Wednesday, October 6, 2010

It Just Doesn’t Add Up

While business borrowers and mortgagors breathed a sigh of relief that the reserve Bank Board decided to leave interest rates on hold, there continue to be signs that not all is well in the Australian economy, and consequently in the Australian community. Today, we have seen the call by Shadow Treasurer Joe Hockey for industrial relations policy to be reformed yet again. The opposition leader may have declared Work Choices to be “dead, buried and cremated” during the election campaign, but there is every indication that certain elements of that policy remain very much on the coalition agenda. Specifically, exemptions from unfair dismissal laws for small business along with individual contracts, which were both key features of Work Choices, are likely to be objectives of any revision to Coalition policy. Of course, Tony Abbott promised that current industrial relations laws would remain unchanged for this term of parliament, but as he did not win the election it’s fair to say that all bets are off and the Coalition is free to rewrite its policy any way it wants.

This comes at a time when it has been revealed that the much vaunted benefits of the resources boom and the resilient response to the Global Financial Crisis has come at the cost of declining wages and conditions for ordinary Australians. A report by the Sydney University Workplace Research Centre has found that while workers in the mining sector have done very well, people employed in retail, hospitality, and community services such as health, are experiencing reduced hours, a move to casual and part time jobs, and wages growth which is failing to keep pace with inflation. In other words, they are literally going backwards. At the same time, essential goods and services such as electricity and many grocery items are increasing in price at a rate above inflation. It all adds up to a significant number of people finding it increasingly difficult to make ends meet at a time when we are all being told how well we are doing. For those people it just doesn’t add up.

Further to this, the Sydney Morning Herald has used figures from the Australian Bureau of Statistics to make a comparison between what would have once been described as “working class” suburbs and the suburbs which are home to our highest income earners. The result is that in the five years from 2003 to 2008 the eastern suburbs average income increased from two and a half times the western suburbs average up to almost three times. As they say, the rich get richer… The same effect can be seen more broadly with the rate of average wages growth being rapidly outstripped by the growth in executive salaries, with CEO pay packets exploding in the past twenty years. Now there’s nothing wrong with top people being paid top money, but there is a structural problem for both the economy and the community as a whole when ordinary people can no longer afford to pay for the goods and services that they themselves produce. You simply cannot have a consumer economy without consumers.

Neither bringing back Work Choices, nor pushing up interest rates can fix that.

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