A couple of years ago, the government changed the rules so that families on $150 000 a year or more wouldn’t be eligible to receive family payments. There were the predictable cries of ‘class warfare’, but there were also claims that $150 000 in Australia leaves you struggling to make ends meet. The Daily Telegraph found a couple on $150k who said “you can survive on $150,000 but you definitely aren’t doing well,” while in The Australian, a couple on $200 000 said “the government are making it bloody hard.”
The campaign by The Australian newspaper against the Fair Work Act has had a few phases. I’d like to go through a few of their key claims and evaluate them against recent data.
I grew up in Perth, where the minimum temperature almost never goes below 1 degree. Even in the depths of winter, the maximum daily temperature is usually in the teens. There’s not a lot of need for heavy jackets or thermal underwear. It never snows.
Now imagine I travelled to Siberia. Having never needed thermal underwear or gloves before, would it be right to conclude that I wouldn’t need them in Siberia? Clearly not. Walking around Oymyakon in jeans and a hoodie would be a recipe for a rapid and unpleasant death. The fact that I’d endured countless Perth winters with only a jacket would be no defence against the cold.
In a Perth winter, a jacket and jeans might be enough to stabilise my temperature. In Siberia, I’d require much more. The ‘neutral’ clothing differs depending on the circumstances. Just as it makes sense to adapt to your circumstances when getting dressed, so does the Reserve Bank need to adapt to changes in the economy.
[A]dopting an incomes policy was like jumping out of a second storey window: nobody in his right mind would do it unless the stairs were on fire… The stairs were aflame in Australia in 1983, when the Hawke Government won office. -Peter Cook.
The Accord is back in fashion. The past few months have seen a lot of pining for the “Hawke-Keating model,” particularly the compact between the two wings of the labour movement. A lot of the discussion seems to me to lack a sense of what made the Accord necessary (in the eyes of the protagonists), what made the Accord possible, and the ways in which our current circumstances differ from those of 1983.
Has the Fair Work Act made the labour market less efficient at matching unemployed people to jobs? One way economists would try to answer that question is with the Beveridge curve.
How would we know if the labour market was ‘flexible’? One way is to look at how the jobs market responds to economic shocks. During the GFC, when the Howard Government’s labour laws were still in effect, the number of hours worked in Australia fell while the number of people in employment didn’t fall.
Imagine if everyone with a surname starting with the letter C didn’t have to pay income tax. For some arcane reason, back in the mists of time when the tax was introduced in Australia, those with a ‘C’ name were completely exempted, and the exemption remained on the books, stubbornly resistant to efforts to remove it.