It was a simple problem, on its face.
Treasurer Jim Chalmers wanted to achieve two things with his speech to parliament on Thursday.
First, he wanted voters to hear the inflation we’re experiencing at the moment, and our deteriorating wages and energy policy paralysis, had little to do with Labor.
“Nine years of mess can’t be cleaned up in nine weeks — it will take time,” he said.
Second, he wanted voters to know economic conditions would get tougher from here, and it could take years for things to improve, but Labor would make things easier where it could, in the meantime.
But that second part could be a hard sell.
The economy will grow more slowly, and wages will deteriorate
Dr Chalmers said Treasury officials think Australia’s economy will grow more slowly than expected during the next few years.
He said inflation would get worse this year, before it started to ease a little next year and finally return to more normal levels the year after that.
He said it was also doubtful we’d see any growth in real wages until 2023-24.
Think about that one.
Real wages growth (when wages grow faster than inflation) over the past decade averaged just 0.1 per cent a year.
In the year to March, real wages deteriorated by 2.7 per cent, which was the worst result in more than two decades.
So, if it’s going to take another couple of years for real wages to grow, it means Australian workers will have been trapped in an extended period of wage stagnation that started long before the pandemic.
“Australian workers now have a government with an economic plan to boost wages, not deliberately undermine them,” the Treasurer said, to try to boost morale.
How will Labor fix things?
So what can they do about it?
Chalmers said some of the policies Labor took to the election would help with cost-of-living pressures in coming years, including cutting child care costs for more than a million families, and cutting the cost of medicines on the Pharmaceutical Benefits Scheme.
He said the decision by the Fair Work Commission to increase the minimum wage by 5.2 per cent would help a little, and Labor was pushing for higher wages in the care economy.
But the next few things would take more time.
He said Labor would deliver more wage growth over time by helping to train people for higher-wage opportunities, and by investing in industries that would deliver secure and well-paid jobs.
It would also try to unclog supply chains to ease inflationary pressures, by investing in “cleaner, cheaper more reliable energy”, by addressing skills and labour shortages, and by establishing a National Reconstruction Fund to make Australia more self-reliant.
Those things could take years.
It’s why the business community, and the union movement, have already responded to Dr Chalmers’ speech by pointing ahead to Labor’s “Jobs and Skills Summit” in September.
“The upcoming jobs and skills summit must be a catalyst for a bold agenda for workforce reskilling, migration, and bargaining reforms,” said Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry.
“Now is the time for government to take on a revitalised and ambitious agenda for reform. While we must not underestimate the challenges of building consensus, business is ready to play its part.”
Sally McManus, the Secretary of the Australian Council of Trade Unions, said business as usual wouldn’t fix this crisis.
“If real wages don’t grow until the middle of 2024, that’ll be four long and painful years of wages going backwards in real terms,” she said.
“Our bargaining system should be the driver of wage growth, but it isn’t anymore. With the new Albanese government and the Jobs Summit, we have the opportunity to change that.”
Jobs and Skills Summit
But the Jobs and Skills Summit won’t be the panacea.
It will only last two days.
And as the economist John Quiggin has pointed out with some alarm, the “Employment White Paper” that Labor has promised to publish some time after the summit has already undergone a worrying name change.
“Labor’s election campaign included not only a commitment to full employment but the promise of a Jobs Summit leading to a new white paper, modelled on that of 1945,” Quiggin wrote on Wednesday.
“The summit was duly announced on 11 July, but with some crucial changes in wording.
“The Jobs Summit became a ‘Jobs and Skills Summit’. More alarmingly, the topic of the white paper was changed from ‘Full Employment’ to ‘Employment’.
“Reading the associated press releases, it becomes clear that the government is now much more concerned about pressure from employers who are finding it difficult to hire workers while offering wages that have fallen behind inflation,” he warned.
“A renewed public commitment to full employment would be transformational, making it clear that changing the government changes the nation. If Labor misses this opportunity, it is unlikely to come again.”
So, the Albanese government is keen for voters to know that it has inherited these economic problems.
It says things will be tough for a couple of years.
But the battle to rebuild the economy is going to take years, and involve all the usual interest groups, and instant relief may not be forthcoming.
And there are already some concerns that Labor may abandon some of its pre-election ambitions as it tries to address the immediate problems we’re facing.
Can it achieve higher wage growth without stoking more inflation? Full employment without ‘skills shortages’?
Can those seeming irreconcilable goals be reconciled? It’s a challenge that could define the success or failure of the government’s first term.
