Hard questions about Australia's current economic growth, the patchwork in place and the historical illusions of previous sector booms were key topics discussed at a recent CEDA forum in Melbourne.
Australian Broadcasting Corporation Chairman and CEDA Patron Maurice Newman AC, Deloitte Access Economics Partner Ian Harper and ANZ Research, Senior Economist Julie Toth addressed delegates on our Patchwork Economy: Beyond Resources.
Professor Harper said that throughout Australian history there were examples of policy reforms implemented in response to an issue which exist for a much longer period than the initial problem.
He said the solution to the extreme growth of the mining sector in the late 1900s was centralised wage fixing and the introduction of the tariff. However, this solution continued to be implemented for over 70 years after the gold rush subsided.
"People literally dropped everything that they were doing in the city and rushed to the gold fields," said Professor Harper.
Similar trends are evident today in the fly in fly out regime of those who are engaged with the mining boom, he said.
Ms Toth made a similar point on this cultural shift and opened the panel's discussion by raising three current themes evident in Australia's financial landscape:
She explained how the success of one particular sector, in this case the mining sector, has driven up the Australian dollar.
However, Ms Toth also made it very clear that the high dollar present in today's patchwork had merely exacerbated a pre-existing trend in Australia's economic structure. It was not the direct cause she said.
On consumer culture, Ms Toth said that with the development of new technologies there has been a shift from goods to services and a definite growth in online markets.
Moving from the national economy to state focused discussions, Ms Toth commented that while Victoria has the lowest yield of mining revenue it was still doing well economically due to the international freight port in Melbourne.
Professor Harper also said that Victoria has seen large population growth and this has been beneficial to the economy.
However, he noted that the underestimation of infrastructure costs and their depreciation had delivered the illusion of a surplus in the presence of debt.
Current themes were then focused on Western Australia, host to 70 per cent of Australia's mining industry and the largest bread winner for the national economy, Ms Toth said.
Mr Newman highlighted that Western Australia was trying to claim a greater portion of resources to fund the boom and said that this was the first time he could recall a state making a claim on what was previously accepted as national revenue.
A final point explored by the panel centred on Australia's inability to locally generate the funding, infrastructure and manufacturing required to service the mining sector boom.
"At a time when we need to do everything we can to offset currency impact on both our export exposed industries and our domestic industries anything which poses a higher threat to rigidities is not welcome and there has been indications of some growing industrial action which I find worrying," said Mr Newman.
Professor Harper commented that for the first time Australia was engaging with foreign investors who were not necessarily politically like minded, as is evident with China.
With the door to foreign invest closed by western democracies like the United States and Britain he noted that, "for the first time in Australian history our largest trading partner is also our largest creditor".
Ms Toth also looked at international relations from a manufacturing and infrastructure perspective in terms of the mechanisms required to service the mining boom and agreed with Mr Harper that local resources and local savings were not enough.
She said that a significant proportion of the equipment being used to facilitate mining is being engineered and constructed overseas then shipped to Australian ports.
Looking to the future Mr Newman said: "We should be looking at competition post the mining boom.
"Decelerating global demand is really where Australia's multispeed economy finds itself. It is a risky outlook which demands a lot more attention and certainly no complacency," he said.
"To me, unfortunately, Australia's outstanding growth post the global financial crisis appears to have bread an unhealthy complacency which silences critics and defers decisions on macro as well as micro reform.
"Deeply worrying are the trends and events overseas which tend to be read with unnerving detachment...now we are perusing the very same policies that have got so many western economies to the point of no return."