The problem with Europe is that it makes ordinary crises look, well, ordinary. There is an unfolding employment disaster going on in Australia, but compared with Greece and Spain, Portugal and Ireland, we’re doing just great.
Yesterday’s labour force figures revealed a big and unexpected drop in employment in December. After holding staff levels steady for 12 months, businesses have started laying people off.
As discussed on Wednesday, banks, retailers and manufacturers are all now cutting employment. To that, you can add cafes, restaurants and the Commonwealth public service — thanks to Labor government policies.
The so-called “modern award” system under the Fair Work Act is imposing intolerable weekend penalty rates on the hospitality sector. Many restaurateurs are saying that they simply can’t employ as many staff as they used to and are either shutting up shop or doing it themselves.
Meanwhile politics, rather than economics, is motivating the government to get its budget back to surplus earlier than either necessary or previously intended; with softer tax revenues because of weaker than expected commodity prices, and this requires public sector staff cutbacks.
Normally that would be a matter for celebration, but right now government is just another sector cutting back employment.
We tackled the Acting Treasurer and Employment and Workplace Relations Minister, Bill Shorten, on these matters in our KGB interview with him yesterday, and it was clear there will be no change to either fiscal policy or the Fair Work legislation.
So there are now five separate reasons the unemployment rate will go above 6% this year:
- Bank funding costs are rising, which means they will cut staff and not pass on the full extent of any official rate cuts — muffling the effect of monetary policy;
- Consumers are saving more and when they do buy stuff it’s increasingly online, so shopkeepers need less staff;
- The Australian dollar will remain above parity because Australia’s government bonds are among the highest yielding AAA securities in the world;
- Cafes and restaurants are being forced by Labor Party legislation to pay uneconomic weekend penalty rates;
- The federal government is unnecessarily returning the budget to surplus next year, which will require retrenching public servants.
There will not be a recession in Australia because investment in mining and energy projects in WA and Queensland will keep national output in the black, but for most of the country it will undoubtedly feel like one.
The Reserve Bank will keep cutting interest rates but this will have absolutely no impact because first, the banks will dribble out only part of them; second, there are a lot more savings now than there used to be, for which a rate cut is an income cut; and third, because mortgagees will use any reduction they get to increase principal repayments, and leave total repayments where they are.
But at least we’ll all be able to watch what’s going on in Europe and still feel like the Lucky Country.
*This piece was originally published at Business Spectator
Alan, I normally find your pieces exceptional economics commentary, but I need to correct you on a furphy you’ve repeated a couple of times: namely, that “Cafes and restaurants are being forced by Labor Party legislation to pay uneconomic weekend penalty rates”.
Penalty rates are not new. They were not introduced as part of the Modern Award process or the Fair Work Act (which is what I presume you mean by ‘labor party policy’). Penalty rates have been a feature of the hospitality industry (and a number of other industries) for many years. In some cases, penalty rates are actually being adjusted down as part of the MA process. In sum, it’s not ‘labor party legislation’, nor is it the delegated legislation of the modern awards that means some employers have to pay penalties.
In any case, regardless of what Labor’s policy is, it’s the Bench of FWA that made the decision about what penalty rates are – the independent tribunal, not the government.
The sad irony of restaurants and cafes bleating on about this (and they got two goes during the MA process to put their case, in Stage 1 and Stage 3, and I was there for both) is that as an industry they are notoriously non-compliant. Depending on whether you include pubs/club in the survey, somewhere between 60-90% of the industry doesn’t pay the Award – that is, they pay their staff less than the minimum wage prescribed. So it’s two bald men fighting over a comb – the majority don’t pay the minimum anyway. No one knows if they can actually afford it or not because they don’t pay it.
Hospitality is a minimum wage industry, with a number of marginal employees. I’m not sure why people zero in on wages as the soft spot here – if cafes were complaining that rents were too high, would we say that landlords are being too greedy and need to drop their rents because they are ‘uneconomic’, or would we say that if you can’t cover the costs of running a business, don’t run one? Wages are a cost you factor in like rent, insurance and the like.
A logical corollary of the argument you run is that to compete with China’s manufacturing imports, we should drop to Chinese wages and safety standards because that’s more economical.
75% loading for Sundays is outrageously high.
75% loading figure being quoted currently already includes casual loading, so it is disingenuous.
John , do you work on Sundays ????. Thanks Claire , agree with all you said, Alan must be getting free meals somewhere ? He wonders why people don’t take up his Finance deals ,when he produces tripe like this. Just another Labor basher working for Rupert and the Fiberals .
Didn’t hear him whine about bringing back to surplus under Howard govt. and the cuts to health , education and infrastructure etc etc ??????????????
Alan , you need to open both eyes .
As soon as anyone puts up and argument as to why Gillard, Swan and Labor are the wrecking ball through the ecomony, the left wingers go into attack mode.
Labor won’t change the Fair Work Act, cause the unions will start a campaign and they dont need attacks on all fronts