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.
Bernard and Glen,
No amount of communication aimed at restoring confidence in neoliberal AKA trickle-down economics will be effective, because in the current conditions of our developed economy businesses don’t need to invest in their development. In short any such communication would just be straight-out lies.
So stimulation for big business, eg enormous tax cuts, just goes straight to their bottom line and joins the PM’s fortune in a sunny Caribbean tax haven.
Business leaders, LNP politicians, IPA-like think thanks: they all all have one and one only solution to every single problem confronting the human race. It boils down to this: take from those who have little, give to those who have a lot.
EVERY damn time.
And seriously, what’s the point in listening anymore when you know what the answer is going to be before the question is even asked? When it’s the same answer you’ve heard ten thousand times before?
Come up with something different even once and I might start listening again. Until then I’ll seek answers elsewhere.
Maybe it was their remoteness, their distance from the grounding of reality – from their Starkship Enterprise – but I can’t understand what was so hard in seeing the flaw in the emerging black-hole created by :-
“Businesses prioritising profits – to increase share-holder returns and, thus, executive remuneration and bonuses for “managing” – by screwing down one component of input that is “overheads/wages” of their employees.
Which meant employees/plebs had less disposable income, less discretionary spending, and had to concentrate on life’s necessities and essentials (like shelter/housing/mortgages, clothing, food, health and education)? Life’s “little luxuries” – the trinkets/optional extras these businesses were making – fall down the list, become unaffordable, dispensible, based on priority spending? (…. Don’t mention “house-hold plastic debt” – used for those “little indulgences” that lubricate the grind of the daily making ends meet – what’s going to happen when that’s called in?)
These Cling-ons of Industry and society compete with each other to beat down wages and conditions of their wage-slaves : relying on others to propel the economy by paying “luxury” wages? When there is no “others”. There is no other life in the Milky Way galaxy that is Business – they and their plebs are IT.
Yet they “earn” executive salaries – for being thick, self-obsessed, greedy and arrogant?”
Then again, maybe it’s just me?
Maybe it’s just me as well…
And only several million others.
Yes I think that’s me too.
Add 1 more to that list, Klewso.
The “Australian” version of capitalism ?
That’s right up there with “crony capitalism”.
It’s all just “capitalism”. The results are predictable, and predicted. The rason capitalism needs extensive regulation is precisely because the outcomes we have arrived at are so obvious.
From this hilariously low bar, the article then descends further into farce with a wordy no-true-Scotsman fallacy arguing about how the problem isn’t actually neoliberalism, it’s that people just aren’t doing neoliberalism right.
But what we are seeing is neoliberalism to a ‘T’.
Business will always agitate for lower wages. Just like it will always agitate for monopoly power and no liability. Because those are the quickest, easiest, least risky and most likely ways to imrove profitability and income.
That they are all also ultimately self-destructive to society (and hence the economy as a whole) is as irrelevant as it is obvious. For the average player, by the time the account comes due they have already cashed out and left the game.
Thus (finally, for some) we see the purpose of Government. To curtail the excesses and damages of capitalism such that its positive attributes can be harnessed for more specific benefits. In a democratic society, this is the people – “socialism” as it seems to be called today. In the kind of society we are rapidly becoming, it is the narrow few who are allowed to define and execute the policy that controls capitalism
Times two DrSmithy. This is not an aberration, capitalism inevitably leads to fat, bloated, lazy monopolists and oligopolists, where risk free returns are the raison detre, anything else is punished by the share-market. Unfortunately Australia is left with oligopolies across the major suppliers of necessities, gas and electricity, supermarkets, banks.
Or the other side, the bloated mining companies, grown fat on taking commonwealth resources and lazily taking big profits while turning out zero-tax outcomes. Is that a problem? You bet he did, I mean you bet I am, I mean you bet it is!
We could hardly have managed worse, given our natural advantages. The icing on the cake though is governments repeating errors, selling off assets that are better left in government hands. The damage the NSW Liberals are inflicting on us will take decades to get over, for a few years of growth, money go rounds and windfall profits mainly for developers.
Pitchforks and guillotines, please.
I have a couple of tumbrils, greased up and ready to go.