An olive branch for Michael Pascoe

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From Greg Jericho to Michael Pascoe:

If there’s one key assumption in Treasurer Scott Morrison’s 2018 budget, one thing crucial to his brave new world of income tax revolution and debt reduction, it’s that wages growth is about to jump well above the inflation rate.

Bad news, Scott: outside one or maybe two industries, it’s not happening and there is no sign it is about to happen.

The Reserve Bank’s deputy governor this week subtly but clearly poured cold water on the government’s wages forecast and a former Business Council of Australia (BCA) president has spelt out what is really happening in the nation’s boardrooms: wages growth is being capped at the inflation rate.

….The reality is that there are several factors combining to suppress wages growth and nobody knows what our wages-boosting “full” employment rate of unemployment is. We won’t know until we have passed it. We only know that “we’re not there yet” – and don’t look like getting there any time soon.

And that means Scott Morrison’s budget forecasts and assumptions are internally contradictory. You wouldn’t want to bet the economy on them.

I’m won’t redo yesterday’s spray at Greg Jericho. On the contrary, given Michael has moved to the New Daily, it is an opportunity for a new beginning.

We pointed many times to Michael’s history on wages and immigration. He was hawkish about it pre-GFC, repeatedly warning of the fallout, in March 2007:

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Immigration Minister Kevin Andrews is reportedly taking to Cabinet next month [a submission] increasing the permanent migration program from the present 140,000 a year to “at least 180,000”…

The surge of guest workers and skilled migration has already kept a lid on wages. As we’ve previously reported, more than half the growth of 200,000 full time jobs last year went to guest workers and targeted skills migrants.

With no apparent cap on 457 visas, plus the Kevin Andrews’s migration submission, it will continue to do so.

In July 2007:

From Brisbane to Perth and all major centres in between, Australian cities are groaning under inadequate infrastructure, choked roads, unaffordable housing, failing public transport.

…the influx remains beyond the planning and delivery capabilities of hapless state governments, never mind a federal government that underfunds the states.

The immigration surge plays a major role in keeping wages inflation under control and, therefore, interest rates down — but it’s putting plenty of strain on other parts of the system.

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In August 2007:

Crucial skills shortages in a number of areas means the idea of a flexible and fast temporary visa system has considerable merit, but the badly-administered and demonstrably slip-shod 457 scheme presently run by Kevin Andrews doesn’t.

And there are broader issues yet to be debated about the impact of 300,000 migrants this year on the labor market and economy, the role such an unprecedented intake will play in keeping down inflation by keeping down wages.

In July 2008:

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457s are now being processed faster than ever… As the Minister correctly notes, “the increase in the subclass 457 visa grants highlighted the importance of the program in delivering skilled labour to employers across a wide range of professions and industries.”

It also helps reduce inflation by keeping down wages in at least some select industries.

And, with the economy coming off the boil, the matching of 457 visa applicants with areas of particular skills shortages is somewhat less than laser sharp, if only because 47 per cent of those 110, 570 visas were for “secondary grants”, i.e. dependents, who themselves have a very high workforce participation rate in whatever field they fancy…

It’s not so good for workers in the lower half of the pay spectrum who lose bargaining power when positions are filled by 457 visa holders…

Yet in recent years as a Domainfax spruiker he has been forced to twist himself in knots trying to undo these simple truths in defense of that dying firm’s real estate bubble business model.

But, now he’s free again. At least, I assume he is. There’s no obvious reason why the New Daily should support mass immigration to the detriment of workers and Australian living standards. Unless its industry super fund backers are so close to the Labor executive that they won’t publish anything that contradicts its policies. Rob Burgess was a card-carrying wowser. Michael Pascoe isn’t.

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So, how about it, Michael? Can you come clean now on the deleterious effects of mass immigration on Aussie welfare?

We’ll support you all the way.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.