Labour market flexibility has kept wages growth down while demand was weak, but it remains to be seen whether it will push up wages when demand returnsFigures released on Wednesday by the Australian Bureau of Statistics show that wages grew by a record low amount in the past year – just 2.27% for private and public workers together. For workers in the private sector alone, wages grew by just 2.20% – another record that continues the poor run of below-average growth.The annual growth of 2.27% dipped low enough to just break the old record set in the March quarter of 2.29%. It now means wages growth has been below average for two and half years, with little sign of turning:Related: Fear of a wages blowout has officially proved overblown Continue reading...
Central bank weakens currency further by 1.1% after previous official cuts that put global financial markets on edgeChina cut the reference rate for its currency for the third straight day on Thursday, after the surprise devaluation of the yuan this week unsettled global financial markets.The central bank put the yuan’s central parity rate at 6.4010 yuan for US$1, the China Foreign Exchange Trade System said, a drop of 1.11% from the previous day’s 6.3306.Related: China stuns financial markets by devaluing yuan for second day running Continue reading...
After securing a heavily negotiated third bailout, Greece now faces stringent regulations regarding its financial futureNew details have emerged of the extraordinarily detailed new memorandum of understanding struck between Greece and its creditors in exchange for an €86bn bailout. The actions Athens have agreed to take are divided into four “pillarsâ€:Related: Greece surprises with 0.8% economic growth in second quarterRelated: Greek bailout terms to give eurozone vast powers over policymaking Continue reading...
Number of people in work was 63,000 lower in second quarter and nearly 75% of employment growth was among non-UK nationalsEmployment opportunities in Britain’s stalling labour market are largely going to workers from the rest of the European Union, according to the latest official data showing a second monthly increase in the number of people out of work.Highlighting the impact of the enlargement of the EU since the turn of the millennium to include former Soviet bloc countries, the Office for National Statistics (ONS) said almost three-quarters of the employment growth in the past year was accounted for by non-UK citizens.Related: Figures do not prove EU migrants are taking new UK jobs or driving down pay Continue reading...
The YouGov poll in July (Anti-austerity agenda a vote loser, poll reveals, 5 August) is surprising, not that 56% (of the 3,000 electorate sample) agreed that “we must live within our means, so cutting the deficit is the top priorityâ€, but rather that 44% did not. This is the dogma that has been pumped out relentlessly by George Osborne, all three main political parties, the City and business establishments, and the rightwing 70% of the media for five years. It is extraordinary that such an orchestrated barrage, opposed not even by the Labour party, should command support from only slightly over half the population.And of course the 44% who disagreed or were not convinced by austerity were right. We should indeed live within our means, but the best way to do that is by growth, not by endless cuts. Despite five years of grinding austerity, the deficit is still an enormous £90bn, having been cut by only £24bn over the last three years. At that rate it will take another 11 years to pay off the deficit. Meanwhile, growth in the previous three quarters halved from 0.8% to a measly 0.4% and is now a very fragile and unbalanced 0.7%. We thus have the worst of all worlds – endless cuts, a debt mountain marooned at a huge, hardly reducing level, and deflating growth. If only the Labour party could speak out and tell the truth about this, the 44% doubters and disbelievers in austerity would soon become an irresistible majority. Continue reading...
Its slowdown is worrying, but the Chinese financial system isn’t as integrated with the world as America’sAccording to a modern version of Metternich’s saying, when the US sneezes, the rest of the world catches a cold. Does the same now apply to the world’s second largest economy? If China implodes, could it drag down the global economy with it?China’s stock market has fallen by about a third since the middle of July, and this week it has devalued its currency, the RMB, not once but twice, sending shockwaves through financial markets. Despite the seeming panic, so far prices have only fallen back to the same levels as at the end of March. In any case, fewer than one in 10 Chinese households invest in stocks and shares, and on average the stock market accounts for less than 15% of household wealth. So the tens of millions of small Chinese investors who play the stock market have mostly been betting relatively small amounts and haven’t lost their shirts.Related: China stuns financial markets by devaluing yuan for second day runningWith its own newly formed middle class, China now has its own consumption base to serve Continue reading...
Ben Cavender, principal at China Market Research Group, analyses why China chose to devalue the yuan for a second day running. Stocks and currencies fell sharply across the region as investors expressed their concerns over a possible currency war and faltering economy. Cavender says the move is intended to strengthen exports and make Chinese good more competitiveRead: China stuns financial markets by devaluing yuan for second day running Continue reading...
by Phillip Inman and Fergus Ryan in Beijing on (#H4J4)
Stocks, currencies and commodities fall sharply across region as investors fear a stalling China economy and possible currency war despite Beijing’s assurances
by Paul Mason, Leah Green , Bruno Rinvolucri andCater on (#H4YT)
The neoliberalist capitalist model has resulted in civil wars and economic disaster, and it’s only going to get worse. Unless, Paul Mason argues, we take advantage of the technological revolution we are living through and create a postcapitalist sharing society. If we let prices fall and delink work from wages, we can save the world from disaster
by Phillip Inman Economics correspondent on (#H3QH)
Euclid Tsakalotos must know the projections he used to convince lenders of a prospective new deal are based on fantasy figures, say economistsEuclid Tsakalotos failed to raise a smile. As the Greek finance minister moved past waiting reporters, he turned and said that only two or three more issues remained on the table unresolved. In other words, an €86bn (£61bn) bailout package was within his grasp.It was a moment to punch the air in defiance. But he seemed resigned and tired. And well he might be. Not only must the rescue package receive the approval of the German government and its sceptical finance minister, Wolfgang Schäuble, he must know that many of the projections he has used to convince lenders they can be repaid are based on fantasy figures.Related: Euclid Tsakalotos: Greece's secret weapon in credit negotiationsRelated: Greek stock market surges as outline bailout deal reached with creditors Continue reading...
Governor Mark Carney tells George Osborne that City traders and bankers will be asked for their views on effect of financial stability policiesMark Carney has told the government that the Bank of England is to examine whether policies intended to strengthen financial stability in the economy have held back economic growth.The Bank governor said Threadneedle Street would use the findings of an open forum in November – when City traders and bankers are expected to give their views on regulation – to “take stock of the reform agenda in financial marketsâ€.Related: Super Thursday: Bank of England transparency or information overload? Continue reading...
People’s Bank of China described move as a ‘one-off’ but if Beijing seeks to boost imports through devaluation, it will be a painful processChina’s weakening of the yuan by 1.9% is an event that, in a year’s time, will be seen either as an irrelevance or a major turning point for the global economy. Everything depends on what happens next. If the tweak heralds the start of a proper devaluation to boost exports, the world economy will have to adjust to a new China. The process would be painful.
Ignore the hysteria. Our plans to tax the very rich and reshape the economy are sound common senseAs people wake up to the prospect of Jeremy Corbyn actually being able to win the Labour leadership, the reaction has become increasingly hysterical, especially from elements of the Labour establishment.The near panic is especially evident in its response to the strategy outlined by Corbyn’s team of economic advisers.We can tackle the deficit by halting tax cuts to the very rich and to corporationsRelated: Poll puts Jeremy Corbyn on course for leadership victory – should we trust it? Continue reading...
by Ian Traynor in Brussels and Jon Henley in Athens on (#H1JD)
Athens hails €86bn bailout but Brussels is keen to stress the deal is a technical, not political, agreementThe Greek government announced it has struck an ambitious bailout deal with creditors aimed at securing around €86bn (£61bn) over three years in return for radical economic reforms to be pushed through parliament as early as this week.News of the agreement after a marathon 24-hour negotiating session at Athens’ Hilton hotel promptly triggered scepticism in Berlin, where the deputy finance minister said fundamental questions on Greece remained to be answered.Related: Greece close to clinching €86bn bailout deal – liveRelated: Greece urged to put 'quality before speed' in bailout negotiations Continue reading...
Supermarket chiefs meet NFU and other leading unions in bid to resolve protests and blockades over falling milk priceMorrisons is to launch a new milk brand that costs 10p extra, with the premium paid directly to British dairy farmers, in an attempt to end a dispute over the falling price of milk.The supermarket chain will sell four-pint bottles of “Morrisons Milk for Farmers†alongside its existing own-brand milk, which will remain at the same price and therefore 10p cheaper.Related: Farming unions call for 'seismic change' in way food is sold in Britain Continue reading...
Exclusive extract: Labor MPs Tim Watts and Clare O’Neil argue Australia must quickly adapt to the technological revolution to remain a fair societyAustralia’s national story is unique. A bushranger who spoke poetically about social justice is celebrated, at once a criminal and a national hero. Young Australians have distinguished themselves in war not just for their grit and bravery, but for the easy egalitarian ways between officer and soldier. Our democratic tradition was founded by a motley crew of gold diggers: women and men, local and immigrant, patrician and proletariat, united in protest under the Southern Cross. Through each of these foundation stories runs a common thread: equality.Related: The best argument against Australian inequality | Miriam Lyons and Ian McAuleyReturns on investment in the early years are usually four to nine dollars returned for every dollar invested.Related: Better equality in Australia is tainted by high jobless poverty rates Continue reading...
China has made the wrong choice as political and social reform takes second placeWhen China does well, the world feels nervous. How high will it rise, and how peacefully? When China falters, the world worries. How will we manage if this mighty economy slumps, or if political control of this immense society should slip gear? Of course every big country, whether it be India, Russia, Brazil or Nigeria, generates a few such anxieties, as does the European Union, but not on the same scale. Only America has the same degree of truly global importance as China. What, for example, links the recent poor performance of Jaguar Land Rover, the halving of Tata’s profits, the shrinking exports of Taiwanese phone firms, the rescue of the Ecuadorean economy after it defaulted on debts, and the fall in the price of gold last month? The answer is the state of the Chinese market, the policy choices of Chinese financial institutions, and the decisions of the Chinese government.Those decisions have an extraordinary ripple effect across the world. What is true in economics is also true in politics and military affairs. More than 100 Chinese ships, including nuclear submarines, last month churned through the waters of the South China Sea, firing off missiles and guns and generally behaving as if there was a war on. Planes zoomed overhead. The Chinese did this in an ocean area they had unilaterally designated as off limits to foreign ships, and they did it immediately before a meeting of foreign ministers of the Association of Southeast Asian Nations in Kuala Lumpur. Continue reading...
by Phillip Inman Economics correspondent on (#H02W)
FTSE and Dow Jones climb as analysts predict Beijing will ease monetary policy to stimulate growth after figures show 8.3% fall in exportsStock markets around the world have been lifted by hopes that the Chinese government will allow its currency to devalue to boost growth after figures at the weekend showed a surprise slump in exports from the world’s second-largest economy.The FTSE turned a near 80-point loss into a 17-point gain on Monday as investors speculated that Beijing will move to offset further bad news from its manufacturing sector on Wednesday with a package of measures to help exports. In New York, the Dow Jones Industrial Average was up 223 points, or 1.3%, in early afternoon trading.Related: Chinese shares are falling, but the real fear is that the economy itself is slowing Continue reading...
Countries should seek to lower both the price paid to oil producers and raise the price paid by oil consumers. And now is the right timeWorld oil prices, which have been highly volatile during the last decade, have fallen more than 50% over the past year. The economic effects have been negative overall for oil-exporting countries, and positive for oil-importing countries. But what about effects that are not directly economic? If we care about environmental and other externalities, should we want oil prices to go up, because that will discourage oil consumption, or down because that will discourage oil production?The answer is that countries should seek to do both: lower the price paid to oil producers and raise the price paid by oil consumers, by cutting subsidies for oil and refined products or raising taxes on them. Many emerging-market countries have taken advantage of falling oil prices to implement such reforms. The United States, which is now surprisingly close to energy self-sufficiency, so that the macroeconomic effects roughly balance, should follow suit. Continue reading...
Areas such as hospitality and parts of retailing do not face the same competitive pressures as high-end manufacturing, the IPPR saysThe government must focus on unloved sectors such as hospitality and retail, if it is to tackle Britain’s lamentable productivity record, according to a new analysis by thinktank the Institute for Public Policy Research.Tony Dolphin, the IPPR’s chief economist, said that while the government tends to target support at the highly skilled workers in advanced manufacturing, it is the low-paid staff behind bars and checkouts whose performance may be critical to sustaining Britain’s recovery. Continue reading...
While other candidates apologise for spending and borrowing too much, Corbyn’s take on austerity and party’s economic record adds upHere’s a question for you. Consider the following statement: “We must live within our means, so cutting the deficit is the top priority.†Do you agree?If you said yes, you are with the majority. If you said no and are a member of the Labour party, you are almost certainly planning to vote for Jeremy Corbyn to be its next leader.Related: Jeremy Corbyn suggests he would bring back Labour's nationalising clause IVRelated: Economist defends 'Corbynomics' after Chris Leslie's criticism Continue reading...
Jeremy Corbyn has been criticised as a throwback, but he is a timely reminder to his party of its values. And history has hardly been kinder to the ConservativesAs CJ, the managing director in a famous bygone BBC television series, might have said: I did not get where I am today forecasting the outcome of elections for the Labour leadership. But we have certainly moved a long way from 1976, when there were no fewer than six heavyweight contestants, namely Jim Callaghan (who won), Denis Healey, Roy Jenkins, Tony Crosland, Michael Foot and Tony Benn.Now, for all the badmouthing of Jeremy Corbyn, my hope is that in due course he will be seen to have been a beneficent influence, forcing the other candidates to do some serious soul-searching – for the soul of the Labour party, no less.In 1979, the Thatcher cabinet was replete with ministers who claimed manufacturing did not matter Continue reading...
George Osborne may have many reasons for selling off state assets, but his promised great divestment is not free of long-term costsGeorge Osborne wasted no time after the Conservatives were returned to power in May before signalling that flogging off public assets would be a key part of his strategy for paying down government debt. Royal Mail, and a parcel of development land around Kings Cross, were quickly earmarked for the block on 4 June. Royal Bank of Scotland is now to follow.When Osborne announced the Royal Mail sell-off in parliament, he lumped it together with in-year spending cuts to Whitehall departments, to come up with a total of £4.5bn. Yet as the killjoys at the Institute for Fiscal Studies quickly pointed out, the two approaches – spending cuts and privatisations - are rather different. Continue reading...
The Federal Reserve looks likely to decide that the time is right for a rate rise, almost seven years to the day since Lehman Brothers’ collapseThe symbolism would be perfect. When the Federal Reserve announces its decision on US interest rates on 17 September it will be almost seven years to the day since Lehman Brothers went bust. That was the moment when the financial crisis went nuclear, ushering in the era of ultra-low interest rates.That era now looks to be coming to an end. The latest set of US unemployment figures were unspectacular, and would have been seen as modest in previous economic cycles. The increase in non-farm payrolls was 10,000 smaller than Wall Street had been expecting.Related: Unemployment rate remains steady at 5.3% as US economy adds 215,000 jobs Continue reading...
Office for National Statistics says trade gap reduced by £2.7bn in the second quarter of this year with sales of chemicals, fuel and cars risingBritain’s exporters narrowed the trade gap with the rest of the world in the second quarter to £4.8bn - the lowest quarterly gap for four years - despite the recent strength of the pound.The Office for National Statistics said a £2.9bn increase in exports had helped to reduce the trade deficit in the April to June quarter by £2.7bn, compared with the previous three months. Continue reading...
Economists forecast that nonfarm payrolls increased by 223,000 last month, matching June’s job gainsThe number of US jobs probably rose at a healthy pace in July and wages likely rebounded in data due on Friday, providing further signs of an improving economy that could allow the Federal Reserve to raise interest rates in September.
Science fiction was serious stuff when I was a child, Douglas Adams showed it could be funny – plus he included something for us economists, tooThere are books that you know before reading them will change you. There are books you read precisely because you want to change yourself. But The Hitchhiker’s Guide to the Galaxy belonged to neither category. In fact, H2G2 (as a tribe of Douglas Adams fandom calls it) is special because I didn’t expect it to have any effect on me, let alone one so enduring. I don’t even remember exactly when I read it, except that it was in the first few years of my arrival in Britain as a graduate student in 1986. The only thing I remember is being intrigued by the description of it as a piece of comedy science fiction (SF).I had been a fan of SF since I was 10 or 11, when I started devouring what I could from the rather meagre selection (often in simplified children’s editions) available in Korea in the 1970s and 80s. SF was serious stuff then: intergalactic wars and imperialism (Skylark), technological dystopia (Brave New World), post-apocalyptic worlds (On the Beach, The Day of the Triffids). It wasn’t supposed to be comical.The Hitchhiker's Guide wasn’t just hilarious, it was beyond my then mental universeRelated: The Picture of Dorian Gray made me forever suspicious of the self-righteous | Deborah Orr Continue reading...
Mass public frenzy, hype and hysteria? Or private panic and adolescent crisis? Suggest songs all about seeing it wrongly, whether in history or just in your head
As talks continue over proposed €86bn third bailout, Greek treasury says tax revenues fell 8.5% in a year, and public spending fell 12.3%Fresh evidence of the dramatic impact of the Greek debt crisis on the health of the country’s finances has emerged, with official figures showing tax revenues collapsing.As talks continued over a proposed €86bn third bailout of the stricken state, the Greek treasury said tax revenues were 8.5% lower in the first six months of 2015 than the same period a year earlier. The bank shutdown that brought much economic activity to a halt began on 28 June.Related: After the Greek crisis, it's time for a new deal on debt Continue reading...
City analysts push prospect of a rate rise into 2016 as only one MPC member votes for an increaseFears that the Bank of England is poised to start raising interest rates have receded, after news that just one of the nine members of its policy committee voted to increase borrowing costs from their record low of 0.5% this month.City analysts pushed their forecasts for the first rate rise since 2007 into next year after the Bank revealed that Ian McCafferty, former chief economist at business group the CBI, cast the sole vote for higher rates when the monetary policy committee met on Wednesday.Related: Bank of England's Super Thursday – live Continue reading...
Ipsos survey of 24 countries reveals a majority of many populations think migration is changing their nation in ways they don’t likeNearly one in two people in the world’s most advanced economies believe immigration is causing their country to change in ways they don’t like, according to a new poll.In many countries this is true in more than half of the population – in Turkey (84%), Italy (65%), Russia (59%), and in Belgium, France, Israel, South Africa, Great Britain, Hungary and India, the survey by global research company Ipsos found.Related: The truth about the people and numbers in loud and furious migration debate Continue reading...
The governor of the Bank of England says the Monetary Policy Committee voted to 8-1 to hold the interest rate at 0.5%. It also voted unanimously to maintain the stock of asset purchases at £375bn and re-affirmed its expectation that when rate increments occur they can be expected to be limited and gradual. However, he adds that the time for a rate rise was “drawing closer†Continue reading...
The simultaneous release of economic documents does little to improve market understanding of the UK economy“Super Thursday†didn’t quite live up to the grand billing. The moment of the first hike in interest rates is getting closer, said the Bank of England governor, Mark Carney, but it is also clear that this song could remain the same for some time. Only one member of the monetary policy committee, not the expected two, voted for a rate hike. It is now highly unlikely that interest rates will rise this year.Despite Carney’s many references to “robust momentum†in the economy, next May is viewed by financial markets as the most likely moment the Bank increases the cost of borrowing. The mildly dovish message was echoed in the currency markets: the pound fell 0.75%. Continue reading...
The US has become an obstacle to reshaping international laws for tax, debt and finance, writes Joseph StiglitzThe Third International Conference on Financing for Development recently convened in Ethiopia’s capital, Addis Ababa. The conference came at a time when developing countries and emerging markets have demonstrated their ability to absorb huge amounts of money productively. Indeed, the tasks that these countries are undertaking – investing in infrastructure (roads, electricity, ports, and much else), building cities that will one day be home to billions, and moving toward a green economy – are truly enormous.At the same time, there is no shortage of money waiting to be put to productive use. Just a few years ago, Ben Bernanke, then the chairman of the US Federal Reserve Board, talked about a global savings glut. And yet investment projects with high social returns were being starved of funds. That remains true today. The problem, then as now, is that the world’s financial markets, meant to intermediate efficiently between savings and investment opportunities, instead misallocate capital and create risk.Related: Development finance summit: milestone or millstone for the world's poor? Continue reading...
Bank will release its decision on interest rates, how the monetary policy committee voted, and the quarterly inflation report, its latest view on the state of the UK economyWhat is Super Thursday?Thursday is the day the Bank of England will announce three major pieces of information: its decision on interest rates; the minutes of the monetary policy committee’s meeting at which that decision was reached; and the quarterly inflation report, its latest view on the state of the UK economy.Related: City braced for Bank of England's Super Thursday – business liveRelated: Why Mark Carney shouldn’t rush to play the rate-rise card Continue reading...
Urban planner Finn Williams uses the building simulator to create a ‘post-growth city’ with an economy based on social exchange rather than consumption
Mark Carney’s tone will pave way for market predictions over interest rate increases – but the data dump may make it harder to scrutinise Bank thinkingIt’s Super Thursday and the City scribblers can barely contain their excitement. It is the day when they get not one, not two, but three big pieces of information about the economy from the Bank of England.Threadneedle Street will announce its latest decision on interest rates. It will publish the minutes of the meeting of the Bank’s monetary policy committee at which that decision was made. And it will present the quarterly inflation report, its take on the state of the nation.Related: The recovery seems to be strong – but a rate rise will bring it crashing down Continue reading...
Greek prime minister says agreement could end uncertainty over country’s place in eurozone as its banks take a stock market hammeringGreece is “in the final stretch†of talks with lenders on a multibillion-euro bailout, the country’s prime minister, Alexis Tsipras, has said, on a day when banks suffered more punishing losses on the Athens stock market.Greece and its creditors are racing to agree a complex, three-year deal worth up to €86bn (£60bn) by 20 August, when Athens must come up with €3.5bn to repay debts to the European Central Bank.
EU government ministers and business leaders are racing to begin new era of cooperation with Tehran – regardless of what US and Israeli sceptics sayAs debate rages among politicians and pundits in Washington over whether to endorse last month’s historic nuclear compromise with Iran, key European allies have already given their verdict: a resounding thumbs-up.Government ministers and business leaders in France, Germany, Italy and elsewhere in the EU are racing to open up a new era of diplomatic, trade, investment and possible future military cooperation with Tehran, regardless of what American and Israeli sceptics say. Continue reading...
Dodd-Frank Act forces US corporations to reveal what their CEOs earn compared with the average worker, but some companies are already embracing pay transparency to build corporate reputation, says Phil DrewInequality is back in the spotlight as the US Securities and Exchange Commission prepares to vote on pay ratios. For the first time, America’s largest businesses could be forced to publish how much more their chief executives earn than the average worker.The disclosure, required under the 2010 Dodd-Frank Act, has long been in the pipeline. If voted in, businesses can expect the new rules to inspire greater levels of scrutiny. Research by Harvard Business School shows people have no idea how much CEOs earn and, when asked, grossly underestimate their boss’s pay. In the US, CEOs earn up to 300 times more than the average salary, yet most estimate the gap to be a fraction of this, at 30 times the average wage.Related: Growth is not the answer to inequalityRelated: Two cheers for the Dodd-Frank Act – but Wall Street culture needs radical changeRelated: Business must collaborate - without it the world is brutal and terrifyingRelated: Don’t blame rising inequality on technological change | Owen Jones Continue reading...
Latest PMI figures suggest economic recovery is slowing, with possible knock-on effects on Bank of England interest rate risesBritish services companies grew less than expected last month as hiring eased to its slowest pace since March 2014, suggesting the economic recovery weakened at the start of the second half of this year.Wednesday’s Markit/Cips services purchasing managers’ index (PMI) fell to 57.4 in July from 58.5 in June, undershooting a Reuters forecast for 58.0 but still indicating expansion among services businesses. Continue reading...
Nigel Wilson says companies should not pay out cash to shareholders at expense of long-term investment, echoing view of Bank of England’s top economistThe boss of Legal & General has backed a call by the Bank of England’s chief economist for companies to invest for the long term instead of paying out cash to feed the short-term demands of shareholders in the City.Nigel Wilson, the chief executive of one of the biggest investors in the UK stock market, said his investment management arm would take a hard line with bosses who put a higher priority on payouts to shareholders than ensuring the future health of their companies.Related: Shareholders receive too much money from business – Bank's chief economist Continue reading...
