Our Malcolm is doing the right thing, sort of. After years of political illegitimacy and stifled debate about policy reform, he is opening us up to new ideas. A breath of fresh air to lift the animal spirits, as it were. Yesterday’s innovation package was good if small but the cultural shift is important.
The problem for the PM is that events are swiftly overtaking his “fresh air” agenda and if he doesn’t act soon on what is transpiring in global markets then the only new idea that he is going to see is the sudden withdrawal of confidence as the country wakes up one morning to find that it has no money left with which to innovate.
No, really.
Australia’s economy rests to two pillars for past and future. The past is iron ore and it is buggered, today at $38.90, and free falling towards a $20 handle where it makes Australia no money. The future is LNG, and it is free falling towards a $4mmBtu handle where it makes Australia no money, either.
Between them, these two commodities were supposed to provide income to the Australian economy for the next thirty years. Instead, both will provide zero within five years of the boom.
The important point for PM Turnbull is that the end result is entirely predictable:
- real income falls
- destroyed Budget projections
- falling interest rates and currency
- falling confidence and asset prices
- rising unemployment
- sovereign downgrades
These are not coming in a decade. They are coming now. Right now.
Part of the solution for the economy is certainly innovation. Given how hamstrung stimulus efforts will be, productivity gains will be essential for growing the economy and innovation is a central plank in that platform. But it is only one small part of the answer to a question that Prime Minister Turnbull has not even put forward to the nation. And that is what the Hell are we going to do as the mining super cycle turns into the greatest commodity bust in a century?
PM Turnbull is putting the cart before the horse, but the cart has hit a bump so hard that it is in severe danger of jack-knifing the horse into the adjoining paddock.
If you do not wish to be thrown that way yourself, Malcolm, I suggest you widen the remit of your narrative, pronto.
