The Treasury head speaks

Attached find the full transcript of the inaugural speech of the new Treasury Secretary, Martin Parkinson. I will return later with analysis.

David Llewellyn-Smith
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Comments

  1. Keith MacLennan

    I really dont understand most of this so my comment could be bollocks but if Mr Parkinson is happy to talk about skilled migration to increase our productivity where are his comments on improvements to the education and training of Australians to increase productivity.
    And what about the resource of the some currently 1,000,000 Australians unemployed or underemployed in Australia for whom it seems to me precious little is being done to retrain and upskill.
    I am not aware of any problem on any scale whose long term solution is aided or advanced in any way by importing more people.

  2. Australia – an economy in transition. A sustained structural change which will reflect a prolonged shift to our comparative advantage. (Mining and services)

    Risks – a possible short-term bumpy landing from China and the necessity for China to uncouple its currency from the USD to effectively contain inflation
    (“raises the risk of action to restrain inflationary pressures in ways that impact on our export sectors”). Of potentially greater concern are the ‘unknowns’: the threat from the European sovereign debt situation and the ultimate form of fiscal consolidation in the US.

    OK, we make it through this. Considers that most Australian businesses are “well equipped to deal with short-term exchange rate volatility” – however, this will not be a temporary appreciation – it will be a sustained drift, mirroring the long term forecast growth in mining. (15 years+/-). The AUD to remain strong.

    The exchange rate is having a significantly different impact on the economy Mining MKII v Mining MI. Will continue to affect tax receipts due to taxation structure and future depreciation considerations. Terms of trade to remain at elevated levels appropriate to improve fiscal position. Sees no need for rapid tightening. Gains from the spoils of the mining boom to be reflected in superannuation savings not SWF.

    Mining and related sectors are expected to grow but will be overshadowed by the long-term shift to services.

    Basically, get used to it.

    My thoughts are that the growth forecasts seem optimistic, at least in the current environment. Mining sector, yes. Other sectors, particularly services, not so sure. My gut feel is that the commonly held view that we are reaching employment capacity is wrong. Again, mining sector excepted. I fear we are on the cusp of a decline in Australia – the situation does not appear (should I say ‘feel’) as rosy as the experts maintain. Of course this may just be the first stage in the structural transition of the economy – relatively short-term. However, I note the paper does advise how difficult it to to recover lost ground in terms of higher unemployment – but they clearly don’t see this as a likelihood.

    Lastly, whilst the paper acknowledges it will be difficult for those exporters in the non-resource sector, there appeared no enthusiasm to extend assistance to those affected – citing the 200,000 or so businesses that start and finish every year. Prepared for a little short-term pain for long-term gain? Not sure about this.

    Just my take on it – what was yours.

    Cheers.