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MEDIA RELEASE

FEBRUARY 19, 2014

POLICY FAILURES DELIVER STAGNANT REAL WAGES


Statement by Burchell Wilson, Chief Economist (Acting) Australia has reached the logical end point of six years of policy drift in the form of stagnant real wages growth. Wages are up 2.6 per cent over the past year but this has been insufficient to offset an increase in the cost of living of 2.7 per cent during this period. The result is that real wages have fallen over the past twelve m onths. Higher real wages can only be sustainably delivered by lifting productivity. Yet policy in recent years has been either neglectful of, or actively worked to undermine productivity growth. The failure to progress any significant structural reform during the last two terms of government has limited Australias productive potential. Worse still have been the clear policy failures that have detracted from productivity, notably: the carbon tax, the National Broadband Network, a dramatically expanded Renewable Energy Target and taxpayer subsidies to prop up failing businesses. Treasury modelling showed the carbon tax detracts considerably from economic growth and is a clear negative for real wages. The Renewable Energy Target, which imposes high cost renewable energy on business and households, has a similarly negative impact on the economy and living standards. Both erode productivity across the economy. Highly inefficient infrastructure investment in the form of the National Broadband Network impos es costs on the economy far in excess of its benefits. Nor is there any policy justification for propping up failing industries with taxes levied on successful businesses, thereby curtailing the growth of commercially viable firms including world leaders in their fields. Constraints on the efficient management of workplaces across the country is a key area where government policy has operated to limit the scope for productivity gains. The Productivity Commission review of the Fair Work Act cannot come soon enough for the business community. It is regrettable that significant changes will be delayed for another two and a half years as a result of political constraints. A succession of policy failures have damaged Australian living standards and need to be remedied. Most immediately this should commence with the repeal of the carbon and mining taxes, and then extend to removing road blocks to productivity at the enterprise level across the country in the form of damaging industrial relations legislation and excessive regulation. Burchell Wilson Chief Economist (Acting) Director of Economics and Industry Policy (Acting)