Renewables and Fair Work Act stand in the way of employment

AUSTRALIA’S unemployment rate, 6.4 per cent, is at its highest in more than a decade. Suddenly, politics became a whole lot more real, but not necessarily tougher, for the Abbott government.

Consider Labor’s response to the latest labour market figures: it reminded voters that Tony Abbott “promised to create one million new jobs in five years”. This was indeed a foolish promise, not because the economy may not deliver the numbers, but because government almost certainly will not. That is, not unless government gets out of the way of employers and employees freely contracting their labour.

Of course, Labor also made foolish promises, and will again, as the next election approaches.

Labor rails against the government’s budget for hurting business and consumer confidence, but apart from supply, few budget measures have passed the Senate.

Labor accuses the Abbott government of making “massive cuts to industry investment, and massive cuts to education and training” and argues that “it was only a matter of time before they would be reflected in the unemployment rate”. Time indeed; the budget is a couple of months old and the cuts in education and training are not in evidence, so the effect must be magic.

Nevertheless, Labor complains the Abbott government still “has no plans for jobs”.

Ah, the old days, when men were men and treasurers had plans.

Remember Labor’s plans?

Remember the January 2009 plan, “to help support Australian jobs”, which was the Rudd government’s $4 billion “Australian Business Investment Partnership”.

And who could forget February 2009, when the Rudd government announced a $42bn “Nation Building and Jobs Plan”. It included such memorable features as “free ceiling insulation for 2.7 million Australian homes” and “a building in every one of Australia’s 9540 schools”.

There was more to come: in February last year the Gillard government’s made a modest $1bn “investment in boosting Australian innovation, productivity and competitiveness”. Of course, by then the money was all but gone.

Those were days when the Socialist Objective was alive and throbbing in the hearts of Labor men and women. Come to think of it, it still is.

But it was not all Labor’s fault that government money was misused to temporarily prop up employment. As a colleague, Kesten Green, writes, expert advice lags decades behind evidence.

The once pre-eminent and mainstream economist Paul Samuelson as late as 1989 claimed the “Soviet economy is proof to the contrary to what many sceptics had earlier believed, a socialist command economy can function and even thrive”.

And so it was that our own Little Sir Echoes in Treasury offices counselled to spend, and spend, and spend.

As the graph (created by SMART Infrastructure senior research fellow Joe Branigan) shows, the floor under the rate of unemployment was 4 per cent in 2009 at the end of a long boom.

True to the theory that expert advice greatly lags events, when the (less than) global financial crisis hit, Labor introduced the Fair Work Act. The consequence is that in recovery, unemployment did not reduce to 4 per cent, but got stuck at 5 per cent. It is now rising from a higher base.

Electricity prices, driven by green schemes and overly high reliability standards in the distribution network, make it harder for employers to hire and retain ­labour. And the lagging response of the experts, the Keynesian, has not worked. Yet Labor is at it again, calling for a plan, aka more spending.

The Prime Minister’s “plan” must remove impediments to employment by tearing up the subsidy to renew­ables, and ripping into the FWA. The unemployed will be grateful.