Im unsure of what the effect of the IR reforms will have upon the Australia economy.
a. There is the idea that as a result of lower paid jobs, it means more productivity and cheaper for businesses, which will then lead to increased investment, and more jobs, the net effect of which will be increased consumption which will further improve investment etc.
b. The other idea is that it will increase income inequality, as the lower paid workers get paid even less whilst the higher paid remain relatively uneffected due to their bargaining powers (highly skilled labour) and those with businesses increase their profts, and dont necessarily inject these profts back into their businesses, absoring the potential benefits to society.
Both concepts have their related economic theory. What I dont understand is why is the government trying to further stimulate the economy in that manner? Apart from the fact that our unemployment rate is very low, there are other means. What about the tax changes recently introduced? The whole idea behind them is that similar to point a above. They involve slightly reduced taxes for low paid workers and significantly decreasef taxes for businesses and higher paid workers, this was meant to increase invesment as businesses Net Profits increase providing them with the necceary capital to invest. Well the effect of these wouldnt have shown yet, as their is a significant lag, so why is the government so swiftly trying to implement the IR reforms before the effects of their other little strategy have been seen? I can only guess that they are trying to have a double pronged effect, maybe trying to hold off an iminent recession? But like I said before, unemployment is low, and I dont know why they dont wait to see how the tax changes will effect the economy, whether the increased consumption levels will lead to business investing more or whether they will absord them...as is the same with their other ingeuius idea of IR reform. Maybe waiting could give them a good indication of what businesses will do with increased profits, because if they absord them in both cases, then both changes would have proven relatively useless and have had negative effect in the form of decreased equality and decreased incomes.