Find below the text of Professor Ross Garnaut’s speech at AARES today. It is very long but I recommend reading it right through.
This is the White Paper for the Asian Century that should have been written. It’s sobering but not without hope and is an effective framework to view investment for many years to come.
c8c8c6b8-7013-11e2-974e-87758d011deb_Text of Garnaut’s speech.pdf by Belinda Winkelman
Kudos to Garnaut for intelligently discussing key aspects of the Asian Century White Paper that were too lightly and too optimistically (politically motivated?) presented. His is a far more realistic and sobering read.
He may be a little too reactive to the climate change unknowns but given his background that is understandable. The wake-up call should resources and ToT decline precipitously deserve wide audience.
A bitter pill when taken together with Gregory’s speech. One most appear not ready to indulge in and one where remedy remains at some distance.
Without having the time to read Garnaut right now, let me ask you: can you quickly compare it to Satyajit Das’s take on the future and say which is more “sobering”?
I read Das yesterday. Both Garnaut and Das have correctly identified the economic dislocation we can expect should the resources boom/ToT crash. Das’ Nauru comparison detracted from the piece. We are not Nauru, a tiny financially and institutionally unsophisticated economy reliant on a single product.
How about reliant on two? Just stirring the pot here bot.
a tiny financially and institutionally unsophisticated economy reliant on a single product.
I don’t know how financial “sophistication” has any thing to do with the real economy. Do you think having more 3-letter financial magic puddings will help the economy?
Do you think our economic institutions like the Treasury, RBA, ASIC, ATO and APRA are “sophisticated” ? They have a lot of but highly paid bureaucrats who stick to orthodoxy/conventional, if thats what you mean. But if you do a cost-benefit analysis, their output has been rather questionable.
Sophisticated institutional framework is important to the development of modern States and their respective economies.
Your repetitive non-answer succinctly highlights the problems with the people manning the institutional framework in our country – all PR spin masquerading as sophistication/leadership and no substance.
Mav, take it up with Acemoglu et al.
http://economics.mit.edu/files/4469
http://www-2.iies.su.se/Nobel2012/Presentations/Acemoglu.pdf
Yes I read Das. He’s got a talent for flair but is pretty much right. I thought the Nauru analogy was inspired. It demonstrates clearly the difficulty in managing commodity driven growth.
The banana republic.
The Nauru reference was not even original!
All resource based economies face challenges when the cycle turns, nothing new there – indeed has been Australia’s experience for many decades (gold rush, sheep, wheat, nickel, coal, io etc) – perhaps it tells us we are in fact more resilient than we think! We have not become Nauru. Horne warned in 1964 and Keating in 1986 and others before and after – it is partly because of our resource diversity (agricultural and mineral) that we have survived so well.
This time perhaps we face uncharted waters off the back of the biggest credit bubble in modern times and the transformation of the global economy via free trade globalisation.
Our resource base has served us very well.
Dunno, I hadn’t seen it elsewhere.
Your smooth defeatism is attractive but that’s all it is.
Defeatism?
Pretty much every post you make supporting mining in the face of criticism boils down to: “it is what it is, and that’s just the way it is – nothing we can (or should) do about it”.
Nasty paragraph from Das:
The resource sector has high levels of foreign ownership; for example, foreign ownership of LNG projects is over 80%. This means that once in operation earnings from projects may flow overseas rather than remaining in Australia, limiting the benefits. The high capital cost equates to large tax write offs, depreciation and capital allowances, which means that the tax revenue benefit to Australia may be much less than expected for some time.
“The resource sector has high levels of foreign ownership;”
Once again that is our choice. We made it long ago.
‘In the China boom, far from what we are doing to minimise the lift in the real exchange rate, we have embraced it. I am afraid that having sown the wind we will reap the whirlwind.
We have to come down from a hump in domestic expenditure, incomes and costs that is extreme in every dimension.’
Well he has gone to the very nub of the issue in a painstaking and detailed way.
You think about the guy’s background – comparing him to Das is a disservice – he nailed what was going on in Asia more than 20 years ago, and anyone comprehending the nuance and public service/academia speak of the piece.
Ross Garnaut is telling us Australia is going to get a kicking, it is going to be a very significant kicking, it is going to be a kicking stronger for our idiocy in managing the resources boom, and a kicking longer for our lack of credible responses so far to the kicking that is closer (in his opinion) than the White Paper assumes.
Yep. Between the two of them today (Garnaut and Gregory) a most salutary warning has been issued. I was particularly pleased to see Garnaut call out the Asian Century White Paper and assess elements of it from a sober realistic non-spin view.
I think was is Garnaut addressing the blind acceptance/complacency that exists within the political sphere and much MSM
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For once 3d I find myself in complete agreement with you.
I think Garnaut has come out quite strongly, and I suspect part of the reason for that would be his view of the MSM. I recall being present when he observed some shortcomings in wider economic reporting/journalism some 20 years ago, and doubt he thinks it has got better.
His comments about the declining ToT and ageing population on economic growth looking forward – and the productivity generation requirements and educational improvements needed to get economic growth going forward are so good I have just made my six year old son read them before bed – to me aloud.
I’m calling the authorities!