Maurice Newman on the Unsustainable Cost of Wages

From a speech given by Maurice Newman on Monday:

Right now, one of the issues even for efficient producers is the high cost of getting goods to market. For example, the cost of sending products from Hobart to Brisbane is the same as transporting them from Amsterdam to Brisbane. This is largely due to anti-competitive coastal shipping arrangements in Australia which the previous government strengthened under union pressure and, relatively high wage costs. For example, some dockworkers can earn more than $150,000 a year while harbour pilots take home $250,000 a year for three days work. Locomotive drivers in Queensland are paid three times what their American counterparts receive. These examples are random and anecdotal but they do make the point. And if you think I have been selective, consider Australia’s minimum wage at US$33,355 for a 38-hour week against other countries with mature economies. For instance, Canada, our closest competitor has a minimum wage of US$22,766, for a 44 hour week. The European minimum is around $US 22,000, New Zealand is $ US23,000 and the United States, $US15,000, all rounded and for 40 hour weeks. A British worker receives about $US20,000 for a 38.2 hour week. On top of our minimum awards Australian employers must pay 10 per cent of their payroll in workers compensation insurance premiums, a 9.25 per cent compulsory superannuation surcharge, sick leave, overtime penalty rates and holiday loadings.

While any discussion in Australia about industrial relations evokes screams of outrage and the spectre of work choices, we cannot hide from the fact that Australian wage rates are very high by international standards, and our system is dogged by rigidities. We have long since breached our salary cap, not just by the standards of our low cost regional neighbours, but also our peers. In the end, regardless of union pressure and criticism from political progressives, relative international wage alignment will occur, either through exchange rate adjustment, unemployment, technology inflation, or, a combination.

The workplace is an important area of reform, but it is one more piece of the jigsaw, albeit a very important one, which requires attention.

Logistical efficiency is urgently needed. Investment in roads, rail and ports which can show commercial returns within a realistic time frame, should be encouraged and fast tracked. Current estimates put the critical infrastructure deficit at around $200 billion. Given that mining investment will be winding down and employment prospects may become challenging for displaced workers, early commencement on commercially sound infrastructure projects could be very well timed. If the investment includes private equity and debt supplemented where necessary with judicious government guarantees, it should be manageable even within the constraints of the debt ceiling.

Click here to read the whole speech

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