Labor’s industrial madness

Bill Shorten has tried to frame the next election as a populist “referendum” on wages growth. The Opposition Leader claimed last week the laws of supply and demand in the labour market were broken; no longer could the orthodoxy of market forces deliver wage rises for workers. He then danced close to the ACTU’s retrograde campaign for a “living wage”, which would push the minimum wage to 60 per cent of the national median wage. Mr Shorten has argued the industrial system requires a radical reboot — part reregulation, part kick in the guts to employers — at a time of weak economic growth. Yesterday he confirmed that Labor is looking to amend the Fair Work Act to force the industrial umpire to raise the minimum wage. Not by mounting a case at the Fair Work Commission, but wage increases by government fiat.

At $18.93 an hour, Australia has one of the highest minimum wage rates in the world. In the past two years, the FWC granted wage rises in excess of inflation, 3.3 per cent in 2017 and 3.5 per cent last year. But Mr Shorten claims that is not enough, calling employers “fat cats”. A few days ago he was appealing to business for a new national spirit of accord and partnership. Now the ACTU, in its FWC submission, is pushing for a $43-a-week increase in the federal minimum wage, equal to a 6 per cent rise. Such a jolt to wages — with no regard for its effect on small businesses — would be a blunt economic blow. Employers are bewildered by the claim, given the weak economy and poor productivity growth; they argue a 1.8 per cent rise would maintain living standards for the low-paid, support job creation and help those in jobs seeking more work hours.

Less intrusive, and more sustainable in the longer term, are tax cuts. As we reported on Saturday, the Morrison government is considering even deeper personal income tax cuts, on top of the $144 billion personal income tax plan announced in last year’s budget. It is possible the phase-in timetable on those tax cuts — currently seven years — could be brought forward by the Coalition, off the back of stronger revenue due to improved export prices, company tax collections and more people in work. Two of the nation’s top business economists have urged the Morrison government to make more ambitious personal income tax cuts in the April 2 budget, perhaps targeting low and middle-income earners. Tax cuts would take some of the pressure off the Reserve Bank to reduce interest rates in a sluggish economy.

Mr Shorten is playing to the mob by bashing employers and grandstanding on reregulating the labour market. It reeks of class war and is a low rhetorical road. If ever implemented, his plan is a well-worn path to economic misery and decline. He must know the best way to higher wages is through improvements in productivity, more investment, profitable companies and a growing economy. Yet the alternative prime minister appears caught in a time warp, auditioning for the role of an ageing shop steward, raising his middle finger to the “big end of town”.