Comments on: Keating Cute

By: Graham Young

Graham Young — Sat, 16 Jun 2007 17:16:14 +0000

Michael, precisely – it was monetary policy, not the fall in the dollar that led to inflation. Keating used to frequently boast that the “conservatives” would euthanase the economy, but only Labor could provide a high growth economy. So he had slack monetary policy because he thought the accord could contain inflation.
The result was boom bust inflation and boom bust interest rates, with the higher interest rates caused by the inflation leading to currency appreciation.

By: Mark U

Mark U — Sat, 16 Jun 2007 13:08:50 +0000

Graham
During the 1980s, the Accord set nominal wage growth, the float of the curency was followed by a large fall in the dollar in 1985. This led to rises in prices of imports and contributed to overall price rises because monetary policy was accommodating in order to keep unemployment low. The net effect was that wages fell behind prices during this time.
The whole thing with superannuation occurred in the early 1990s, well after the drop in real wages had occurred.

By: Graham Young

Graham Young — Wed, 13 Jun 2007 15:44:10 +0000

Mark U, that’s not how exchange rates work. For starters, they only affect that part of the economy which is exposed to international trade. And then they increase the prices that some industries receive, increasing their ability to pay higher wages at the same time that they increase costs for importers, decreasing their ability to pay higher wages.
But in an economy with relatively inflexible labor markets, wage increases will reflect the average balance between the two. As a devaluation of the dollar means exports are more competitive, it provides a real boost to that part of the economy, while it also boosts those parts of the economy that are import competing. The result is an economy with an overall enhanced ability to pay higher real wages.
The inflation part of the argument is a furphy. Inflation is governed by money supply, not exchange rates.
The real reason that Keating cut real wages was because he was trying to move a proportion of the share of the economy held by employees to business as a further boost to the economy via investment.
The Accord was used to depress real wages, and there was also a trade-off against compulsory superannuation, which represented in an increase in real wages, but did not show up in the wage packet. Keating saw this as a way to increase wages and savings at the same time without causing inflation.

By: John Ryan

John Ryan — Wed, 13 Jun 2007 10:13:51 +0000

Jeeze Graham dont think so not going by the almost hysterical EDs and columns in Murdocks OZ against Labour.
If ever a paper can be said to be barraking for Howard and the Libs its the OZ

By: Mark U

Mark U — Tue, 12 Jun 2007 23:08:08 +0000

“like that real wages fell because the dollar dropped”
Under the Accord, with wage increases negotiated between unions and government and then largely ratified by the Conciliation and Arbitration Commission, real wages did in fact fall in the face of a falling dollar because of inflation being imported into the country. If the dollar had not fallen then prices would have been lower and real wages higher.
All through the mid 1970s and early 1980s there was a debate about the “real wage overhang”. This phenomenon largely disappeared during the late 1980s and early 1990s.

By: Bobbie

Bobbie — Tue, 12 Jun 2007 21:41:03 +0000

Your comments mirror my thoughts. Howard has been trying to link Rudd with Keating and Keatings spray put a lie to that. Yes, T Jones let Keating get away with furphies for a reason….and Howard and Costello bit today in Parliament. I had a chuckle.

By: paul walter

paul walter — Tue, 12 Jun 2007 20:12:31 +0000

Hope you are right, Karosoon.
Nonetheless, Keating raised issues that have not been faced over more than a decade of failure ( think of the disgraceful Lennon treachery of 2004! ), for rank and file and the ordinary citizenry, concerning internal democracy, goals, policies and presentation that needed to be fixed before the ALP could reasonably hope to regain office, with the hope of doing something worthwhile.
The public is quiet, but the most recent disappointing op.polls speak eloquently for themselves and the public they represent. They show a public still are not convinced that “new” Labor is “dinkum”.
They want the Labor leadership to finally commit to Australia and Australians rather than shonks like Gunns and so-called “developers” that always seem to hanging around politicians.

By: Colin Gradolf

Colin Gradolf — Tue, 12 Jun 2007 20:04:22 +0000

the sainted paul gave us a brief golden age of society and politics and anything he says must be viewed in that context.
i hope that 1996 was an abberration that we have finally got over and that we can move onfrom the me too mediocrity that the current regime represents.

By: Karooson

Karooson — Tue, 12 Jun 2007 14:42:30 +0000

Paul Keating one of the greats of the ALP.But he should not have come up with those remarks,at a critical time,such as now.Kevin Rudd will be Prime Minister come hell or high water

By: Dr Who

Dr Who — Tue, 12 Jun 2007 14:18:44 +0000

Mr Keating needs to remember he belongs to the past & stay there.Let Rudd have his day, lets see what changes he has on offer.Mr Howard has shown his so called best,& what he has instore.I am yet to see something that will benefit Australia.