July 30, 2012
Cheap debt costs provide the means to generate jobs.
NEWS in recent days that Qantas, Caltex and Ford are cutting jobs underscores the reality that Australia has a two-speed economy. The boom in mining investment and exports is the key reason economic growth remains solid; indeed it is moving at a faster clip than in many industrialised nations, although it remains well below the pace of expansion in our biggest trading partner, China. But mining produces only 2 per cent of jobs in Australia, and there are predictions that the boom will fade in the next two to three years.
While this augurs poorly for the economy, it would be unduly pessimistic to predict that alone poses a huge threat. The reality right now, though, is that the south-eastern states are facing difficult times. The budgets of New South Wales and Victoria are under great pressure, adding to concerns that further job losses loom.
The two-speed economy is best reflected in unemployment rates. Tasmania's is 7.4 per cent, Victoria's 5.5 per cent and South Australia's 6.4 per cent. The NSW rate is 5.1 per cent. The unemployment rate in Western Australia, the epicentre of the mining boom, is 3.5 per cent. In 2011 there were more than $170 billion worth of projects either under construction or awaiting confirmation in WA.
This adds some context to the upbeat economic assessment given last week by Reserve Bank governor Glenn Stevens in a speech titled The Lucky Country. Mr Stevens was seeking to soothe concerns that Australia is vulnerable to a slowing Chinese economy, global financial stress and a domestic housing slump. The state of the economy, he said, was ''not too shabby''.
That is a fair assessment of the overall situation. Figures last week showed inflation at an annual rate of 1.2 per cent, its lowest rate in a decade. Combined with our relatively robust economic growth rate, low public debt and an overall unemployment rate of close to 5 per cent, it is a picture the envy of many other industrialised nations, particularly in Europe, where huge public debt is causing concerns there will be another global financial and economic crisis. But the big picture masks the patchy reality.
The Age has long called on the federal government to respond to the two-speed economy with policies to help buttress Victoria, which went backwards in the December quarter. Tens of thousands of jobs, many in manufacturing, have been lost here in the past year. Stimulatory policies need not be heavy-handed or interventionist; indeed the best way to give the economy a fillip is to reduce the costs on business, both by cutting red tape and lowering tax rates.
Another way to stimulate economic activity in the struggling states is to invest in infrastructure. Mr Stevens also pointed out last week that Australian governments are enjoying their lowest borrowing costs in more than a century. This has sparked debate about whether the Commonwealth ought to go into deficit to capitalise on the cheap cash and fit the economy out for our expanding population. Given Australia's public debt, at about 30 per cent of gross domestic product, is far below that of comparable nations, there appears room to at least consider investing in public infrastructure. It would not only help create jobs, but would provide benefits for generations to come.
The main impediment to such a policy is not economics, but politics. Both sides of politics have become obsessed with generating budget surpluses. These have become the proxy for responsible economic management. The Age is not advocating budget deficits per se but would encourage a more open-minded debate on sound fiscal policy. Mr Stevens himself has room to help ease the two-speed woes, too; low inflation leaves ample room to cut interest rates, one of the most effective ways of stimulating the economy.
LAST week, resistance among Australia's Catholic hierarchy to a royal commission into clerical sexual abuse weakened for the first time. In a carefully worded statement, Bishop Bill Wright of Maitland-Newcastle said he was ''broadly supportive of public inquiries into these matters''. Bishop Wright said it was for the government to determine the best form of inquiry, but he acknowledged that calls for a royal commission were growing and praised the work of an earlier commission. The Wood royal commission in NSW in the 1990s, he said, had ''comprehensively reviewed issues of child abuse across the whole community, including churches'', resulting in ''powerful sweeping reforms to child protection in NSW that remain in place today''.
Bishop Wright's statement is all the more significant in that the NSW government, unlike its counterpart in Victoria, continues to resist the calls for an inquiry. That a Catholic bishop should not only have acknowledged that one is needed, but also implicitly accepted that it should be a royal commission or judicial inquiry, is a huge step forward. It must be hoped that his statement will encourage those within the church, including some senior clergy, who have also supported the calls for a royal commission.
The Age continues to believe that only an investigation with appropriate independence, resources and duration can properly deal with the scale and gravity of the problem. And, because it is not a problem confined within any one state's borders, it should be a national inquiry. For all those reasons the parliamentary inquiry announced by the Baillieu government is unlikely to be adequate to the task, though it is an advance on anything the O'Farrell government in NSW has been willing to consider.
Victoria's inquiry, which has yet to conduct hearings, has had a faltering start. The Age has reported the story of Peter Blenkiron, a Ballarat man who was a victim of sexual abuse by a priest. When Mr Blenkiron wrote to the inquiry, he was referred to Centacare, a Catholic agency that in Ballarat and Geelong conducts assistance programs for the Victims Support Agency. As Mr Blenkiron told Age religion editor Barney Zwartz, such referrals are likely to discourage victims from approaching the inquiry. The incident appears to have been an oversight: the inquiry's executive officer, Dr Janine Bush, had earlier told this newspaper that any conflict of interest in referrals would be avoided. Inquiry staff must recognise, however, that for those whose trust has already been eroded even inadvertent mistakes can compound the harm.