken away and allow them to experience the ‘unpaid overtime’ reality that most workers endure now.

Any change has to come from the top – CEO’s and their $10’s of million in bonus’ – the shareholders tax incentives and perks – the list is endless – and it all amounts to the ‘haves’ and what they expect from their position as opposed to the ‘have nots’ who are often the volunteers who bridge the gap to help those in need.

Money can never really make you happy – it’s a saying as old as time – yet the world today is all about money and that to me is the ‘bellhop’ getting to tip to buy shares.  Get out now …


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  1. Herman
    December 14, 2011 at 11:05 am

    During the great depression twice public service pays were cut by 10% in Australia. The logic goes, that as all prices fall, those still in in employment have greater purchasing power while those who lose their jobs, have no purchasing power, but still need to eat. Hence the introduction of the first dole, food coupons.

    As of now, the USA is a great case study. They have had little recovery since 2008 in unemployed. It has marginally recovered at best. Recent stats are about 8.8% unemployed give or take for arguments about statistical bias. With their massive government debt, continuing fiscal deficit, and several other issues, as consuimption demand falls, what sector can possibly absorb excess capacity to stimulate the economy. The government has stimulated about as far as is possible without further destabilising the total economy. Economists truly worry about negative spirals. That is exactly what was going on post 1932, and why most see World War 2 as being the real short circuit to end the Great Depression.

    Frightening to say the least.

    Other world issues might have consistencies but need to be understood exactly in their own individual way. Europe (Euro zone) might be the world’s biggest economy, as a union of states, each country has somewhat unique problems. Spain by way of example has the largest unemployment. If again we can leave statistical bias aside, increasing taxes will not solve their problems. What %age of that issue is those who actually survive outside the measured economy, the cash economy.

    If you try to see through the issues as Euro decreased technical barriers to trade, the least developed (value added/manufacturing sector economies) were those who competed most directly against former soviet bloc or other lesser developed economies. Spain was right in the firing line. Somewhat affected was Italy (the cote d’azure holiday region on the border of France). Spain was much more dependant on tourism and primary production.

    Greece and Italy have very bloated public sector spending including social security.

    In the USA there needs to be a change in attitude. Taxes need to be levied more equitably. Executive slaries compared to median salaries are out of proportion. Executive salaries are unsustainable. They impact aggregate demand. Yet Capitol Hill keeps talking about further stimulating of supply side economics when there is a demand imbalance. A capacvity to pay.

    As you read the history of the Great Depression you come to understand the FDR “new deal” saw massive job losses. Was it the cause, or affect. Wall Street crashed in 1929. FDR took the oval office in 1932. Would you term that the Depression we had to have. Necessary to address the imbalances of that time.

    All of this is where Criticism within Australia is based. The Treasurer and Prime Minister, and their cronies keep telling us we have never had it so good. Australia is immune. Demand from China and India underpin Australia’s continued growth. Is it all to be believed. When Federal government is running a 15% of GDP deficit in good times, what will occur in bad times? Just how sharp a slowdown in China will it take to cripple Australia?

  2. December 14, 2011 at 12:01 pm

    Well Said Herman,

    The permutations are too numerous to fathom – there is no railroad track to follow – the history of the ‘Great Depression’ is a lighthouse beacon on a stormy night and to follow it is to risk life and limb never knowing the new pitfalls in between.

    For far too long the ‘consumption’ side of economic stimulus has been the only lever Governments and Central Banks have pushed – the resultant so-called ‘solid’ GDP growth becomes the benchmark investor’s use when deciding to invest internationally –

    Since the GFC – the GDP numbers are blotchy at best given the Government stimilus contribution – how much of the GDP growth over the last 4 years has bee induced by the mounting sovereign debt expenditure – and to call that GDP growth is a falacy.

    If you take GDP as any reliable measure – investors are making their decision like pinning a ‘tail on a donkey’ – it’s Russian Roulette with three barrells loaded instead of one – 50/50 at best – or a head or tail call – odds or evens – odds we do – evens we don’t – there is nothing measured or reliable about those types of decisions – yet the global pool of retirement and wealth managed funds are using this type of decision making process to invest.

    This has led to the volatility and the ‘get in’ and ‘get out’ type investment choices – stop levels are tight – losses are mounting – and the pool of funds is diminishing at around 5% a quarter at last Managed fund reporting date.

    At what point does one say – I’VE HAD ENOUGH – I’M NOT GONNA TAKE IT ANYMORE!

    The recent murder suicide loss of life – i.e. Norway, Belgium, France and other hotspots – can be brushed aside by news cycles – but the heart of the problem is that people are not coping with the stress’s in providing for their families – any little thing can trigged an incident – i.e. the pepper spray and gunshots at recent Wal-Mart Yearly Thanksgiving sales.

    This undercurrent of emotion with no acknowledgement of its destructive capability from Leaders – i.e. Hermans comment re Australian PM and Treasured saying Australia is lucky we have it so good – is indicative of a society turning on itself. Australia well may not have had the murder suicides in public places as other Nations have – the exception being Port Arthur – but the same is happening in our private homes and in Nursing Homes –

    Brush it aside is the easy response – talk it down and the economy up – The Worlds Best Treasurer says that we’ll reverse a $40 billion budget shortfall next year – if he hasn’t shoved his dick fair and squarely in the PM – and under orders to do so – then his dream solution and fix to Australia’s future is about screwing every Australian with bullshit …

    The tide has turned – it’s just that everybody hasn’t noticed …

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