Reigniting the economy

Following the appointment of a new Prime Minister in mid-September, Phil Ruthven asks whether the economy can be reignited.

Australia’s economic engine has been running on just six of its eight cylinders from the time the electorate sacked the Howard/Costello Government in 2007. Real growth has been down to an average 2.7 per cent each year over the past eight years instead of our long-term average of 3.5 per cent per year. Full employment faded some years ago, productivity is patchy, deficit spending has become the norm and consumer confidence has been stuck in the red more than in the confident zone.

There are no valid excuses for the underperformance of three previous governments since 2007. We have enjoyed a mining boom both in terms of price and/or volume growth; and we’re still growing in volume terms, which matters more than prices when measuring GDP growth. 

We had no national debt when the global financial crisis (GFC) struck, thanks to the previous Coalition Government, insulating us from the ravages of financial rapaciousness.  We are part of Asia Pacific, the world’s most populous, largest and fastest-growing economic region, where three-quarters of our trade, immigrants and tourism emanate.  We have been virtually free of racial, religious and terrorist traumas. We have the world’s third or fourth highest standard of living of countries with a population over five million people. Many nations would love to have these attributes.

What went wrong? We have had three governments who didn’t know – or care – enough about where the nation is heading, or its potential. Instead they had been intent on staying in power and appearing to care. If an incoming government has not done its homework on the nation’s critical issues and developed strategies before coming to power, it is too late to do them on the run.

Inaction

In these situations, they tend to hold peak conferences, such as the 2020 Summit, others hobbled by restrictive terms of reference such as with the Henry Tax Review. Virtually all have been followed by no action. They are mere show-pony exercises. Tens of millions of dollars, if not hundreds, have been wasted by government ministers, bureaucrats and eminent business people to no avail. The Rudd, Gillard and Abbott governments have all been down this path.

Too many politicians across parliament as a whole really have no idea where the economy and society stand now, let alone have the long-term vision or the ability to sell and make it happen. Or they lack the courage. So we witness internecine fighting and point-scoring in parliaments, replacing vision, strategy, pragmatism and progress. The new Prime Minister, Malcolm Turnbull, used these inadequacies to bid for the top job and won.

History tells us we should not be surprised. Since 1788, some 227 years ago, the nation has produced few statesmen – just 19 out of 76 national leaders in the form of governors, then premiers (of the two dominant states), then prime ministers; only one in four. Fortunately they lasted longer in power than the also-rans and the nation has been well led for nearly half that time.

Judging a statesperson isn’t that hard. All one has to do is ask any adult what they want of their nation for themselves, their children and grandchildren. A handful or two will do for starters. Safety from invasion, terrorism and crime-waves would head the list. Shelter, food and healthcare come a close second.  These two are clearly survival issues. Then comes jobs (full employment), modest inflation (around 3 per cent) that doesn’t destroy earnings and spending, productivity (around 1.5 – 2 per cent per year) to enable a rising standard of living and economic growth (around 3.5 per cent per year).

These can be joined by interest rates that neither penalise mortgagees or retirees, suggesting mortgage rates around 7 per cent even though the average has been closer to 9 per cent over the past half century.

A nation should be able to pay its way, so balancing its current account is important over time, and so too is having a healthy exchange rate that facilitates fair trade and capital flows. Balanced budgets over any five or 10 year period at most, is a vital discipline to avoid going down the road to economic perdition such as we have seen in recent times with the GFC and some individual nations such as Greece.

Great leaders

As said, only 19 of our national leaders have passed this test. None qualified unless they had three or more years in power; so who made the honour list? Seven governors did: Phillip; King; Macquarie; Darling; Bourke; Fitzroy; and Dennison. Four premiers between 1856 and 1901 did: Reid (New South Wales); McCulloch; Service; and Turner, the latter three from Victoria. Eight prime ministers made the grade: Deakin; Fisher; Hughes; Menzies; Curtin; Chifley; Gorton; and Howard.

Some of these were divisive, some despised by a big chunk of the electorate, but they did not seek popularity; only electability to be able to do the job. All, interestingly, were in the last one fifth of the expected lifetime of their era, suggesting they were more interested in leaving a legacy for future generations than self-aggrandisement. All were realists, espousing but not following ideological rhetoric. Many reform leaders such as Sir Henry Parkes, Hawke and Keating are respected, but they were not able to give a tick to half the above tests. Menzies was the longest serving at 18 and a half years, and Ben Chifley had the highest score of the 19.

So, what are the current issues that, if dealt with, would lead to a 20th statesman or stateswoman and reignite the nation’s spluttering engine? The list to the right refers. The number of clear “yeses” have been few.  But the business world is stirring, they have given enough time for the government and alternative government to start showing they have what it takes to lead this rich country currently going nowhere and are venting their impatience.

So too is the electorate which has shown in elections this century at both state and federal levels they are prepared to kick an incumbent government into temporary oblivion. As Henry Bolte, a Victorian Premier, once said: “You don’t win elections, you lose them.”

Perhaps all of the above is why the Liberal Party decided to take the painful step to elect a new leader in Malcolm Turnbull, to hopefully address the important issues, reignite the economy and instill confidence in the future of the nation so often said to be the lucky country.