The positive economic mood of early this year has now definitely vanished. And if it translates into slower — or even negative — growth, then much of the responsibility will rest with Australia’s business leadership, rather than the government.
As we noted after the budget, Treasury has forecast weaker-than-expected growth for the rest of this financial year but thinks it will pick up next year. That came at the same time as AMP’s Shane Oliver suggested there was a chance growth in the March quarter (that GDP data will be released on June 7) will be negative. Since then, additional data has confirmed that Australians are cutting their spending at the same time as the housing construction boom has started to fade, leaving a big question mark over what will drive growth in the absence of an upturn in non-mining investment.
Businesses complaining about slower growth have no one to blame but themselves. Despite real wages being stagnant or falling for nearly three years, business lobby groups have continued to demand wage cuts and industrial relations deregulation to give them greater “flexibility”. Stagnant wages and the constant drumbeat for fewer rights for employees undermine confidence as much as the actual purchasing power of households, increasing concerns about economic security.
Some sectors are particularly egregious. The retail sector laments poor or non-existent growth in retail turnover while urging cuts to penalty rates for their own employees and featuring most of the worst offenders when it comes to underpaying workers. Despite a low-inflation environment, energy companies are using market power and a rigged regulatory system to gouge households and other businesses. The banks, as always, are the banks.
This doesn’t merely undermine the relationship between business and the community, it undermines consumer sentiment and it undermines the electorate’s buy-in to market economics. There’s a lot of talk about the “social licence” of industries these days. But the most important social licence is for capitalism itself, and there’s a widespread perception in the electorate that the Australian version of capitalism is no longer serving the interests of the community, merely those of wealthy business elites and their political hangers-on.
Some business figures have started working this out. The banks are at the pointy end of the backlash and have been working to perform the Lazarus-like act of repairing their relationship with the community. “It is not in shareholders’ interests or the national interest that the relationship between banks and the community continues in this way,” ANZ chairman, and probably the most respected business figure in the country, David Gonski said yesterday, making it clear that it was banks, not the community, that needed to change (although his suggestion that the bank levy be temporary was right out of the old business playbook — wouldn’t it be nice if the rest of us could demand that government make our taxes “temporary”?)
Then there’s Jac Nasser, chair of foreign mining company BHP Billiton, which is also going through a rebranding process to rid itself of the stain of years of tax dodging, attacking workers, building lethally insufficient dams, intervening in politics and wasting over $10 billion of shareholder value. “Business and government have done a terrible job of communicating what is needed. Business has taken for granted that business is good for you. And that is just doesn’t work anymore,” he told the Financial Review. “There are too many different ways that people get communication and information and they are sitting there either really angry or badly informed or just want to better understand what the situation is.”
“The bedrock of all of that is you have to have a competitive framework for business,” Nasser said.
The problem with Nasser’s view is that it’s not, or certainly not merely, a communications problem — although for a long time many of us who wondered what had gone wrong with the “reform agenda” in Australian politics thought that’s what it was. Better explaining the need for a “competitive framework for business” isn’t going to elicit any greater support from Australians, because of the widespread perception that businesses are looking after themselves and no one else, and that the whole economic system is rigged in their favour and against ordinary Australians.
The government has belatedly worked out what many in business still haven’t — that it’s not just about better communicating neoliberal economic policies, it’s about restoring to the electorate the sense that the system works for them as well as for business. That’s why it has switched to the centre. But it’s done so at a point when stagnant wages and political disillusionment have inflicted serious damage on the successful Australian economic model of the last two decades — and when it is planning to cut its deficit by around ten billion dollars. That’s the sensible fiscal call, but also means the level of fiscal stimulus into the economy, which has been crucial to propping up growth since 2012, is diminishing at a point when real questions are emerging over growth.
Business may well come to rue attacking Australians’ wages over so many years. The result may require a damn sight more than better communications to salvage the economy.