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Economy

"Austerity is not the path to prosperity"

"There is no public appetite for major changes to workplace laws in favour of employers." ACTU President, Ged Kearney has told a Queensland CEDA EPO audience.

 
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"Austerity is not the path to prosperity" and "there is no public appetite for major changes to workplace laws in favour of employers," ACTU President, Ged Kearney has told a CEDA audience at the Queensland EPO event on 23 February.

"The protection and growth of secure jobs across the workforce must be the focus of the 2012-13 Federal Budget and of all economic policy. Secure jobs and decent work are the foundations of economic growth," Ms Kearney said.

"To secure the gains from the boom for the next generation of working Australians, we need to put long-term sustainable job creation at the centre of economic policy," she said.

"Secure jobs that pay decent wages and have workplace rights can be built on our economic strengths. The actions of governments can play a role in achieving this goal. But we must avoid sacrificing jobs and growth on the altar of some form of economic or fiscal purity."

The Australian, Chief Political Correspondent, Matthew Franklin said "The economy is in a transition phase, the government's role is to ease that transition and to help those people who lose their jobs."

With reference to the car industry Mr Franklin said that he has seen no evidence that the money given to support manufacturing companies, over the decades, has made them any less reliant on the taxpayer funded dollars.

"I don't have much confidence that either side of politics will embrace genuine reform in this area," he said.

Although he doesn't believe the car manufacturing industry should close down, he said that: "the challenge for policy makers is to create a framework which taxpayer funds come with the expectation of a delivery of a certain outcome that leads to self sufficiency."

Productivity was also affected by "slower than hoped for progress on attempts through COAG to harmonise business regulation," he said.

On the manufacturing industry Professor Paul Simshauser, Chief Economist and Group Head of Corporate Affairs, AGL said unless industries and companies can adjust, they are going to tread water with a grim outlook.

QR National, Chief Financial Officer, Deborah O'Toole said there is a "need for strong leadership at all levels for companies, industry sectors and government policy levels. All need to have an appetite for reform, to be aligned, and boosting productivity and driving investment."

"We need productive low cost mines, we need efficient supply chains and we need the right policy settings around them," she said.

"With China looking for another 400 million tonnes of metallurgical coal from global markets and India's domestic consumption expected to increase by about 120 per cent over the next decade, "it's in our hands, whether we end up the best choice for these end customers and the predominant provider for these end customers or not," she said.

"We can enhance it by improving efficiency of the supply chain, by incentivising and aligning investment for growth, and by ensuring that the regulatory environment supports that."

There were significant challenges ahead including the disciplined deployment of capital, maintaining a good reputation, continuing to build robust infrastructure on time and on budget and ensuring we acquire and attract skilled people, she said.

But with a fundamental structural shift in Australia's economy the focus must be on training and retraining to support the adjustment. We've heard a lot about it but haven't seen evidence of it. We need to see the policy makers stepping up much more strongly she said.

Deputy Premier, Treasurer and Minister for State Development and Trade, The Hon. Andrew Fraser echoed these sentiments.

We need to "not just observe a boom in resource development, but harness that prosperity and push it out across future generations," he said.

"Queensland sits on the doorstep of a century of opportunity.

"The Premier's proposal for a Queensland education trust, to be funded with 50 per cent of all future LNG royalties across the next decade is at the centre of our economic vision.

"We need to invest in the overall skills profile of the nation to promote our productivity capacity."

When questioned over the recent recommendations from the Gonski review to increase funding for schooling, Mr Fraser said that they had not been taken into account because the budget was written before the Gonski Review was released.

"Any expenditure of the sort Mr Gonski is talking about is going to be a substantial hit on the bottom line of the [state] budget," he said.

"We would find it difficult to be able to do that without a substantial rewrite of the federal-state financial relationship."

He said the State Government's current focus was the move from grade seven to senior school, at a cost of $350-400 million in capital expenditure.

See Mr Fraser's blog entry about his Queensland EPO speech.

Australian Minister for Trade, the Hon Dr Craig Emerson, said that Australia is in "the right place at the right time" in the Asian century due to the work of past prime ministers to establish trade relationships in Asian and fashion an open, competitive economy without tariff barriers.

"Productivity growth rates now, in this Asian century, are very similar to the economic growth rates of the last decade," he said.

"That is China, India, Indonesia and other countries of the region far outpacing productivity growth in the developed world.

"So if today's productivity growth is tomorrow's prosperity, what this tells us is that this is going to continue on a massive scale. And we want to be part of it."

Some of the big challenges for Australia to take advantage of in this economic shift include:

  • Managing the mining boom and improving mobility;
  • Pricing carbon; and
  • The ageing population.

For people to work smarter to increase productivity, Mr Emerson says we have to fundamentally reform our education system, which the recently released Gonski Review looks at.

Mr Emerson said we have already had an increase of 20 per cent in the number of university places since the beginning of the Labor Government in 2007. In addition, the socio economic mix of university students is trending more towards low socio-economic backgrounds.

This is evidence that, "the market is working," he said.

"This is not only a great reform for productivity; it's a great social justice reform."

Deputy Leader of the Opposition, Shadow Treasurer, Shadow Minister for Finance and Trade, Tim Nicholls provided a political outlook for Queensland in 2012.

Mr Nicholls set out the LNP's vision for how Queensland needs to develop, highlighting the pillars of agriculture, tourism, resources and mining, property and construction and infrastructure.

"The events of the last week, particularly at the federal level, have shown why people are starting to get sick of politics...they have been talking about themselves, not what matters to voters," he said.

The primary guiding principle of the LNPs recently released six-year economic blueprint is to drive the State's unemployment down to four per cent over two full terms, he said.

"Our aim...in terms of my portfolio area is to ensure that we have a sustainable budget and we that can control debt," he said.

"The loss of our triple A rating is costing us, according to various estimates, up to $200 million dollars a year extra in additional payments."

Fiscal principles of the LNP plan include:

  • Return the budget to surplus in 2014-15 and to start to pay down the debt;
  • Subject major capital projects to proper cost-benefit analysis;
  • Put a plan in place to regain triple A rating; and
  • Fully fund the long term liabilities of the state, such as superannuation.

"We are also going to address the regulatory burden on business," he said.

"We believe that red tape is strangling business and preventing business from taking the steps that are necessary to employ more people and give them long term sustainable jobs.

"Queensland ranks second last on unemployment and yet investment in Queensland is booming and vacancies are at a record high."

Unemployment is currently at 5.5 per cent but Mr Nicholls said that given the economic cycle and the resources boom, Queensland should be getting somewhere into the fours.

Payroll tax is one of the major reasons why employment growth is stalled in Queensland and as a result the LNP proposal is to cut payroll tax by raising the payroll tax exemption, he said.

The Australian, Chief Political Correspondent, Matthew Franklin also gave his outline of the national political scene and how it may affect the prospects for productivity and reforms over the next year. Apart from the Labor leadership tensions and distractions, Mr Franklin said that the political focus would be on the transitioning economy, IR laws, productivity and the proposed COAG reforms as well as the APEC TransPacific trade partnership.

NAB, Group Chief Economist, Alan Oster agreed that the structural shift in the economy is not going away and some sector models will be redundant. In the short term there will be pretty significant unemployment in some sectors and wherever there are structural changes, even if positive, the short term will be negative, he said.

Professor Paul Simshauser, Chief Economist & Group Head of Corporate Affairs, AGL provided an overview on the impact of the carbon tax. He said if all things were held constant the impact would be .67 of a per cent and equate to only three per cent of the governments revenue, compared with 42 per cent from income tax. He also said there is a cost of doing nothing; it will end up catching up with the economy and having a much more adverse impact.

FURTHER INFORMATION

Extract of Saul Eslake's contribution to CEDA's 2012 EPO publication as published in the Financial Review, 17 February 2012.

Media release

EPO publication summary

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