http://www.couriermail.news.com.au/common/story_page/0,5936,12218728%5E27197,00.html
Perils of prosperity
Saturday View with Matthew Franklin
12feb05
The good news from Canberra: You've probably got a job.
The bad news: Don't pin your hopes on a fat pay rise any time soon. And an increase in home loan interest rates looks likely too.
But hang on. Don't we have the lowest unemployment rate (5.1 per cent) in decades? Haven't interest rates and inflation been under control for some time too?
And didn't Prime Minister John Howard say during the election campaign last October that the economy was in great shape? He did and it is.
But according to Howard and Treasurer Peter Costello, prosperity can cause problems – skills shortages and the possibility of a breakout in wage demands that would drive up inflation and harm the economy.
So after nine years of blaming previous Labor governments for the nation's economic woes, Costello will now have to blame his own success as an economic manager as the reason for future problems.
It's a weird situation but it makes some kind of sense.
Asked about joblessness this week, Costello said it was great to have low unemployment.
"But it brings a new set of problems and we must ensure that particularly in the wages area that wages do not overshoot," he said.
The push for wage restraint is based both in philosophy and political need.
Any treasurer wants to avoid an economic downturn. But the wider context is Howard's continued preparation of sweeping industrial relations reforms in line with his long-held ideological commitment to a more flexible workplace.
A key plank in the argument for workplace reform is the view that greater workplace flexibility will make Australia more internationally competitive and prosperous. The linking of the need for reform with the problems caused by low unemployment is part of a clear push to set the scene for the release of the plans, which will draw the opposition of unions and state Labor governments.
Not that this will mean much after Howard assumes majority control of the Senate on July 1.
It's not all politics. There clearly are skills shortages in many sectors – something that business community representatives and, increasingly, the Opposition have warned about regularly.
Howard responded during last year's election campaign by promising a series of new, federally run technical colleges.
It is a simple rule of supply and demand that workers whose skills are rare can demand higher wages.
That's why this week Costello and his Assistant Treasurer, Mal Brough, both told The Courier-Mail they were worried about the State Government's recent decision to award power workers a pay increase worth 27 per cent over three years.
They accuse Premier Peter Beattie, in strife over power blackouts, of seeking a political fix by agreeing to a ludicrously huge pay rise which could set off a wages explosion.
Beattie says they are wrong, but business lobby the Australian Industry Group also has concerns about a wages blowout and reports a sense of disquiet in business over skills shortages.
Costello argues that bosses simply should not award pay rises that are not justified by demonstrated productivity gains. And in a radio interview yesterday, Howard demanded restraint from company executives themselves so their workers do not use big increases in their already mind-boggling large packages as evidence for fresh pay rise demands. He also forecast a tight Budget in May, citing the need for economic caution.
The other key political development in Canberra this week was news that Sydney had been chosen over Brisbane as host of the 2007 meeting of the leaders of the 21-member Asia-Pacific Economic Co-operation group.
It will fall within weeks of the next federal election, raising obvious questions about whether Howard will still be PM at the time. If he is, it is safe to assume he also plans to lead his party to the election, foiling Costello's hope for a pre-election succession.
Howard has a stock standard response for questions about his leadership: He feels fine and he's happy to serve for as long as his colleagues want.
After last year's stunning election win and the return of Kim Beazley as Leader of the Opposition – the man Howard has beaten in federal election campaigns in 1998 and 2001 – there's no shortage of Liberal backbenchers who want to stick with a winner.
As for Costello, he's hard at work on yet another Budget and must be concerned at increasing speculation among political commentators that his time might never come.
There's an emerging theory that says that if Howard stays healthy and leads his team into the 2007 election, by the time he does stand down Costello might have lost patience.
Or worse still for him, he might have lost his status as heir apparent.
• Matthew Franklin is The Courier-Mail's national political editor. His column appears every Saturday.
[email protected]
Perils of prosperity
Saturday View with Matthew Franklin
12feb05
The good news from Canberra: You've probably got a job.
The bad news: Don't pin your hopes on a fat pay rise any time soon. And an increase in home loan interest rates looks likely too.
But hang on. Don't we have the lowest unemployment rate (5.1 per cent) in decades? Haven't interest rates and inflation been under control for some time too?
And didn't Prime Minister John Howard say during the election campaign last October that the economy was in great shape? He did and it is.
But according to Howard and Treasurer Peter Costello, prosperity can cause problems – skills shortages and the possibility of a breakout in wage demands that would drive up inflation and harm the economy.
So after nine years of blaming previous Labor governments for the nation's economic woes, Costello will now have to blame his own success as an economic manager as the reason for future problems.
It's a weird situation but it makes some kind of sense.
Asked about joblessness this week, Costello said it was great to have low unemployment.
"But it brings a new set of problems and we must ensure that particularly in the wages area that wages do not overshoot," he said.
The push for wage restraint is based both in philosophy and political need.
Any treasurer wants to avoid an economic downturn. But the wider context is Howard's continued preparation of sweeping industrial relations reforms in line with his long-held ideological commitment to a more flexible workplace.
A key plank in the argument for workplace reform is the view that greater workplace flexibility will make Australia more internationally competitive and prosperous. The linking of the need for reform with the problems caused by low unemployment is part of a clear push to set the scene for the release of the plans, which will draw the opposition of unions and state Labor governments.
Not that this will mean much after Howard assumes majority control of the Senate on July 1.
It's not all politics. There clearly are skills shortages in many sectors – something that business community representatives and, increasingly, the Opposition have warned about regularly.
Howard responded during last year's election campaign by promising a series of new, federally run technical colleges.
It is a simple rule of supply and demand that workers whose skills are rare can demand higher wages.
That's why this week Costello and his Assistant Treasurer, Mal Brough, both told The Courier-Mail they were worried about the State Government's recent decision to award power workers a pay increase worth 27 per cent over three years.
They accuse Premier Peter Beattie, in strife over power blackouts, of seeking a political fix by agreeing to a ludicrously huge pay rise which could set off a wages explosion.
Beattie says they are wrong, but business lobby the Australian Industry Group also has concerns about a wages blowout and reports a sense of disquiet in business over skills shortages.
Costello argues that bosses simply should not award pay rises that are not justified by demonstrated productivity gains. And in a radio interview yesterday, Howard demanded restraint from company executives themselves so their workers do not use big increases in their already mind-boggling large packages as evidence for fresh pay rise demands. He also forecast a tight Budget in May, citing the need for economic caution.
The other key political development in Canberra this week was news that Sydney had been chosen over Brisbane as host of the 2007 meeting of the leaders of the 21-member Asia-Pacific Economic Co-operation group.
It will fall within weeks of the next federal election, raising obvious questions about whether Howard will still be PM at the time. If he is, it is safe to assume he also plans to lead his party to the election, foiling Costello's hope for a pre-election succession.
Howard has a stock standard response for questions about his leadership: He feels fine and he's happy to serve for as long as his colleagues want.
After last year's stunning election win and the return of Kim Beazley as Leader of the Opposition – the man Howard has beaten in federal election campaigns in 1998 and 2001 – there's no shortage of Liberal backbenchers who want to stick with a winner.
As for Costello, he's hard at work on yet another Budget and must be concerned at increasing speculation among political commentators that his time might never come.
There's an emerging theory that says that if Howard stays healthy and leads his team into the 2007 election, by the time he does stand down Costello might have lost patience.
Or worse still for him, he might have lost his status as heir apparent.
• Matthew Franklin is The Courier-Mail's national political editor. His column appears every Saturday.
[email protected]
