Peruse the Reserve Bank governor’s recent remarks to the senate or listen to the commentariat on talkback radio and it would seem that Australia’s economy has become victim of nothing more than an insidious rogue gloom-and-doomerism that threatens to hurt the nation, or worse.
At its worst, this anti-half-glass-empty rhetoric smacks economic McCarthyism. Shooting the messenger is as old as politics itself, but in what we like to consider an open, pluralistic society, let alone the 21st century, we should demand a higher standard of debate.
Saying that Australia has unusually high house prices, has a banking system vulnerable to external shocks, relies too much on a cyclical and temporary mining boom, or carries far too much household sector debt is not unAustralian, it is patriotic. And calling on policymakers to do something about our vulnerabilities is not negative behaviour, nor does it diminish our otherwise very obvious achievements, it is prudent.
Just like the debt-free person who still saves money, or the profitable company that still spends dollars on R&D, seeking to do better no matter where you sit on the ladder is the behaviour of a winner, not a loser. If anything, Australia’s experience at the 2012 Olympic Games should teach us that.
The problem is, the lucky country is not only becoming the complacent country, it is becoming the country that refuses to believe it’s lucky or complacent. While in many ways our economic survival during the GFC was down to little more than concurrent stimulus packages in Canberra and Beijing, we – the winners of the Steven Bradbury award for political economy – often like to consider ourselves somewhat immune from macroeconomic forces and financial shock. And woe betide anyone who says otherwise.
And while Australians – led by our politicians and business elite – boast of world-class industries, seer-like policy making and a currency that clearly demonstrates we’re number one, as data from the Australian Treasury and the McKinsey Global Institute can attest, around half of the growth in average incomes between 2000 and 2010 was down to terms of trade and around 90% of growth in incomes between 2005 and 2012 was down to the resources industry.
No debate
It is not only extraordinary that few are talking about this, it is extraordinary that much of what passes for debate on mining and macroeconomics treats things like the delay of BHP’s Olympic Dam expansion, or the fall in the price of iron ore, as little more than either a derivative effect of the carbon tax, an exercise in short-term corporate greed, or something to do with what Tony Abbott said in Beijing.
History teaches us that since European settlement Australia’s economy has been highly reliant on externalities, whether wool demand from Britain, tourism from Japan, or, more recently, coal and iron ore from China, which now accounts for the lion’s share of Australia’s marginal growth rate. Yet we treat the very real forces that buffer our shores as little more than something to be talked away.
And while of course this isn’t the complete story, and in many ways Australia still has the infrastructures of a diversified and sophisticated post-industrial economy, now that China is slowing down surely it is appropriate we properly debate the risks of this and seek to mitigate them with both urgency and intention.
Still, like a team that is too busy revelling in its own glory to pick the best draft or hone the latest techniques, we refuse to debate the issues, whether due to the demands of the 24/7 media cycle, the lowest-common denominator narrative in parliament, or some kind of post-colonial cultural cringe we still cannot shake 111 years after independence.
The bears, the doom-mongers, the chip-kickers, the Hanrahans and the whingers aren’t a bunch of lazy bludgers, jeering from the sidelines, they are the people who are cognisant of the very real risks to the Australian economy. Many of them merely believe that while Australia’s economy is great, and its stewardship has been largely competent, even a perfect work of machinery can have its flaws and it would be remiss to ignore these if they can damage the whole.
Like we seemingly celebrate boosterism, backslapping and self-congratulation, we should try on rational optimism for size. It’s not pessimism, nor does it require a sandwich board saying the end is nigh, but it does say that things can, and should be better with our economic planning.
Although it’s probably too late to implement policies that would have had us squirrel away some of the boom for a rainy day – a boom that Rio Tinto’s CEO now denies ever existed – and although it’s probably too late to diversify our trade balance before China stops building surplus fixed inventory, it’s not too late to reshape our economic conversation before we face the next challenges, opportunities and threats as an economy and as a society.
Michael Feller is an investment strategist at Macro Investor, Australia’s independent newsletter covering stocks, trades, property and fixed interest. Macro Investor is running series of specials on how to profit from the end of the mining boom. A free 21-day trial is available at the site. This article was an op-ed in the Fairfax press.