Michael Cooney
Monday, 20 July 2015

Inclusive Prosperity – Australia’s record and the road ahead

The Inclusive Prosperity Commission argues rising inequality is a threat to Australia’s future growth prospects. In turn, we argue that polices to limit inequality are urgently needed – while policies which make inequality worse are neither tough nor necessary but would harm our future prospects.


Inclusive Prosperity – Australia’s record and the road ahead


We firmly argue that an emerging squeeze on living standards in ‘middle Australia’ is bad for Australia¹s future growth. For the past twenty-five years, rising living standards in middle Australia have strengthened our economy in a period when run-away inequality and wealth concentration destabilised the US and much of Europe. Now threats are emerging at home which could see us repeat that overseas experience.

The clear signs of a wage ‘decoupling’ or ‘disconnect’ where rising labour productivity is not matched by rising labour income are most troubling.

If our labour market institutions have weakened unions and workers so much that they can¹t successfully bargain for a return on productivity, this is not just bad for living standards in the short term it is bad for productivity growth in the long term. The widening gender pay gap hits working families particularly hard.

The widespread public calls for a new consensus for bold productivity-enhancing reform must acknowledge the vital importance of wage growth as an incentive for productivity growth. Policies to make industrial relations more ‘flexible’ by further weakening bargaining power of employees would be fundamentally misguided based on this evidence.

Similarly, business and media elites pushing for economic change must acknowledge the central place of equality to future growth. Policies to make firms more ‘competitive’ by redistributing income and wealth away from middle Australia through badly targeted changes to the mix of consumption, income and asset taxes would be a disastrous step down the discredited American road.

Our discussion paper is issued on the eve of the National Conference of the ALP. The threat of rising inequality is critical policy context for major debates at Labor’s conference on fiscal policy, tax policy, industrial relations and trade – a pro-equality platform will be a pro-growth platform.

About Michael Cooney:

Michael is a former Executive Director of the Chifley Research Centre. He was previously Speechwriter to Prime Minister the Hon Julia Gillard MP, Senior Adviser at the HR Coombs Policy Forum, Crawford School of Public Policy at the Australian National University, and was Principal Policy Advisor to Federal Labor Leaders Kim Beazley and Mark Latham.