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economic critique « Previous | |Next »
December 13, 2004

In the absence of critical commentary by the Canberra Press Gallery or the ALP that contests the Howard Government's rhetoric on the economy, we have to turn to the cartoonists for economic critique:


Fortunately, we also have the ever reliable Ross Gittens. He quickly summarizes the situation Australia is in:

"The Aussie is well above its long-run average of about US70c and this is probably one of the factors contributing to the blow-out in our trade deficit and thus our current account deficit ..... The most obvious explanation for the strength of our dollar is the weakness of the greenback. It's been declining since February 2002 and is widely agreed to have further to fall. The question is whether the fall stays as slow and steady as it's been to date, or whether it will reach what's been euphemistically described as a "sharply defined tipping point".

Gittens then gives an explanation for why this is happening along conventional lines:

"Why is the greenback falling? Because America's huge current account deficit, equivalent to 5.7 per cent of US GDP, is widely agreed to be unsustainable. And reducing a country's exchange rate - so that its export and import-competing industries become more price competitive - is the market's way of trying to bring trade deficits into line."

Then he asks the right question that the ALP"s Wayne Swan and the Canberra Press Gallery should be asking but do not:

"But hang on a mo'. If the Yanks' current account deficit is unsustainable at 5.7 per cent of GDP, why isn't ours unsustainable at 6.5 per cent? And if the market's downing the greenback to reduce the Yanks' trade deficit, why won't it soon be subjecting us to the same fate?"

Is our trade deficit unsustainable? Why is that question not being asked? Where is the criticism of our current account deficit our deficit of $50 billion a year being unsustainable?

There is room for an economic critique: the current account has blown out; our export performance has been weak for a long time; we are not changing from domestic-led to exportl-led growth; the high dollar is not providing a boost to our international price competitiveness.

Where then is the ALP? Wayne Swan, the shadow Treasurer is not on the ball. His website says that he is still the shadow minister for family and community affairs. We can only infer that Wayne Swan is not on top of the shadow Treasurer's job.

| Posted by Gary Sauer-Thompson at 7:10 AM | | Comments (0)