Last week unemployment was up. This week wages growth was down.
These two series measure the most important and relevant determinants of Australia’s economic well-being. Both are deteriorating.
Forget interest rates. Forget house prices. Forget the dollar. Forget petrol prices and forget the share market.
How much money people make is the single biggest determinant of how well off they are. And we’re not doing well at all on that score.
This is a failure of economic policy. No government should be complacent in the face of a weak labour market.
The Government is silent on this and to its credit the opposition is squawking at them.
For the first time in over 20 years, Australia has over 800,000 people unemployed (the last time was November 1994)
— Bill Shorten (@billshortenmp) August 6, 2015
But it is to no avail. No decent policy is evident.
There’s a Productivity Commission report on our workplace relations policies, but nobody really thinks that will make a lick of difference, even if the government had the political capital to implement it.
These days it seems like some on the left actually relish a bit of weak wages growth. They use that to bash the government for hypocrisy over a wages breakout and guard against workplace reform.
In the June quarter Australian wages failed to keep pace with even our low inflation rate. And still employers want a return to Workchoices.
— Bernard Keane (@BernardKeane) August 12, 2015
I wouldn’t mind seeing a wages break-out. Isn’t that what good economic policy would produce? Wealth shared widely?
The failure of our labour market to do very much in the last few years probably comes down to macroeconomic factors. The high dollar crimped output and hiring. So did weak federal spending.
The high dollar was a result of US quantitative easing and there was little more we could do beyond slashing official interest rates. That policy front was maxed out. But fiscally, we pulled puches.
Esteemed labour market economist Jeff Borland argues our failure to remedy unemployment is due to a shortage of aggregate demand.
“•The rate of unemployment in Australia has increased from 4.0 to 6.4 percent since the GFC. Over that period it has shown little tendency to decline. The rate of unemployment in the US is now lower than in Australia.
• This increase in the rate of unemployment in Australia appears to be explained entirely by the cyclical downturn in aggregate demand.”
How could the government have increased aggregate demand? Spending more would have been one answer.
The Swan Budgets in 2012 and 2013 and Hockey’s efforts in 2014 and 2015 were all deficit-obsessed. All were focused on “return to surplus.” None of them achieved it. Instead unemployment has risen from 5.2 per cent to 6.3 per cent.
That deficit obsession hurts us all.