Beyond the ‘beyond blue’ economy

Buck-up! That’s the increasing message from various quarters today. Most prominently from NAB CEO Cameron Clyne at Sydney Morning Domain:

National Australia Bank chief executive Cameron Clyne says taxpayer funds in bailing out some industries could be better spent investing in sectors such as technology that will provide jobs of the future.

The banking boss also cautioned Australians over talking their economy into a gloom, pointing out it was still outperforming many developed countries around the world on most measures.

Mr Clyne’s comments came as figures released on Wednesday show consumers were increasingly worried about their jobs and the economic outlook as consumer confidence slumped to its lowest since May. Westpac and the Melbourne Institute’s consumer confidence survey is now 10 per cent lower than its post-election peak reached in November.

It never ceases to amaze me how thin this notion of confidence is. Let’s use an illustration.

If I’m a number three batsmen in an under 16’s cricket team, with dreams of playing for Australia, then I’m going to need a fair bit of confidence to get there. How will I get it? Will I:

• keep batting with a positive attitude but faulty technique that has me averaging 19 per dig, slightly better than the other young hopefuls in the team, but not good enough to match my aspirations, or
• recognise the structural shortcomings in my approach, work hard on fixing them, then enjoy new levels of FAR HIGHER confidence when the structure of my game takes my average to 40?

I would have thought the answer is obvious. Confidence derives from capability not from positive thinking. In my experience, telling someone to buck-up when their reality is difficult only makes them angry. In some cases that anger may turn into motivation but for most it will increase their sense of isolation and depression.

That’s what’s holding back national confidence today: a failure to address reality not a lack of positive thinking.

Take, for example, Westpac’s latest unemployment expectations data, which has rocketed to recessionary levels:

• The unemployment expectations index rose 5.5% in Mar following a 2.3% gain in Feb and a flat print in Jan (+0.7%). So far this year the index has lifted 8.6% and is 17.7% higher in the year.The index is now at its highest level since May 2009 which was in post GFC washout. More critically, Jun 2013 was looking as it was going to be the peak of this cycle but that has not been so. We have seen three “local maxima” in this cycle and Mar 2013 is currently the high point.From a Sept 2013 low, the index is up 15.3% taking the annual rate of growth from –8.2% to 17.7% in Mar.We now have a decidedly pessimistic trend suggesting that households are getting increasingly anxious about the jobs outlook. The widespread reporting of the closures of Holden, SPC, and Toyota manufacturing, and the uncertainty surrounding the timing and magnitude of the jobs cuts at Qantas, would not have helped.
• Worth noting is that the index trend is now 25% higher that its 10 year average. This is consistent with the observation that employment growth is underperforming relative to population growth. As such, it is likely that the employment to population ratio will push lower and that we are unlikely to get a sustained near term lift in full-time employment.
• The worries of paraprofessional/trade & sales/clerical are surging while men remain more worried than women. It is interesting that tenants are more worried than other types of residential status.
• While unemployment expectations are rising in all states, WA stands out as being the most worried about jobs compared to their long-run average.

A few points then. Although recent job losses in eastern states have done some damage, this recent move higher in job concerns (not pessimism, sorry) is being driven by WA where the mining bust is in full roar:

What does that tell you? Are sand-gropers a bunch of self-disgusted losers? No. Are they living through an economic bust? Yes. Is it really that wrong to react to the reality of their economy’s changing capability with a fall in confidence? Obviously not.

WA is not talking itself into recession. The rest of the economy is not doing so either. It’s simply the reality of our circumstances that we need to work hard to change, instead of whinging about whinging.

I’ll close with another analogy. In day-to-day psychology there are two basic schools of thought about depression. The first is that a person can get themselves into a feedback loop of negative thinking that leads them to get ‘down’. Ironically, this same school often bases itself in the notion of a chemical imbalance in the brain.

This is the Beyond Blue school in which redress is to use what is called “cognative behavioural therapy” that actively works to change negative thoughts patterns to positive thought patters. Drugs can be used as well. Both are useful tools that can help manage and alleviate the symptoms of depression day-to-day.

The second school has different names but in general falls under the heading of “psychotherapeutic”. It sees depression as the result of unexpressed past trauma. It sees the body as frozen in a past state of pain that must be thawed out. Chemical imbalances are merely an expression of this deeper reality.

The treatment is to connect with a trustworthy person and un-thaw the past pain. These days that is a therapist of some sort. In the past it would have been a priest or similar. The end result, however, is improved emotional structure and the curing of the problem not treatment of the symptoms.

I submit to you that that is where we are today in our economy. For decades we’ve applied cognitive behavioual therapy to it. We’ve managed our imbalance, we’ve taken drugs to push back our doubts, we’ve listened to the Beyond Blue rhetoric and gotten on with it.

But today that just isn’t cutting it any more. We’ve all seen what happened to other economies that ignored their deeper issues and that nagging sense of doom just won’t go away this time. The harder we push it down the more it raises up, encouraged by the reality of difficult circumstances confronting our peers.

To repair national confidence now is not about more drugs or happy thoughts, it’s about addressing the underlying reality that causes the need for them. It will require firm yet sensitive leadership, a strong sense of personal responsibility yet an abundance of empathy. It will require connection with a new vision for Australia, one that is mindful of past failures but confident about a new vision for success.

But, above all, it’s first going to take the cojonies to face the truth.