Yes, the economy is cruising back to pre-pandemic level. However, as Terry McCrann has pointed out it The Australian, the nation has a flawed economy built on a fortunate series of short-term events that are unlikely to last.
First, after 44 years of big current account deficits (Australia importing far more than it exported), there have been eight big current account surpluses aggregating to $88 billion, driven by China’s appetite for WA iron ore. But how long will this last, given China’s search for other sources of this mineral essential to China’s growth?
Second, the government is spending a couple of trillion to boost the economy, but how long can this big spending last?
Third, the reserve bank has dropped interest rates to near zero, but this is driving yet another housing and construction boom, which will make housing even more unaffordable for average families when interest rates rise. Near zero interest rates cannot be sustained.
As McCrann says:
Who really believes this period of zero rates, multi-trillion-dollar central bank money-printing, ever-escalating property and share prices – great for asset owners, billionaire and millionaire alike; but matched by decades-long stagnant incomes for workers – is going to end well, or even just un-bumperly?
It demands a fundamental shift in short-term policy and investment thinking; it demands an even more fundamental and complex thinking into the longer term. (my emphasis)
I add: and how does Australia build new industries if they are to be saddled with high cost electricity because of increasing reliance on renewables as low cost coal plants are shut down? The Federal government’s best offers are more gas plants and hydro, while Labor remains hostile to coal. (A motion to Queensland Labor’s state conference from the Right faction calling for the party to support expansion of the states gas industry, was voted down by the the party’s Left faction. I explained the implications of such a policy, as reflected in Labor’s vote crashing in the by-election for the NSW state seat of Upper Hunter, in my recent editorial.)
So what are the “fundamental and complex” long-term policies needed?
The government needs a long-term strategic industries plan that involves creating a super department for strategic industries. The plan should aim to double manufacturing production by 2035. Needed are the industries required to sustain the country should another pandemic or major conflict threaten our international supply chains, and should include:
- important defence products;
- pharmaceutical and other medical supplies;
- transportation and agricultural equipment sectors;
- machine tools;
- metals processing;
- advanced chemicals;
- some essential consumer goods manufacturing;
- telecommunications and transport;
- agriculture and food-processing industries;
- electricity and liquid fuels.
When will the government think long-term in the strategic interests of the nation?
Read more about what’s needed on the NCC’s Time to Build page. You can join this campaign.