It’s marvelous what arguments you can come with if you assume that:
a) the economy doesn’t ever have to compete and,
b) we’re Aussies so we’re different!
Bernard Keane and Glenn Dyer are writing regularly about economics at the moment and that’s their starting point, very deliberately chosen so I’m told, which is hardly objective journalism or analysis, but crikey, it’s good readin’, heh!
Today’s hatchet job is on a few folks that have recently made the point that a fall in real incomes is needed to restore Australian competitiveness:
A subtle shift — or subtle as these things go — has occurred over the last 12 months in the industrial relations debate, and it’s an important one. The business lobby, its media cheerleaders and the Coalition have shifted ground on IR, from productivity to wages.
That’s primarily because business lost the productivity “debate”, such as it was. We have a major problem with labour productivity, business insisted, via organs like the Financial Review, because the Fair Work Act is too inflexible. And every quarter from the end of 2011, the national accounts would emerge to show growing labour productivity under theFair Work Act.
Significantly, at last week’s SPC media conference, Prime Minister Tony Abbott was asked if he believed there was enough flexibility in the FWA to allow the company to negotiate lower costs with its workers, and he failed to deny it.
By the second half of 2013, the productivity line was fading, even as a few holdouts manfully toiled to demonstrate theFWA had locked the economy into a straitjacket of laziness and trade union bastardry. It’s a crude measure, but somehow telling: the number of mentions of “labour productivity” in stories in the last six months in the AFR, which now essentially functions as a media release service for business, is half what it was in the same period in 2012, and lower than the first half of 2013, too.
But while “productivity” was being retired, a new IR argument was being prepared: the wages of Australian workers were too high. A couple of weeks ago, the AFR explained that “business leaders and economists” believed Australians would need to accept wage cuts in order to reduce inflation. The “business leaders and economists” turned out to be Coalition-aligned businessman Don McGauchie and JP Morgan’s Stephen Walters, while the Grattan Institute’s Jim Minifie said real wage growth should be lower and Australian Chamber of Commerce and Industry’s Burchell Wilson said wage growth was already so low that real wages might fall (so much for the “Fair Work Act drives wages up” argument).
The argument for falling real incomes that’s been in the public domain over the past few months has been made by many, including the RBA. It is that as the dollar falls and tradable inflation rises, letting that tip into wages will eliminate the increased competitiveness delivered by the currency.
That’s not a conspiracy. It’s true. Australia’s real effective exchange rate (REER) against just about everyone remains so over the top that that is why we are seeing tradable businesses closing hand-over-fist:
Yet this argument isn’t even canvassed by the Crikey duo who are two busy stuffing their straw man with ad hominem capoc:
Whether McGauchie is in a strong position to demand Australian workers take pay cuts is moot. This is the man who presided over a disastrous period in the life of Telstra as a private company, hiring the highly aggressive Sol Trujillo and his friends to pursue a strategy of all-out aggression against the government and regulators that failed disastrously.
…Walters, who at the start of 2012 boldly suggested Australia could be in for a recession that year, followed up last week, saying that Australia could only restore its competitiveness by cutting wages. Then he confused things by saying that nominal wages “couldn’t” fall but that there should be “a demonstration of restraint”. Presumably not by investment bankers and chairmen of underperforming companies, but by workers.
The burden of this adjustment should be shared and, on that front, McGauchie and the Abbott Government are behind the curve, but the need for it to happen isn’t in doubt if Australia wants to sustain full employment.
