“Nevertheless, the growth of [gross operating surplus] was much larger in the March quarter (up 4.8% qoq), so labor’s share of income fell,” the economist wrote.
“My understanding is that the main driver of the strong March quarter EBITDA was the sharp increase in earnings at non-financial resource companies due to higher commodity prices.
“Excluding export-exposed commodity companies, the labor income share result in the March quarter might have looked better.”
The Financial analysis understands that the email was from an economist, the conclusion is accepted more widely within the bank.
Huge Windfall Profits
If mining companies are excluded from the data, wages as a share of national income have risen by 0.5 percentage points over the past 20 years, according to analysis by the Ai Group’s chief policy adviser, Peter Burn.
“Developments in the mining sector of the economy have had a major influence on changes in the revenue share of the overall national economy, if only because of the impact on the size of the national income,” Mr Burn said.
Left-leaning think tank The Australia Institute released analysis on Wednesday suggesting LNG exporters stand to reap up to $40 billion in windfall profits due to price spikes sparked by China’s invasion of Ukraine. Russia.
Large gains made by exporters of iron ore, coal and liquefied natural gas have prompted calls for the government to tighten the oil resource rent tax and introduce a mining tax. To date, Prime Minister Anthony Albanese and Treasurer Jim Chalmers have dismissed those ideas.
Australia Institute executive director Richard Denniss says if a windfall tax had been in place during the current resource price boom, government revenues would have been $20 billion higher this year alone. .
“[That] could have funded the entirety of the Australian Government’s $20 billion investment in Rewiring the Nation and still compensated Australian households and businesses for soaring energy bills,” said Dr Denniss.
Federal coffers received a windfall of nearly $30 billion last year, mostly from taxes on mining companies. Dr Chalmers said high prices would continue to generate bumper gains this financial year, but also warned that record prices were starting to moderate.
Uncertainty “while the TOT is heating”
The RBA economist noted that the increase in profits could be affected on wages in the mining sector, which employs around 2% of the workforce, or just over 250,000 people. It could also support wages in support sectors if mining companies choose to invest their profits – although this is not happening.
“If companies take a larger share of the windfall gains directly into profits, the money will flow to foreign investors, domestic household financial income and government tax revenue,” the analysis says.
“This would weigh on the labor share of income, but at least households would benefit from financial income and public spending. We’ll see how this plays out over the next few quarters as the TOT [Terms of Trade] heated.
The documents communicated to the Financial analysis also showed that central bank pundits were critical of wage and productivity comparisons published by unions and their aligned think tanks. The same criticism was made by Productivity Commission Chairman Michael Brennan in August.
Although they concluded that even when calculated correctly productivity had exceeded wages, the bank’s deputy director of economic analysis, Lynne Cockrell, suggested that this was also due to mining profits skewing the data .