On budget night Anthony Albanese sat opposite Josh Frydenberg, whose major announcement three minutes into his speech was that unemployment was at 4 per cent – the equal lowest in 48 years – and would go “even lower”, which meant having 3 per cent in its front.
That week saw the parliament, the media and the Liberal-Labor debate focused on a budget that forecast unemployment would fall to 3.75 per cent this year and would remain there until 2024-25. This means an employment-to-population ratio at an unprecedented high.
In political terms, the unemployment rate was the single most potent figure in the budget. Falling unemployment is vital for jobs, economic health and family households. It underpins rising living standards. But unemployment is also vital for wages. Falling unemployment means a tighter labour market and, at a certain point, that drives higher wages – Labor’s core goal.
This link between falling unemployment and rising wages is pivotal. If you aren’t focused on unemployment then you aren’t focused on how you increase wages and get a better life for the people Labor cares about. This economic linkage has been a central preoccupation of the Reserve Bank, the Treasury and the economic debate in recent years.
The mistake Albanese made on Monday was not just forgetting an economic indicator. Forgetting a number is trivial, it’s not important. It typically has no significance beyond being a cheap “gotcha” moment for the media. But this is entirely another matter.
It shows Albanese’s mind is not on the economy, not focused on crucial economic policy issues, not cogitating on what is needed to sustain low unemployment and not obsessed about the relationship between unemployment and wages. Virtually every senior political journalist would know the unemployment rate. Australia has just survived a pandemic and recession when unemployment threatened to reach as high as 15 per cent and welfare queues in early 2020 briefly reminded of the Depression.
Given the history of this parliamentary term, dominated by the unemployment risk, how can an alert Labor leader not know the unemployment rate?
Even worse, how can he be clueless, initially suggesting in an astonishing spectacle that it might be 5.4 per cent when the economic debate for months has been a rate with a 4 in front of it and then a 3 in front of it?
The only explanation is that Albanese has been somewhere else – targeting Scott Morrison’s character, exploiting the public’s cost-of-living woes, pledging to be a caring and uniting prime minister. But he missed his prime task as the alternative PM – proving his command of economic policy.
This was a personal challenge. His blunder will bedevil Labor through the campaign because it exposes the party’s core vulnerability. The lesson from the past generation of Australian politics is that prime ministers must be economically literate and must show, in office, they can manage the economy. Failing this test, they are doomed. Having a competent treasurer is essential – but it’s not enough. Paul Keating and John Howard both climbed that economic mountain. It was central to their political success. Morrison’s performance as PM always draws on his years as treasurer.
In relation to the other indicator Albanese didn’t know – the Reserve Bank cash rate – every financial journalist has followed the intense debate about when the bank will lift the cash rate beyond 0.1 per cent given the implications this will have for borrowers and for voters.
Pretending Albanese’s ignorance on these economic indicators doesn’t mean anything is a fool’s project. Opposition Treasury spokesman Jim Chalmers and finance spokeswoman Katy Gallagher would never get caught out in this way. That’s because their mindset is economic policy. And that should be Albanese’s mindset too.
Even putting policy to one side, this should have been a political imperative for the ALP leader given the Prime Minister and the Treasurer have told the world their re-election theme is don’t risk Albanese on the economy because he lacks the experience and the ability and can’t be trusted.
The slur Morrison and Frydenberg used against Albanese – that he had never delivered a budget and never held an economic portfolio – always looked a bridge too far. Now it suddenly looks relevant. On the opening day of the campaign Albanese has invited a debate about his economic competence and in this context his budget reply speech of March 31 is highly relevant.
This budget reply dodged any discussion of economic policy. Filled with compassion and empathy, Albanese pledged to build “an economy that works for people, not the other way around”. He promised that under Labor “no family will be worse off”, that wages would be stronger, that jobs would be more secure, and he outlined a program to solve the crisis in aged-care accommodation.
These are necessary and worthy objectives. But a feel-good pitch littered with empathy doesn’t constitute an economic policy. On the economy, Labor makes a series of claims that it will increase growth, lift productivity, boost wages and lift business investment, yet its policy agenda to sustain such claims is weak – a criticism that can also be mounted against the government.
In his budget reply Albanese said wages growth was essential to combat the cost-of-living pressures and that Labor had a plan to boost wages. Yet that plan looks thin – assorted elements around skills, infrastructure, childcare, clean energy and submissions to the Fair Work Commission. Albanese will face intense pressure to explain how Labor can actually deliver its economic objectives.
If he is wise, Albanese should brief himself on the non-accelerating inflation rate of unemployment, the NAIRU, that has dominated the recent economic debate – this refers to the lowest unemployment rate without causing wages and inflation to rise – or the rate below which they will rise because there is no longer spare capacity in the economy.
In the budget Treasury now assumes the NAIRU to be 4.25 per cent, which means wages and inflation will be driven higher with unemployment below this level. Don’t rule out media questions on this issue.
Albanese’s worst blunder now will be overcorrection. Referring to his past yesterday as an economic adviser to the Hawke government – presumably from being on Tom Uren’s staff – was a mistake. Uren was a left-wing critic of much of the Hawke-Keating economic reforms, as set out vividly in his autobiography Straight Left.
So Albanese pledges to govern in the Hawke mould but the minister he served as an adviser was a principal internal critic of the Hawke-Keating agenda. It may be a small opening, but with Morrison under attack for alleged events that happened 15 years ago don’t be surprised – given Albanese’s opening – if Morrison pursues the issue. Albanese’s economic credentials, now and in the past, are going to be put under the microscope.
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