When Donald Horne coined the phrase ‘the lucky country’ in 1964, he was being sardonic, not proud.
This is how he actually put it: “Australia is a lucky country run mainly by second-rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise.”
That seems a fair description of how we have stumbled from one lucky happenstance to another. From the sheep’s back to the iron ore boom, something has always kept the economy from falling into the gaping hole of fiscal ineptitude that has opened up time and again.
This is reinforced by the fact that Australia is about to achieve the longest streak of economic growth in global history. Our last recession was in 1991 and there has been steady growth since then, fuelled in large part by population gains and resource exports to China.
Australia’s GDP growth rate since 1959
Leadership wherefore art thou?
The other part of Horne’s comment, about leadership, is demonstrated by a very recent example – the new bank levy. Surprisingly, the six-basis-point impost on banks with liabilities of at least $100 billion that was announced in this year’s Federal Budget is tax-deductible.
Tax-deductibility will cut the cost to the big four banks – Commonwealth, Westpac, NAB and ANZ – by $415 million a year, on Deutsche Bank calculations. The levy was meant to raise up to $1.6 billion a year for ‘budget repair’. Sounds a lot like that policy wasn’t thought through.
So, how long will Australia’s luck stand up? This is the multi-billion-dollar question no-one has ever been able to answer.
There are so many factors at play in the economy – and more are being revealed almost every day – that reading tea leaves and analysing historical numbers have about the same chance of divining the future.
However, the pain points are easier to recognise.
The labour market is weak. About 750,000 people are unemployed and a further 1.1 million are underemployed. This means that about 15 per cent of Australia’s potential workforce is not working or not doing the number of hours they would prefer. The soft clampdown on 457 visas won’t have any effect.
Wages growth is at record low levels, massive increases in household debt are keeping consumer sentiment depressed, and a failure to spur productivity has resulted in stagnant living standards.
The population is growing and ageing, putting pressure on the superannuation and social security systems, as well as the Federal Budget. Housing is also costly and in short supply.
Consumer sentiment May 2017
Economic growth needs to be stronger, but the government is timid and lacking in foresight. It needs policies to promote trade across the board, not just in minerals; to increase the supply of land for housing; and to promote and encourage education and training.
Australia may remain lucky without any changes as our major trading partners may be willing to keep paying high prices for our outputs. However, what if this changes?
Regret won’t pay the bills.