By Joe Montero
Treasurer Scott Morrison is calling for the company tax rate cut to be fast tracked, claiming that this is the only way to get the Australian economy moving. Continue reading Morrison’s Corporate tax cut drive is wrong
Category Archives: Economy
IMF acknowledges fall in wages growth but offers no solution
By Joe Montero
The International Monetary Fund’s (IMF) latest economic outlook report, notes that industrialised economies are experiencing slow wage growth and Australia is at the head of the pack.
Under the heading Seeking sustainable growth: short-term recovery, long-term challenges, the latest report has downsized its prediction for Australia’s economic growth to 2.2 percent this year. The unemployment rate, even by the underestimating measure used, is expected to stay the same over the coming period.
The focus is on the absence of wages growth. The IMF suggests that the reasons are higher unemployment, the rise in underemployment, declining productivity growth and what is defined as lower inflation expectations in general, but not so much for Australia.
While the connection with a lower inflation expectation is unclear at best and may be taken with a pinch of salt, what is undeniable, is that underemployment is a major driver. The IMF is right to suggest this and has a point, to an extent at least, in pointing to an association between wages and underemployment.
This is no mystery to most Australians, who do not need an IMF report to tell them this is the way it is.
To an extent was mentioned, because the IMF overlooks the simple reality that underemployment, or the casualisation of labour by another name, is really a form of unemployment. So, when viewed in this context, the relationship between wages and unemployment remains the same, except that it has changed the way it looks.
The IMF report wrongly holds that the old nexus between unemployment and wage rates no longer holds. The problem is that is that the agency is locked into a world view, backed by economic theory that has limited connection to the real world, which blocks the capacity to adapt to anything else.
What is important is not the number of jobs on the books, but the number of hours worked, along with the relative positions of the employer and employee to exert their interests. The report does recognise the that the average number of hours worked is falling in Australia and other industrialised countries. the problem is that is goes no further.
Unacknowledged, is the failure of more than three decades of neoliberalism, which has involved an active drive to push down wages. The IMF has been one of its leading advocates.
Successive Australian governments have been zealous in applying neoliberalism and continue to be so today.
The IMF’s suggested solution to stagnated wages is that in an era of highly flexible employment, governments needs to protect and extend minimum wages and change the approach to unemployment benefits, to acknowledge that the era of full time unemployment has gone.
Measures like these will improve the safety net for the most vulnerable and are justifiable on this basis. But they will not solve the problem.
The biggest weakness in the report is that it in no way challenges the existence and growth of underemployment. The stock argument remains, and that is that the best way to improve the jobs market is to increase productivity. There is not even a hint of steering away from this.
Increasing productivity means more quantity of goods and services created in a given period of time. Contrary to the claim sometimes made, Australia, like other industrialised countries, has a high level of productivity.
This has been brought about by a combination of high skills levels and the application of new technologies. The form that rising productivity has taken has been the replacement of labour by these new technologies and the associated re-organisation in the way work is done.
An outcome of this has been to feed an ongoing increase in the relative oversupply of labour. This is what unemployment is.
Employers finding that they have relatively greater strength to impose their will, have not backed off taking advantage of the opportunity. And they have been supported by government to wage an assault, which takes the shape of turning full time jobs into lower paid and often causalised work, provided by labour hire firms.
The government has moved in and helped by slashing jobs in the public sector and has set up the Fair Work Commission to strengthen the hand of the employers. The recent decision to cut penalty rates is a case in point.
While increasing productivity there has been a fall in the cost of doing business for those that can operate on a large enough scale, there is a paradox, in that it has at the same time, particularly in the higher tech areas, has caused a fall in prices, while those in relatively lower tech and more labour intensive areas, have been squeezed by higher costs and an inability to compete without raising prices
Falling prices have led to a lower rate of return per unit, a rate of return on investment, wilting investment in the real economy and the economic stagnation.
Responding to a systemic problem, employers are using higher real unemployment as a tool to offload the cost of running the business onto the wage earner.
The second paradox is that while it might look good on the short-term balance sheet of individual businesses, the longer-term effect, if it occurs on as big enough scale across the economy, is that it will inevitably shrink the available market.
We are already seeing a trend to lower consumer spending. And this contraction of the market comes around to hit the bottom line, induce further economic stagnation, if not contraction. Life is made more difficult for the employers that pushed in this direction and it is made even more difficult for those on which the burden had been imposed.
For as long as agencies like the IMF and governments like those that Australia continue to ignore these realities and fail to act appropriately, they will continue to be part of the problem.
A solution to the problem is not easy because it is systemic and correcting this requires operating the economy in a way where it is not driven by the major employers and takes the form of working together and rewarding for effort.
At the very least, there is a need for significant government intervention to slow the rot, taking the form of simultaneously enforcing acceptable wages and conditions of employment and applying a plan to grow a new economy that will provide a new supply of job opportunities.
Thousands come out against Adani coal mine
By Jim Hayes
On Saturday, thousands took part in events around Australia, observing the national day of action to oppose the proposed Carmichael coal mine in Queensland’s Galilee Basin. Continue reading Thousands come out against Adani coal mine
Toyota Altona plant closure and the death of the car industry
By Joe Montero
The Toyota manufacturing plant in Melbourne closed last Tuesday. For Australia, this is the second last act that will put an end to the 92-year-old car manufacturing industry. The last to go will be the Holden plant at Elizabeth in South Australia. Continue reading Toyota Altona plant closure and the death of the car industry
Reserve bank maintains the rate of interest at a record low
By Joe Montero
Something is going on. The Reserve Bank has just kept the official rate of interest at a low 1.5 percent for the thirteenth time in a row. Continue reading Reserve bank maintains the rate of interest at a record low
Commbank scandal demands appropriate action
Contributed by Joe Montero
Commbank’s participation in money laundering and its failure to come clean, even after the scandal was exposed, underlines the need for appropriate action to clean up the banking system in Australia. Continue reading Commbank scandal demands appropriate action
Video: What happens when they cut wages?
If you think cutting wages is the way to create jobs, this little video clip provides a simple explanation why this is not true. Continue reading Video: What happens when they cut wages?
Privatisation has damaged the economy says ACCC chief
Patrick Hutch (The Sydney Morning Herald 27 July 2017) reports that Rod Sims, the head of the Australian Competition and Consumer Commission (ACCC), stating that the sale of public assets has harmed the Australian economy. Many voices have been saying the same for years. When someone in Rod Sim’s position says it, can there remain any room for doubt?
Selling public assets has created unregulated monopolies that hurt productivity and damage the economy, according to Australia’s consumer and competition tsar, who says he is on the verge of becoming a privatisation opponent.
In a blistering attack on decades of common government practice, Australian Competition and Consumer Commission chairman Rod Sims said the sale of ports and electricity infrastructure and the opening of vocational education to private companies had caused him and the public to lose faith in privatisation and deregulation.
ACCC chairman Rod Sims says privatisation is hurting productivity. Photo: Vince Caligiuri
“I’ve been a very strong advocate of privatisation for probably 30 years; I believe it enhances economic efficiency,” Mr Sims told the Melbourne Economic Forum on Tuesday.
“I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales and I think it’s severely damaging our economy.”
Deregulating the electricity market and selling poles and wires in Queensland and NSW, meanwhile, had seen power prices almost double there over five years. Photo: Glenn Hunt
Mr Sims said privatising ports, including Port Botany and Port Kembla in NSW, which were privatised together, and the Port of Melbourne, which came with conditions restricting competition from other ports, were examples where monopolies had been created without suitable regulation to control how much they could then charge users.
“Of course you get these lovely headlines in the Financial Review saying ‘Gosh, what a successful sale, look at the multiple they achieved’,” Mr Sims said.
“Well of course they bloody well did: the owners factored in very large price rises because there’s no regulation on how they set the price of a monopoly. How dopey is that?”
Mr Sims, who recently launched legal action against Medibank Private alleging it concealed changes to health insurance policies to boost profits ahead of its privatisation, said billions of dollars had been wasted in the scandal-plagued vocational education sector since it was opened up to the private sector.
A deal to privatise the Port of Melbourne was struck in March with conditions that restricted competition from other ports.
Deregulating the electricity market and selling poles and wires in Queensland and NSW, meanwhile, had seen power prices almost double there over five years, he said.
“When you meet people in the street and they say ‘I don’t want privatisation because it boosts prices’ and you dismiss them … recent examples suggest they’re right,” he told the room of influential economic and policy experts.
“The excessive spend on electric poles and wires has damaged our productivity. The higher energy price we’re getting from some poor gas and electricity policies are damaging some of our productive sectors.”
Mr Sims said he was growing “exasperated” as governments including the Commonwealth became more explicit in trying to maximise proceeds from asset sales.
“I think a sharp uppercut is necessary and that’s why I’m saying: stop the privatisation,” he said.
Mr Sims also used the forum to continue a public stoush with opponents of a proposed “effects test”, saying they were relying on “bogus” arguments against the Harper review proposal to give the ACCC powers to block action that had the purpose or effect of substantially lessening competition.
The Productivity Commission last week joined the Business Council of Australia, the federal Labor opposition and the supermarket giants in opposing the so-called “effects test”, which is a pet policy of National Party MPs including Deputy Prime Minister Barnaby Joyce.
Continue reading Privatisation has damaged the economy says ACCC chief
Turnbull allows another Aussie ship to sail over horizon
From the Maritime Union of Australia (MUA)
The Turnbull Government must stand up for Australian jobs in blue water shipping after its administration of coastal shipping rules encouraged a major international employer to dump the crew on another Australian vessel. Continue reading Turnbull allows another Aussie ship to sail over horizon
Unions call on super funds and government to act on affordable housing
From New South Wales
Unions covering teachers, police and other emergency and those working in other emergency services, have taken on the issue of housing affordability.
They find that many of their members are struggling to put a roof over one’s head provide for family.
Many union members do not qualify for public housing or other forms on non-privately owned properties, which go under the banner of social housing. The result is that a growing body of working Australians are being pushed into the urban fringes, where they miss out on many important services and must often commute long distances to work. This impacts on quality of life issues.
The big problem is the lack of affordable housing stock, in a market characterised by a bubble that has sent both mortgage repayments and rents through the roof.
Some unions have consequently began to look at ways in which they can help their members.
Early talks have begun in New South Wales, between the Australian Teachers Union in this state (NSW Teachers Federation) and First State Super and Teachers Mutual Bank, aimed at accessing suitable housing in the areas where teachers work. It was announced at the union’s 4 July conference by state general secretary General Secretary John Dixon.
The initiative has encouraged other unions to look at doing something similar.
However, pursuing affordable housing is not supported by the New South Wales Industrial Commission, not by the Australian Fair Work Commission, which have imposed a narrow band of matters on which unions and business can agree. Unions face the need pursue creative means by which to move ahead.
Taking on affordable housing is an important step, especially if it catches on and becomes a national campaign involving all public sector unions and expanding to other unions and sections of the workforce.
Means of financing is there, in the form of superannuation funds. After all, the money going into them comes from the wages of workers. Even the employer contribution does, because it is the outcome of direct wages trade-offs. There is no reason why this money should not be put to work for those to whom the the money belong.
Up to now, the money in these superannuation funds has been at the disposal of major employers, to be used as a source of back up capital loans or as means to acquire shares in other companies.
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