I also agree that immigration is adding to housing inflation and it is here (especially in the rental market) that one sees a genuine example of “demand pull” at work, but this is a specific problem that requires a specific solution rather than a macroeconomic onslaught.

It may come as a surprise to you but the composition of society is not uniform and not everybody is in the same bargaining position. As far as I see it, in a tight labour market the only way policies such as workchoices can keep a lid on wage inflation, as its proponents contend, is by removing some of the protections afforded to the most vulnerable members of society.

Of course we can talk about productivity trade offs but that was happening pre-workchoices. Excluding the annual reviews of the minimum wage we havent had a centralised wage system since 1993.

Im sorry but I have little sympathy for Tony Abbott. After all he had little sympathy for the elementary production and service workers of this world when he was out championing the brave new world of workplace relations.

Employers in Singapore (55%), New Zealand (40%), and Australia (38%) are experiencing wage inflation the most due to increased competition for available professional talent.

Price going up to reflect a shortage is not inflation – that’s how the system is supposed to work.

http://www.apegnb.ca/index.php?option=com_content&task=view&id=76&Itemid=2

Maybe I’m pessimistic (or perhaps I’m in the wrong profession :) ) but I can’t see how these types of shortages are not going to lead to wage inflation, which is only going to be moderated by either a recession caused by our government or external forces (like the US), especially given the aging workforce (i.e, fewer professionals). Or is it the case that I am incorrectly assuming that increases in professsional wages have less effect than increases from other sectors and that they don’t flow on to other groups?

the only thing I see it doing was to place the brunt of wage restraint on the most vulnerable members of society.

How so, as new jobs went gangbusters over the period. We still have the old IR laws and wages rose 4% for the past year.

I noticed on the telly the other night that Tony Abbott wasnt too pleased about being asked to bear the same burden.

No one should be asked to bear any burden over wage negotiations. A person should get the maximum he can negotiate without having to be told by an elected official they need to show restraint.

Right now however monetary policy is loose and needs to be tightened. Just take a look at M3 growth.

As for workchoices, the only thing I see it doing was to place the brunt of wage restraint on the most vulnerable members of society. I noticed on the telly the other night that Tony Abbott wasn’t too pleased about being asked to bear the same burden.

The second issue raised by Turnbull was even more challenging how to address the geographic and regional imbalances in employment opportunities and the insensitivity of monetary policy to such imbalances. Again, this is a good question which Treasury should ponder about when it advises Swan on the structure of fiscal spending.

We live interesting times. It’s going to be very interesting to see what gillard comes up with that allows for regional wage differentiation when the state apparatus that used to do that has been basically knocked out of the ballpark by the previous government. I can’t see how they can possibly manage this under a federalized award system and not allow the market to sort it out without truly screwing it all up.

Fred, monetary policy can’t be used to figure this stuff out. It’s not that it’s insensitive, it the wrong instrument. It would be like a surgeon using orthopedic tools to remove a gallbladder with a surgical saw and drill. Blood would be splattering everyhwhere.

I would have thought that a lot of people lucky enough to be working in areas where there are not enough people being trained would be looking for a decent rise and probably getting it (unionized or not). I imagine this would have long ago caused a fair bit of wage inflation had we not also had record levels of skilled immigration at the same time. Of course, the downside of having record levels of immigration (especially of rich people) and moderate birth rates is that inflation is simply going pop up in other places like the housing market, which is currently going through the roof (both for sales and rentals), despite dropping in many other countries.

If generals always prepare for the last war, so do economists. The obsession with potential wage cost pressures (which is what a NAIRU-based approach implies)is quite misplaced in present circumstances.