The Age editorial (2/7) continues its Mad Hatter line promoting continued and increasing levels of regulation. The attack on the Industry Commission's call for lower tariffs suggests that this will bring higher unemployment. Your editorial writers must then surely believe that higher tariffs will cure unemployment. Why not move to tariffs on all industries of 200 per cent?
The fact is that low tariff countries have lower unemployment and faster income growth. This is no coincidence. Lower tariffs bring investment and work to activities that are more productive. This means consumers can obtain more goods for less money and have additional real incomes for additional consumption or savings. Also, producers have lower input costs and improved competitiveness.
Similarly, the remarkable claim that low minimum wages in the US lead to impoverishment flies in the face of reality. The facts are that the average wages in the US are 50 per cent above those of Australia and worth 60 per cent more because lower US tariffs mean many goods are cheaper there. Wage flexibility has been a key ingredient that has brought average wage levels in Hong Kong and Singapore considerably above those in Australia.
Low minimum wages in the US and elsewhere offer people a chance to get on the bottom rung of the job ladder, which almost all employees climb up. Greater wage flexibility in Britain has also paid dividends. Measured on the same basis, Australia's unemployment at 8.4 per cent compares to 5.4 per cent in the US and 6 per cent in Britain.
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