Via The Australian:
As the politics of disruption intensify in Australia the policy debate sinks into more regression and populism, with the Coalition and Labor running competing growth agendas and Bill Shorten flexing his anti-business, anti-private enterprise and anti-coal muscles.
Shorten’s latest slogan is the “left behind society” to exploit deprivation and resentment arising from stagnant or modest wage rises amid high energy, housing and private health insurance prices — inviting anybody with a grievance to cast their vote against Malcolm Turnbull and the big end of town.
Consider the opening week of the political year. Shorten gave rhetorical backing to the radical ACTU agenda to boost wages by government intervention, he attacked the private health insurance industry, pledged an integrity commission at the national level — long a Greens position — and all but announced Labor’s opposition to the Adani mine in Queensland when opening the ALP’s by-election campaign in the green-oriented inner-Melbourne Batman seat.
Shorten’s rhetorical ability to shift position and tap into public angst is unrivalled, yet guaranteed to maximise doubts about his cynicism, expediency and flawed solutions. “We are in danger of creating two societies,” he said in his year-opening Press Club address. “Business as usual doesn’t cut it and my concern is that Australians have given up.”
The power of the “left behind” delivered Brexit in Britain and Donald Trump in the US. But Shorten’s actual prescriptions don’t fit the problem and rely on a fog of populist confusion — having declared cost of living the problem, his answers are more trade union powers, the imposition of higher wages on business possibly by legislation, retaining high taxes on medium and larger business and, on the energy front, championing his emissions reduction credentials with a far higher 2030 reduction target of 45 per cent.
Unfortunately for Shorten, political disruption cannot disinvent the laws of economics — much of his program seems in practice an agenda for cost increases. This is because it is a grab-bag of political tactics to deliver various stakeholders: keep the unions close, win the renewables vote, keep the Greens at bay, fund more health and education spending, appease the anti-Adani inner-city vote and channel the cultural hostility over business, inequality and “two societies”.
Trickle-down drivel, Paul. Where’s the guy that wrote The End of Certainty?
The Shorten energy agenda will lower energy costs much faster by boosting cheap renewable supply to displace higher cost coal at the margins. Labor will also, surely, deploy the Coalition’s bizarrely idled domestic reservation mechanism for the gas market which will end the intermittency drama and crash utility prices.
Shorten’s commitment to hike minimum wages will be a one-off reset that will disappear like rain on the mountainside amid his mass immigration agenda.
Adani should not go ahead given it has no business case and will only succeed in destroying existing coal mines as a subsidised marginal cost-producer, reversing productivity.
Moreover, what about negative gearing reform? This will obviously keep the house price deflation trend running, lowering land input costs in a one-off adjustment and versus the ongoing counter-factual.
Australia’s problem is capital not labour inefficiency. Labour productivity has been rising at a good clip but capital productivity has been falling and stagnant for years. This is owing to massive capital misallocation into house price gambling, as well as other stupidities like cartel structures, government perversity in energy and mining boom excesses. Shorten structural reforms will do more to unwind these than the current mix presented by the Coalition, boosting multi-factor productivity. Remember that stuff?
As such, it will reduce inflation not increase it, lowering the Aussie dollar as well.
That’s suitable policy for Australia’s biggest challenge today which is to lower the real exchange rate to overcome the half-over post-mining income shock. The Shorten agenda may cost some lower paid jobs in this environment but it will also force more of the adjustment onto capital, a good thing in terms of national equity, and a great thing if your supply side is dominated by fat oligopolies that need a rev-up to invest in efficiency.
As you used to understand, Paul, there are more input costs in the economy than just labour.
