So, any schism between the rhetoric of Prime Minister Kevin Rudd and his Treasurer Chris Bowen has been addressed and bridged. In an interview with the weekend AFR, Bowen made it clear that Labor’s post-mining boom narrative and policy platform will be about promoting economic diversity through increased competitiveness, not increased spending.
When asked about his views on China, Bowen said:
You have to look at what Kevin has said and what I have said, and they are the same things…That is that the China mining investment boom is drawing to an end, that is replaced by production, but that has a very different impact on the economy…Production obviously doesn’t suck up nearly as many employees as the investment phase does…That’s a challenge that will require careful management…I do think that there’s two transitions going on. There’s the investment in the production phase of the mining sector; and then you’ve got this cross-over where mining investment has overtaken non-mining investment for the first time, but then they are likely to cross over again and you’ve got to ensure you’ve got the settings in place for non-mining investment to be robust because the transition is inevitable. I see our task as making the transition non-jerky, making it as smooth as possible, making sure that we don’t see cliffs and rises, but that it’s smooth. I think we can do that.
On whether or not there’ll be any increased stimulus as a part of his strategy he responded:
Kevin, when he was prime minister the first time, responded appropriately to the global financial crisis. The stimulus was well-calibrated and absolutely necessary. So anyone who takes that approach and says that it applies equally to today’s economic circumstances is fundamentally misreading the Prime Minister. Kevin said on the night he announced he was available to be Labor leader that he believed in surpluses over the economic cycle. Since then Penny Wong has said that and I’ve said that. So I think that is frankly a pretty simplistic analysis from people who aren’t giving the Prime Minister the sort of consideration in terms of his economic approach that is appropriate.”
On what Labor will do, Bowen said he:
…is here to ensure that we are as competitive as we can be as a nation. I think we are here to facilitate economic growth. We are here to facilitate decisions necessarily taken by business. I believe in economic growth. I believe that economic growth is what lifts people out of poverty and turns aspirations into reality. That means a pro-growth agenda. It also means a pro-opportunity agenda. Growth is not enough. So I see the role of government as promoting economic growth and opportunity…Obviously Paul Keating is a very dominant figure in Labor history and rewrote Labor’s economic narrative in terms of Labor being the party of competition, the party of growth. That is an agenda that I very much sign up to.
A few points. This should be music to every Australian’s ears. We finally have a government in place that has eschewed the cheap, easy and wrong Australian exceptionalism narrative. Bowen is exactly right on the forthcoming challenge. He is also right to point out that the Opposition hasn’t addressed this at all. For the good of the nation, Labor should prosecute this case as its central re-election narrative and force Tony Abbott to do so as well.
The second point is twofold. The media spent last week behind the curve on this issue. It should now move to push Labor on how it will restore competitiveness. It’s one thing to say it will, another entirely to do it. There are four key elements to restored competitiveness: a narrative of shared sacrifice, a lower currency, capped wage growth and boosted productivity. Each obviously comes with massive challenges and it is here that the media should focus its questions. For instance:
- Labor is ahead of the RBA on these issues. The central bank has been very slow to recognise China’s growth transition, even slower to cut interest rates and slowest of all to innovate policy to bring down the dollar. How can Labor’s platform be integrated with our recalcitrant monetary authority?
- Despite a sluggish RBA, global markets are thankfully delivering the lower dollar. How will Labor ensure that this nominal devaluation continues and becomes a real devaluation that boosts competitiveness? That is, as tradable prices rise, how will wage claims be kept in check, especially in reference to the unions which will get restive?
- How will Labor boost productivity? If it’s not going to increase spending then will it improve spending? What wasteful middle and upper class welfare will it cut to fund increased infrastructure investment to boost productivity? How will such investment be kept free of pork? How else can it boost infrastructure without increasing spending? What other productivity reforms will happen?
- If all of these things are going to happen, where is the narrative of shared sacrifice that will be needed to prevent social dislocation and conflict?
- If Labor is not going to increase spending, as it should preemptively with a 1% of GDP infrastructure build in my view, then how low has growth got to get before it does increase spending? Growth is already fading towards 2%. Is it really sensible to wait until the economy reaches stall speed? And if it comes to that, what will it spend on?
Off you go, kiddies.
