Shadow Minister & Yabby, in reply

Shadow minister,

we all have access to journals or the ABS, I'm not disputing your figures, my claim is that in the aggregate ,the situation with our current account deficit is not improving and the aggregate is the only real statistic to rely on if you want to demonstrate your argument. Climate change could be disastrous for Australia,there has been no planning, it was treated as an ideological battle, that is an example of gross negligence. Fiscal discipline is useless if there is nothing fiscal to distribute, government surpluses were supposed to correct our external imbalance, this is nonsense. Foreign lenders will not allow our external debt to increase year after year without requiring higher interest rates.

Yabby,

I suppose what we are disputing is whether or not our economy is restructuring, this is not reflected in our current account figures. You mentioned the inflation caused by the mining boom, after 100 years of independence mining still drives our economy, when it's all over we will be left with an empty quarry and few other industries. All the income will have been squandered on pork barrelling.

And finally, I'm sure that Labor has its own areas of incompetence, usually lack of vision is not one of them. Australia needs a development/industry policy desperately, heresy!

Only history will tell for sure whether Howard has ruined our economy, I'm sure that Labor will get the blame for the consequences of the Coalition government's reckless policies.( Economics is not a science, there is too much grit in the wheels of theory, that's why I recommended economic history).

Mac “Australia needs a development/industry policy desperately,”

Any plan can only be better than the Button Plan to remodel the auto-industry and the mid 1980’s manufacturers Bounty regulations, administered by Customs and Excise (basically taxpayers money disbursed to directly subsidise and unequally advantage certain manufacturing sectors).

I further recall massive subsidise available for textile clothing and footwear sectors, often taken up before the companies went belly up.

“Only history will tell for sure whether Howard has ruined our economy,”

Ask yourself, how much more public debt interest would we all be paying if the debt-hungry socialists had been in power for the past decade?

How much more would income and company tax rates need to be to cover the public debt which the Coalition deliberately paid down.

There would be
Higher tax rates
no superfund co-payments
lower income tax thresholds
there would still be a massive unfunded civil servants superannuation debt.
there would still be tax payers money being poured in to cushion the incompetence of Telstra unionised employees and institutional management.

And Keating would still be buying his suites in Paris, (so much for defending TCF policies).

If anything, the current economic circumstances are testimony to the Coalitions competence and ability to plan and manage to avert an inherited disaster, rather than any producing any ruin.

Had the socialists been in power we would now be the "Banana Republic" which Keating envisioned when his bunch of jelly-men were screwing the national economy.

Mac, our current account reflects a lack of savings by ordinary Australians,
as much as anything. If Australians saved more, owned more of BHP for
instance, profits would stay here, rather then be sent offshore.

If the current account stays high, so let the Aus $ drop, to reflect the value
of exports. Instead, we tax labour on exports.

How much economies change in 50 years tells me that we don’t have the
foggiest of what the Australian economy will be like in 50 years and nobody
can predict it. I have an old geography book from the 1960s here. That
states that Australia has virtually no iron ore, the largest deposit being in
South Australia. Our largest export by far at the time was wool. So to
start being concerned about running out of resources which we haven’t even
discovered yet, is a little premature.

I’m certainly glad that Costello paid off Govt debt. In 1996 it swallowed 7%
of federal expenditure. Increasing tax rates by 7% to pay interest, is not
my idea of good economic management.

I certainly don’t believe that Govt is able to predict what industry should be
doing. Far better to create a suitable climate for exporters, then let talented
entrepreneurs and venture capitalists find the niches. I was involved in
innovative exports for many years. On the one hand there were well meaning
Govt officials trying to interfere, on the other hand there were other Govt officials
inventing more red tape and restrictions. If they both got out of the way and
all those costs were reduced, we’d be far better off and results might improve.

Restructuring an economy from one that depended on the sheep’s back, where
manufacturing was a mollycoddled, overprotected dinosaur, to an innovative
market economy, is not going to happen in a few years.

All credit to Keating, he started it and Costello has continued it. But we still
have a long way to go. Meantime mining is certainly assisting to help
fund that transformation. So be it.

Col Rouge and Yabby

Yabby,

"let the $A drop, to reflect the value of exports", it won't will it, as long as the mining boom keeps it high, the boom is not financing restructuring but pork barelling such as first home buyers grants. Mining geologists are already expressing concern about the decline in available high grade deposits. The Howard government has, too late, realised its mistake and is starting to implement policies to encourage venture capital and R&D, our venture capital is about 1/3 of the OECD average expenditure and R&D about half. " resources we haven't discovered yet" are you serious? When? Where? The Japanese and Koreans used industry policies to develop their manufacturing bases and let the fiscal side of the economy serve their aims, not the other way around as in the Anglo neo- liberal fantasy.

Col,

We are a already banana republic, with a foreign debt of 1/2 a trillion dollars and no prospect of turning the situation around with the current policies. You are concentrating on government surplus as the only measure of competence. Just wait and wait and let the market perform its magic,someday. The industrialists in NE Asia will buy and sell us long before then.

Mac, given that Australians have 2.4 trillion$ worth of assets, why should
500 billion of debts be a problem?

http://www.smh.com.au/news/business/were-all-richer-we-just-dont-realise-it/2007/10/01/1191091029764.html

We are still a young country, debt is to be expected, unlike old Europe,
where wealth has accumulated over hundreds of years.

I would not panic just yet about iron ore reserves. Last I looked, they were
still busily drilling to discover how much they actually have. We are mining
ore with 60% iron content, the Chinese are mining ore with 10%. The NW
gas fields are still being drilled, most projects have not even begun production
yet. BHPs uranium reserves recently doubled, when they finally got around
to drilling around their SA mine site.

You sound determined to have Govt tell industry what it should do.
That might work in Japan, where compliance and conformity are part
of the culture, but they are not part of our culture.

I remind you that the Swiss have no industry policy and their industries
have done extremely well in the global economy, by developing high
value niche industries.

I disagree that our current account won’t be turned around. What was
always lacking was our ability to save. Now we have enforced savings,
through the super levy. That’s added 1 trillion$ to our wealth accumulation.
That will continue. Many of the mining projects now being invested in,
won’t even start production for a few years, so it will take a while for
those figures to show in our current account.

New niche manufacturing industries will be created, if innovation
is allowed to thrive and is encouraged. We are not doing that yet.
In my experience, when entrepreneurial types do undertake a venture,
they are usually bogged down in State Govt red tape to such an
extent, that in the end they throw in the towel and decide to go and
make their venture happen elsewhere.

Yabby,

I hope you're right, however I don't share your optimism given the country's past record, the "Lucky Country" description still applies. Just a few points, first a simple arithmetical comparison between assets and liabilities is not adequate as any accountant will tell you. Much of our debt is used to finance consumption, not income producing assets, and the mining boom is currently squeezing industry. The super levy was a Labor initiative, wasn't it, Gasp! I spent some time comparing the Japanese and Australian economies and you are carictaturing MITI's industry policy as authoritarian, it was far more subtle and flexible than that , and yes obviously it's a different culture and Japan has negligible natural resources. The Swiss were also Hitler's bankers, I wonder if they have a better class of client now. Even if you're correct we still have the problem of servicing that debt until we reach the neo-liberal nirvana. In say, 5 years time, one of us we be able to say "I TOLD YOU SO"