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The economy: plugging the gaps « Previous | |Next »
March 1, 2005

The news today is that Australia has recorded its worst current account deficit on record. The current account deficit as a proportion of GDP rose to 6.5 per cent, and that means increasing foreign debt, which used to be a bad thing. This terrible external account comes at a time when the economy is slowing (meaning lower imports) and the terms of trade are very positive (meaning increased exports).

The Howard Government is not that concerned about this policy failure. It's line is the economy is strong, 'don't worry the resources boom will plug the deficit', and the proposed industrial relations reform will make the economy more competitive. It does not seem to matter that Australia remains a quarry rather than becomes a knowledge nation or becomes a banana republic.

The standard response from the Treasurer was that the states are to blame for the decline in manufactured exports. The commonwealth is not responsible for its lack of an industry policy. Does not this provide an opening for the ALP to place the federal Treasurer on the defensive with a full frontal attack?

And there is another policy failure. What has also been forgotten is that there are lots of vacant jobs and lots of people who are unemployed with the jobless not fitting the vacancies. As Tim Colebatch observes the unemployed, underemployed, or prematurely retired have relatively low skills and education levels, whilst we have have more jobs vacancies for skilled jobs.

So why not a national investment in eduction and training to plug the gap? Does not this investment increase our future ability to earn income? Are not real educational courses to equip workers with generic trade skills, literacy, numeracy and computer skills a better way to address the gap than the proposed welfare-to-work reform to get the disabled into the workforce?

| Posted by Gary Sauer-Thompson at 4:32 PM | | Comments (3)
Comments

Comments

I would like to bring attention to another article by Colebatch in todays Age. Cheerfully titled We're on a long and slippery slide to disaster.

The important points he makes:

Keating recognised that a large current account deficit was a sign of policy failure; Labor took gutsy decisions to strip away entitlements, slow the economy and shift resources to exports and manufacturing.

In the next 10 years, the volume of exports more than doubled, and manufactured exports more than quadrupled. Had those trends continued, by now the current account problem would be behind us.

But in 1996 the Coalition won office and abandoned or gutted most of Labor's programs. It thought we didn't need to build up exports and manufacturing. It even put a new $400 million a year tax on manufacturers.

Guido,
'tis a great opportunity for the ALP to get stuck into Costello as a bad economic manager is it not?

Will they? Or will they play safe and stick to the line that the increase in interest rates is a broken election promise?

I think that they have to get stuck into Costello. If things go pear shape Howard will leave before the train crash and leave Costello with the baby.

(sorry for the mixed metaphores)