Wednesday, June 13, 2012
That's the gist of Glenn Stevens' ideas for Australia, and it's pretty much the same message that Julia Gillard and Wayne Swan are delivering to the Government's economic forum.
Last week Stevens declared that Australia's glass is "more than half full", contrasted its growth with the stagnation of Europe, Japan and the US, and suggested that much of Australia's glum economic mood was due not to the high dollar and the mining boom that caused it, but to the end of the extraordinary rise in wealth delivered by three decades of debt - and particularly, the decade to 1995.
Today he repeated all that, with a further twist: arguing that the high dollar was really not all that high if you look at it in a very long term perspective.
In real terms, the Governor said, the dollar is now back to where it was 100 years ago, relative to the US dollar. In nominal dollars, it's even better: 100 years ago, ten shillings (the equivalent of our dollar today) would buy you $US2.40.
Even in Stevens' own lifetime, he recalled, the dollar had been $US1.40 before the high inflation of the Whitlam and Fraser era.
Well, true. But then, as Keynes said: "In the long run we are all dead".
That distant past is irrelevant to the problems we face now. And to the extent that the Governor conceded that the high dollar is damaging large swathes of the Australian economy, his advice was simply: adapt. Learn to cope with it, by making your business more productive.
How? he was asked. He waved it on to the Productivity Commission, whose chairman, Gary Banks was in the audience. The commissioned has published a long list of proposed reforms, Stevens said. His advice to governments was: "Go get the list, and do them".
"They're not popular. They're politically very difficult", he conceded, pointing to reform of Federal/State relationships as an example. "They're very hard to do, and it's grinding work." But that was his only suggestion.
A Reserve Bank governor has to be careful in what he says. Anyone else might add that politically, reform agendas become virtually impossible when politics becomes as polarised as it is now.
Many of the problems facing the Australian economy - highlighted in the past two days by surveys showing business confidence at a three-year low, and consumer confidence showing virtually no gain from the recent interest rate cuts and budget handouts to households - are worsened by us living in an environment of constant negativity and attacks on whatever course the government decides on.
Tony Abbott's war against everything has made good government in Australia very difficult, and courageous reforms almost impossible. Labor's main contribution has been the carbon tax, and Abbott has taken a blood vow to undo that reform. Whatever it proposes, he opposes.
Look at the United States, and India, where partisan politics has ruled out any serious attempt to reform even the most obvious problems. Australia is now in that state.
Australia would not have been able to achieve the reforms it did in the 80s and early 90s if John Howard, Andrew Peacock and John Hewson had adopted Abbott's take no prisoners approach to the job of Opposition Leader.
They did oppose a lot of things that Liberals now accept - compulsory superannuation, Medicare, indigenous land rights, to name a few - but they waved many of Labor's reforms through. Had they not done so, we wouldn't have had the benefits those reforms have brought since. A war against everything ends up becoming a war against us.
But Labor is also playing partisan games where it ought to be trying to create a bipartisan agenda.
Last night behind closed doors, Swan flatly rejected a call by Victorian Premier Ted Baillieu for a Productivity Commission inquiry into Australia's construction costs. That was a serious step backwards, after Gillard had appeared supportive of the proposal when Baillieu raised it earlier this year at the Council of Australian Governments summit.
The issue is of huge importance to raising productivity. One of the main ways of raising productivity is to invest in better infrastructure - that's exactly why we're building the NBN - and Australia has an estimated backlog of $700 billion of infrastructure projects which could raise productivity significantly if they were built.
But they can't be built because construction costs are so high. Victoria is looking at a $100 million bills on average to replace each of Melbourne's 175 level crossings. Asian cities are racing ahead of us in this area.
Baillieu is the only Liberal premier to accept his invitation to the forum. His proposal was a sensible, modest first step to trying to bring down construction costs.
At worst, it could do no harm. At best, it could do a lot of good. But Labor depends financially on donations by the construction unions, who do not want the Productivity Commission investigating their turf. So no inquiry - and none of the productivity gains that might have resulted from it.
Productivity remains a word that easy to say, hard to do.