Ten ways Australia can regain momentum

There are many strategies we can embrace to help save non-mining Australia, including weaning ourselves off the European banking system, looking at alternative fuel sources, and further reforming industrial relations.

I was overwhelmed by the response from our readers looking for ways to get Australia out of the hole we have dug for non-mining Australia. Hundreds of ideas came from our readers and I commend our Conversation section to you. I have selected around 10 to place emphasis on.

But first I want to emphasise that the dramatic fall in Australian productivity when compared to the US over the last decade must be reversed. That is going to require a different attitude by governments, management and the wider community. Greater use of internet technology (helped by greater availability of broadband) will be vital. Business Spectator is leading that drive.

One of the greatest opportunities for Australia is Chinese tourism but we will need infrastructure. As I explain below if we are clever enough we can be an exporter of hospital treatment. And of course, a simpler approval process will boost our housing.

Our readers raised a problem that is not often discussed – we need to wean ourselves off dependence on the broken European banking system, which remains a key provider of our bank funds. One reader suggested that the government should borrow from the Reserve Bank and replace the Europeans that way.

A better way might be to make sure that interest rates are attractive enough to ensure that self-managed and other superannuation funds take out more bank term deposits.

Of course high interest rates contribute to a high Australian dollar and our readers want the dollar to fall.

Nevertheless while we are so dependent on the European banking system there remains a level of uncertainty in the Australian business scene. There are no easy answers but we are not helped by a treasurer and finance minister who simply ignore our European reliance in advocating banks pass on Reserve Bank rate cuts.

Second, Australians have taken up the battle cry of President Obama and Mick Romney who are both advocating lower US company taxes. Our readers understand that what Obama and Romney are saying is right – if you reduce company tax companies will invest more and employ more people.

Of course that is a politically incorrect view for both sides of federal politics but it will come to the fore when the mining investment boom subsides.

Some readers suggested that we lift the GST to fund the fall in company tax and also suggest that income taxes be reduced along with company tax.

This is a long running debate and we face a world in which Australia is emerging as a higher taxer of profits than many other countries, which is a dangerous situation in a globalised business world.

Three – either we abandon the carbon tax or place a tax on all imports that involve carbon.

Four – there was a strong belief that Australia needs to balance the budget and that big deficits and US exercises like QE2 are not the way to go

Five – many readers were nervous that politicians, in their desire to balance the budget, will slash education and health service provisions. We are fortunate that breakthroughs in hospital technology mean that the costs of operating in a hospital can now fall dramatically while service levels rise. But this requires extensive training of management, nursing and medical staff (Giving health a tech checkup, May 10).

And it also requites capital investment. I suspect education costs can also be reduced with new technologies but that is a less proven concept.

Australia has the opportunity to not only provide better medical services at lower cost but be an exporter of efficient high quality hospital care.

Six – one reader suggested that we should use our gas reserves to drive our cars rather than import oil. Behind that simple statement was one of Australia's great untapped opportunities.

So far most of the gas we have discovered we have exported as LNG. The gas companies like Santos say that there are substantial reserves still undiscovered – gas which can be tapped if we introduce market prices.

And when the discoveries are made the price will come down just as it has in the US. America is using its gas discoveries to transform its economy and reduce its carbon. We have the same opportunity but there is not the political leadership on either side to do this.

Seven – we have a magnificent asset in our superannuation funds but they are hooked onto the stock market which has not been a good performer. This gives us the opportunity to offer different sorts of securities.

One reader suggests that we make it compulsory to subscribe to 4.5 per cent commonwealth bonds; another suggests that superannuation should be used for infrastructure. If we do want to encourage superannuation money to go in that direction then we must offer top security and good returns.

Given the fall in the stock market over the last seven year the time to do this is now.

Eight – many readers suggested industrial relations reform in different ways. In terms of Fair Work I am hopeful that the Shorten inquiry will make worthwhile amendments but we are going to need better management in many areas. A greater use of independent contracting will help.

We have just seen how the costs of erecting a new mine have risen 100 to 300 per cent. Unless we control this building cost escalation we simply will not have the ability out erect the infrastructure that we need. Most forward thinking on this front is coming from Victoria’s Baillieu government which is introducing a series of measures to stop the so called desalination cancer from infecting new Victorian building projects. Other states are looking at following. The biggest problem is the weakness of management (Dodging mining sector mothballs, May 22).

Nine – we need to lift research and development and to boost capital investment possibly with accelerated depreciation.
Finally, readers realised the risks that bankers are taking in their business and want this curbed to create a more healthy banking environment.

One reader suggested that we should take advantage of the current falls in property values to make lending ratios more conservative. I don’t agree but there is a clear theme that we want a more conservative approach to our funding. Missing in this debate has been migration. We will leave it for another day.


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