From AAP, Glenn Stevens at the Government’s economic do today:
“I actually think that a lot of the disquiet and dissatisfaction that we see isn’t really related to the mining boom at all,” he said.
“I think it’s got a lot to do with changes of household behaviour, which come after a very unusual period of strong spending, leveraging up and saving nothing out of current income.
“And that was bound to end sooner or later, and it has.
“In fact, it ended about five years ago.
“And we are still, I think, coming to grips with the importance of that now, and I think it’s a significant factor that is behind some of the disquiet we see.”
This material is running at the major papers under a series of headlines about how mining is not to blame for our economic disquiet. Before we get carried away with Governor’s Glenn spruiker-busting crusade on yesterday’s credit bubble, let’s not forget too that mining is absolutely to blame for the pain being felt among a long ignored and nationally vital sector: non-commodity exporters.
The Governor has done a great job of diagnosing the ills of the households but he has not done a great job of doing so for exporters. The oft trotted out excuse at Martin Place and in Canberra that we were going to lose our industrial base whatever happens is not an argument. Everyone in investment knows that past performance is no guarantee of future outcomes. As the Governor himself says, look at housing.
There is nothing inexorable about the decline in Australian non-commodity exporters. Nor is there anything inevitable about high terms of trade for any length ahead. Indeed, although China is in the process of rescuing commodity prices with another round of accelerated infrastructure spend, it is inevitable that that growth model and its inherent imbalances will end, and likely the denouement will be sooner rather than later as the risks of continuing with an unbalanced growth model slowly outweigh the benefits. That means dramatically lower commodity price in the medium term and a time when we will wish we have a much more diversified exporter base than we are currently aiming at in three commodities.
Nor is mining innocent in terms of an unhealthy influence over policies that aim to offset the above issues. Let’s not throw the baby out with bath water, eh?
