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You can find the current article at its original source at https://www.theguardian.com/australia-news/2017/jul/30/convincing-voters-inequality-has-got-better-is-a-tough-sell-for-coalition
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| Convincing voters inequality has 'got better' is a tough sell for Coalition | Convincing voters inequality has 'got better' is a tough sell for Coalition |
| (35 minutes later) | |
| More than perhaps anyone, the words spoken or attributed to the governor of the Reserve Bank are analysed in minute detail. When Philip Lowe speaks, people listen closely, because his words move markets and because they know, unlike politicians, he cannot afford to be glib or inaccurate. So his words this week agreeing that inequality has worsened should be listened to by the government – because right now they are being left behind by Labor and looking very much out of touch with the experience of most workers. | More than perhaps anyone, the words spoken or attributed to the governor of the Reserve Bank are analysed in minute detail. When Philip Lowe speaks, people listen closely, because his words move markets and because they know, unlike politicians, he cannot afford to be glib or inaccurate. So his words this week agreeing that inequality has worsened should be listened to by the government – because right now they are being left behind by Labor and looking very much out of touch with the experience of most workers. |
| After a speech Lowe gave this week on the labour market, the questions from journalists quickly turned to inequality and wage growth. Asked if he thought “inequality is rising of getting better in Australia?” he responded, “Well it’s risen. It rose quite a lot in the 80s and 90s, and its risen a little bit just recently.” | After a speech Lowe gave this week on the labour market, the questions from journalists quickly turned to inequality and wage growth. Asked if he thought “inequality is rising of getting better in Australia?” he responded, “Well it’s risen. It rose quite a lot in the 80s and 90s, and its risen a little bit just recently.” |
| As you can expect, such a statement didn’t quite gel with the government’s version of events, and thus some quick spin was required. When asked about this statement, the treasurer tried to suggest the governor had said something else entirely. | As you can expect, such a statement didn’t quite gel with the government’s version of events, and thus some quick spin was required. When asked about this statement, the treasurer tried to suggest the governor had said something else entirely. |
| Scott Morrison told 6PR radio that what Lowe was really talking about was “the wealth measure, and he’s particularly talking about what’s been happening in house prices on the east coast”. | Scott Morrison told 6PR radio that what Lowe was really talking about was “the wealth measure, and he’s particularly talking about what’s been happening in house prices on the east coast”. |
| Except he wasn’t. | Except he wasn’t. |
| Lowe did separate the two strands of income and wealth inequality. He argued that “wealth inequality has become more pronounced, particularly in the last five or six years because there have been big gains in asset prices”. | Lowe did separate the two strands of income and wealth inequality. He argued that “wealth inequality has become more pronounced, particularly in the last five or six years because there have been big gains in asset prices”. |
| But whereas Morrison suggested “the income and equality measures show ... that since the GFC, inequality hasn’t got worse in Australia ... if anything, they’ve got better”, Lowe by contrast said “on income inequality, it’s drifted up a little, but not very much”. | But whereas Morrison suggested “the income and equality measures show ... that since the GFC, inequality hasn’t got worse in Australia ... if anything, they’ve got better”, Lowe by contrast said “on income inequality, it’s drifted up a little, but not very much”. |
| Lowe concluded that “the movement in wealth inequality is a bit more pronounced because of the rise in asset prices”. | Lowe concluded that “the movement in wealth inequality is a bit more pronounced because of the rise in asset prices”. |
| Now arguing over annual movements of the Gini coefficient or the importance of the share of national income held by the richest 1% is a little bit angels on the head of a pin. It’s nice for economists, but when we’re talking marginal movements, whether or not it is up, down or stable is mostly irrelevant to people’s lives. | Now arguing over annual movements of the Gini coefficient or the importance of the share of national income held by the richest 1% is a little bit angels on the head of a pin. It’s nice for economists, but when we’re talking marginal movements, whether or not it is up, down or stable is mostly irrelevant to people’s lives. |
| And the point about inequality is not that it has suddenly jumped up, but – as Lowe noted – that it has risen over the past 30 years. It is hitting now as a major political issue because whereas when the economy is growing strongly – such as during a mining boom, people’s rising incomes wallpapers over the problem of inequality. When the economy is growing weakly, it becomes harder to ignore. | And the point about inequality is not that it has suddenly jumped up, but – as Lowe noted – that it has risen over the past 30 years. It is hitting now as a major political issue because whereas when the economy is growing strongly – such as during a mining boom, people’s rising incomes wallpapers over the problem of inequality. When the economy is growing weakly, it becomes harder to ignore. |
| And it is odd how flat-footed the government has been on this issue. Morrison’s response has been to not only focus on the past five years and suggest things are getting better, but he has also fallen back on the old tropes of “politics of envy”. | And it is odd how flat-footed the government has been on this issue. Morrison’s response has been to not only focus on the past five years and suggest things are getting better, but he has also fallen back on the old tropes of “politics of envy”. |
| But Lowe’s speech on the labour market highlighted why inequality has become such a hot-button issue. When asked about how the issue of inequality fed into the RBA’s decision making process, he noted “the fact that people now expect their wage growth to be weak is dragging on their consumption”. | But Lowe’s speech on the labour market highlighted why inequality has become such a hot-button issue. When asked about how the issue of inequality fed into the RBA’s decision making process, he noted “the fact that people now expect their wage growth to be weak is dragging on their consumption”. |
| So pathetic has been wages growth for so long, that people are basically resigned to it. | So pathetic has been wages growth for so long, that people are basically resigned to it. |
| That is a horrible position to contemplate. He also noted that people are moving jobs less than in the past – people are more wary of switching jobs, and businesses are also less interested in attracting workers with the offer of higher wages. | That is a horrible position to contemplate. He also noted that people are moving jobs less than in the past – people are more wary of switching jobs, and businesses are also less interested in attracting workers with the offer of higher wages. |
| What is worse, Lowe also suggested this was likely to continue. He told the audience “perhaps the most common theme that is coming out of liaison [with businesses] is that the current rate of wage growth is going to be sustained for quite some time”. | What is worse, Lowe also suggested this was likely to continue. He told the audience “perhaps the most common theme that is coming out of liaison [with businesses] is that the current rate of wage growth is going to be sustained for quite some time”. |
| He suggested both workers and businesses were getting used to wages going up by around 2-3% each year. | He suggested both workers and businesses were getting used to wages going up by around 2-3% each year. |
| But such a situation will see the living standards of most workers continue to fall. This week the latest inflation figures were released, and among the items that have seen prices go up by more than 3% in the past year are fruit and vegetables, petrol, electricity, childcare, medical and hospital services, property rates and charges, and secondary education. | But such a situation will see the living standards of most workers continue to fall. This week the latest inflation figures were released, and among the items that have seen prices go up by more than 3% in the past year are fruit and vegetables, petrol, electricity, childcare, medical and hospital services, property rates and charges, and secondary education. |
| With the cost of such essentials rising faster than wages, there is little joy for households to know that the price of audiovisual and computing equipment fell 7% in the past year. | |
| And it is a situation which means the government needs to quickly sharpen its message and also its policies on the issue. | And it is a situation which means the government needs to quickly sharpen its message and also its policies on the issue. |
| If, as Lowe suggests, wages stay low into the foreseeable future, that would mean at the next election the Liberal party will be arguing that voters should stick with them even though they had less purchasing power than when the Coalition took power five years earlier. | |
| I suspect under such a situation, convincing voters that “if anything” inequality has “got better” might be a tough sell. | I suspect under such a situation, convincing voters that “if anything” inequality has “got better” might be a tough sell. |