The latest set of national accounts confirms what many have suspected for a long time – Australia’s productivity crisis is no more. Two of Australia’s most respected economics writers contemplate the significance of this, while another ushers in the next great opportunity for Australian exports. All in all, it’s a positive morning in The Distillery. No hangover whatsoever.
Fairfax’s Ross Gittins is struggling to understand where all the strident agitators for change to rescue us from a decline in productivity have gone.
“For months we had big business arguing the seemingly weak rate of improvement in the productivity of labour during the noughties needed to be corrected by restoring the Howard government's WorkChoices biasing of industrial relations law in favour of employers. Some even went so far as to claim it was Labor's Fair Work changes that caused the weak productivity improvement. Another line we kept hearing was that a big cut in the rate of company tax was needed to get productivity up. No one prosecuted this campaign more enthusiastically than the national dailies; they were always fretting about productivity. Yet in their extensive reporting of the national accounts, neither found space to note what those accounts told us about such a crucial issue. Even the media's exaggerated preference for bad news over good isn't sufficient to explain that omission.”
The Australian’s economics editor David Uren points out that lower productivity has not been a problem experienced exclusively by Australia in the early 2000s, far from it. Not only that, our rebound isn’t unique either.
“It has variously been blamed on the lack of economic reform since the 1990s, the rigidities of the Australian industrial relations system, a lack of infrastructure spending, weaknesses in education and the structural change forced by the resources boom. However, a recent paper by researchers at the Chicago Federal Reserve Bank shows that the problem is global. Their analysis of 21 advanced countries shows that only Switzerland enjoyed higher productivity in the first decade of the 2000s than in the last decade of the 1990s. In 14 of those countries, multi-factor productivity fell in absolute terms during the 1990s. Australia, where productivity fell by an average of 0.71 per cent a year over the decade, is in the bottom third of the list. Although some of the nations on neighbouring rungs Australia might prefer not to be compared with, such as Greece, Spain and Italy, its position is not much worse than that of Canada and compares favourably with Norway.”
Meanwhile, The Australian Financial Review’s economics editor, Alan Mitchell, tells the story of our next Treasury secretary Martin Parkinson and the federal government’s Bureau of Agricultural and Resource Economics and Sciences, and what Australia has to do to turn Asia’s growing demand for agricultural products into another Australian boom.
“First, it [ABARES] says, we have to reverse the slowdown in farm productivity, which for broadacre farming has been negative for the past decade. We also need to better target consumer needs in fast-growing markets, especially Asia. Reviving productivity growth will be harder than it looks. Productivity has been negative temporarily because of droughts, but there has also been a more permanent slowdown. Broadacre and dairy productivity was boosted by the major reforms of the 1980s and 1990s, including the dismantling of statutory marketing and price support schemes, labour market reforms and the phasing out of tariffs on imported agricultural products.”
Elsewhere Fairfax’s Malcolm Maiden compares the concept of a banking super profits tax to the proposal by Greens MP Adam Bandt to impose a levy on banking assets. On the first, he finds the banks are surely profitable, but not super profitable. On the second, well…
“Bandt's proposal is a bigger threat to the banks, firstly because instead of being tagged to so-called super profits, it is tied to the fact that the big banks are too big to fail. It's a threat secondly because the levy is big. The Parliamentary Budget Office calculated that it was equal to 25 per cent of the tax the banks already pay. It noted that, in fact, this was a potential problem: the hit is so large that it would probably trigger a ''behavioural response'', such as restructuring aimed at avoiding the levy. The levy idea is also a threat because it has been floated in an election year, when the government and for that matter the opposition are making promises they can't afford: $11 billion from the politically unpopular banking sector might be tempting.”
The Australian Financial Review’s Chanticleer columnist, Tony Boyd, notes somewhat cleverly that the media industry is literally asking whether it is the end of Time, given that the magazine’s publishing company Time Warner is spinning it off. Did you get it? Time is also the name of a magazine!
In local company news, The Australian’s Rebecca Urban is like-minded with those that have pointed out that Mesoblast’s $170 million capital raising mightn’t be the “litmus test” for the rest of the sector that many are hoping for because it specialises in the “complex and sometimes controversial” area that is stem cell research.
Fairfax’s Michael West equates Australian Securities Exchange to the spotter for a sniper. The sniper is Treasurer Wayne Swan and their target is competition in the exchange business.
Meanwhile, The Australian’s John Durie explains how Malcolm Turnbull, should the Coalition win the September election, will immediately remove Mike Quigley as head of the NBN and conduct what will be the largest corporate restructure in his entire career in law, investment banking and government.
The Australian’s Robin Bromby notes the massive underperformance of the metals markets compared to US equities – a point The Distillery hasn’t seen made before. This also informs the arguments about why the ASX200 is trailing the Dow Jones so badly.
And finally, The Australian Financial Review’s Christopher Joye delivers his take on the implications of news in the same newspaper that hackers have penetrated the Reserve Bank of Australia.
The AFR reports that “a Chinese-developed malicious software” has been employed on the central bank. But the it doesn’t say explicitly whether the software was launched from a Chinese source in an attempt to clean competitive information or the housing industry lobby in a covert attempt to fake a rate cut.