Archives for posts with tag: productivity

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.

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[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.

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How would we know if we were having a wages breakout? Back in the 70s, there was a period in which wages rose faster than productivity, leaving a situation that some economists dubbed a “real wage overhang”. This, I believe, is what people are talking about when they warn of a “breakout” – an inflationary burst of wages growth well in excess of productivity growth. In fact, since around the turn of the century, we’ve experienced the opposite phenomenon in Australia. Wages haven’t kept pace with labour productivity. They’ve “decoupled”.

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You might remember that in late 2010, we were warned repeatedly that Australia was facing a ‘wages breakout’. The Australian, in the typically calm and measured tones of its editorial page, warned that “the economy, unfortunately, is facing an economically irrational assault on a scale we have not witnessed for a quarter of a century.”

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Yesterday, the national accounts released by the ABS showed that we had the fastest productivity growth in over a decade, in the year to the March quarter. You would think that this would give pause to the alarmists who claim that our current industrial relations laws are ruining the economy. You would be wrong.

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At 11:30 this morning, the ABS published the Australian national accounts for the March quarter of this year. Among other things, they show that the rate of productivity growth has surged – in the past year, labour productivity in the market sector grew at its fastest pace in over a decade. I’m sure this will be a major focus of the news coverage tomorrow, just as the disappointing productivity numbers were closely examined in early 2011. Just in case The Australian doesn’t choose to highlight the issue, here’s a handy chart for your reference:

Labour productivity in the market sector – year ended growth

Source: Calculations based on ABS 5206, table 1.

While it’s true that you should be careful about drawing too many conclusions from the quarterly productivity data, that was just as true this time last year when various pundits leapt on the data to suggest that the Fair Work Act has damaged Australia’s productivity performance.

I don’t want my blog to just be a forum for rebutting claims made in The Australian, but it can be difficult to resist.

For example, this quote from Stephen Matchett in today’s Oz [paywalled], regarding the slowdown in productivity growth, riled me enough that I couldn’t let it through to the keeper.

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Grace Collier, union official turned employer-side industrial relations consultant, had a column in yesterday’s edition of The Australian. I found it quite offensive. Here’s a snippet:

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