Australia’s big corporations are enjoying the strongest boom in revenue and profits in history. Monday’s figures from the Australian Bureau of Statistics show gross operating profits for the September quarter were a thumping $79.2 billion. That’s the highest for any September quarter ever. It is third-highest result for any quarter, beaten only by the previous two quarters this calendar year. But only by a smidgeon.
Total operating profits for the full 12 months to the end of September reached all-time records in several industry sectors.
Winners and losers
The big winners are companies in:
- finance and insurance;
- mining;
- manufacturing;
- electricity, gas, water and waste;
- professional, scientific and technical services; and
- rental hiring and real estate.
Not all companies are surging, however. Lagging sectors include:
- accommodation and food;
- retail;
- wholesale;
- construction; and
- arts and recreation.
Finance and insurance
Profits for the 12 months to September were $7.6 billion, more than double the $3.6 billion for the equivalent period a year ago. This is the third year profits have strengthened. Compared with three years ago, gross profits are up 128%.
The big miners
Mining profits for the last 12 months were up an extraordinary 66.4% over last year to $108.8 billion. That sets a new all-time record, beating the previous best, back in 2011, by $14.5 billion.
The three big foreign miners Rio Tinto, BHP and Fortescue have recently announced payouts of more than $9.5 billion in dividends to their foreign and local shareholders.
Professional, scientific and technical services
Profits in this sector have surged 64.3% over the preceding 12 months, to the highest level on record.
Manufacturing
This sector continues its recent recovery with profits up an impressive 12.0% to $30.5 billion in the 12 months to September. This is the fourth consecutive annual rise, and by far the strongest.
Sectors still subdued
As is inevitable when jobs, wages, salaries and pensions are depressed, food and accommodation companies are struggling, with profits down an alarming 19.2% to just $5.4 billion.
Retail and wholesale both experienced small profit rises, but assessed over the last three years, returns have been below the rate of inflation and population rises. Construction profits increased over the disastrous level a year earlier, but remain well below levels of the preceding four years.
Company profits overall
The crucial indicator, of course, is gross profits for all sectors combined. This reached a new record: $318.7 billion — up an astonishing 27.1% on the same period a year ago. That’s the highest annual percentage increase since 2001, when the economy was recovering from the early 2000s global recession.
Company taxes collected
Despite profits at all-time highs, corporate taxes collected by the Turnbull government are at historic lows. So far this financial year, from July to October, just $23.6 billion has been collected. That is well below the $25.7 billion collected over the same period in 2011, and the $27.0 billion in 2012 and the $26.4 billion in 2013. Those years were towards the end of the global financial crisis when corporate profits were well down on current levels.
Two economies
Clearly, Australia’s national wealth and income are increasing rapidly, as is happening across the developed world. This is evident in the record streak of trade balances, the value of the sharemarket, the surge in the wealth of the top 10% of Australians, the inexorable growth in gross domestic product – a world-beating 26 years – and, now, booming corporate profits.
The tragedy for Australia is that, simultaneously, other indicators show that most citizens are missing out badly on their fair share of the economic pie.
Wage rises have been at record lows, more than 700,000 people have been unemployed for 49 months straight and the share of the nation’s wealth owned by the bottom half of Australians has declined over the last four years.
The way forward
The critical area the government must now examine, in light of Monday’s profits data, is company tax paid by the roaring corporations.
If collections were anywhere near the nominal rate payable under Australian law, or the rates historically collected, there would be funds aplenty for all current fiscal and social challenges.
That’s a serious disparity which I don’t expect to see in the mainstream media anytime soon.
How many staff were removed from the ATO by Abbott and Turnbull?
GST Ramblings
We should look closely at the real contribution of mining to Australia – billions of dollars GST are refunded to the mining industry each year. The extractive industries contribution to the economy is a lot less than most realise.
This refund is treated as a balance sheet item and does not impact on the profit or loss – or directly affect any other tax the industry pays.
• For most exporters, the current GST policy seems rational – those industries with substantial local “value add” such as agriculture or manufacturing.
• Extractive industries, on the other hand, could be viewed differently. These exports have a minimal Australian “value added” component and appear to make a lower contribution to the economy. In fact, to the extent that they reduce competitiveness, they have a negative impact on the other sectors of the economy.
• The mining and gas industry is the largest beneficiary of the current GST policy.
Applying GST to the extractive industries (without allowing for any volume/pricing adjustment) would yield in the order of $20-30b pa.
I distinctly remember hearing Treasurer Morrison telling us that company taxes have to be cut so profits can go up so wages can rise. Now it’s clear that profits have been going gangbusters but wages not to speak of. Treasurer Morrison?
Would like to think you would get an acknowledgment EditorB but Treasurer M’s track record . . . well, not so good eh? The trickle down principle is only meant to trickle very slowly, and mostly not down; but out . . . . .
As for “trickle down” : don’t eat the yellow snow.
How true. How many times have we heard it, according to Scrotonomic Theory – “Higher profits go to higher wages”?
In the last 50 years, the contributions to Treasury in tax from individuals and corporations has virtually reversed, 60%+ from individuals – excluding GST – and 10%+ from corporations.
Bring back the 60s, full employment, one income more than sufficient to buy or build a house and have a family.