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.
I believe we will go through a long and sustained period of de-growth. As opposed to recession, where it’s rapid, panicky and concentrated in specific corners of the economy, de-growth is a natural correction of the rampant consumerism, which is causing our modern capitalist system to devour itself.
And I for one welcome our new period of de-growth. If money in your pocket shrinks, so too should the cost of living. For all of the efficiency gains we’ve made, we blew them on growth and buying more crap – rather than locking in a more sustainable way of using resources.
Everything that is wrong with australia`s economy is the direct result of the Australian conservative ideology copied from Ronald Reagan and Britains Margaret Thatches disasterous trickle down policies starting with howard and intensified with Abbott and now Scummo, the conservatives obsession with destroying the Unions and stacking the fairwork commission with their stooges and opposing any wage,pension or newstart increases guarantees a dying economy just as happened and still happening in the U.S, while China does the opposite and increases incomes year by year creating the biggest middle class in the world making china self sustaining and not totally reliant on exports as the U.S, Britain and now Australia is, and the stupid voters cant see this, as their world crumbles around them they continue to vote for their own extinction, like lemmings rushing over the nearest cliff.
braddybear, such a pity you failed to research the topic properly before posting !
It was Paul Keating as treasurer and prime minister who was the architect of neo-liberalism in Australia in following the lead of Thatcher, Reagan and Blair and not John Howard.
Howard and Costello merely extended and refined what Keating had commenced.
I proffer the view that it was Keating and his policies of deregulation and privatisation that have created the crisis that the country and the Labor Party now finds itself in.
Unfortunately politics in this country, myth, when repeated often enough becomes gospel, especially when supported and pushed by Murdoch and his foot soldiers.
We have gone on a cheap-goods consumer binge for the last 20 odd years and it’s reached it’s end. Everyone has a house full of plastic crap made in China and we just cannot get any more inside. The only businesses besides health doing well, seem to be food supermarkets and cafe’s. Even the fad “I’ve just got to have a twincab Ute like every other bloke” seems to have peaked and is waning. How many more big screen LED TV’s can we fit on our walls. The world is full of manufactured stuff that has really bought us little happiness and fullfilment. The growth fantasy has ended and we need a new kind of steady state economics so as we preserve what is left of the environment before we make ourselves extinct. I think that people know this deep down but cannot face it yet, so they voted for a stupid shallow advertising man instead of Labor who had good policies that were starting to address the real problems.
I won’t argue that we aren’t in a period of stagnation, we clearly are. I will point out that the money to the CEFC is not a cost to government, it’s a loan book that the government makes money from.
In that respect it will fund much of the cheapest and most effective emissions reductions that govt can buy.
But isn’t that what “small government” is all about? All the perks (for you and your sponsors/mates) and no responsibility?