The big fall in business confidence last month was no accident. Abolishing the carbon tax and making government more efficient are important, but business is reacting nervously to other events that go to the heart of the level of prosperity we will encounter in the next three years.
Unfortunately, so far the Abbott government has yet to publicly recognise that these issues exist, let alone start devising a plan to deal with them.
And unless they are tackled the fall in business confidence will spread to consumers, which could develop into a spiral.
I refer, of course, to the fact that there are now four enormous contraction pressures bearing down on the economy at once threatening to spill more than 400,000 people into the ranks of the unemployed or underemployed. Abolishing the carbon tax is an important part of the solution but it is only one part.
Prior to the NAB survey that revealed the confidence fall (Business confidence slumps in Oct, November 12) and Callam Pickering’s excellent analysis of what was happening in business loans (Australia's two-tier credit boom, November 12), I set out these downward pressures.
The biggest downward pressure is of course the rapid end of the unprecedented mining investment boom. Almost every day a major company undertakes a contraction in response. Yesterday WesTrac announced that 630 workers were in jeopardy (WesTrac restructure to cost 630 jobs, November 12).
In all some 150,000 people, including those indirectly employed, are going to lose their jobs or suffer a big fall in working hours over the next two years as a result of the mining investment collapse.
Instead of recognising that the economy must adapt to this and helping us get through it (via the carbon tax abolition, independent contracting and deregulation, and infrastructure investment), the government’s current plan seems to be to double the problem by closing the motor industry, which puts another 150,000 into unemployment or reduced hours at the same time as the mining contraction.
And all this is happening when the size if the public service is being reduced and there is a massive rise in retail penalty rates, which is set to kick in next July. This might even trigger an event that rivals motor and mining in terms of job losses, if Australians swing to internet shopping in response.
What the government must do is clear. Even though subsidising motor is bad economics, you can’t change what you have been doing for decades in the midst of the mining investment collapse, government cut backs and retail pressures. And if you are cavalier enough to do it then expect to be a one-term government.
Once we have locked the motor industry in until 2022 (and that might require some hardball with Toyota’s unions) then the government can start the process of using deregulation and independent contracting to reduce the effects of the mining investment boom decline and the retail blows.
In particular, deregulation can reduce the cost of housing and bring first home buyers into the market. That is, of course, a state matter but they can be encouraged.
I have written two previous commentary articles on this subject because it goes to the heart of what is happening in Australia and it is not being recognised outside Business Spectator. (Australia faces a humiliating retail calamity, November 12) and (Tony Abbott's 300,000 new enemies, November 11).