To be sure, the role of economic policy making in a decent society is to provide a safety net of basic support, retraining, reskilling and education for all those workers who happen to be in industries in decline – and we generally do that well. But policy making is also about driving an agenda that is built around internationally competitive tax structures and increasing the ease at which the private sector can invest, expand and employ.
Allocating money to an industry that will never be able to compete with a higher quality, lower cost product made outside Australia is unsustainable. Giving money to businesses that inevitable fail due to a flawed model (farmers who only stay on marginal land due to subsidies, drought relief and the like) is also horribly inefficient and costly. Money allocated to first home buyers, while nice in theory, is a costly and demonstrably useless policy in terms of getting people into the owner-occupied hosting market. Using that money, for example, to build infrastructure for new housing land and building low cost affordable housing would win any cost benefit analysis by the length of the straight.
Despite the stunningly favourable structure of the Australian economy right now, there remains some sacred cows of industry and business that governments, of both colours, have seen fit to nurture. Thankfully some governments in the last 30 years or so have been tremendously courageous at reducing industry assistance. I suspect if Australia is to be structurally sound in a decade or so, or whenever the mining boom reverses, we need to ramp up the reform agenda … and soon.
Did you know Australia used to manufacture televisions? Preposterous! Image if we still had those whacky tariffs in place that forced us to make and buy locally made TVs now?
Renaults, Mini Mokes and Austin Lancers (among many others) used to be made in Australia. Huh?
Thankfully no more.
I hope that in 50 years, we look back and see how absurd it was that Australia had a car or steel industry at all. I hope we have an economy based in high income, high skill jobs, not ones proped up by government distortions at a high cost to the economy.
The government needs to be err on the side of letting go, in the way it treats job losses in banking or small business or real estate or construction. Let it happen.
Do nothing specific, but have in place a generous and well targeted retraining scheme, facilitate relocation to the strong parts of the country and leave in place an environment that allows for sustained solid economic growth that takes up the workers lost from the industries that will inevitably decline.
- Australia will end up in the same economic position as Europe if the government doesn’t start to curb spending, says former Liberal treasurer Peter Costello. “Europe at the moment is suffering under a mountain of debt that it can’t service,” he told Macquarie Radio on Tuesday. Australia’s longest-serving treasurer warned Labor to heed the lessons implicit in Europe’s demise, saying the government could only spend money it doesn’t have “for a while” before it will end up using all of its income to service its debt.
- “This is what I have been warning about here in Australia for some time,” he said.
- “If the journey keeps continuing at the rate in the years ahead that it did in the last three or four years it won’t be too long before we start experiencing European-type problems.
- Government spending to GDP averaged 24.2% of GDP during the 12 Budgets that Mr Costello delivered between 1996 and 2007.
- Government spending rose as a result of the stimulus measures during the GFC and peaked at 26.0% of GDP in 2009-10.
- It since fell to 24.7% of GDP in 2010-11.
- Government spending to GDP is projected to be 23.6% of GDP in 2012-13.
- This will be around 1.5% of GDP below the average government spending to GDP ratio of the last 30 years and obviously below the average spending to GDP ratio in the Budget’s the Mr Costello delivered.
It is very rare for employment to fall in two straight months.
Since 2002, it has happened only six times.
Two of those back-to-back falls in employment have been since June 2011 – in the two months to August 2011 and now the two months to December (confirmed in today’s data).
Of the six occasions of consecutive monthly falls in employment, the most recent cumulative fall (-36,900) is the largest.
Three straight falls are even more unusual – since the early 1990s recession, it has happened only once (the three months to November 2000 as the terms of trade collapse and US tech-wreck was biting).
It would be a massive shock if employment doesn’t rise when the January data are released next month.
- “changed behaviour by households and the high exchange rate have had a noticeable dampening effect.”
- “with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened.”