Whilst Australia’s economy is facing enormous challenges arising from the impact of the global recession, there is another story emerging.
It’s a story of consumer spending holding up, of the housing market remaining strong, and of companies sharing around the burden by shortening hours to keep employees in jobs.
We are not out of the woods yet, but in the short-term the savage downturn that’s hit many other countries so hard, has been averted here in Australia. I believe this has happened because the Government has displayed two important strengths in a time of crisis: political courage and long-term vision.
Public policy is made democratically in the public arena where big ideas are fought over and orthodoxies established. The process involves websites such as The Punch, academics, think tanks, vested interests and policy makers in sometimes highly charged public debates.
The past couple of decades saw the establishment of a new orthodoxy that essentially said that running a budget surplus was the be-all and end-all of responsible economic management – regardless of whether that surplus was hiding chronic underinvestment in the workforce, skills, and modern infrastructure that underpins our future prosperity. And because surpluses were all that mattered, productive long term investment got the chk, chk boom treatment.
Infrastructure spending was seen as simply a cost rather than as an investment.
Staying within the confines of these orthodoxies might offer intellectual comfort and an easy alternative to hard thought, but it can also offer a convenient excuse for failure. Like the economists who made the stock market collapse of 1929 turn into the Great Depression of the 1930s, orthodoxies allow policy makers to say that they were only following accepted wisdom and evade responsibility for their actions.
In the face of the financial crisis of 2008, it would have been easy to have taken refuge in this orthodoxy. But it would have meant retrenching and retreating, backing away, avoiding bold moves, and obsessing about debt – all at precisely the wrong moment in history.
Instead of following the advice of our critics, the Government acted boldly. Just 9 months on from the Lehman Brothers collapse, the Prime Minister’s leadership of a gutsy expansionary and reform strategy now looks like common sense. This wasn’t a foregone conclusion by any means last September.
I believe history’s verdict will be that in the face of a huge challenge, the Government showed not just intellectual leadership but high-order political courage and skill.
The initial measures are well known to readers of The Punch. A $10.4 billion Economic Security Strategy in October last year; a $4.7 billion Nation Building package in December; and a $42 billion Nation Building and Jobs plan in February.
These measures had an emphasis on increasing economic activity by boosting consumer demand and getting vital job-creating nation building under way in crucial facilities like rail, road, ports, schools, TAFEs, universities, and broadband. And they were backed up by strong measures to keep our financial sector strong and stable.
I know some of the associated consumer stimulus measures provoked some unease. People prefer to see public funds invested in projects of long-term benefit to the nation, not as cash advances to boost consumer demand.
True, stimulating consumer demand is not an end in itself. But, those interim measures represented a lifeline to support jobs and growth at a time when we were facing a collapse in consumer spending, and before the larger scale nation-building projects could get underway.
It’s early days, but I believe we have been vindicated by Australia’s relatively strong economic performance to date in the form of small but positive growth and rising consumer confidence.
The Government’s stimulus has been delivered while keeping our net debt at one-fifth of that of comparable nations – a demonstration of responsible economic management.
The second strength Australia needs to get through the global recession and prosper in the future is long-term reforming vision.
Australia has been through eras of boom and bust before, but in the past we’ve made the boom work to our long-term advantage. Take for example, the benefits of the 1850s Gold Rush which can still be seen in the splendors of Victorian-era Melbourne and cities like Ballarat and Bendigo. The Roaring Twenties left us with the Sydney Harbour Bridge, the Great Ocean Road and great memorials to the First World War – projects started when the economy boomed and completed with public investment after it crashed.
The great era of Post War Reconstruction gave us the Snowy Mountains Scheme, the Australian National University and the public infrastructure that enabled us to massively increase our population and create modern Australia. The boom of the 1980s gave us many advantages, most notably a massive expansion in education and skills.
But the most recent mining boom was a strange aberration – it’s like the dog that didn’t bark.
The fastest rise in wealth in Australia’s history failed to leave its mark. It should have accelerated us into first place in the things that determine the wealth of nations in the 21st century like early childhood education; improved year 12 retention rates; fast broadband; efficient transport systems; and cleaner energy sources.
Yet at the end of the boom, Australia had gone backwards in world rankings in so many of these areas – most ludicrously of all we even had bottlenecks and inefficiencies in the very aspect that had enabled the boom in the first place – mining exports. In fact, under the Howard Government, public investment in the nation’s infrastructure as a proportion of national income fell by close to 20 per cent.
What we had for the first time in our history was a progress-free boom. The Gold Rush without the splendour. The Twenties without the Bridge. The Forties without the Snowy. And the Eighties without the massive expansion of education opportunities.
We now have to make up for this lost opportunity, and do the things left undone when the times were relatively easy.
We are rolling out a nation-building agenda which will put people to work building the infrastructure that Australia needs for tomorrow.
The unprecedented investment of $35 billion in transport infrastructure alone will deliver real progress in developing the modern urban rail infrastructure to make it easier to get around our major cities, while also creating a national road network equal to the needs of the 21st century, and developing more efficient ports to support our exporters.
The $8.5 billion of new funding in this year’s Budget provides for 15 nationally significant rail, road and port infrastructure projects to lift national productivity, tackle urban congestion and build a stronger economy, while supporting thousands of jobs in these tough economic times.
Every year, millions of people drive over the Sydney Harbour Bridge to get to work, to visit friends or sometimes, as tourists, just for the sake of doing so.
Some may even reflect on the fact that the people who built it not only had foresight in economic nation-building for the future, but a sense of the requirement to support jobs when it was most needed.
The bridge started as a nation-building project and was completed as a means of keeping people in work. Hundreds of similar projects built with the same intentions during that era are scattered across the nation.
Great works of productive national infrastructure give people a sense of national pride. They tell us something about what sort of people we are and what sort of nation Australia is today. And they make it possible for us to leave to future generations a stronger nation and a stronger economy – like the generations that came before us.