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The report is the second in a five-year study of Australian workers, and provides the most authoritative data on Australian work life from the workers' perspective. Although at the time of data collection the present financial crisis had not kicked in, workers said that managing their household income was getting difficult and they were struggling to make ends meet.
“Two out of five employed people say they are just coping on their household income,” the study said.
The proportion of workers who say they are finding it difficult to “get by” increased from 52 percent in 2007 to 56 percent in 2008. Many households that rely on debt such as mortgages and credit cards to maintain their standard of living are falling behind on payments. Many workers also reported they had less control over their working hours and were accumulating large amounts of unpaid overtime.
Despite Australia’s booming economy, with its record surge in exports, a strong dollar and a bullish property market, even prior to the global financial meltdown not all Australians were benefitting, the study proves. Now, with the unprecedented hit that Australian stocks, currency and property have taken due to the financial crisis, the report is anything but heartening on the future of the economy.
The results of the study have also put pressure on Prime Minister Kevin Rudd’s government to deliver its election commitment of a “Forward with Fairness” policy to create a fair and flexible workplace-relations system with the right balance between employers and employees. The opposition has viewed this promise as more of a political gimmick than a serious effort to strengthen workplace relationships.
The Rudd government is scrambling to help families cope with the worsening economic conditions. Its federal stimulus package of A$10.4 billion (US$6.8 billion) includes handouts to families and pensioners. But these funds are more likely to be used by consumers to pay off their mortgages than to be spent on entertainment and Christmas goodies, according to a survey released Wednesday by the Australian National Retailers Association.
“Close to 40 percent of people will put the money towards their mortgage or credit card debt, or pop it into the bank,” ANRA CEO Margy Osmond said. “People are going to use this money to get ahead and relieve the financial pressure.”
However, there is intense pressure on consumers whose deposits in Australia’s financial firms and investment companies remain frozen after a run on institutions not covered by the government’s guarantee on deposits announced on Oct. 12.
As per media reports, at least 13 of Australia’s 20 investment and mortgage funds are holding close to A$12 billion (US$7.9 billion) in frozen assets. This means those who need funds to counter the financial crunch are unable to withdraw their deposits.
While those with steady incomes are still relatively insulated against the financial downturn, those on the verge of retiring are likely to struggle the most. This is because the nation’s mandatory retirement funds, also known as superannuation funds, have lost more than A$160 billion (US$105 billion) in value due to credit woes that began late last year and declining stocks in the past weeks.
Retirees with negative fund balances have two options: to work beyond their retirement age or rely on other sources of income and funds. The former is certain to burden the job market, which is already under intense pressure, while the latter may be inadequate or unavailable.
Pauline Vamos, CEO of the Association of Superannuation Funds of Australia, believes that members should not exit from their funds. “The moment a member takes their money out of a superannuation fund they do a number of things from which they may never financially recover – first, they crystallize their losses because they are selling out of shares and other investment vehicles that will undoubtedly rebound,” she said.
Blaming widespread publicity of the financial crisis as the cause for panic, Vamos said, “Even people in a transition to retirement or post-retirement situation receive benefits from remaining in the system.” While that may not console members hurt by losses, especially with retirement benefits wiped out, it still offers a ray of hope in traversing Struggle Street.
The Melbourne Institute of Applied Economic and Social Research predicts that Australia will weather the financial storm. According to the institute’s Professor Guay Lim, an increase in unemployment is expected. However, “Conditions in the labor market may not deteriorate drastically, as the fall in the Australian dollar, the 100 basis-point cut in official cash rate and the proposed A$10.4 billion (US$6.8 billion) stimulus package are all expected to kick in to maintain some export growth and domestic spending,” he said.
The institute’s October bulletin of economic trends predicts a “soft outlook for Asia.” In Japan, industrial production, employment, income and sales are weak, while the recession in the United States and the slowing of the Chinese economy are putting downward pressure on Australian exports, it said. Trouble is also brewing for the Indian economy, where soaring inflation is coupled with weak growth.
Asia's recessive trend is impacting Australia’s economic growth. Although the government is fighting hard to restore stability in the financial sector and boost consumer confidence, Struggle Street will continue to be crowded and tense.
