This is amusing from the AFR:
Treasurer Jim Chalmers has warned that fixing Australia’s flatlining productivity will require a third term of government, as he ruled out accepting every proposal that will arise from a crisis review into the problem that he commissioned before the election.
It will take Treasurer Chalmers an infinite number of terms to fix productivity because he has a conflict of interest in doing so.
The conflict boils down to one word: immigration.
There are lots of reasons why Australian productivity has collapsed – weak reform, tax distortions, over-concentration in the market sector etc – but one factor is far and away the most important.
Australia’s immigration-led labour market expansion growth model destroys productivity at spectacular speed.
A good way to understand this is a brief history of the car wash.
Through the 1970s and 1980s, labour-intensive car wash services, including those at home, were replaced over time by automatic car wash machines. These were cheap and did a good enough job, so they were widely used. Indeed, the volume of clean cars grew on the road.
This increase in clean cars increased the profits of the car wash owners, who could then invest in other business advances, say, self-service petrol browsers and increased mechanical repairs.
Jobs were lost each time, but the business grew more profitable with fewer but more specialised and better-paid people.
These better-paid people consumed more, and other jobs were created. The lost jobs were replaced elsewhere.
This is a classic business investment-led economy driven by productivity gains.
But that is not what Australia has had for twenty years now.
We replaced it with an immigration-led labour market expansion growth model that is disproductive at its core.
Returning to the car washes, since the 2000s, that industry has regressed.
Automated car washes began to be replaced by cheap foreign labour manual car washes.
The service outcome is probably lifted a little, but the price of that lift is immense disproductivity because there are increasing numbers of workers doing the same job at a far higher charge and lower profit.
Worse, the new cheap foreign labour car model is only viable if it underpays its imported workers.
Now multiply this a millionfold across many industries, and suddenly, all public services begin to be crush loaded under the load of excess labour, and they lose efficiency. Roads are clogged. Trains break. Emergency services cave in and go on strike. There are no houses for anybody near where they work, if at all. Private capital gives up on business investment speculates on house prices.
Governments invest heavily to keep up but can’t, and deficits blow out. Now they invent new and stupid ways of keeping pace with the crushloading and hose hundreds of billions into nothingburger outcomes. Welcome to Victoria.
This immigration-led labor market expansion model can only do productivity destruction via what we eggheads call capital swallowing. That is, there is less automation per head to aid efficiency gains in our lives.
And here it is.
So, why can’t Jim Chalmers fix it? What’s his conflict of interest?
Because he’s importing Labor voters.
Jim Chalmers has no incentive to disrupt Australia’s disproductive immigration-led labor market expansion growth model.
The economic hamster moves slowly enough to deny it is happening while the Labor voters rise at an unchecked pace.
He will take us all the way back to Indian living standards before he disrupts this model.
