After yesterday’s Battelino nothing speech, I’ve now managed to wade through Treasury Secretary Martin Parkinson’s effort last night at The Shann Memorial Lecture.
Titled “Sustainable Wellbeing – an Economic Future for Australia” the thing is truly soporific, worthy of some Platonic form of bureaucratic perfection.
The speech began poorly, citing a series of risks but resorting to the usual posture of Canberran economics, we are different:
It is not well appreciated in Australia that our economic position is markedly different to that of the rest of the developed world. While a number of factors were at play, it should be obvious that if it were not for our flexibility — itself a consequence of sustained structural reforms and sound monetary and fiscal frameworks — Australia would not have avoided the worst of the impacts of the global financial crisis (GFC).
However, it should give us pause that the US economy shrunk by 5 per cent during its most recent recession and today has still not made up this loss. Indeed, real GDP per person in the US is still over 3 per cent lower and the proportion of adult Americans in employment is around its lowest level in a quarter of a century.
When we look at Europe or Japan, the situation is even more grim — Japan‘s real level of GDP is 6 per cent lower than its pre crisis peak, while the Irish and Greek economies are 12 and 10 per cent smaller than before the crisis.
Here’s a chart of Australia’s real GDP per capita:
Yes, that’s right, real GDP per person is also below its 2008 peak here and does not appear to be going anywhere fast. It’s a bit better than elsewhere. But hardly ‘lighting it up’. Back to Parko and it’s onto China yada, yada, yada:
The continuing transformation of the economies and societies of China and India has far-reaching implications. For example, by 2020, the Asia Pacific region could have more people in their middle class than the rest of the world combined. China could have a middle class market that surpasses the US in dollar terms. The continued rise of the Asian middle class presents Australia with huge opportunities — a potentially very large market for our goods and services. But it is not pre-ordained that this will benefit us — we need to take the decisions that will allow us to succeed in this new world, one where there will be a premium on a flexible, adaptable and innovative Australian business culture.
So, what are these critical decisions? I don’t know because Parko doesn’t tell us. Instead we trudge through a bleached landscape of the two-speed economy that includes the following clanger:
First, despite the significant improvement in the terms of trade, and consequent increase in national income, many Australians don‘t feel better off. Why is this?
… The reason real incomes have continued to grow at around the same rate, despite the improvement in the terms of trade, is because labour productivity has not kept pace with the high growth achieved during the 1990s. I have discussed the consequences of this for Australia‘s future income growth elsewhere, but it also feeds back directly into the pressures confronting some Australian firms as a consequence of the exchange rate.
So while households have higher real purchasing power as a consequence of the boom and its impact on the exchange rate, real income growth is occurring only at a rate with which people are already familiar. This, combined with the employment effects of restructuring, appears to be resulting in a sense that people are not sharing in a once in a century increase in Australian wealth.
One of the more interesting features of the politico-housing complex is that despite the extraordinary policy support that pours forth any time housing gets into trouble, no policy-maker ever talks about it. As I made plain recently, the main reason that Mining Boom II feels so much worse than its parent is that we are no longer able to leverage the proceeds and pump up asset prices. Not once in this speech did Parko mention housing. This black out just makes our officials look dim.
We finally return to our critical decisions for the future and find that they are:
A flexible, responsive economy will be crucial.
It will be important that we facilitate structural adjustment, not oppose it.
It will be important to build new comparative advantages through investments in infrastructure, education, skills and innovation and that we take advantage of the opportunities presented by the continued development of the emerging market economies.
Then we get to the details and find that the decisions are already made. The first area cited by Parko is rapid technological advancement, read the NBN. The second was boosting productivity and participation rates to overcome aging, read workplace training programs etc. And finally, environmental sustainability, read the carbon tax.
I don’t disagree with any of these but the lineup is also suspiciously political, leaving me half asleep and wondering how the hell to make reporting on the speech interesting.
I apologise if I’ve failed.