Wednesday, July 30, 2014

Social and economic case for helping women work


Fine. But this has required much change to social and economic institutions, which we've found quite painful and is far from complete. It's changed the way marriages and families operate - changed even the demands made on grandparents - greatly increased public and private spending on education, led to the rise of new classes of education and childcare, changed professions and changed the workplace.

It has led to greater "assortative mating", where people are more likely to marry those not just of similar social background, but of a similar level of education.

For centuries the labour market was built around the needs of men. Changing it to accommodate the needs of the child-bearing sex has met much resistance, and we have a lot further to go. This is evident from last week's report of the Human Rights Commission, which found much evidence to show "discrimination towards pregnant employees and working parents remains a widespread and systemic issue which inhibits the full and equal participation of working parents, and in particular, women, in the labour force".

You can see this from a largely social perspective - accommodating the rising aspirations of women and ensuring they get equal treatment - or, as is the custom in this more materialist age, you can see it from an economic perspective.

By now we - the taxpayer, parents and the young women themselves - have made a hugely expensive investment in the education of women. It accounts for a little over half our annual investment in education.

If we fail to make it reasonably easy for women to use their education in the paid workforce, we'll waste a lot of that money. Our neglect will cause us to be a lot less prosperous than we could be.

Of late, economists are worried our material standard of living will rise more slowly than we're used to, partly because mineral export prices have fallen but also because, with the ageing of the baby boomers, a smaller proportion of the population will be working.

They see increased female participation in the labour force - more women with paid work, more working women with full-time jobs - as a big part of the answer to this looming catastrophe (not).


So, for the most part, taxpayers have picked up the tab. Government funding of childcare has reached about $7 billion a year, covering almost two-thirds of the total cost. The cost of government-provided paid parental leave is on top of that.


More recently, increased evidence of the impact of the early years of a child's life on their future wellbeing has shifted governments' objectives towards child development and higher-quality, more educationally informed, childcare. This includes getting all children to attend pre-school. Linked with this has been a push to raise the pay of childcare workers.

The federal government asked the Productivity Commission to inquire into childcare and early childhood learning. Last week it produced a draft report. I suspect the pollies were hoping the commission would find a way to reduce regulation of what they kept calling the childcare "market"; thus improving workforce participation and "flexibility" while achieving "fiscal sustainability".

If so, they wouldn't have been pleased with the results. The main proposal was that the childcare benefit and rebate be combined into one, means-tested subsidy payment paid direct to childcare providers.

This would involve low-income families getting more help while high-income families get less. There would be a small additional cost to the government, but this could be covered by diverting money from Tony Abbott's proposed changes to paid parental leave. It was "unclear" his changes would bring significant additional benefits to the community.

The commission wasn't able to claim its proposals would do much to raise participation in the labour force, mainly because our system of means-testing benefits - which works well in keeping taxes low, something that seems to be this government's overriding goal - means women face almost prohibitively high effective tax rates as their incomes rise, particularly moving from part-time to full-time jobs.

Like the Henry tax review before it, the commission just threw up its hands at this problem. And even the commission couldn't bring itself to propose major reductions in the quality of education and care. Sorry, no easy answers on childcare.

Monday, July 28, 2014

A more balanced budget might get through Senate






Just so. There are many ways to skin the budget cat - some fairer or more sensible than others - and it's absurd for the government and its barrackers to pretend, Maggie Thatcher-like, that the measures proposed in the budget are the only alternative to irresponsible populism.

Anyone who knows anything about successful "fiscal consolidation" knows it invariably involves a combination of spending cuts and tax increases (including reductions in tax concessions - "tax expenditures").


Yet Hockey and Abbott thought it sensible to propose a 10-year budget plan that relied almost exclusively on cuts in government spending - apart from the temporary deficit levy and much unacknowledged bracket creep.








We could get the budget back in the black without any loss of economic efficiency and do it in a way much fairer to ordinary voters - remember them? - and less partial to the Coalition's big business backers.

Saturday, July 26, 2014

Why we're still not free of the GFC

Almost six years since the global financial crisis reached its height, it's easy to forget just how close to the brink the world economy came. To someone like Reserve Bank governor Glenn Stevens, however, those events are burnt on his brain.

Which explains why he thought them worth recalling in a speech this week. And also why, so many years later, the major developed economies of the North Atlantic are still so weak and showing little sign of returning to normal growth any time soon.

When those key decision-makers who lived through 2008 and 2009 say that there was the potential for an outcome every bit as disastrous as the Great Depression of the 1930s, "I don't think that is an exaggeration", he says.

"Any account of the events of September and October 2008 reminds one of what an extraordinary couple of months they were. Virtually every day would bring news of major financial institutions in distress, markets gyrating wildly or closing altogether, rapid international spillovers and public interventions on an unprecedented scale in an attempt to stabilise the situation.

"It was a global panic. The accounts of some of the key decision-makers that have been published give even more sense of how desperately close to the edge they thought the system came and how difficult the task was of stopping it going over."

But, despite the inevitable "mistakes and misjudgments", the authorities did stop it going over. Stevens attributes this to their having learnt the lessons of the monumental mistakes and misjudgments that that turned the Great (sharemarket) Crash of 1929 into the Great Depression.

Economic historians (including one Ben Bernanke) spent decades studying the Depression and, in Stevens' summation, they came up with five key lessons: be prepared to add liquidity – if necessary, a lot of it – to financial systems that are under stress; don't let bank failures and a massive credit crunch reinforce a contraction in economic activity that is already occurring – try to break that feedback loop; be prepared to use macro-economic policy aggressively.

So far as possible, maintain dialogue and co-operation between countries and keep markets open, meaning don't resort to trade protectionism or "beggar-thy-neighbour" exchange rate policies. And act in ways that promote confidence – have a plan.

There was a lot of action and a lot of international co-operation, and it worked. As a result, we talk about the Great Recession, not the Great Depression Mark II.

"We may not like the politics or the optics of it all – all the 'bailouts', the sense that some people who behaved irresponsibly got away with it, the recriminations, the second-guessing after the event and so on," he says. "But the alternative was worse."

With collapse averted, the next step was to fix the broken banks. Their bad debts had to be written off and their share capital replenished, either by them raising capital from the markets or accepting it from the government.

Fixing the banks' balance sheets was necessary for recovery, but not sufficient. A sound financial system isn't the initiating force for growth, so stimulatory macro-economic policies were needed to get things moving.

On top of all the government spending to recapitalise the banks came a huge amount fiscal (budgetary) stimulus spending. Stevens says a financial crisis and a deep recession can easily add 20 or 30 percentage points to the ratio of public debt to gross domestic product.

Then you've got the weak economic growth leading to far weaker than normal levels of tax collections. Add to all that the various North Atlantic economies that had been running annual budget deficits for years before the crisis happened.

"So fiscal policy has not had as much scope to continue supporting recovery as might have been hoped," Stevens says. "Policymakers in some instances have felt they had little choice but to move into consolidation mode [spending cuts and tax increases] early in the recovery."

He doesn't say, but I will: this crazy, counterproductive policy of "austerity" has helped to prolong the agony.

With fiscal policy judged to have used up its scope for stimulus, that leaves monetary policy. Central banks cut short-term interest rates hard, but were prevented from doing more because they soon hit the "zero lower bound" (you can't go lower than 0 per cent).

But long-term interest rates were still well above zero and, in the US and the euro area, long-term rates play a more central role in the economy than they do in Oz. Hence the resort to "quantitative easing".

Under QE, the central bank buys long-term government bonds or even private bonds and pays for them merely by crediting the accounts of the banks it bought from. Adding to the demand for bonds forces their price up and yield (interest rate) down. And reducing long-term rates is intended to stimulate borrowing and spending.

Has it worked? It's intended to encourage risk-taking, but are these risks taken by genuine entrepreneurs producing in the real economy, or are they financial risk-taking through such devices as increased leverage?

Stevens' judgment is that it always takes time for an economy to heal after a financial crisis [because it takes so long for banks, businesses and households to get their balance sheets back in order - they've borrowed heavily to buy assets now worth much less than they paid] so it's too soon to draw strong conclusions.

For Stevens, the lesson is that there are limits to how much monetary policy can do to get economies back to healthy growth after financial crises. "If people simply don't wish to take on new business risks, monetary policy can't make them," he says.

Perhaps the answer is simply subdued "animal spirits" – low levels of confidence, he thinks. But, at some stage, sharemarket analysts and the investor community will ask fewer questions about risk reduction and more about the company's growth strategy.


Putting people back in the rent or buy decision

So, the Reserve Bank has done the numbers and killed the Great Australian Dream: owning your home is no more lucrative than a lifetime of renting. Somehow, I doubt that will be the end of the matter - and nor should it be.

The strongest conclusion we should draw from the Reserve’s figuring is that, when you view home ownership purely as a financial investment, buying rather than renting isn’t the deadset winner most people assume.

It can be a close run thing, mainly because people take insufficient account of the costs of home ownership - not just all the interest they pay but the stamp duty and conveyancing costs, insurance, repairs and maintenance and the rates and other payments not borne by renters.

But our deeply ingrained belief that home ownership is a great investment is only one of our motives for wanting to own rather than rent. The other big one is security of tenure.

It’s nice to own your own place and make your own decisions about alterations and improvements, minor and major, about painting it or not painting, building up the garden or not bothering.
 It’s also nice to know you’re unlikely to have to leave it unless it’s your choice. Renters generally have a lot less say over how long the rental lasts, rent rises and changes of landlord.

The Reserve’s calculations take no account of these non-monetary considerations, which could easily be sufficient to bring ownership in as a clear winner in many people’s minds (starting with me).

And though those calculations are as careful and impartial as you would expect of the central bank, that doesn’t stop them being based on assumptions and averages like all such calculations, meaning they may or may not be a good fit with your own circumstances and preferences.

For instance, what’s true for average home prices across Australia, may not be true for Sydney. And what’s true for the whole of Sydney may not be equally true for inner ring, middle ring and outer ring homes.

We know the authorities expect huge growth in Sydney’s population over the next 20 or 30 years. And unless they greatly improve their performance on congestion, my guess is we will see inner-ring property prices grow a lot faster than Sydney prices generally.

The Reserve’s calculations roll together home owners and renters of all ages and stages. But switching rental accommodation is not the problem for young adults that it can be for families with school-age children.

The calculations assume home owners change homes every 10 years. If you have already, or intend to, stay put a lot longer than that then your investment is already performing, or is likely to perform, better than the figures suggest.

Of course, no calculations based on what’s happened to home prices and rents over the past 60 years is a foolproof guide to what they’ll do over the coming 60.

And remember, the low level at which the age pension is set tacitly assumes people own their homes outright. The value of your home isn’t included in the means test, but other investments are.


Wednesday, July 23, 2014

Big cities have become the engine of the economy




That make any sense to you? It's completely off beam.





















Monday, July 21, 2014

Mining boom our gift to rich foreigners

The mining tax - whose last-minute reprieve may well prove temporary - is the greatest weakness in the argument that we gained a lot from the resources boom. The blame for this failure should be spread widely, with economists taking a fair share.


The government is refusing to accept the amended version of the bill, arguing that "by voting to keep many of the associated spending measures [naughty - most are actually tax expenditures], senators have effectively voted to keep the mining tax".

We'll see how long that lasts. But if you're thinking the tax raises so little it hardly matters whether it stays or goes, you're forgetting something. When Labor allowed BHP Billiton's Marius Kloppers and his mates from Rio Tinto and Xstrata (now Glencore) to redesign the tax, they predictably opted to take their depreciation deductions upfront. Once they're used up, however, receipts from the tax will be a lot healthier - provided it survives that long.

You can blame Kevin Rudd, Wayne Swan and Julia Gillard for their hopeless handling of the tax. But don't forget to copy in Tony Abbott who, faced with a choice between the interests of Australian taxpayers and the interests of three foreign mining giants, sided with the latter in the hope they'd fund his 2010 election campaign.

You can also blame Treasury for originally proposing an incomprehensible, textbook-pure version of the tax which couldn't survive, and so getting us lumbered with a fourth-best version. It also did a bad job of quietly test-marketing the tax with its banking contacts and of estimating the likely receipts.

But where were all the economists - including academics - explaining to the public why the tax wouldn't discourage mining activity or otherwise damage the economy, as it suited the big miners to claim?



Part of the problem is an ethic among economists that regards it as bad form to distinguish between local and foreign investors for fear of inciting "economic nationalism" - a form of xenophobia. If an investment generates jobs and income, why does it matter whether the firms involved are local or foreign?



Added to that, as Dr Stephen Grenville (a former senior econocrat who does make a useful contribution to the public debate, via the Lowy Institute) has written, "mining royalties, a state government domain, fall victim to special relationships and inter-state competition to attract projects".

Put all that together and you see why having an effective resource rent tax is so essential to ensuring Australians get a fair reward for the exploitation of their birthright. High economic rents, few jobs created and the lion's share of profits going to foreigners mean unless especially high rates of profitability are adequately taxed we don't have a lot to show for the resources boom.

Saying that isn't anti-foreigner, it's simple self-interest, the driving force of market economies. Foreigners are welcome, provided we get a fair share of the benefits. Foreign investment isn't meant to be a form of aid to rich foreigners.

It's true our rate of national saving increased during the boom. But a lot of this was foreign-owned mining firms reinvesting their profits in local expansion rather than repatriating them, thereby increasing their share of our productive assets.

Now the construction phase is ending, more of the (undertaxed) profits will be sent back home. And the capital-intensive production and export phase will mean each $1 billion of growth in GDP now creates fewer jobs than it used to. Thank you Labor, thank you Coalition, thank you economists.

Saturday, July 19, 2014

How to reform industrial relations
























Wednesday, July 16, 2014

Carbon tax not real reason for soaring power prices




He would be wise to change the subject and join the push to reform the electricity pricing arrangements.

A new report by Tony Wood and Lucy Carter, of the Grattan Institute, Fair Pricing for Power, says that over the past five years the average Australian household's electricity bill has risen by 70 per cent to $1660 a year.

And this has been happening while the amount of electricity we use has been falling, not rising. Just why electricity demand has been falling is a story for another day.

The cost of actually generating the power accounts for 30 per cent of that total. The cost of delivering the power from the generator to your home via poles and wires - that is, the electricity transmission and distribution network - accounts for 43 per cent of the total.

That leaves the costs of the electricity retailer - the business you deal with - accounting for 13 per cent of the total bill, with the carbon tax making up 7 per cent and the various measures to encourage energy saving or use of renewables making up the last 7 per cent.

Of these various components, the one that does most to account for the rapid rise in overall bills is the cost of the physical distribution network. Whereas there's fierce competition between the now mainly privately owned power stations, the network businesses - still government-owned in NSW and Queensland, but privatised in Victoria and South Australia - are natural monopolies.

This means the prices the networks are allowed to charge - whether government or privately owned - are regulated by government authorities. And this is the source of the problem. Loopholes in the price regulation regime have made it easy for the network businesses to feather their nest at the expense of you and me.

Why would a government-owned network business want to overcharge? Because their profits are paid to the state Treasury, which needs all the cash it can get. So the NSW and Queensland governments gain by looking the other way while their voters are ripped off. The gouging hasn't been nearly as bad in privatised Victoria, where electricity prices are well below the national average.

An earlier report from the Grattan Institute identified four main faults in the system used to regulate the prices of network businesses: the pricing formula allows excessive rates of return, considering essential monopolies are low-risk; government ownership leads to excessive investment in infrastructure and reduced efficiency; reliability standards to prevent blackouts are wastefully high; the pricing formula rewards investment in facilities you don't really need.

The various combined state and federal regulatory bodies have belatedly begun attempting to fix these problems, but they could do a lot more if the politicians prodded them harder.

Meanwhile, the latest Grattan report proposes a solution to one aspect of the over-investment problem: coping with peak demand. The trouble with electricity networks is that, if you want to avoid blackouts, the network has to be powerful enough to cope with the periods when a lot of people are using a lot of electrical appliances at the same time, which these days is a hot afternoon.

Over the course of a year, these occasions are surprisingly few, so you end up having to build a lot of capacity, which is expensive, but then is rarely used. It would make far more sense to encourage people to avoid such extreme peaks in their demand.

The way the pricing system works at present, however, is that far from discouraging people from buying airconditioners and turning them on full blast on very hot afternoons, they're subsidised by those householders who don't.

The simple answer would be for the part of people's bills that relates to their share of network costs to be changed from charging for how much power they use to a capacity-based charge. That is, they pay according to the maximum load they put on the network in peak periods.

The result would be to remove the subsidy between high and low-capacity users, increasing or reducing their bills by up to $150 a year.

The greater benefit would be the price signal sent to high-capacity users to reduce their use of appliances during peak periods and save. As people responded to this incentive, the need to keep adding to the network's capacity would fall, thus reducing the need for higher electricity prices.

Monday, July 14, 2014

Bankers and wealth managers take ethics oath






Moral compasses are hard to find. But that's why I'd like to see a movement initiated by Dr Simon Longstaff, of the St James Ethics Centre, the "banking and finance oath", get more publicity and more signatories. The better known are the oath and those who've signed up, the better judgments others can make about how a particular action measures up.





But it wasn't always like that. Before the financial markets were deregulated in the early 1980s few economists worked in them, the Reserve kept its opinions to itself and Treasury's official forecasts in the budget papers were kept terribly vague. Billy Snedden's last budget advised that "economic growth is expected to quicken considerably in 1972-73".







Saturday, July 12, 2014

How economists changed their tune on minimum wages

When the Fair Work Commission announced a 3 per cent increase in the national minimum wage to more than $640 a week - or almost $16.90 an hour - from last week, employers hinted it would lead to fewer people getting jobs and maybe some people losing theirs.

And to many who've studied economics - even many professional economists - that seems likely. If the government is pushing the minimum wage above the level that would be set by the market - the "market-clearing wage" - then employers will be less willing to employ people at that rate.

That's because market forces set the market rate at an unskilled worker's "marginal product" - the value to the employer of the worker's labour.

Almost common sense, really. Except that such a conclusion is based on a host of assumptions, many of which rarely hold in the real world. And over the past 20 years, academic economists have done many empirical studies showing that's not how minimum wages work in practice. They've also developed more sophisticated theories that better fit the empirical facts. It's all explained in the June issue of the ACTU's Economic Bulletin.

As a result, there's been a big swing in academic thinking on the question of the minimum wage. Last year, researchers at the University of Chicago asked a panel of economists from top US universities whether they agreed with the statement that "the distortionary costs of raising the federal minimum wage to $US9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy".

Fully 62 per cent agreed and 16 per cent disagreed, leaving 22 per cent uncertain.

Earlier this year, more than 600 US economists - including seven Nobel laureates - signed an open letter to Congress advocating a $US10.10 minimum wage. They said that, because of important developments in the academic literature, "the weight of evidence now [shows] that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers".

The first such study, published by David Card and Alan Krueger in 1994, compared fast food employment in New Jersey and Pennsylvania after one state raised its minimum wage and the other didn't. They did not find a significant effect on employment.

Since then, many similar US "natural experiments" have been studied and have reached similar findings. In Britain, the Low Pay Commission has commissioned more than 130 pieces of research, with the great majority finding that minimum wages boost workers' pay but don't harm employment.

There's been less research in Australia, but one study by economists at the Australian National University, Alison Booth and Pamela Katic, suggests that the facts in Australia seem to fit the "dynamic monopsony" model of wage-fixing.

Under the simple textbook, "perfect competition" model of the market for labour, individual firms face a horizontal supply curve: each firm is so small that its demand for labour has no effect on the price of labour. It can buy as much labour as it needs at an unchanged price.

In the dynamic monopsony model, however, each firm faces an upward-sloping labour supply curve. This is because more realistic assumptions recognise the existence of "imperfections" or, more specifically, "frictions".

Such as? Workers may not have perfect information about all the alternative jobs they could take and this could make them cautious about moving. Searching for a job may involve costs in time or money. Workers and jobs may be mismatched geographically, so changing jobs may involve greater transport costs. Workers - being humans rather than inanimate commodities - may not have identical preferences about the jobs available.

In other words, there are practical reasons why it takes a lot for a worker to want to leave their job.

These frictions, or "transaction costs", are assumed away in the simple model. But their existence can result in employers having market power, which they can take advantage of to pay workers less than the value of what they produce (their marginal product).
Economists call such power "monopsony" power. Just as a monopolist is a single seller, so a monopsonist is a single buyer. But don't take that word too literally. An employer with monopsony power doesn't need to be a monopolist in the market for its product (the "product" market), nor the sole buyer of labour in the region or the industry.
"A single employer in a market with many employers can have monopsonistic power if workers bear costs of job search," the article continues. In other words, it possesses a degree of monopsony power.

The point is, if a firm is facing an upward-sloping labour supply curve and wants to hire more workers, it may need to pay a higher wage than it is paying its existing workers. So, if it goes ahead with hiring, it will need to increase the wage rates of its existing workers.

And this means the firm's profit-maximising level of employment and wages will both be lower than they would be under perfect competition.

In such a model, if the minimum wage rate is set at or below the marginal product of labour, this won't cause employment to fall and may cause it to rise. Monopsonistic models don't have an unambiguous prediction for the employment effect of a minimum wage.

A paper by Bhaskar, Manning and To, published in the Journal of Economic Perspectives in 2002, concluded that "a minimum wage set moderately above the market wage may have a positive effect or a negative effect on employment, but the size of this effect will generally be small".

It will be interesting to see how long it takes those many Australian economists who don't specialise in studying the labour market to catch up with this change in their profession's thinking.

Wednesday, July 9, 2014

Ignoring climate change will cost the economy


But if they imagine the lifting of this supposedly great burden on them and the economy will mean it's back to business as usual, they'll soon find out differently.

They may have rolled back the economic cost of doing something about climate change, but now they'll face the increasing cost of not doing something about it. As Martijn Wilder, an environmental lawyer with the Baker & McKenzie law firm, finds in a new report for the Committee for Economic Development of Australia, we're going to be hit from all sides.

There are the costly physical effects of climate change we've already started experiencing, there are the consequences for us of measures our trading partners are starting to take to limit their emissions, there's the growing reluctance of foreign institutions to fund new coalmines and power stations and there's the threat to our fossil fuel industries from ever-cheaper renewable energy.


Do you think all that generates no costs to business, no disruption to the economy? Take the Queensland floods in 2011, Wilder says. They not only hit insurance company earnings, they also halted production at various coalmines. This forced up world coal prices, with adverse effects for industries reliant on coal.

Since we've always had cyclones and floods, no one can say climate change caused this particular disaster. But the scientists tell us events such as these will become more frequent. And the insurance industry's records tell us the number of catastrophic weather events is already increasing, with the economic losses associated with weather rising.

As for the idea there's no hurry in preparing for problems that may not become acute until later this century, consider this. Had a levee to protect Roma, in Queensland, been built in 2005, it would have cost $20 million. Since it wasn't built, $100 million has been paid out in insurance claims since 2008 and a repair bill of more than $500 million incurred by the public and private sectors since 2005.


Perhaps such events explain why many other countries are moving forwards rather than backwards in their efforts to combat climate change. Australia's coal and natural gas industries won't escape being affected by tougher regulation of the use of fossil fuels in the countries to which they export.

While Europe has had a weak emissions trading scheme since 2005, the Chinese are trialling such schemes in six provinces. South Korea, one of our main trading partners, is to introduce a scheme next year. The US is taking direct action to cut power station emissions.

China is moving to limit coal to 65 per cent of energy consumption by next year and has banned new coal power generation in Beijing, Shanghai and Guangzhou. Wilder says this will cut demand from the largest importer of Australian coal and thus affect the value of big mining and loading assets in Australia.

The more the rest of the world seeks to reduce its use of coal and other fossil fuels, the more Australian businesses need to contemplate the possibility of their mines becoming "stranded assets" - assets that suddenly become unprofitable and so lose their value.

Until recently, foreign investors and financiers haven't taken climate-change risk into account. Now they're starting to worry not just about the morality of emitting more greenhouse gas, but the risk that investments in new mines and power stations will lose their value before they reach the end of their useful lives. The change started with international agencies such as the World Bank, but is spreading to pension-fund investors.

Then there's the threat from the rise of renewable energy. China's goal of becoming a world leader in renewable energy has made it the world's largest maker of renewable energy equipment and the single largest destination for investment in renewables.



I know, let's get the government to put the kybosh on renewables. That would be a smart move.

Monday, July 7, 2014

Tough times restore productivity performance

It's official: Australia's rate of improvement in the productivity of labour returned to normal during the reign of Julia Gillard.

How is that possible when big business was so dissatisfied and uncomfortable during Gillard's time as prime minister? The latter explains the former.


This is what had big business rending its garments over the productivity crisis. Egged on by the national dailies, chief executives queued to attribute the crisis to the Labor government's "reregulation" of the labour market, its failure to cut the rate of company tax, plus anything else they didn't approve of.

Except that, according to the Reserve Bank's figuring, labour productivity improved at the annual rate of 2 per cent over the three years to the end of 2013.






But requiring them to be lifters rather than leaners - which is pretty much what That Woman did - usually gets better results. And since the dollar remains too high and seems unlikely to come down anytime soon, it's reasonable to expect the non-mining sector's productivity performance to continue improving. Who told you productivity was soft and cuddly?

As for the convenient argument that the productivity slump must surely be explained by Labor's "reregulation" of the labour market under its Fair Work changes, it's cast into question by some figuring reported in another speech last week, from Dr David Gruen, of Treasury.




Notice any kind of pattern there? It's pretty clear. Wages in those industries most directly boosted by the resources boom rose significantly faster than aggregate wages, though not excessively so considering it was a 10-year period.


That's just the dispersion you'd expect to see in a "reregulated" labour market? Hardly.


If that's reregulation, let's have more of it.