Labor’s ideological obsessions foiled by cost-of-living reality
Weekend customers at the BP service station in Double Bay were showing no apparent signs of pain, despite paying $2.53 for a litre of premium unleaded petrol.
Some 40km to the west, however, in the badlands beyond the M5 tunnel, the fuel queue at Costco in Casula stretched out of the forecourt and back to the roundabout. A 15-minute wait seemed a small price to pay for a saving of 60 cents a litre.
The length of the Costco bowser queue tells us more about the real-world economy than we could learn from listening to ABC Radio National for a fortnight.
When customers finish loading their tanks and then drag out a couple of jerry cans from the boot, it’s a fair bet the cost of living weighs more heavily on their minds than, say, an Indigenous voice to parliament.
While the Prime Minister has been fighting the culture wars and creeping around the edge of the Matildas’ victory celebrations, his Treasurer has been out doing the hard yards on breakfast TV.
“Treasurer, you’re a top bloke,” Sarah Abo began on the Today show, “and we keep hearing from you about how the government is doing all it can to try and help households out here. But that just doesn’t seem to be enough.”
Jim Chalmers countered the best he could. Extra subsidies for early childhood education, relief for electricity bills, rent assistance and cheaper doctor visits.
Yet talking points from May’s federal budget could not refute Abo’s point that whatever the government thinks it’s doing, it doesn’t seem to be doing enough. But Chalmers can only work with the material to hand and, after 15 months in government, that’s not very much.
Labor promised better wages for Australian workers, highlighting the gap between the 3.5 per cent rise in the cost of living in the Coalition’s last year and the 2.3 per cent rise in wages. In the 12 months to the end of March this year, the gap between wages and inflation blew out to 5.9 per cent, with wages rising by 3.7 per cent and a 9.6 per cent increase in the cost of living for employed households.
A far uglier set of statistics lies hidden under the thickening fog of economic illiteracy that envelopes the national debate. Productivity is in free fall, tumbling in the March quarter by 4.7 per cent, the highest drop since records began. It continues the steep downward trend that began in the first half of last year.
For economic realists, the fall in wages in real terms will be a relief since productivity is inexorably connected to remuneration and the level of employment. It is a link, however, that Labor refuses to accept, proffering less conventional explanations for low income growth such as wage theft, profit gouging or other forms of mean and tricky behaviour by employers. Yet raising wages by fiat, like the 5.7 per increase to the minimum wage, will only reduce the chances of minimum-wage workers getting a job in the first place, particularly in a tightening employment market where productivity is falling.
In his recent speeches, falling productivity and stubborn inflation have been top of mind for retiring RBA governor Philip Lowe. The challenge, said Lowe, is not knowing what do to. We have a Productivity Commission to do that. What needs to be added is the political will to do it, since the measures outlined by the PC in its recent five-year inquiry range from the politically un-sexy to the politically poisonous. Of the 71 recommendations, 15 are education reforms and seven require changes to workplace regulation. Eight deal with climate and energy policy, arguing the energy transition should be made at least cost, with indifference to the type of technology. For a government that remains firm in its irrational opposition to nuclear energy, that may be one of the most unpalatable recommendations.
There is an alternative to following the PC’s recommendations, which is to keep faffing about with the same unserious policies. That, says Lowe, would mean “condemning our citizens to slower growth in real wages, smaller public services and an increased tension on income distribution”.
That is not a goal Labor would want to pursue, yet the party’s ideological fixations and bullying bedfellows from the unions make the productivity challenge much harder. The proposed same job, same pay legislation is wilfully blind to the difference in productivity between workers with differing skills, experience, intelligence, strength or capacity for hard work. The return to industry-wide bargaining supported by Labor denies differences in productivity between businesses, let alone individual workers.
Entrepreneurial agility and workplace flexibility are essential for the innovation that increases productivity. Yet Labor’s instincts to tax and regulate push in the opposite direction.
While a genuine recession may seem unlikely, the chance that Anthony Albanese may be the first recessionary prime minister since Paul Keating increases by the day. The consumer confidence index, another set of ugly forward-facing figures, points to harder times ahead.
Seasonally adjusted consumer confidence appears stuck at its lowest level since 2010, when the RBA first collated the figures using the Westpac-Melbourne Institute survey.
In the first seven months of 2020, in the early, uncertain days of the Covid pandemic, consumer confidence averaged 89. In the first seven months of 2023, it has averaged 81. In other words, the sharp, V-shaped downturn during Covid has been followed three years later with a precipitous downward slope that signals a profound downturn from which there is no escape as long as this economically jejune government remains in power.
Albanese better start gathering his excuses for breaking his cost-of-living election promises. A $275 cut in the annual household power bill looks like a bad joke. Ditto the promise that wages would keep pace with inflation.
The chance that Albanese may preside over the first single-term government since the Second World War may be less remote after the potential punishment of losing the voice referendum. He will be diminished in the eyes of those who care about these things and distant from those who don’t. For them, this pointless excursion into race politics will further prove that today’s card-carrying members of the Labor Party have little in common with card-carrying members of Costco.
Nick Cater is senior fellow at the Menzies Research Centre.