Stop whingeing, fix productivity

Instead of whingeing outside the Reserve Bank’s headquarters in Sydney, ACTU secretary Sally McManus and union members would do workers greater good by looking at what the union movement could contribute to economic reform that would help curb underlying inflation by improving productivity. That outcome would help create the conditions for the bank to begin reducing interest rates earlier in the new year and across a sustained time frame.

Ms McManus and other union leaders should look back 40 years to when Bill Kelty led their movement and he worked with Bob Hawke and economically rational industry minister John Button to map out the nation’s economic future. The process worked because industry leaders were involved and wanted the same outcome as the unions – a more competitive economy and better living standards. The Prices and Incomes Accord that was struck and improved across subsequent years through workplace changes that made the system more flexible, to the advantage of employers and workers, was one of the nation’s greatest productivity drivers. But demanding that the RBA cut rates, as Ms McManus argued simplistically on Monday, because working people are “the main drivers of the economy” and other nations’ central banks have acted does not take account of all of the complex factors the board considers. But no doubt the Albanese government was pleased to see the ACTU arguing the case, saving it from doing so.

The ACTU complained that the RBA’s refusal to ease the official cash rate posed a risk “to the one million new jobs that have been created over the past 2½ years as they remained determined to tip people out of jobs”. Almost two-thirds of those jobs, unfortunately, have been created at taxpayers’ expense in the public sector or in fields that depend on government. That is a major weakness of Labor’s economic narrative. University of Melbourne economics professor Jeff Borland has a point, as Jack Quail reports, when he says the booming growth of public sector jobs has disguised the depth of weakness in the private sector. The RBA was over-estimating the strength of Australia’s jobs market, he said, and the situation did not justify keeping interest rates on hold. That is no reason for the RBA board to cut rates prematurely, however. Doing so risks inflation becoming more entrenched, leading to “even higher interest rates” as RBA governor Michele Bullock has warned. For the sake of budgets, debt, taxpayers and reducing inflationary pressures, the federal and state governments should show restraint in growing public service numbers.