The Webbs knew more than a century ago that if you pay high wages you get high productivity

During the recent inflationary episode, the RBA relentlessly pursued the argument that they had to keep hiking interest rates, and then, had to keep them at elevated levels, well beyond any reasonable assessment of the situation, because wage pressures were set to explode. They claimed their business liaison panel was telling them that wages were becoming a problem despite the facts being that nominal wages growth was at record lows and real wages (the purchasing power of the nominal wages) were going backwards at a rate of knots. The RBA massaged that argument by adding that productivity was low and that there was no ‘non-inflationary’ space for wage increases as a result, as if it was the workers’ fault. Yesterday (May 28, 2025), the Productivity Commission (a federal agency that morphed out of the old – Tariff Board – published an interesting research report – Productivity before and after COVID-19 – which lays bare some of the misinformation that the corporate sector has been pumping into the public debate about productivity growth. In particular, it demonstrates that forcing workers to work longer hours undermines productivity growth, that work-from-home is beneficial, and the lack of investment in productive infrastructure by corporations is a major reason for the lagging productivity growth in Australia.

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Japan sales tax debate continues – Reiwa are the only Party that understands the reality

On July 22, 2025, the – 2025 Japanese House of Councillors election – will be held. I have a good friend who is standing for the – Reiwa Shinsengumi – which is a genuine progressive, Left-wing party, not like the fake progressive parties these days that masquerade as social democratic parties (for example, British Labour, Australian Labor, US Democrats, to name a few of many). My friend is the endorsed candidate for the Kyoto Electoral District (頑張ってね、みなこ). One of the major policies that Reiwa proposes is the abolition of the consumption tax. In fact, this election has spawned widespread opposition to the consumption tax from other parties as well. It has been a highly contentious issue in Japan for several decades and its introduction and regular increases to the present level of 10 per cent reflects the dominance of neoliberal misinformation about the fiscal capacities of the Japanese government. Perhaps, this election we will see some more sensible outcomes.

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Commentary on Moody’s downgrade gives the game away – finally

We sometimes encounter commentary that blows away the smoke that provides cover for important myths in the world of economics and finance. Whether that commentary knows the import of its message is questionable but it certainly has the effect of casting aside a myriad of fictions and redefines the sort of questions that one can ask. Such was the case last week following the decision by the ratings agency Moody’s on May 16, 2025 to ‘downgrade’ US government debt ratings from Aaa to Aa1. While many commentators acted in Pavlovian fashion and crafted the ratings downgrade as signifying that the US government was “more likely to default on their sovereign debt”, one influential opinion from the mainstream came out with the conclusion that “there is next to zero chance the government won’t be able to pay its creditors”. Which really game the game away and exposed these ratings agencies as political attack dogs representing sectional interests that want less government money going to welfare and more to them – among other things.

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A Just Transition framework is required to head off the climate denying Right

The recent federal election in Australia saw the conservative opposition coalition lose further seats in parliament building on their disastrous 2022 result. The coalition is made up of conservative urban types (the so-called Liberal Party) and the National party, which represents the rural lobby. The Nationals are essentially climate-change denialists and because the Liberals require them to have any hope to govern, the smaller rural lobby can dominate policy choices. To convince the Nationals to adopt a net-zero by 2050 stance, the Liberals had to agree to propose a shift to Nuclear power, which was neither realistic in a logistical sense or economic in a cost sense. The electorate clearly rejected that option at the recent election. Now the Liberals, who are facing an existential crisis after the devastating loss, has to make a choice – stick with the Nationals and jettison net zero or break the Coalition and pitch a climate policy that will be acceptable to voters. The problem is that neither option will deliver them electoral success. Progressives are enjoying some rare schadenfreude over this conservative dilemma. It seems that the British Labour Party has got itself into a similar dilemma, with pressure from the Right-wing Reform Party to water down its climate policy. But what is more interesting in the UK setting is the role played by Labour’s former Prime Minister, who is also now attacking ‘green’ stances. I predict that will not end well for Starmer and Co. Fortunately, the Australian Labor party, which is also in government is sticking to a more ambitious climate agenda, although, even then, it is not ambitious enough. However, governments that are pursuing a net zero agenda must provide security for communities and regions that will bear the brunt of the policies introduced. The resistance to change that political forces such as Reform UK exploit can be easily offset if governments accompany their net zero agenda with a Just Transition framework. However, there is an absence of policy development in that area.

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Australian labour force data – employment growth absorbs rising participation without increasing the unemployment rate

Last month’s labour force data for Australia revealed a sluggish labour market, seemingly on the cusp of contraction as other indicators were pointing in that direction. The Australian Bureau of Statistics (ABS) released the latest labour force data today (May 15, 2025) – Labour Force, Australia – for April 2025, which revealed that employment growth was strong enough to absorb a 0.3 point rise in participation without increasing the unemployment rate. The broad labour underutilisation rate (sum of unemployment and underemployment) did, however, rise 0.2 points to 10.1 per cent on the back of a rise in underemployment. The fact that 10.1 per cent of available labour are not being used indicates that folly of those who claim Australia is close to full employment. There is substantial scope for more job creation given the slack that is present.

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Australian wages growth – real wages stable – no breakout evident

Throughout the recent period of higher than usual inflation, the Reserve Bank of Australia kept telling us that they had to keep hiking rates (even though the inflation trajectory was downward) because they were predicting a wages explosion. Who told them about that? Their so-called business liaison meetings. The business sector is always claiming that a crippling wages breakout is about to happen because they want policy makers to suppress employment growth to give them the upper hand in wage negotiations. Anyway, no such wages explosion occurred. And the latest data shows that things haven’t changed. Today (May 14, 2025), the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the March-uarter 2025, which shows that the aggregate wage index rose by 3.4 per cent over the 12 months (up 0.2 points on the last quarter). While most commentators will focus on the nominal wages growth relative to CPI movements, the more accurate estimate of the cost-of-living change is the Employee Selected Living Cost Index, which is still running well above the CPI change. Using that measure, purchasing power of the nominal wages was stable in the March-quarter. There is no wages breakout happening.

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I wonder how progressives are viewing the fact that they gave credence to a key Trump operative

It’s a big data week for me and today’s post is more of a news information offering rather than a deeper analysis of a topic, which is my usual pattern. However, I discuss in some detail recent appointments to the US Health Administration, some of which were prominent during the early COVID years and received considerable promotion from so-called Left progressives. One of the leading characters in the attack on government restrictions is now Trump’s appointment to the major national health research funding agency and he has vowed to defund any institution that doesn’t follow the ‘freedom’ dictates of the authoritarian regime that Trump is running. I wonder how these progressives are viewing the fact they gave credence to a key Trump operative.

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The intersection of neoliberalism and fictional mainstream economics is damaging a generation of Japanese workers

The – Japanese asset price bubble – burst in spectacular fashion in late 1991 (early 1992) following five years in which the real estate and share market boomed beyond belief. The boom coincided with a period of over-the-top neoliberal relaxation of banking rules which encouraged wild speculation. The origins of the boom can be traced back to the endaka recession in the mid-1980s, after the signing of the – Plaza Accord – forced the yen to appreciate excessively. This was at the behest of the US, which wanted to reduce its current account deficit through US dollar depreciation. The narratives keep repeating! This post, however, is not about the boom, but its aftermath. The collapse in 1991-92 marked the beginning of what has been termed the – Lost Decades – which was marked by a trend slowdown in economic growth, deflation, and for the purposes of this post, cuts in real wages as nominal wages stagnated. While the long period of wages stagnation was bad enough for Japanese workers, there is still hardship coming as the cohort who entered the labour market during this period reach retirement age. This post is part of work I am doing on Japan, which I hope will come out in a new book early next year after I return from my annual working period in Kyoto towards the end of this year.

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Australia is not America – elections after Trump

Last week, the – 2025 Canadian federal election – was held and the Liberal Party won for the fourth consecutive time securing 169 seats (in the 343-seat House of Commons), just short of a majority. They also won the popular vote (43.7 per cent of the vote – up 11.1 per cent), which was the first time they had achieved that since 2015. The Opposition Conservative Party leader lost his own seat in the election. On January 7, 2025, national polling saw support for the Conservatives of around 47 per cent and support for the government around 20 per cent. By the time the poll came, that had shifted dramatically in favour of the government. In between, came Trump. The UK Guardian analysis (March 19, 2025) – Canada’s Liberals on course for political resurrection amid trade war, polls show – said the shift “has little precedent in Canadian history, reflecting the outsized role played by an unpredictable US president”. To some extent, the craziness of the US political situation at present also impacted on the – 2025 Australian federal election – which was held on Saturday (May 3, 2025). The incumbent government, which was well down in the opinion polls before Trump took power, won in a landslide achieving the highest two-party preferred outcome in Australia’s electoral history. The parallels with the Canadian outcome are strong despite the different voting systems in both countries. Moreover, the conservative Liberal-National Coalition in Australia, the dominant party in the Post-WW2 era has been reduced to being little more than a far Right populist party. Similar to the Canadian situation, the Opposition leader also lost his seat, which was the first time that has ever happened in Australia. So Trump is undermining the very movements he is trying to promote. But what is very clear is that Australia is nothing like the US, despite some commonalities (language – sort of!).

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