The question for the Australian economy is no longer whether we’re mired in stagnation — we have been for several years — but whether that’s likely to change in the future.
Surely the stagnation will end, and growth return, at some point? Ask the Japanese. They’re still waiting after more than two decades. For Australia, there’s no reason to think the stagnation that has beset our growth, our wages or our productivity is going to end any time soon.
In a speech last night, Reserve Bank governor Philip Lowe warned that “it is likely though that we will require an extended period of low interest rates to reach full employment and for inflation to be consistent with the target”.
The bank’s most recent forecasts, in its August Statement of Monetary Policy, don’t see CPI going over 2% until late 2021; unemployment will only (just) fall below 5% in the same time-frame; in the interim, wages growth will improve only fractionally. The “extended period”, on those forecasts, is well into 2022. And Lowe accepts that further interest rate cuts won’t do a lot to help, even though the bank is ready to use them. No, addressing the stagnation is “a matter for government and for business”.
At the moment, the government has its fingers in its ears and is yelling “budget surplus budget surplus”. But what about the opposition, now that Anthony Albanese has begun discussing Labor’s policy path to the next election?
Albanese’s first major economic speech yesterday, full of bromides about Labor being a pro-growth party (as opposed, presumably, to being anti-growth), had a couple of interesting ideas. His proposal for an Infrastructure Australia-equivalent body for skills and vocational education is a good one, albeit missing the acknowledgement that Labor is just as responsible for the demolition of vocational education in Australia as the Coalition. And he continued Labor’s recent theme of urging greater infrastructure spending and extending not tax cuts but accelerated investment deductibility for business.
It’s also clear that Labor under Albanese will prefer to spend its way to emissions reduction, rather than use a market mechanism — something the government is also doing by throwing another $1 billion at the Clean Energy Finance Corporation, a body Tony Abbott tried to kill off. The result: emissions reduction achieved at much higher financial cost, but with a much lower political cost.
But Albanese never really explained how the future under Labor would be different from the stagnant present. Indeed, while acknowledging job insecurity was on the rise, he wants to find ways to facilitate the gig economy through the industrial relations system (like portable entitlements), as long as “people… elect to take on this form of work because it benefits them, not have it imposed on them”.
Business, which has been fighting an extended defence against the ACTU’s campaign against casualisation, will be chuffed to hear that. It won’t do anything to help wage stagnation, though.
Wage stagnation will only be addressed by lifting productivity; increasing the bargaining power of workers in their dealings with employers so that the benefits of that lift are shared; and cutting temporary migration. Temporary migration has surged in recent years, enabling an epidemic of wage theft and exploitation that sees a quarter of small and medium businesses, as well as some of our largest companies, ripping off their staff.
It’s clear what’s necessary to lift productivity — the PC spelled it out in 2017. But the states and the federal government have avoided these recommendations — restructure health care, reform pharmacies, improve teaching, make infrastructure investment more independent, road pricing, land tax, fix energy — like the plague.
Bill Shorten talked about improving bargaining power before the last election, but nothing’s been heard of that since. And even then, no one in Labor dared to speak out about the complicity of Labor’s biggest donor, the SDA, in rampant wage theft in the retail sector (the latest example: Woolworths, today, revealing 5700 workers had been ripped off, with the cost as high as $300 million).
And far from discouraging temporary migration, the government — which has already overseen a surge in the number of temporary workers here — is creating more sub-classes of business-sponsored visas and encouraging universities to rely ever more heavily on foreign students.
Without action in those areas, the stagnation isn’t going to end. The future won’t be different, because there’s no reason why it should be. Don’t think it can’t happen here.