It is maybe a considerable blow to our national pride that the Philippines boasts the world’s biggest crocodile, but when it comes to the national accounts Australia can stand tall.
While other Western economies are ailing, ours is plodding along quite nicely at 1.2 per cent, according to the second-quarter gross domestic product numbers.
Mind you, that’s well below the 3.2 per cent trend, and it’s before August ructions on global markets and the recent slather of downgrades in Europe and the US.
Still, it surpassed expectations and sparked the strongest rise in the sharemarket in a year. Here was evidence, against the prevailing and bearish tide of economic punditry, that things were not too bad.
Really, not too much to whinge about – and certainly a superior performance to that of our peers.
It seems the clamour by sections of the media and business designed to talk down the economy and skewer the Gillard government had become a tad too infectious.
On the consumer front, the message from the numbers is don’t expect a rate cut too soon, unless perhaps the global market ructions turn into a violent rout. The next relevant data point comes in late October with the consumer price index. Meantime, the jury is entirely out.
On the policy front, the message from the recent raft of data is: the two-speed economy, something needs to be done about it. Indeed Glenn Stevens reaffirmed his concern in a speech yesterday about the weakness in the non-mining economy. To frame these concerns in layman’s language: Australia is a quarry and a farm, which is now enjoying high prices for its goods. Hence our excellent standard of living.
When Asian demand for our resources, such as coal, iron ore, gold, nickel and copper declines, we risk being left with a few big holes in the ground.
Neither of the two main parties has addressed this issue properly. Individual MPs such as Malcolm Turnbull have advocated a sovereign wealth fund, as have an impressive and increasingly long list of business leaders.
A sovereign wealth fund is a no-brainer. Like the family that saves to ensure its economic future, a national pool of savings would underwrite Australia’s future.
Otherwise, we will all wake up one day, the boom will be over and the price of some commodities will be so low they will cost money to stockpile. End of golden era. Full stop. Where did the money go? Oh, that’s right, was it Bob Brown who was saying 83 per cent of our mining was foreign-owned?
The only thing the government has bothered to say on the matter of a sovereign wealth fund has been Assistant Treasurer Bill Shorten’s flippant reaction that Australia has 1.6 million sovereign wealth funds in superannuation accounts.
While it is true the $1.3 trillion super system provides a terrific buffer – if only a paltry 3 per cent-odd return for its retirees – in terms of national savings, too much of it is squandered on the army of middlemen. And it can hardly be actively deployed in the national interest.
The NSW government’s move this week to tap the state’s mines for an extra billion dollars in royalties has thrown the federal government’s mineral resource rent tax into further disarray. Fact is, the tax is inadequate – an ad hoc deal struck with the three biggest miners to smooth the Gillard ascension to The Lodge and Labor’s return to office.
It is poorly constructed and unlikely to raise much money at all – let alone restructure the tax base appropriately for the nation’s future.
It is also worth revisiting a few of the points in the Greens’ critique of foreign ownership of mining. Not that there is a problem with foreign ownership. Foreign capital is to be applauded.
The crux of the issue is achieving the appropriate tax and royalty mix so capital is adequately rewarded and the owners of the resources get their cut – that is, all Australians, the actual owners of the stuff in the ground before someone pegs a lease.
In the next five years, says the report, ”foreign owners will earn about $265 billion from their investments in Australia’s mineral resources. Around $50 billion of this will leave the country as dividends while $205 billion will be reinvested in further mining development”.