News National Building a case for wages – what Morrison could do to save himself

Building a case for wages – what Morrison could do to save himself

Building infrastructure is one way Scott Morrison can get wage growth moving again. Photo: Getty
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With the latest Newspoll indicating few people are taking any notice of Scott Morrison’s various stunts, the Liberal Party can be relied on to turn to money to minimise its losses.

The problem for the government though is that next month’s federal Budget will only offer one half of a decent “Fistful of Dollars” campaign.

“I want Australians to earn more and I want Australians to keep more of what they earn,” was Mr Morrison’s weekend mantra.

The second half of that sentence presages bigger tax cuts on April 2 and ramping up the “Labor will tax more” claims.

But the government has no policy beyond “tax cuts will eventually do it” to address what has long been our key domestic economic challenge: Weak wages growth.

And Labor has already grabbed the “living wage” slogan.

So, Scott, despite our differences, despite thinking you’ve been a dreadful failure as prime minister, I’m here to help.

And to help me, I asked a tame economist for advice. It would startle the horses, but a three-step prescription is the result under the title “a mini version of the Whitlam approach”.

First up, the government could put its money where its mouth is by programming annual wage rises in the Commonwealth sector of 2.5, 3.0 and 3.5 per cent in its first term.

Remember the irony of the Reserve Bank advocating bigger wage increases but itself limited by the federal government to average rises of just 2 per cent?

The telegraphing of such a program and the pay itself would eventually flow through at least partly to the private sector.

That pace is conservative – maybe make it 3 per cent in each of the first two years.

Secondly, the feds could commit to more infrastructure spending instead of less, which is Morrison’s present pea-and-thimble policy.

(As has been repeatedly explained here, Morrison’s “$75 billion over 10 years” infrastructure investment pledge is a reduction on Joe Hockey’s previous effort, which was itself a reduction on what Anthony Albanese was spending as the relevant minister.

Boosting infrastructure investment would increase the demand for skilled labour and, therefore, at least in theory, the price of labour.

It also would mean a slower path to surplus, but a worthwhile one if the infrastructure is wisely chosen as it then ends up more than paying for itself.

As previously argued, this would be a particularly good time to boost direct government spending on social and affordable housing as part of that infrastructure.

Housing is quicker to build than roads and bridges and such. It’s very “shovel-ready”.

It would pick up the slack now emerging from slowing private-sector housing starts and it would help solve some of our household debt problem as a significant part of that record debt comes from relying on the household sector to provide nearly all rental accommodation.

The third step, albeit out of the government’s control, would be a cut in interest rates, mainly for the sake of putting downward pressure on the exchange rate.

Again as previously argued, I’m not a fan of the commentariat’s reliance on monetary policy for stimulus.

Yes, the exchange rate impact if good and, given time, cheaper money stimulates demand, but heavens knows years of cheap money now haven’t done anything for wages, most of the stimulus going into boosting asset prices.

As my tame economist put it, the first two steps would be terribly courageous, minister.

In other words, there’s doubt a Liberal government is capable of doing anything that could be considered Whitlamesque, whether mini or minuscule.

The hard-right ideologues running the government are not capable of that much imagination.

Yet something needs to be done to offset the residential construction drop when the consumer is reflecting the reality of real, take-home wages going backwards.

One can only try to help.

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