Monday 25th of November 2024
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Doing Rudd slowly while the economy boils over

Christian Kerr writes:

If you’ve ever watched Jamie Oliver, you’ll know how all the different people in a commercial kitchen have to work in unison. And so it is running a nation. The economic Escoffiers and political patisseriers just can’t do their own thing.

Yesterday, Bureau of Statistics figures showed gross domestic product in the year to 31 March rose a seasonally adjusted 3.8%, well above the forecast 3.1%.

The higher than expected economic growth raised the chance of an interest rate rise in July, calculated from the implied yield on the Sydney Futures Exchange's interbank cash rate futures, from 4% to 22%. Market expectations of a November increase rose from 72% to 112%. In other words, they reckon it’s a cert.

This morning, we learned that the unemployment rate has reached a 32-year low. These figures have raised the heat in the kitchen.

Iron Chef John Howard wants to do challenger Kevin Rudd slowly – or at least wait for the polls to get better before exposing him to the searing heat of an election campaign.

But there’ll be trouble if the economy boils over. The Iron Chef’s efforts will be spoilt, and apprentice Peter may never get his white hat.

Some connoisseurs of politics say that interest rates are just one little item on the spectacular degustation menu we’re being offered. Chef Howard has made them the centrepiece of his political banquets in the past, they say, and we’ll trust him – he always asks us to trust him on this issue – to dish up what we want in the future.

These connoisseurs, however, tend to be Chef Howard’s own junior kitchen hands.

They haven’t learned yet that foodies are a fickle lot.

Costello's pants

TONY JONES: It's also a matter of record that they've been in government for 11 years and look at what we've got. Strong growth, low inflation, record low unemployment, high dollar, booming stock market, record profits, steady interest rates. Do these really sound to you like the sort of conditions that would have people clamouring for a change of government?

PAUL KEATING: Much of that existed in 1996. Five per cent growth to the year, inflation 2.5, 3 per cent. These were the conditions. I think when the economy gets, when things are good in the economy people think they can be a little more footloose in changing governments without getting hurt in the crossfire and I do think that is in the mind of the community now.

But this maintaining low inflation now is all about these structural things. Let me go back to enterprise bargaining. I removed the centralised wage fixing system in 1993. One hundred years of industrial practice gone. Nothing to do with the Liberal Party, nothing to do with the Business Council, everything to do with the Government I led and the ACTU and the leadership of Bill Keelty. The end result is that we double trend productivity so that real wages grew through the '90s at 2 per cent a year, 10 years of 2 per cent is 20. You hear Mr Costello talking about 20 per cent in real wages.

But since 2000 real wages have been going down, so the 20 per cent increase came out of the Labor Party and the Labor Party's policies. It's nothing to do with WorkChoices. Individual workplace agreements go to 3 per cent of the working community. The rest of the community are working on enterprise bargains.

So there's the exchange rate taking the shocks, there's tariffs letting the deflation in and there's enterprise bargaining giving within sector flexibility keeping inflation low.

TONY JONES: But, of course, since you've mentioned industrial relations what the Government is clearly saying is that their industrial relations reforms now are one of the key underpinning new economic reforms, and that that's being put at risk by the possibility of a Labor Government coming to power?

PAUL KEATING: Well, they're not economic reforms at all they're actually anti productive. I've made this point before, but I'll make it again.

If you go to 200 or 300 people in a factory or 200 or 300 people in a workplace and come to a three or four year bargain to the improve productivity and share it between wages and profits you've got a good chance of getting productivity from the whole enterprise. But if you just take one person at a time, bring them into the boss' office and cut their wages there's no chance of getting any productivity. That's why trend productivity is now rapidly on the way down. It was 3 per cent under me. It's now under 1 per cent. So how are we going to keep inflation low with, at the moment wages are running at about 4 per cent, productivity is under 1. This is consistent with an inflation rate of 3 per cent, or higher. The Reserve Bank knows that. That's why they've got the rates on hold.
 

Australia missing out

US leads search for climate solutions
In the second of a series examining California's "green revolution", the BBC News website's Sam Wilson reports from San Jose on how the state is at the forefront of innovation in clean technology.

The most striking thing about the Miasole solar cell production plant in San Jose is how much of it is empty.

Probably less than a fifth of the huge production floor is occupied by machines.

But if Miasole's plan comes together, within a couple of years it will house a production line turning out vast rolls of photovoltaic cells, that some believe could help put solar power on a par with coal, gas or oil.

"It's an enormous growth opportunity," says chief executive officer David Pearce, matter-of-factly.

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Gus: under the coal regeeme of our UnAustralian Glorious Rattus, Ortralya is missing out big time...