Finally someone in public life has stated an important truth. On Insiders today, Gerard Henderson said, as an apparent side issue, something like: 'The only way wages can go up is for productivity to increase'. Barry the boss failed to pick up the point but it is one that needs to be publicised widely and understood by the voters. Of course, Treasurer Scomo will not make the point because the Turnbull government is making no real attempt to introduce policies that will raise national productivity. This attitude is best described as 'unfathomable stupidity'.
'What happens when a Shorten government introduces wage increases unbacked by productivity increases? Jobs growth will slow, gentle readers, and, if unbacked wage increases are large enough, job numbers will fall. Such a response was proven by the Whitlam government and endorsed by Prime Minister Hawke in briefing the 'Sherpas' preparing the modelling for the National Economic Summit and endorsed by the ACTU Sherpas. And the ACTU accepted a cut to real wages by not demanding compensation for cuts in real wages resulting from the fall in the Aussie dollar during the 'Banana Republic' episode.
Australia is at risk of Banana Republic # 2. Lots of factors are similar. Here is Henry's attempt to point out the possible scenario facing Australia and Australians.
In 1986 Australia's international debt was growing far too quickly for comfort. After prodding by the RBA's Head of Research, and a fiery interchange in the presence of top teams from Treasury and the Reserve Bank, Treasurer Paul Keating resolved to follow relevant recommendations. These were to convert the budget deficit to a surplus, convince the ACTU to cop a cut in real wages due to a falling exchange rate and to allow the Reserve Bank to raise interest rates.
These policies were all implemented and (after a substantial fall in the value of the floating dollar) the economy moved to a better configuration. Soon however, as the dollar began to recover, the RBA top leadership resolved that this was equivalent to a tightening of monetary policy. While the board was advised of the need to tighten monetary policy by raising cash interest rates, and seemed to agree with this advice, the opposite happened month after month.
The economy began to overheat and, perhaps by coincidence, a new management was installed at the RBA. In quick time cash interest rates were raised dramatically almost to 20 %, creating the worst recession since the Great Depression of the 1930s. This recession was not as dramatic as depicted in the painting (see Image below), but the next Great Recession might well be. Again government debt is growing rapidly and interest rates are very low and supposedly to remain that way even as USA rates rise. Additional factors are that household debt is unsustainably high, real wages and productivity growth are zero or very low and the global boom (also built on borrowing) is likely to end soon.
The unfathomable stupidity of the Australian cricket team has appropriately been labelled as 'worse than the underarm bowling incident'. Worse because it was decided at a partial team meeting over lunch, whereas the underarm bowling was an act of passion. Worse because the youngest member of the team was fingered to do the deed. Worse because it was a furtive act that was just as certain as an over of underarm bowling to be seen on television.
Send the Mont Albert Fourths to play the Fourth test, or at least pick an entirely fresh team lead by Aaron Finch, current best performing Aussie opening batsman. And all the other good performers in Sheffield Shield, with a sprinkling of Victorian players who get no joy from the NSW-biassed selectors. Why are we surprised that descendents of the NSW Rum corps are cheats?
Good news. The AFLW final was a beauty with the doggies winning despite their leader being unable to play due to an unfair tribunal decision designed, it is said, to impose a softer set of rules on the wimmin. It was alleged on ABC TV this morning that the mighty AFL are going to impose a softer set of rules on the poor, weak wimmin players. What rubbish, gentle readers. Let the Hunger Games begin!
More good news. Caaaarlton! jumped out of the starting gate to blitz premiers Richmond with 5 goals in the first few minutes. Faster than last year, stronger - think Cripps as the most obvious - and above all confident with the new attacking flair that has been created by coach Bolton in his third year rebuild. Finally toward the end of the third quarter gas was being lost, and severe injuries saw one player off for the game and only ruckman Mathew Kruezer hobbling about on the forward line. The Premiers went on to a win they will be relieved to have got.
Image of the week - Banana Republic, as it might have been, or could be.