Flat White

The real problem with the Australian economy

14 June 2019

1:56 PM

14 June 2019

1:56 PM

The unemployment figures came and went yesterday with just the usual passing mention.

There is a real problem in Australia, an economic problem and the problem is economic growth.

And I know as you read out that line most of you are nodding your heads sagely and demanding the government do more to promote investment, consumption, even exports, and therewith economic growth. The problem is not confined to conservatives. It is as much a part of ALP thinking as it is Liberal or National thinking. And that is the problem. They all promise policies that will promote economic growth.

And not just economic growth, but ever increasing economic growth; and they have failed dismally. Yes, we have had economic growth, but mostly in the two to three per cent range in real terms despite the hundreds of thousands of cashed up Chinese migrants and burgeoning steam production in China and the tons and tons of coal that country produces. Well, I think you are wrong; or maybe you are right but you’ve missed out a very important reason for growth. Let me try to explain.

If we pause for just a moment and ask the question, what is a government’s economic policy supposed to achieve. Most people will, these days, say growth, or qualify it by reference to regional growth, or urban growth. But if you look at it as John Maynard Keynes did in 1936 (not 1931) and say ‘full employment’ we have to focus on the effect of our policies on employment, rather than their effect on growth.

In fact, full employment actually trumps economic growth every time because it has far more important social results than economic growth. I don’t know about you but I do not want to see another thirty something year old money market guru driving around in a Porsche or BMW with the latest pair of sunglasses taped to his forehead; particularly when there are thirty year old men with families who can’t find work in their home town or who can’t find work at all and end up waiting on tables.

Unemployment is as much a social disease as any other social disease, but its after effects are much, much worse. And that goes to under employment, people who might have a part time job but want to work full time. The latest study of under employment that I saw says, double the unemployment rate to find the number of people who want to work full time but can’t get a job. And remember, if you spend, one hour a week in paid employment, one hour, you are not unemployed.

Donald Trump has turned the United States economy around by focussing on policies that increase employment rather than policies that increase growth. His policies promote industries for which the US (and Australia) was once famous. So, you see, if you focus on the policies that promote employment, you will get growth; but if you focus only on growth you won’t necessarily get employment because those who profit from growth can reduce their costs.

What our governments haven’t realised is that it takes more than an apron, a beard and a coffee machine to be employed. That is not to denigrate the work of baristas; but I haven’t seen many baristas over the age of forty who don’t try to look thirty.

There are men and women in this country who have natural talents for making things, for learning the skills and making things that we need; things we need more than a double shot latté with a twist every morning or a two story reno in the worst street.

There are many social problems that would be remedied with full employment. There are many social evils that are facilitated by unemployment. The government needs to bite the bullet and focus on employment. The first step must be to redefine problem so that everyone knows exactly what needs to be solved. Then perhaps they will be able to keep a bit more coal in the ground, or at least spend it on producing cheap electricity to power up the productive economy.

David Long is a retired solicitor, economist and PhD candidate at Griffith University, School of Law.

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