The wages of ignorance

I have been following this business about wages with no little amazement. Here is the story that sums it up but it was in all the papers today:

A demoralised government put in a dismal performance in parliament today. In Question Time and the debate that followed, Malcolm Turnbull was constantly on the defensive on an issue that is a gift for Bill Shorten — pay cuts for workers.

There was a time when I was Chief Economist for the Chamber of Commerce that a decision like this would have been recognised by a Coalition Government as a reprieve for the economy and very good news for workers. Naturally, the Labor side would have talked about workers losing pay etc, but the government would have stood there with small business and the unemployed, reminding everyone that economic growth and higher wages can only come from a stronger economy. So let’s look at some more of this story and then come back to the issues again.

The government looks frozen in the headlights as this dire political threat approaches. Unions are mobilising with a potent message to ordinary workers — whether there are 700,000 or 285,000 hurt by the cuts.

This was a shared humiliation for the Coalition. Barnaby Joyce was difficult to understand, despite his volume. Julie Bishop offered a mundane answer about strong exports from Western Australia, doing nothing to turn pressure back on Labor. Scott Morrison went through the economic growth figures but barely stirred the backbench.

Turnbull had no answer on penalty rates other than to attack Shorten’s history at the AWU. The Prime Minister seemed to be losing his voice as he ploughed on through Question Time and the suspension motion. He was also losing traction.

And the Coalition backbench did nothing to help. Staring at their mobile phone screens or their paperwork, MPs and ministers barely offered a murmur of support. There were no cheers, no interjections. It was a huge contrast with the Labor benches, where MPs are fired up over penalty rates.

In the month of the GFC the unemployment rate was recorded at 3.9%, which I always remember since it was the first time I had seen it fall below four in all the years I had been in Australia (the number has since been revised to 4.2%). The latest unemployment rate is much higher, at 5.7%, and real earnings are falling. A fall in penalty rates is an unmitigated good thing for the economy. It might end up being a minor retreat for a relative handful of employees but looking at the larger story, it is all to the good. It will make our industry stronger, create more jobs, and add to future prosperity. If nothing else, it is a decision that not only can be defended, it ought to have been.

The long faces on the Liberal side is the most comprehensive sign that these people have more than lost their way. They have no idea this side of the next Newspoll which way is up, with the Prime Minister the worst of the lot. They stand for nothing and most definitely do not stand for private sector growth. This is a decision that they ought to have embraced and welcomed, not run from. That they have no idea why living standards are falling – to them it’s in spite of the NBN and not because of it – tells me how far out in the economic wilderness they are.

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