Low interest rates also needed for productivity

July 31, 2026

Gittins ignores the significant swing to above-inflation wage rises under Labor for those on minimum and award wages. Consumer wages have fallen for the top-half, but if wage rises spur productivity by lighting a fire under the arse of business to invest, while also providing the demand for the output of that investment, then fallen consumer wages doesn’t tell us the full story. Producer wages – deflated with domestic output rather than CPI – have not fallen by 5 per cent. That is, although on net wages have lost 5 per cent purchasing power, they have actually increased as a cost for business. From business’ perspective, wages have risen above inflation.

What is not mentioned is the state’s other key lever apart from Wages Policy: Monetary Policy, which is much more important managing investment than inflation. Wages as both the cost and revenue of business mean that higher interest rates reduce the proportion of what businesses pay out which gets back to them as revenue, because households divert more of it to mortgage repayments i.a. This reduces the profitability of the average investment, existing and prospective. Simultaneously the cost of borrowing for now less-profitable investments rises. And we think investment in productivity will happen?