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Plastic bag bans and employee loyalty are hurting your paycheck, Treasury claims — but one top economist isn't buying it

Jack Derwin
* Treasury deputy secretary Meghan Quinn has claimed workers in Australia that refuse to switch jobs are to blame for weak wages growth. * The idea was panned by economist and former Julia Gillard adviser Stephen Koukoulas who said that Treasury needs to "get back to basics" instead of making excuses for sluggish growth. * It comes after published internal Treasury documents reveal that it has been concerned that plastic bag bans at grocery stores may have led to reduced spending, further weighing on the economy. * * *The Australian economy is soft at the moment, as Australians spend less, construction slows, and the retail sector continues to struggle.What's surprising however are the reasons the Australian government are blaming for the slowdown.At the heart of the issue is the fact that Australians haven't been getting the pay rises required to substantially increase their spending and stimulate the economy. Treasury deputy secretary Meghan Quinn on Tuesday blamed stubborn workers who have been slow to switch jobs as a culprit. "Treasury work highlights the fact more frequent job switching is associated with higher real wage growth, even for those that stay in their job," Quinn said, addressing the Australian Conference of Economists in Melbourne. "This research suggests that a 1 percentage point decrease in the job switching rate, for any given demographic or cyclical conditions, is roughly associated with a ½ percentage point decline in average wage growth."To paraphrase, Quinn's argument goes that workers need to leave low-productive low-paying businesses to high-productive high-paying ones to grow their paypackets. With 2% fewer workers making that switch since the early 2000s, Australians are getting paid less as a result, Quinn said. The claim was slammed by economist and former Julia Gillard economic adviser Stephen Koukoulas, who told Business Insider Australia that the government "needs to get back to basics"."This is really clutching at straws and looking for excuses why the economy is looking soft, rather than being proactive," he said. "It's pretty clear why wages growth is weak when the most basic of basic economic theories tell you what's happened when we've had three straight years where GDP growth has barely averaged two and a quarter per cent."While 'The Kouk', as Koukoulas is known, admitted there is some relationship between employee mobility and wage increases, he said it's inconsequential compared to issues of unemployment and underemployment -- when workers can't find full-time work for example.It comes less than a month after Treasury documents, published by The Australian, blamed a plastic bag ban for Australians spending less money."Several firms suggested that the introduction of a ban on plastic bags meant customers reduced their consumption to an amount that they could instead carry, and delayed purchases of heavier groceries,” Treasury economist Angelia Grant wrote in a note sent on 2 April. Those kinds of arguments don't carry much weight however, according to Koukoulas, who said the Treasury should give away these "pretty poor ideas" and focus its energies elsewhere. "It's interesting to see the rhetoric change post-election and (Treasurer Josh) Frydenberg giving the all-clear to publish this material, putting out reasons why the economy is weak that has nothing to do with the RBA getting things wrong or fiscal policy being inappropriate for this stage of the cycle," he said. To get wages trending higher -- an achievement that has eluded governments for years -- unemployment simply has to fall, Koukoulas said.https://twitter.com/TheKouk/status/1151075175024062464
  • Treasury deputy secretary Meghan Quinn has claimed workers in Australia that refuse to switch jobs are to blame for weak wages growth.
  • The idea was panned by economist and former Julia Gillard adviser Stephen Koukoulas who said that Treasury needs to "get back to basics" instead of making excuses for sluggish growth.
  • It comes after published internal Treasury documents reveal that it has been concerned that plastic bag bans at grocery stores may have led to reduced spending, further weighing on the economy.

The Australian economy is soft at the moment, as Australians spend less, construction slows, and the retail sector continues to struggle.

What's surprising however are the reasons the Australian government are blaming for the slowdown.

At the heart of the issue is the fact that Australians haven't been getting the pay rises required to substantially increase their spending and stimulate the economy.

Treasury deputy secretary Meghan Quinn on Tuesday blamed stubborn workers who have been slow to switch jobs as a culprit.

"Treasury work highlights the fact more frequent job switching is associated with higher real wage growth, even for those that stay in their job," Quinn said, addressing the Australian Conference of Economists in Melbourne.

"This research suggests that a 1 percentage point decrease in the job switching rate, for any given demographic or cyclical conditions, is roughly associated with a ½ percentage point decline in average wage growth."

To paraphrase, Quinn's argument goes that workers need to leave low-productive low-paying businesses to high-productive high-paying ones to grow their paypackets. With 2% fewer workers making that switch since the early 2000s, Australians are getting paid less as a result, Quinn said.

The claim was slammed by economist and former Julia Gillard economic adviser Stephen Koukoulas, who told Business Insider Australia that the government "needs to get back to basics".

"This is really clutching at straws and looking for excuses why the economy is looking soft, rather than being proactive," he said.

"It's pretty clear why wages growth is weak when the most basic of basic economic theories tell you what's happened when we've had three straight years where GDP growth has barely averaged two and a quarter per cent."

While 'The Kouk', as Koukoulas is known, admitted there is some relationship between employee mobility and wage increases, he said it's inconsequential compared to issues of unemployment and underemployment -- when workers can't find full-time work for example.

It comes less than a month after Treasury documents, published by The Australian, blamed a plastic bag ban for Australians spending less money.

"Several firms suggested that the introduction of a ban on plastic bags meant customers reduced their consumption to an amount that they could instead carry, and delayed purchases of heavier groceries,” Treasury economist Angelia Grant wrote in a note sent on 2 April.

Those kinds of arguments don't carry much weight however, according to Koukoulas, who said the Treasury should give away these "pretty poor ideas" and focus its energies elsewhere.

"It's interesting to see the rhetoric change post-election and (Treasurer Josh) Frydenberg giving the all-clear to publish this material, putting out reasons why the economy is weak that has nothing to do with the RBA getting things wrong or fiscal policy being inappropriate for this stage of the cycle," he said.

To get wages trending higher -- an achievement that has eluded governments for years -- unemployment simply has to fall, Koukoulas said.

https://twitter.com/TheKouk/status/1151075175024062464