Our big debts make this a bad time for technology-fuelled unemployment

Labor should know that, in debt up to its eyeballs, Australia can probably afford unemployment less than any other developed country.

Even the hospitality industry will be hit by technological change. Picture: Michael Chambers

As we head to an election Australia faces three hidden unemployment dangers as a result of the actions of its politicians. And because banks have loaned ordinary Australians large sums, higher unemployment would hit our country harder than most other nations.

One of the political actions is a dual party mistake which can be easily fixed before the polls. I’ll leave that to tomorrow to discuss.

Another error is a well-meaning ALP policy and the third is a Coalition mistake in government. Neither the ALP plan nor the government mistake is easily changed. .

My three-part series on these three dangers was prompted by the remarkable new predictions by global investment giant UBS in The Weekend Australian .

You will remember back in 2017 and 2018 I took seriously the UBS dire predictions on housing and dubious bank lending. The Reserve Bank and Treasury scoffed at them. UBS was right.

That’s why all Australians must now take notice of the latest predictions by UBS that unemployment is set to rise because, if true, it will trigger a much bigger downturn than either Treasury or the Reserve Bank think likely.

My first hidden danger starts with the ALP policy to lift the level of wages by changing the industrial relations system. I have no doubt that Australians employed at all levels will relate favourably to this policy. They are currently being squeezed by higher energy prices (usually caused by state government green policies) and other cost rises at a time when their wages and salaries are not rising.

They have maintained their standard of living by running down savings or additional borrowing. At the same time, they are watching CEOs, (led by banks) other senior managers and directors appear to line their pockets. Bill Shorten knows that a vast number of Australians believe it’s time to shift the goalposts. We are seeing a very similar movement in the US.

I can really understand why so many Australians would find appealing policies that put more income in their pockets. Many are borrowed to the hilt and are really struggling. And the supporters of the policy (which include many traditional Coalition voters) can point out that our society managed such an arrangement in previous generations.

Many swinging voters are likely to say: “even if UBS is right, we should take the risk”. The opinion polls say the ALP will win the next election, so unless Bill Shorten reneges on the policy after he is elected, we are headed for a return to a wage setting system that delivers higher wages.

But the game has changed dramatically from the era when we used that old wage system. In part, thanks to the ALP, we have lowered protection to almost nil. But more importantly we are on the brink of a new industrial revolution where “white collar” labour is to be replaced by machines in the same way as has already taken place in factories.

Banks will halve their staff. Telstra’s cuts may be just as dramatic while lawyers, accounting firms, retailers, restaurants, distribution centres and eventually trucks will see computerisation and artificial intelligence transform their operations. The power of this technology is far greater than current computerisation.

For example, unions made call centres in Australia uneconomic and most went overseas. The unions are now trying to bring the call centres back. They may succeed but the new Australian call centres will be based on voice recognition technology and involve few humans — albeit those that remain will be highly paid Australians. In call centres it will be the armies of overseas workers who will lose their jobs. But in other areas such as cafes and restaurants that offer electronic order and collect services, it will be Australians who are retrenched. Many enterprises will be reluctant to join the revolution because of the staff retrenchments. But they will have no choice because they can’t sustain higher costs than their rivals.

Eventually the public service will have even higher costs than the rest of the country, forcing the revolution onto public service staff levels.

Last week I set out how BHP will undertake the task and it covers every aspect of their activities.

People can feel the revolution is pending so that commentary enjoyed an incredible response.

Australian enterprises have been examining white collar labour saving via computerisation and artificial intelligence but their actions have been tentative. If wages rise, we will see a rush to computerisation and AI.

If UBS is right, this will happen in an era when unemployment will be rising anyway. The social implications will require a new style of government.

Bill Shorten can argue legitimately that at least those who are employed will be paid at a better rate and they will participate in the higher productivity rewards — it won’t all go in profits and CEO or director salaries.

That’s not an unreasonable argument. But he needs to understand the forces he will unleash.

Instead of the transformation being taken at a steady pace it could come in a rush, creating maximum disruption. Any rise in unemployment among highly leveraged Australians who owe the banks vast sums would hit Australia more than almost any other developed country.

In the US their debt is in companies rather than consumers. We are already seeing corporate investment rise, indicating that the revolution has started. If Australians vote for a changed wage system via the ALP, then Bill Shorten, and Chris Bowen will need to take into account the new industrial revolution or they will create chaos.

Tomorrow I’ll discuss how the dual-party mistake boosting unemployment can be fixed.