The knackery beckons

Ross Gittins, economics writer in the SMH, used his column space during the election campaign to debunk the economic nonsense sprouted by Howard & Co as to their success as economic managers. Again & again he pointed out that the boom had largely come about as a result of the fiscal reforms enacted by the Hawke-Keating governments, and the happy accident of a resources boom thanks largely to extraordinary growth in the Chinese economy.

Which did little to dampen conservative insistence as to their god-given right to hold the reins of the galloping stallion of relaxed & comfortable economic surety. Though that rather inconvenient interest rate rise in October was a little difficult to explain away. However Gittins & quite a few others are now beginning to point out that the economic mount may turn out to be a rather bad-tempered pony with a bad case of worms & a vicious bite.

It is becoming very apparent that Howard has not left Australia with an economic legacy to keep us in the style we have grown accustomed to. It appears that inflationary pressure is much greater than admitted by either Costello or Treasury, & there's quite a few other significant problems brewing. Some of which are not of any government's making, yet Costello & Howard certainly failed to put into place policies & initiatives that would have helped insulate the Australian economy.

Tax cuts given or offered by Howard & Costello are not in any way solely responsible for an economy now running with an underlining inflation rate of 3.1%. But they certainly did not & do not help. & I suspect it may turn out that it's not so much the extra consumer spending that matters, but rather the failure to develop & improve capacity in an economy stretched to meet its own demands & export demands. Where Mr Howard & Mr Costello, were the policies & ideas to develop long term infrastructure projects sorely neglected by both major parties? Where were the innovative responses to climate change? Where were the commitments to improving productivity, other than through raising participation rates - a policy that will initially lower productivity as more unskilled workers are pulled into the labour markets. But where were the training & education policies that would develop these workers?

Tired old notions of technical high schools & colleges were a shabby revisiting of educational policies of an Australia 50 years ago. Tertiary education rates are still far too low in Australia, TAFE education is being hanged, drawn & neatly quartered by industry expectations that they should no longer be involved in training for their own skills needs, poor funding, high & inequitable fees, and an appalling lack of rigorous research based pedagogy. A poorly educated workforce in an economy heavily reliant upon resources is not going to be able to display the flexibility we must have to remain as the lucky country of Howard's dreaming. Because we certainly are not the clever country.

Flexibility is not about Howard & Costello's ideological agenda of driving down wages & conditions, casualising the workforce - this serves in the short term to artificially hold company profits at record levels but it effectively deskills the workforce. The flexibility that we should be fostering should be focused around infrastructure redevelopment, education & training that fosters & entrenches the notion of life-long learning, & a very fundamental change to management cultures that invests in research & development, both of its human capital & processes.

None of which Howard & Costello had any interest in doing. Instead they have left us with an economy exposed to shifts in resource markets, an education sector demoralised & burdened with managerial notions of outputs instead of outcomes, and an infrastructure that has neither a national planning base nor adequate investment from either government or private sources.

The response to telecommunications for example is a horrible case study of poor governance & corporate piracy. A lot of the fundamental problems stem from the manner in which Telstra was privatised - losing strategic control of infrastructure provision in the most fundamental area of communications was the height of stupidity. Hiving off retail sales may or may not have been workable, but losing the ability to respond to changing technologies & new demands from a changing world economy in a nation of this geography both physically & socially was & is the blunderings of the incompetent. As Matt O'Sullivan reports in today's SMH, the roll out of a broadband network capable of delivering minimum speeds of 12 megabits per second is being priced at $150 per month. All in the name of shareholder profits. We already have the third highest charges among OECD nations - how quite Labor can unpick this mess remains to be seen. But one possibility would be for the Future Fund to effectively institute a majority buyback, & drive a devolution into two structures - one to research, develop & install infrastructure & the other to be a retail division, resold to the market. Well, its better than MacFarlane's plans to play with the private equity markets for god's sake.

But the main point remains - the historical revisionism that continues to fill the pages of the daily presses trumpeting Howard & Costello as economic managers par excellence will not help in any way for us or government to deal with the very real structural problems that Howard & Costello have left in their wake. The highest trade deficit on record, a 9% fall in building approvals, a slump in the last quarter's company profit figures that no-one seems to be able to explain, an underlying inflationary figure that can only be managed by the very blunt tool of interest rate control, over-capacity & record levels of personal debt. As Gittins wrote in his first major piece after the election, the odds of a recession are now in the vicinity of 30%. Odds greatly increased by the fiscal illiteracy of 11 years of a Howard/Costello government.

Rudd & co are no doubt looking at figures indicating that the stable door is well & truly open, the wormy old pony of the Australian economy is half way down the paddock & heading for the creek, & some bastard stole the stable door bolt. & we get to muck out the stables. Shovels, anyone?

Cross posted at LP in Exile