Why hasn’t anyone else picked this up?
Where are the critical economics reporters these days?

The Reserve Bank announces an interest rate
hike sighting concerns over inflationary pressures. The Bank highlights strong
commodity prices and importantly, a tight labour market. Yes, read that again,
a tight labour market.

So what is Labor’s policy critique? Not
enough on fixing the skills crisis and building infrastructure. Let’s run a
ruler over that.

Mr Beazley, isn’t your announcement to ban
foreign apprentices going to just make the labour marker even tighter in the
short term? Doesn’t your policy just make it easier for domestic apprentices to
bid up their wages with the knock-on effects to other skilled labour? And come
to think of it, won’t your opposition to WorkChoices make the labour market
even tighter? Won’t WorkChoices, for all its warts, actually assist in
dampening the labour market? And isn’t this good for inflation – and lower
rates – because it will dampen the risk of wage inflation?

Never mind; let’s turn to the next
prescription. Our problems are going to be solved because we can thank Labor
for giving us more infrastructure. Which, I guess, presumably means more
government spending. But hang on, doesn’t that risk reducing the size of the
surplus, fuelling even more demand, and dare I say it, putting upward pressure
on rates? I would have thought that you actually cut government spending at
times of excess demand. Maybe I missed that tutorial.

Whichever way you look, Labor’s so-called
solutions to the interest rate issue fail basic first year economics. You have
to wonder whether they will ever get it right. Oh, for some real economists in
the show.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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