Retuning Australia's economic debate

While Australians constantly put 'the economy' at the top of government's priorities, the trend in education is that fewer and fewer students are taking economics in favour of more narrowly focused business studies.

Is this a concern for Australia's political economy?

Twenty years ago business studies and variations on it, such as business management, were introduced into Australian Year 11 and 12 syllabuses. In the two decades leading up to business being introduced in New South Wales in 1991, 35 to 40 per cent of students studied economics in their final year of high school.

Today that number has been eroded to about 8 per cent. Students slowly migrated across to business courses, overtaking economics enrolments in the mid 90s and completing the transition in the mid 2000s – the figures have stayed roughly the same since, with about 25 per cent of students taking business studies and 8 per cent economics. Economics slipped from being the third most popular individual subject to the 16th.

In Victoria it was the same story. When business management was introduced in 1992, it immediately started eating into the similar portion of students who were taking economics. Nowadays, only 4 per cent of VCE Year 12 students tackle economics, with 24 per cent opting for business management, which has been among the top five or six VCE subjects the past six years. (Economics has not been in the top 20.)

While business studies do take into account 'economic conditions', there is little discussion of what drives those conditions – the public policy angle is neglected.

Economist Saul Eslake says there is a similar pattern emerging in universities, where finance courses are on the up and economics enrolments in decline. But he says that Australia's economic literacy is still comparatively good.

"I think it's probably still fair to say that the Australian population is more economically literate than that of many other countries," he says.

Eslake cites two main reasons. The first is having variable interest rates linked to the RBA cash rate, which, bar the UK, are rare in the developed world.

"We also have a high rate of home ownership, so Australians are unusually attuned to the things that influence monetary policy," he says.

The other reason is our recent history. Eslake says the big economic reforms of the Hawke-Keating era – the floating of the dollar, the reduction in tariffs, the introduction of a compulsory superannuation scheme – have stood us in good stead because they forced us to understand economics. He also says we were also blessed with two prime ministers, John Howard and, particularly, Paul Keating, who were good communicators on the subject of economic issues and who were able to persuade the population to take on reforms that would cause short-term pain but long-term gain.

But while this generation is sound in its knowledge, Eslake does fear for the next.

"We don't have the same sense of crisis that informed a lot of the economic debate of the 80s and 90s. (Public debate) now reflects the fact that Australia hasn't faced serious economic issues for 20 years.

"Obviously the GFC was the most serious external economic threat since the Second World War, but the fact we got through it with so little damage has, if anything, reinforced what Ross Garnaut called 'the great complacency'."

Furthermore, he says, our economic debate in the political sphere has moved from the grand reforms of the Hawke-Keating era to streetfights on interest rates and handouts which cater almost solely to the so-called mortgage belt in Australia's key marginal electorates, from western Sydney through to the Queensland coast.

"Political leaders on either side are not of the same calibre as we once had in 80s and 90s," he said. "They don't have the same capacity to communicate economic issues to the broader public as they did, particularly as Keating and Howard did."

This tendency from politicians to pander rather than persuade may account for affronts to 'Economics 101', like this line from opposition treasury spokesman Joe Hockey in February, after a surprise decision by the RBA to hold rates steady: "Everyday Australians were looking for some interest rate relief today, it didn't come. The clear message from the Reserve Bank is that the economy is fragile."

Meanwhile, NSW Economics and Business Educators president Joe Alvaro says the drift from economics is something the group will address along with other state associations at a national biennial conference in Sydney in October this year.

"(EBE NSW) is currently contributing to the development of the Australian curriculum ... we will be making the case for a high quality and world leading curriculum in the area of economics which will engage a great number of young people and increase their levels of economic literacy," Alvaro says.

"There will be a critical national conversation on these matters at the conference."

Alvaro says a good understanding of economics is part and parcel of being a "an active and informed citizen", a reason why the association has tried to boost economic understanding in 'Civics and Citizenship' courses.

"There is a great potential to improve the economic literacy of the Australian population through economics lessons in our schools. We have a syllabus conducive to this and experienced teachers with the knowledge and skills to implement this syllabus," he says.

It is a relief that if our politicians won't raise the bar, our teachers just might.