While the short-term issues associated with the recovery are crucially important, they’re not the only serious economic problem we face.
Although it may seem like the sort of dull thing we used to be concerned about back when we didn’t have any real problems (circa 2019), you may recall that wage growth leading into the recession was at near record lows, despite a 28-year run of uninterrupted economic growth.
As the Productivity Commission pointed out in their latest report on productivity, stimulating and maintaining productivity growth are the only things that will boost wages in the long term.
There are two roadblocks to rebooting productivity. From the right, the concern is the re-emergence of economic nationalism and protectionism. From the left, the issue is the strangling growth of regulation.
It took a long time for Australia to move away from protectionism. There is a serious risk that the border safety concerns of the pandemic will drive Australia, and the rest of the world, back towards the insular, protectionist attitudes that were prominent in the 1950s, 60s and 70s.
Scepticism of a free trade led approach to international relations has been growing for years before the pandemic.
But a pro-market agenda is not a pro-business agenda: it’s a pro-consumer agenda.
The biggest benefit comes from the competition that foreign producers bring to domestic markets. Competition drives innovation and cuts margins: that means more products and lower prices for consumers.
Regulation is a different type of limitation on competition, one that is equally damaging and even more insidious.
The number and scope of regulations imposed by government has exploded in the last decade or so. It would be convenient to point to the global financial crisis and its supposed failure of capitalism as the genesis of this trend, but in reality a desire to tamper with market forces to control economic outcomes far predates this downturn.
If the green shoots of recovery are indeed more robust than they seemed a few months ago, it will be because of Australia’s efforts at deregulation and opening of markets in the 1990s and 2000s made our economy one of the most resilient in the world, in spite of the hostility to those ideas that has been growing since then.
It will not be easy to reignite this agenda. But if we want broad-based wage growth, then it’s time to go to work.