There’s a saying in politics that the moment you reach the point of being sick to death of repeating a message over and over, that’s probably when voters are only just starting to hear it.
Reserve Bank governor Philip Lowe seems to be adopting the same approach to communicating what’s driving the Bank’s monetary policy decisions — but with financial markets and neoliberal commentators on monetary policy standing in for disengaged voters.
After yesterday’s December meeting, Lowe again said repeatedly he wants wages growth. Inflation is lower in Australia than elsewhere, he says, and it’s because of “only modest wages growth”.
Wages growth has picked up but, at the aggregate level has only returned to the relatively low rates prevailing before the pandemic. A further pick-up in wages growth is expected as the labour market tightens. This pick-up is expected to be only gradual, although there is uncertainty about the behaviour of wages as the unemployment rate declines to historically low levels.
Interest rates won’t rise until “actual inflation is sustainably within the 2% to 3% target range. This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time and the board is prepared to be patient.”
Patient. Get that?
There are good reasons for the board to be patient. The government is committed to bringing in hundreds of thousands of temporary workers who will drive wage pressures down, especially in industries like construction, agriculture and retail where they are ruthlessly exploited as part of a wage theft-based business model.
Wage growth didn’t lift above 2.5% during the jobs boom of 2015-19 — far short of where Lowe wants it to be. What’s hopefully different this time is that the government is pumping tens of billions of dollars of deficit spending into the economy on top of near-zero interest rates.
Amid all the talk of a recovery from the pandemic, we should remember the Australian economy is still receiving the highest levels of fiscal and monetary stimulus it has seen in generations, and will continue to do so for the foreseeable future — and yet the central bank is still wondering whether that will be enough to spark inflation.
Some commentators think consumers will help out by spending more than $350 billion in savings in the financial system from the high household savings rate — though that ignores that there’s been a big splurge on housing over the past two years, not to mention on renovations and the full suite of consumer electronics.
And the very thing that would curtail any consumer-led recovery would be an early rise in interest rates of the kind financial markets and inflation-obsessed commentators want.
What’s definitely clear is the RBA won’t make the same mistake it made between August and December 1994, when it lifted rates 2.75 points in three moves and choked off the recovery in employment (and probably Paul Keating’s election hopes) and sent the jobless rate back up above 9%, because of an obsession with inflation.
well if you repeat the message long enough it may get through their thick heads, offering 2 to 3% wage increases over 3 years is perthitic considering how long wages have been stagnant. I dont understand why the government is so againced wage increases as they will get more tax back directly and indirectly and help the economy moving. They must like the low interest rates that effect investor’s that would look else were to get better value for their monies, just goes to show were the government values lay.
They are afforded the luxury of not having to ensure compliance with awards or conditions when Australians are well conditioned to blame ‘immigration’ to avoiding confronting the authority of the LNP, peak employer bodies and US linked think tanks; with the latter promoting radical right libertarian socioeconomics.
Australian media are encouraging us (ageing electorates) to be passive, believe in authority and follow orders good for the ‘top people’ while we are encouraged to rise up against sensible Covid constraints; shows how easily led Australian as followers are……
we don’t want ordinary people getting wealthier, we just want owners of capital to get the spoils