Time to patch up the Aussie economy

Politicians frequently use and abuse figures on productivity, unemployment and terms of trade to paint a broad economic picture – one that's desperately short on nuance.

Australia Day is not a bad time to reflect on where we sit in relation to our trading partners and competitor economies. Are we building a bright future as a sophisticated, prosperous global entrepreneur, or are we sliding towards becoming a global village idiot?

Several key parameters are used and abused in answering this question: productivity, the unemployment rate and Australia's booming terms of trade are right at the top of the list.

We're smart global entrepreneurs, so the story goes, because we've woken up more quickly than competitor nations to the fact that the world (China and India) wants what we've got (iron ore, coal and LNG). We're pursuing competitive advantage, textbook-style, and that's making us very rich, thank you very much.

The counter-narrative is that we're still milking prosperity from a series of reforms enacted in the Hawke, Keating and Howard years and that our current prosperity is distracting us from falling productivity and a looming jobs crisis, particularly in manufacturing and the finance sector. When the boom ends, there goes our economy – boom!

These competing stories are the basis of much of the invective hurled back and forth in the federal parliament – and we will see it all again when MPs shuffle back into the two houses on February 7. In broad terms, Labor tells the first story (look at our current account figures!) and the Coalition is focused on the second (we're headed back to the old rust-belt levels of productivity!).

And both arguments, when our beloved leaders make them, should be torn to shreds daily by a critical media.

Why? Because both rely on a kind of blanket reasoning – taking crude aggregate data as the justification for whatever suite of policies you happen to be pushing.

It has rarely been more important than in 2012 to stop staring at the whole blanket and start considering the 'patches' of the patchwork economy. (I realise the term 'patchwork economy' has been used by Labor to sweep inconvenient data under the rug, but it has its uses nonetheless).

In the past couple of weeks we've seen alarming movements in several patches – the beginning of finance sector and auto manufacturing layoffs, at the same time as continuing labour shortages in the resources sector and now, it seems, in tourism and hospitality. Tourism Minister Martin Ferguson and Immigration Minister Chris Bowen have just released draft plans to allow foreign workers to stay longer on 457 visas to help with 36,000 unfilled vacancies in those sectors that are otherwise projected to grow to 56,000 by 2015.

The AMWU expects 3,000 auto industry job losses to be the knock-on effect of the 350 redundancies Toyota announced this week. And following ANZ's cutting of 130 staff (expected to grow to 1000 within six months), UBS has predicted that 7,000 finance jobs will go across the sector.

The 'blanket' story, therefore, is that we're heading into a jobs crisis, but looking at individual 'patches' tells a different story – resources, tourism and hospitality still want workers.

In Canberra, Treasury has long framed these kinds of developments as 'making room for the resources boom'. That argument looks great on paper, but when you ask a newly unemployed auto worker if they'll be jumping on a plane to the Kimberley, the answer is likely to be "get stuffed!"

And why won't young Australians take the lower paid jobs in hospitality? Unemployment in the 15-19 year bracket has risen from 13.6 per cent in 2008 to 17.3 per cent currently. Many have argued that the Fair Work Act's lack of flexibility is causing this problem, but does that gel with a major government initiative to bring workers into the country to fill low-end hospitality jobs?

The other aggregate figure being roundly abused in national debate is 'productivity'. Australia both does, and does not, have a productivity problem.

The fact that laid-off auto workers and financiers don't make a bee-line for the mines means wages in resource areas (more than half being common law contracts that do not involve enterprise bargaining) continue to boom.

Likewise, we continue to rely on $2000-a-week foreign backpackers to fill unskilled jobs in resources areas, because most young unemployed people in metropolitan Australia just don't want to go there. Neither has anything to do with productivity. It's supply and demand, and it is skewing aggregate productivity figures, as I explained last year (The dark side of productivity reform, September 1). Elsewhere, companies that have made great strides in improving productivity, such as Toyota, lose workers to the minerals-led terms-of-trade boom.

Offices in Canberra will soon be filled with political operatives honing messages that use top-line figures on unemployment, wages and productivity to sell their policy wares.

But we are deceived if we accept such simplifications of what is a highly complex industrial landscape out there on the ground.

Events of the past few weeks are a reminder that in 2012 we must push for nuanced policy responses that make us the sophisticated, prosperous global entrepreneurs we want to be – and, conversely, reject the crude, blanket reasoning that both sides of politics would prefer to use to sell us a future that could indeed leave us looking like idiots.


{{ twilioFailed ? 'SMS Code Failed to Send…' : 'Enter your SMS code' }}

A text message with your verification code was just sent to {{user.DayPhone}}

We cannot send you a code via SMS to {{user.DayPhone}}

Hi {{ user.FirstName }}, please provide your mobile number.

{{ content.trialHeading.replace('{0}', user.FirstName) }}

We'll send you a text message with a verification code to start your free trial.

Log in

{{ content.upgradeHeading.replace('{0}', user.FirstName) }}

The email address you entered is registered with InvestSMART.

Login or to reset your password, select Forgotten password

Email is required.
Email must be a valid email.
Password is required.
First name is required.
Last name is required.
Mobile phone number is required.
Mobile phone number is invalid.
You must accept the terms and conditions.

Already an InvestSMART member? Log in

SMS code cannot be sent due to: {{ twilioStatus }}

Please select one of the options below:


Looks you are already a member. Please enter your password to proceed

You have entered an incorrect email or password

Email is required.
Email must be a valid email.
Password is required.

Please untick this box when using a public or shared device

Not a member? Sign up

Forgotten password? Click here

Your membership to InvestSMART Group recently failed to renew.

Please make sure your payment details are up to date to continue your membership.

Having trouble renewing?

Please contact Member Services on support@investsmart.com.au or 1300 880 160

You've recently updated your payment details.

It may take a few minutes to update your subscription details, during this time you will not be able to view locked content.

If you are still having trouble viewing content after 10 minutes, try logging out of your account and logging back in.

Still having trouble viewing content?

Please contact Member Services on support@investsmart.com.au or 1300 880 160

{{ upgradeCTAText }}

Updating information

Please wait ...


{{ productPrice }} / day
( GST included )
Price $0
Discount -{{productDiscount}}
GST {{productGST}}
TOTAL   (inc. GST) {{productPrice}}
  • Mastercard
  • Visa

Please click on the ACTIVATE button to finalise your membership

You have entered an incorrect email or password

Email is required.
Email must be a valid email.
Password is required.

Please untick this box when using a public or shared device

Not a member? Sign up

Forgotten password? Click here

Related Articles