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Can Albo be Bob Hawke on economics?

Peter Switzer
11 May 2022

Labor and its leader Anthony Albanese have come up with the killer play — a pledge to keep wages up with inflation — and in doing so have backed the union’s call at the Fair Work Commission for a 5.1% rise in the minimum wage.

Business isn’t happy. Scott Morrison isn’t happy and is putting the wrecker tag on Albo saying he’s not prepared to manage the economy.

But low paid workers, whose pay packets are influenced by the minimum wage, would be really happy about the would-be PM’s commitment to back the big pay rise.

Politically, his support looked on the run, as he hadn’t shown such full support until yesterday when a reporter’s question about whether he supported the 5.1% rise was answered with: “Absolutely.”

Albo’s newly revealed position must have surprised the CEO of the Australian Chamber of Commerce and Industry (ACCI), Andrew McKellar, who hosted the Labor leader at Doltone House in Sydney on Thursday (which I attended). There was no reference at the lunch to supporting the 5.1% claim of the ACTU at the Fair Work Commission, which is going on right now. “Imposing unaffordable wage increases on small business will cruel jobs, not create them. Any increase of 5 per cent or more would inflict further pain on small business, and the millions of jobs they sustain and create. Small business cannot afford it,” Mr McKellar said.

The minimum wage case sets the pay of 2.7 million workers and the unions want the hourly rate to rise from $20.33 to $21.45. In Government, a Labor PM will tend to let the Commission work out what is fair and affordable, but before an election, an Opposition Labor leader is much more likely to go in full backing a big hike in the minimum wage.

And they’ll say things like: “If you’re on the minimum wage, you’re struggling to pay your rent, you’re struggling to buy food, you’re struggling to get by, and the Fair Work Commission should bear that in mind in the decision they make.”

These sorts of pleas are less likely from a PM, who in reality can help those on struggle street with tax cuts and direct payments.

At last week’s ACCI lunch, Albo brought an A-team along with him, with the likes of former Treasurer and PM Paul Keating in attendance. And one comparison Albo wanted to make us think about was the great achievements of Labor under Messrs Hawke and Keating. This was rammed home in so much of his speech that you knew he was saying that this possible Labor Government could be like that Labor government. Sure, things went wrong under that team (home loan interest rates at 18% in the late 1980s and a deep recession in 1990-91 that took unemployment up over 10%) but they were prolific reformers, which partly explains why our economy went 30 years without a recession, which came with that damn Coronavirus.

But if you want to see how an Opposition leader differs from a successful Labor PM, let me recall when a journalist accused Bob Hawke of being a Labor leader where profits went up at the expense of wages. Hawke’s response was that he could do more for his constituency in Government than he could by championing causes that could toss him and his team to the losing side of Parliament House. That said, the chart below shows how workers had been heavily paid up in the 1970s, so the 1980s were a time for wage moderation.

Ultimately, if Albo is too soft on wage rises and we get a wage-price spiral, we will end up in a recession. And that’s not the kind of economic ‘feather in his cap’ that will give him a second term as PM, assuming he looks likely to get a first!


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