Wayne Swan’s first speech since being deposed as treasurer and deputy PM was remarkable for its unremarkableness. There were no veiled swipes at newly anointed Rudd, no calls for Labor Party reform, and true to form it was designed to create the impression that it was Labor that saved Australia during the GFC.
As I have written before, Swan and Rudd, and then Swan and Gillard, need to be given credit for not stuffing the economy up during the GFC. And yes, the early stages of the Rudd stimulus program actively helped keep thousands of businesses trading when severe recession could have befallen the nation.
But Labor had no input into the major cause of our salvation – China’s extraordinary and sustained fixed-investment splurge, which represented one of the greatest stimulus programs in history.
So the Chinese Communist Party really saved Australia. And Swan, as treasurer through that entire period, managed to not stuff things up. I, for one, am grateful for that.
However, there is a great danger in continuing to pretend that Labor’s economic genius saved the day. That’s because, from here on, a lot more economic genius will be needed.
China’s growth rate is moderating. And though, as Stephen Koukoulas pointed out on Monday (Vital signs from China, July 15), China’s contribution to global growth will remain high, the sudden surge of demand for our commodities that pushed iron ore and coal prices to stratospheric levels is over.
In place of the mad scramble to shift as much ore and coal to China as possible – a process that sent wages for mine workers through the roof – Australia now has some solidly performing mines that will make their money from volumes rather than prices. We won’t be rich, but it’s a nice bread and butter industry.
A further moderating factor looks to be a hit to our coal exports to India. Our fourth largest export market is going through one of its periodic shake-outs, with capital fleeing the nation and its central bank struggling to stop the currency collapsing.
But that’s not going to ruin us. What Swan would be looking forward to, had he not been replaced by Treasurer Chris Bowen, is a future in which all the low-hanging fruit has been picked and eaten.
There was some acknowledgement of this in Swan’s speech to a Sydney conference hosted by The Economist magazine yesterday.
Swan said: “We know there will come a point in the next decade or so when mining output growth will slow down. It’s true now but it will be even more apparent then that Australia’s continuing prosperity, our capacity to raise our living standards, will depend on the four fifths of our economy which is not mining or farming or manufacturing, and which, except for construction and utilities, is all services.
“We will depend on services growth for our increasing living standards, and for our ability to grow our imports without an unsustainable trade deficit. More exactly, we will depend on increasing productivity in services – increases in output of services per worker.”
Without wishing to belittle the huge achievements in technology, engineering and logistics that underpin the resources boom, the Australian economy has to get even smarter to grow the sectors Swan is alluding to.
While domestic services growth is a normal part of the economic transition developed countries went through in the second half of the 20th century, in Australia’s case services exports are key to the future – primarily because we are looking to take up the slack of the high-price phase of the mining boom.
Export opportunities still exist in education, telecommunications, financial and legal services and even in growth areas such as the engineering and technology services that are core to the development of renewable energy in our near neighbours.
In essence, the skills to win in these export sectors are the old “clever country” suggested by Bob Hawke in the late 1980s.
But what are the signs that we will win in these sectors?
A mixture of the mis-selling, poor delivery or rorting for immigration purposes has already put a blight on our education exports. And just as our dollar is falling back to more reasonable levels, making our tertiary education sector more affordable, one of our biggest customers, India, is coming apart at the seams.
In IT and telecommunications, it looks very much as if the expertise and innovation that would flow from having the world’s most advances all-fibre broadband network will be lost if the Coalition’s hybrid fibre/copper scheme gets up.
In this vein, Communications Day reports today that: “Australia has lost its competitive edge as a regional hub for datacenters”, warns SubPartners and Megaport founder Bevan Slattery, “and must urgently re-evaluate its future in the space, or miss out on a regional cloud hosting boom".
We are making some in-roads in selling financial services expertise to Asia, but remember it was only two years ago that the ASX was looking at merging with Singapore Exchange – a move that Swan himself was controversially instrumental in killing off based on Foreign Investment Review Board advice.
And as for exporting carbon-emission reduction and renewable energy technologies, the Greens continue to argue that we can, and should, be regional leaders in this space – something the RET and carbon pricing between them should encourage. But again, if once those schemes are weakened or dismantled altogether, we’ll be buying those services in from abroad.
Swan’s legacy will be mixed. He did a marvellous job of not stuffing things up during his tenure. But any idea that the kind of dumb luck Australia had during the GFC will be repeated is dangerous indeed. Whoever is treasurer after the next election will need to sweat blood to shift the economy from low-hanging fruit to the clever apples higher up the tree.