Cabinet minister disavows and then embraces idea that keeping wages modest is a ‘design feature’ of the economy

This article is more than 1 year old

This article is more than 1 year old

The new minister for defence industry, Linda Reynolds, has disavowed and then embraced arguments from her cabinet colleague Mathias Cormann that wages adjusting in line with economic conditions is a “deliberate design feature” of the Australian economy.

During an untidy television appearance on Sunday morning, the newly minted cabinet appointee was asked whether she agreed with the sentiment that flexibility in wages, and keeping wages at a relatively modest level, is a deliberate feature of Australia’s economic architecture to help drive employment growth – a point the finance minister made last week.

Believing the observation was an argument being put by Bill Shorten in his economic messaging, Reynolds initially flatly rejected it, and blasted the Labor leader for making it.

“No I don’t believe that – absolutely not – and for Bill Shorten to even suggest that, I think, shows a fundamental lack of understanding about economics,” Reynolds said.

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When it was pointed out to her that the argument was actually Cormann’s, not Shorten’s, she promptly declared her colleague was “absolutely right”.

Cormann last week made a technocratic argument about the link between wage levels and unemployment levels during an interview with Sky News.

The finance minister noted it was “a deliberate feature of our economic architecture” that “wages can adjust in the context of economic conditions … to avoid massive spikes in unemployment, which are incredibly disruptive” – meaning wages could decrease or increase in line with prevailing conditions in the economy.

With both major parties now on an election footing, and with debate about economic management sharpening ahead of the looming federal budget – Labor grabbed Cormann’s observation, and also pilloried Reynold’s stumble on Sunday morning.

The shadow minister Jim Chalmers, appearing on the ABC on Sunday, contended the statements from the two government figures were evidence that “stagnant wages growth, under the Liberals, is not some accident – it’s a deliberate policy objective”.

Shorten last week declared the coming election would be a referendum on low wages growth, and Labor is pursuing policy measures ranging from restoring penalty rates, moving to tighten regulations around labour hire, and adjusting the minimum wage in an effort to boost the pay packets of low-paid workers.

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Pushed on how pursuing a living wage would work in practice, Chalmers said it would be partly a function of the Fair Work Commission sharing a new government’s priorities “to deal with what is a wages crisis in this economy”.

Labor proposes to adjust the conditions the FWC takes into account in determining the level of minimum wages. “We need to encourage the Fair Work Commission to do the right thing,” Chalmers said.

He said other “levers” for an incoming government to pull included labour hire regulations, curbs on “sham contracting, dodgy visas and penalty rates across-the-board”.

The shadow finance minister was asked what Labor would do to restore industry-wide bargaining, which is high on the wishlist of the ACTU for labour market reform, but of great concern to employer groups.

Chalmers said Labor was not contemplating “pattern bargaining” but signalled Labor was looking at ways to make the enterprise bargaining system fairer, including looking at creating scope for industry-wide bargaining for people on low wages.

“It’s obvious to any objective observer of the workforce right now that ordinary working people aren’t getting a fair go,” he said. “Wages are the defining feature of an economy that’s not delivering for ordinary people.”