The proliferation of internet connected devices: smartphones, tablets and cloud computing has driven a surge in the Australian economy (contributing $79 billion, or 5.1% of GDP this year) while at the same time driving an increase in unemployment which is now at its highest level in 12-and-a-half years.
The democratisation of technology has given rise to companies like Uber and AirBNB which rely on the existing capacity of their customers to power their business, meaning companies can invest less in infrastructure and human capital.
Economist Mike Keating told SBS that Australia has been experiencing a “hollowing out” of mid-level jobs since the 1970s where huge numbers of blue collar workers lost their jobs to automation, with the male workforce being hit the hardest. A lot of female workers were also laid off, with typists and clerks the hardest hit, but overall female workforce participation has been increasing in “leaps and bounds” over the same period in response to the growth in jobs in the service industries.
“The net result is more people at the top of the financial spectrum, and more people in the bottom,” he says. “That shows up as an increase in inequality.”
Economist Philip Soos told SBS Australia is experiencing an “income recession”.
“According to the best technical measure of economic growth – real net national disposable income per capita – Australia has been experiencing degrowth since 2012Q1, for 17 straight quarters,” he says.
The rapid growth in the finance, insurance and real-estate sectors has led to a heavily financialised economy which prioritises borrowing, speculation and extraction over investment, production and consumption, resulting in “a parasitic economic system”.
Techno-revolution a double-edged sword
Apps like Uber and AirBNB are restricting the government’s ability to accurately collect revenue to power services like schools and hospitals, triggering a crackdown by the ATO which has given the companies two-and-a-half months to start paying GST.
Salaries are down across most Australian industries, and have been since the GFC. Even the financial industries have been affected. There are now 90% fewer bank tellers than there were 20 years ago according to economist Stephen Koukoulas.
“The transition to these big economic changes is extreme and it is hurting the economy,” he says. “Especially for those at the bottom end of the income spectrum, they tend to be the ones who work in hotels and drive taxis.”
Australia’s generational disadvantage
The latest Household Income and Labour Dynamics (HILDA) results show there is also a generational disadvantage, with the older cohort (65+) experiencing a significant increase in their real net household wealth over the last decade while the young have barely seen any growth.
Keating says Australia is likely to see an increase in older workforce participation, particularly those over 50 who find, approaching retirement, that they don’t have enough in their superannuation to live off, while youth workforce participation is likely to plateau.
The economist says that until recently it was routine jobs being replaced by automation, “but ITC is becoming more intelligent and moving into jobs that require more discretion”, he says.
Advances in analytics and data processing threaten jobs that previously only humans could do.
Taxation
Economist Philip Soos says middle-income earners bear the brunt of “Australia’s pathologically insane 419 tax and tax-like fees” which are in urgent need of reform.
“A worker on $75,000 a year with few deductions will pay a larger proportion of their income in taxation versus a high income earner who will have a lower taxable income by pure virtue of being able to write off a significant sum of their income in pursuit of capital gain” he says.
Australia also has the world’s highest rate of tax expenditures, around 8% of GDP, according to the IMF.
“These tax concessions need to be reduced and eliminated,” he says.
Economist David Havyatt said it would be “sensible” for the ATO to offer an employee earning clearing house function where all pay is remitted to an ATO account in the individual’s name.
“The ATO would determine the appropriate tax to withhold for the period before remitting net pay,” he told SBS. “Then the ATO could distribute superannuation to a nominated fund.”
Super
One of the knock-on effects of Australia’s new digital economy is a trend towards a freelance model of employment which will result in many middle-income earners struggling to earn enough superannuation to support themselves, (self-employed workers are required to fund their own super).
“Particularly for people in manual occupations, stacking shelves, construction, even things like child care - these jobs are physically tough - and can be very demanding,” says economist Stephen Koukoulas. “You don’t see many 50, 60-year-olds carrying bricks up-and-down building sites. What should they do? How do they get their super when they’ve not been high income earners anyway?”
The economist says the changes should be funded, “rightly”, by taxing high-income earners their fair share and making sure they pay it by closing legal loopholes that have enabled off-shoring. “It’s revenue neutral so it won’t impact the budget,” he says.
According to the Grattan Institute, Australians are paying far too much for superannuation, roughly $21 billion a year in fees, with little evidence that funds with higher fees provide better member services.
Philip Soos says Super has “morphed into a leviathan which overwhelmingly benefits the wealthy” and should should be eliminated.
Koukoulas disagreed, and proposed that rather than axing Super, it should be capped so that high-income earners fund their own Super and provide tax-breaks for low-income earners.
“We shouldn’t have people with a lot of income putting $35,000 of their spare cash into super every year, that’s just absurd, for tax reasons or anything else,” he said.
“Stagger it so it is not dissimilar to income tax. It seems to me if you have $1.6 million in Super, you can pay tax.”
Economist Tim Harcourt said super contributions should be “bumped-up” from 9.5% to 12.5% and said fee structures must be simplified to reflect that workers have more portable lives. Economist Philip Soos refutes this, claiming it will have the effect of decreasing salary packages.
However, Economist Mike Keating says the best way to ensure a strong economy with a well-endowed middle class is through education.
Today, Australian males aged 25-64 who left school without completing their HSC and have no further qualification are 17.5% less likely to be employed compared to their peers who completed school and and/or have a further qualification. A similar comparison for females who are early school-leavers shows that they are 22% less likely to be employed.
“If we want to adapt to a digital economy, education and training is dead centre,” he says. “That includes basic employability skills, literature, language, numeracy and problem solving in computer environment.”
The economist says Australia needs to improve its balance between generic, vocational and specific job skills.
The economist says Australia also needs to fund a fair amount of research or else we’re not going to be able to innovate. (Though he acknowledges Australia will likely end up “copying” technologies and innovations produced elsewhere, even this ability to copy and adapt quickly depends upon having a basic research capacity. Look at the Big Four Banks’ tussle with the regulator over Apple Pay, for example).
“Your ability to copy depends on how much you know and how quickly you know it,” he says.
“Unless we’ve got scientists working at forefront of knowledge we’re not going to be able to copy other people’s innovation.”
Economist Lindsay David says the digital economy will benefit young Australians if our economy successfully transitions to becoming a disruptor of innovation (a creator and manufacturer), rather than a nation being disrupted by the innovation of other nations.
“If we continue to be a nation disrupted by the digital economy rather than disrupting the digital economy, it will become increasingly harder down the line for young Australians to find good quality, fair paying jobs as the rapid acceleration of automation labor will replace large sums of human labor,” he says.
Claire Connelly is a freelance writer, journalist and consultant. She writes for The Australian Financial Review, SBS, The Australian, The Age, specialising in finance, technology, economics and policy. She tweets here.
Tune in to #TheFeedSBS at 7.30pm Monday - Friday on SBS 2, stream live, or follow us on Facebook, Twitter, Instagram, Tumblr, or Vine.
Through award winning storytelling, The Feed continues to break new ground with its compelling mix of current affairs, comedy, profiles and investigations. See Different. Know Better. Laugh Harder. Read more about The Feed
Have a story or comment? Contact Us
