For the Australian economy to escape the low-growth trap, businesses will need to not only employ more workers but also pay them a better wage. | OPINION by Ross Gittins economy inflation
Despite any impression you’ve gained, fixing inflation isn’t the end game. It’s getting the economy back to strong, non-inflationary growth. But I’m not sure present policies will get us there.
So, Kennedy said, “when assessing the policy decisions made during the pandemic there was an additional consideration for policymakers in wanting to not just return to the pre-pandemic situation, but to surpass it.”One economist who shares this longer perspective is ANZ Bank’s Richard Yetsenga. He describes the 2010s as our “horrendum decennium” where unemployment and underemployment were relatively high, consumer spending relatively weak and business had plenty of idle production capacity.
Yetsenga says this decision to entrench relatively high unemployment was a mistake. “Unemployment, underemployment and the inequality they contribute to, all affect macroeconomic outcomes [adversely]“. To employ more people, give more hours to those working part-time, and raise wage growth, business needs to see demand strong enough to pay for the labour.Unemployment is at its lowest in five decades and underemployment has fallen significantly. Real consumer spending is 9 per cent above pre-pandemic levels, and businesses’ capacity utilisation has been restored to high levels not seen since before the global financial crisis.
“We should expect the ‘real’ side of the economy to have improved as well: more demand, more employment and more investment.” Third, the idea that we can’t get higher economic growth until we get more productivity improvement has got the “direction of causation” the wrong way around. We won’t get much productivity improvement until we bring about more growth.
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