Matt McCarten: Absentee economic landlords ratchet up profits at the expense of workers

A survey released this week showed a marked improvement in the optimism of business leaders in the economy. Business lobbyists over recent months have been advocating economic problems and gleefully forecasting a recession. Predictably the National Party joined in, suggesting we all immigrate to Australia to save ourselves.

I said a couple of weeks ago how disappointed I was by Michael Cullen using the doom and gloom "beat up" by his opponents to announce that workers should not get pay rises.

He was concerned that if workers sought compensation for the increase in higher petrol prices, then this would push inflation even higher.

Since then I have been approached by many workers appalled that a Labour Government was advocating that workers shouldn't get a pay rise when their employers are doing well.

It wasn't lost on these workers that Cullen's new position is at odds with the Government's stance that it is committed to a high wage economy. If this was true then, of course, it would be supporting wages rising every year by more than the rate of inflation.

As one of the workers commented: "Where was the exhortion to bosses to take less profit and put some of it into better wages as their contribution to keeping inflation down?"

How Cullen's insistence that workers not take a pay rise while, at the same time, saying we need to close the wage gap between Kiwi workers and Australia also isn't explained. That is, unless we are expecting Australia's anti-worker laws just introduced by their government will drive their wages down toour level.

You would assume that there would be wage increases if businesses were making more profits or that productivity increased. But it seems not the case because corporate profits increased by 44 per cent from 2000 to 2004 and worker's productivity increased 2.6 per cent. Yet in the same period wages increased by little more than 10 per cent. Recent figures indicate these trends are continuing.

The conclusion seems to be the more profits received by shareholders and the more productive workers get, the less wages they receive in return.

According to the experts the main cause of inflation is a huge $14.5 billion account deficit. That's a whopping 9.3 per cent of GDP. Much of the commentary about this situation has focussed on our low savings and insistence on buying cheap imports. Do these experts think low wages might have contributed to these two crimes?

But by focusing on these two reasons they disguise the fact that nearly $4 billion of this deficit is banks borrowing funds overseas and lending it on to us as home mortgages. By cranking up interest rates the Reserve Bank Governor is trying to stop us borrowing for a home. Maybe if we slept in the streets we might help him get inflation down.

But the biggest secret to the real reason to our problem is the profits being made by overseas owners. In fact, income on foreign ownership in New Zealand was a huge $7.6 billion. This means that over half of our current account deficit is due to profits made by foreign investors.

The irony according to Peter Conway from the CTU is that because we have privatised so much, and allowed foreign investors to own many strategic assets, when the economy does well and profits are up, our current account deficit actually worsens. In a low wage economy, when workers are struggling to afford housing (and therefore take out large mortgages on a long term basis), and when overseas owned firms are making significant profits, our current account deficit is always going to be ugly.

The economy is in good shape despite the mischief espoused by our business lobbyists. GDP is up 2.1 per cent. Inflation is now 3.3 per cent.

Wages are up 4.1 per cent. But don't be fooled as this includes politicians and management types. Workers in low paid jobs got about half of that. The average hourly wage is $21.50. If you get $15 an hour or less, you're poor. But the workforce did increase by 2.5 per cent and unemployment is still the lowestin the OCED at 3.9 per cent.That's very good.

There was an 8 per cent drop in job vacancies over the last year but there are still major labour shortages. Of 14 main trades, the number of workers achieving qualifications has jumped from 1600 to 3000 in the last four years. This is very good.

Exports rose to $3.6 billion in the last month, the highest on record ever. But there was a trade deficit of $104 million for the month because of the extra we are paying for petrol.

Unemployment had dropped to 41,000 which is 9000 fewer people on the dole than this time last year. That's very good.

In fact, there are now 120,000 fewer people receiving the unemployment benefit compared with 1999 when National was last in charge.

I can now see why Cullen and the Government get pissed when business lobbyists slag them off. The economy, in orthodox terms, is managed well and is in good heart.

The next time you see economists in the media commenting about the current account deficit you'll be wasting your time getting them to talk about the real reasons for it. After all they are all employed by the banks. It's easier for them and the politicians to blame us for buying cheap imports and not saving enough.

The real problem is not workers wanting a wage increase but that too much of our money is being shipped as profit to our absentee landlords.