Australia is now officially a ‘patch-work’ economy, according to anyone trying to explain away massive mining profits amidst job losses and rising living costs elsewhere.
It’s a neat term because it has a sort of unthreatening, homely feel; just a series of patches, knitted together by the golden thread of trickle-down economics.
But if you were to map out our economy into sectors and ask people to rate their value, you would see something looking more like a ragged blanket being pulled in multiple directions by different interests.
Which is exactly what we have done in this week’s Essential Report – asking people to rate industries by their importance – as well as by how we think they are travelling.
Q. Thinking about Australian industries, how would you rate the current state of the following industries? PLUS
Q. And which of these industries are the three most important for Australia’s economic future?
|Top 3 Imp||Very good||Good||Poor||Very poor|
Mining: Unsurprisingly mining tops the pops. After knocking off the Resource Rent Tax and then posting record profits the mining industry is going like the clappers, held up only by its ability to dig things up and ship them out. The $20 million-plus spent fighting the first incarnation of the tax has solidified impressions this industry is the cornerstone of our economy, despite employing only about two per cent of the workforce.
But there are also costs. The next three industries in order of importance face a direct impact of the success of mining and its impact on the Australian dollar.
Agriculture: important for exports, but also our national food security, farmers are pointing to the high Australian dollar as a reason for struggling sales abroad, while bracing for a range of cheaper imported goods into the local market.
Tourism: another industry feeling the heat from high comparative prices – particularly at the high-end of the market where Australian is no longer a low-cost luxury option.
Manufacturing: the closures of BlueScope operations have drawn an almost direct line between the mining boom and manufacturing’s demise. An industry that still employs one million Australian workers, in desperate need of an industry plan.
Mid-table we also have a number of confidence industries – whose performance is linked to individual’s living standards and economic confidence levels; these are the industries that stimulus spending and tax cuts most directly benefit.
Construction: a bellwether industry for the nation’s economic health, when times are good people build and governments spend. Neither is happening right now.
Retail: another sector feeling the heat from living costs, employs a massive number of people at the bottom end of the labour market.
Hospitality: like retail, but with a higher level of discretionary spending making it even more subject to the whims of consumer confidence.
Finally we have the aspirational industries, the ones we sort of want to base our economy on but deep down question whether we are not just having ourselves on.
Finance: in the 1980s this was the industry that would drive prosperity and for a while it did; these days people see massive profits and wonder how it helps the nation.
Telecommunications: let’s face it if you can’t articulate a benefit side of the cost-benefit analysis for an industry that’s about to spend $34 billion in taxpayer money, you can’t really blame the public for wondering what the fuss is about.
Media: for all its noise and self-importance, the public knows where it/we sit in the broader scheme of things: a couple of big companies – and a whole lot of foreign content.
This is the Australian Quilt – a mining industry booming; a bunch of export-exposed industries struggling, some more that relying on flagging consumer confidence and then aspirational high-yield operations which we don’t really rate.
The challenge for any government managing this economy is to actually bring the patches together with something more durable than faith.
A first step will be the mining tax, as negotiated down or as amended with some Green input – that will for the first time draw a line between mining profits and investments in the rest of the economy. As our poll this week shows, you won’t lose votes pushing this one through.
A second is to act on the calls for a review of manufacturing sector, where the next wave of high-skilled jobs will come from.
And finally, if it works for manufacturing, what’s wrong with extending the concept to the rest of the economy, the sectors that employ the 98 per cent of Australia’s who aren’t trousering six-figure incomes in the mining industry.
The problem with a patchwork economy is that it is an easy excuse – we can’t give you a coherent plan because it’s a patchwork economy. Maybe if we put a bit more focus on how these patches hung together, the counter-intuitively low levels of economic confidence would get a much needed boost.
Did someone say National Economic Summit?
- Peter Lewis | Director, EMC
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