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After the boom: where will growth come from?

Where will jobs and growth come from after the mining boom? This is the fundamental question facing the next Australian government, whose success will depend to a great extent on how it addresses this…

What is the future of Australian productivity and investment after the mining boom? AAP/Christian Sprogoe

Where will jobs and growth come from after the mining boom? This is the fundamental question facing the next Australian government, whose success will depend to a great extent on how it addresses this question.

The resources investment of recent years may well bring additional production and exports, but it’s becoming clear that the boost to our national income growth from the high commodity prices from Australia’s latest mining boom is coming to an end, revealing a serious and potentially damaging fall in productivity.

What do we need to do to create long-term growth and jobs?

How we got here

Let’s begin at the beginning. We have to ask ourselves, did Australia make the best use of the windfall from the boom that was never supposed to end? The economic gains were unprecedented in their size and impact, and even though temporary, could have prepared us well for a post-boom economy. Prior to the 2007 election, then opposition finance spokesperson Lindsay Tanner complained that the Howard government had been:

…rained with revenue by the minerals boom and it’s wasting far too much of it and it’s not building it for the future.

The incoming Labor government had an opportunity to capitalise on the re-emerging mining boom, driven by demand from China and the region. However, apart from the government’s deft handling of the global financial crisis, which was no small achievement, it is difficult to make the case that Labor did so much better than its predecessor in constructing an economic legacy for a world of knowledge-driven products and services.

As well as being constantly distracted by leadership issues, the government made little headway against the prevailing economic orthodoxy: the misunderstanding of short term business cycle activity as longer term structural change, and the false belief that resources- driven growth had become such a permanent feature of the Australian economy that manufacturing and other sources of growth could safely be abandoned.

Fiona Katauskas

Clearly, the global economy is going through major structural change, but this is less about commodity price fluctuations than innovations in technology and business models and the changing patterns of international trade and development.

The problem and continuing challenge is that Australia is not taking as much advantage of these changes as we could. Both business leaders and policy makers have allowed the contribution to growth from trade to mask a steady deterioration in our productivity over the past decade, which will be fully laid bare as the mining boom fades in coming years.

This is nothing new. Australia has seen such booms before, which have ended badly, and their lessons have been widely canvassed. We have also had the benefit of observing the impact of North Sea gas discoveries in the 1970s on Dutch manufacturing, as booming gas revenues drove up the value of the currency, making it much harder for Dutch industries to compete on the international market. It took many years with a laser-like focus on industry and innovation policies to overcome the so-called “Dutch disease” and reconstruct and reposition manufacturing.

Similarly, North Sea oil and gas enabled the UK government of the 1980s to keep itself in office by fuelling a consumption boom with tax cuts. Only gradually was there a realisation that, in the words of J. K. Galbraith, the price of private affluence was public squalor, as schools and hospitals bore the brunt of neglect and key areas of manufacturing were lost, never to return. Ironically, the experience was repeated with the finance sector in the 1990s and 2000s, once more ending badly, with a new government committing to “re-balancing” the economy.

All Australia had to do was learn from the past – and observe the current approach of Norway, which actually learnt something from the experience of other resource rich economies. Norway has taken a public stake in its mammoth oil and gas assets, imposed a 76% resource rent tax, and established a sovereign wealth fund to partially quarantine the exchange rate and provide an income stream for investment in research and innovation.

Beyond the boom, Norway will have given itself the best possible chance to build a competitive knowledge-based economy. Already it is a world leader in productivity performance – we have a lot of catching up to do.

Productivity slowdown

Without a shared understanding of the problem, it’s not easy to come up with a solution to Australia’s productivity slowdown, which has only partly been reversed over the past year and not anywhere near the required scale of improvement.

While economists and policy-makers agree that productivity drives growth, competitiveness and living standards, there is much less agreement on where productivity comes from, and how to measure it – and thus on the policies which contribute to sustainable productivity improvement. The need for productivity improvement has been sharpened by two separate but related problems that have recently received considerable public attention.

The first problem is the impending fall in Australia’s terms of trade from the heights reached during the commodity boom. The unprecedented rise in our terms of trade as a result of increased commodity prices delivered a massive boost to the growth in our national income in the early 2000s – around 15% over a five year period – and has not inaccurately been described as the “gift from China”. Combined with an effective stimulus, the boom helped to shield Australia from the worst of the global financial crisis and make our economy the envy of the world.

However, it also masked the second problem, which is the deterioration of Australia’s productivity performance since the 1990s. While this problem could be safely ignored, and was ignored in the past, as rising terms of trade took up the slack, it is now increasingly exposed as the commodity cycle runs its course. There were warning signs but many policy-makers and commentators mistakenly saw a cyclical event as structural change (see below).

Australia’s Productivity and Income, 1990-2012. ABS

Recently I prepared a detailed report with my colleagues Phil Toner and Renu Agarwal for the McKell Institute Understanding Productivity (2012), which explores Australia’s productivity slowdown and the policy measures that are being proposed to address it.

We found that just as the slowdown was previously ignored, it is now misinterpreted and exaggerated to justify measures that may have little or no relevance to our future productivity performance, and which may themselves have contributed to the slowdown.

The report notes that the most common measure of productivity performance is labour productivity, which measures the value of goods made or services provided either by hours worked, or by employed person.

Growth in this kind of productivity slowed in the early years of this century. This was less a result of the waning of the 1990s microeconomic reform agenda than a consequence of the increase in total employment and, at least since the global financial crisis, the decline in output growth.


This is an edited extract of a chapter from Pushing our luck: ideas for Australian progress from the Centre for Policy Development.

Join the conversation

104 Comments sorted by

  1. James Hill

    Industrial Designer

    Had they not been duped out of their share of the North Sea Oil, the Scots, with a similarly sized population, may have been able to emulate Norway.
    Australia with a series of Norway sized states and endless bickering between governments is more likely to have a UK style result.
    Does this indicate that in developing Post Boom economies, states should emulate Norway's superior political focus and go it alone on ensuring their future.
    The author has shown how the more complicated governance of the UK botched its oil bonanza compared to smaller Norway.
    Should Australia states, to an extent, abandon federation, as a failed experiment, and instead promote their own futures, more free of political interference/complications?

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    1. Bronislaw Tabaczynski

      Senior Travel Consultant

      In reply to James Hill

      The Australian Commonwealth is probably still a positive, but we do as a single nation have to do a better job. There have during the past few years been suggestions of an Australian Sovereign wealth Fund which was rejected by the Gillard Government. This should be revisited. Also a point that should be noted is that I suspect that yes the price of various commodities over the next few years will go down but hat the economies of China and India will rebound and that this will in the medium to long…

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    2. Ian Rudd

      Retired accountant

      In reply to Bronislaw Tabaczynski

      I'm afraid I don't share your optimism about the economies of China and India rebounding in the medium to longer term. Resource constraint will prohibit much more growth in the world's two largest countries.

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    3. James Hill

      Industrial Designer

      In reply to Bronislaw Tabaczynski

      Yes, good post, Bronislaw.
      Another major problem for manufacturing is the indebtedness of the Australian population.
      Take as example the car manufacturers.
      If all things were equal in the economy, those who manufacture the vehicles would be reasonable targets as purchasers of the vehicles.
      Their wages effectively returning to the factory owners as happened with Henry Ford's famous doubling of his factory workers known famously known as the "Five Dollar Day".
      They then were able to buy their…

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    4. Ian Rudd

      Retired accountant

      In reply to James Hill

      I'm not so sure that really low interest rates are a good thing. There needs also to be an incentive to save both on a personal level and for the economy as a whole.

      Of course nowadays it seems that the connection between savings and investments have been lost as banks can simply create credit more or less out of thin air and then provide easy access to debt by consumers to leverage up their housing or share investments. And so we end up with asset bubbles that must eventually burst.

      Investment needs to be directed into productive enterprise not speculative ones.

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    5. James Hill

      Industrial Designer

      In reply to Ian Rudd

      Yes, once upon a time in Australia, (early sixties) interest rates were fixed at three and three quarter per cent and the amount committed to paying off a house loan was restricted to twenty five per cent of a single household income.
      Then the speculation nonsense began.
      Perhaps we cam rely upon Tony The Wrecker to smash it all down so that it can be built on prudent economic principles once more?

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    6. Ian Rudd

      Retired accountant

      In reply to James Hill

      Ah the good old days of affordable housing, free education and no need for both parents to have to work to lead a reasonable life.

      Were we better off then? Not if you measure it by per capita GDP; so what went wrong?

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    7. James Hill

      Industrial Designer

      In reply to Ian Rudd

      Well, yes there does seem to be an economic truism behind that restriction of lending on housing in former times.
      And it does go to the acknowledged cause of the GFC.
      "A dwelling house as such adds nothing to the income of its inhabitants".
      That being the accepted economic truism, then spending 70% of the double? household income on an asset that does not pay for itself seems to be recipe for disaster.
      As for Gross Domestic Product as a measure of economic activity how does "Asset Price Inflation…

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  2. Trevor Kerr

    ISTP

    Should citizens be looking for a signature "common purpose" project or fund to stimulate research and innovation? We don't have anything like the American plethora of privately endowed philanthropic trusts. Is that because we've lost interest in maintaining an "Australian" character & spirit?
    Perhaps, for a start, Roy could tell us what he thinks are the risks attached to "sovereign wealth funds", apart from the usual political interference, ideological bloodymindedness and individuals' greed?

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  3. Dale Bloom

    Analyst

    Norway has the biggest sovereign wealth fund in the world, with a population of about 5 million, estimated to climb to only 7 million by 2060.

    Out of that only 460,000 people are immigrants or Norwegian-born to immigrant parents.

    Its revenue from North Sea oil may have been similar to revenue earnt in Australia from coal, gas and iron ore.

    The job increase in Australia during the mining boom was barely enough to cover the increase in population.

    The boom is now over, but the population increase continues.

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  4. David Thompson

    Marketing Research

    This article is quite astonishing. The article discusses the very real and central issues of economic growth and productivity. But even though we live in a 21st century market capitalist world, reading this article, one would think we live in the East Germany of the 1970s, and that academics and bureaucrats create wealth and increase productivity. What a joke. These roosters rely on taking a cut from the productivity increases and economic growth created by Australians running large corporations, entrepreneurs, employees of businesses large and small, canny investors, financiers, and so on. Not bloody academic macroeconomists (who always have picked 150 of the last two recessions), and public servants in Belconnen. If these guys were as important as this article claims, we'd see the academics and pen-pushers putting their money where their moths are. The last one who did was last seen on his walk of shame from Canberra to Mt. Kosciuszko!

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    1. Doug Fraser

      policy analyst

      In reply to David Thompson

      Read this contribution and you will see why Australia has a productivity problem. Most of Australia's economic problems are down to the fact that it is overburdened with woefully uncompetitive industries and businesses which have been kept alive by ceaseless featherbedding, stepped up every time an election comes around. They are in uncompetitive in large extent because their owners and managers are too conceited and too arrogant to entertain the possibility that someone else with a broader view…

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    2. John Whelan

      logged in via Facebook

      In reply to Doug Fraser

      We need lower wages and lower taxes. We need less big government and big government spending. Put the money in the hands of the people and let them decide the spending priorities. That is by far the best and most effective way to stimulate growth in any economy. Even the Communist Chinese are learning that! That was the fundamental economic strategy of Milton Friedman and he earned a Nobel Prize for it. Margaret Thatcher was the first to try it, Reagan was next, our own Howard did a good job of it too. The less big spending government policies we have the better. Throw the socialism of big spending governments in the bin. Thats what Premier Deng did and look at what it has done for China in only 20 years. Economics is simple, give the people more spending power and they will grow the economy because ordinary people spend almost every cent they earn. Lower taxes will allow their spending to spin many more times through many others expanding the economy automatically.

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    3. Mike Stasse

      retired energy consultant

      In reply to John Whelan

      I suggest we cancel all debts. They cannot possibly ever be paid now, and they're all created out of thin air anyway, so I think charging interest on monopoly money is fraud...

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    4. David Thompson

      Marketing Research

      In reply to Doug Fraser

      "Most of Australia's economic problems are down to the fact that it is overburdened..."
      Economic problems!!!? Whattha? Doug, You do know that Australians are the richest people on the planet, with the highest levels of human development also on the planet, don't you? I don't know where you've been living for the past 20 years, coz it sure couldn't have been the same country I'm from.

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    5. Mike Stasse

      retired energy consultant

      In reply to David Thompson

      Creating money and credit simply creates more claims on existing real-world resources--it doesn't create new wealth or resources. When those claims vastly exceed the underlying wealth/resources, the system of credit and currency claims will implode.

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    6. Ian Rudd

      Retired accountant

      In reply to John Whelan

      John, your solution has worked a treat as evidenced by the GFC and the continuing trend toward more inequality and hollowing out of manufacturing and the welfare system.

      I recommend it to any nation bent on committing economic hara kiri which Norway clearly was not intent on doing.

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    7. Ian Rudd

      Retired accountant

      In reply to David Thompson

      Did we remember to offset the value of non renewable resource depletion and future damages caused via our GHG emissions? Just asking.

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    8. Doug Fraser

      policy analyst

      In reply to John Whelan

      Did I detect a typo there? Surely you meant to say "Put the money in the hands of the corporations"?

      The rest of this rant can be summarised in six words: "Two legs good, four legs bad". It totally ignores the all too obtrusive evidence of where the Thatcher and Reagan revolutions have landed us, 20 years on.

      No, economics is not simple. Ever. Anyone who believes such a thing should be finding other things to do with his retirement than attempting to engage in economic debate.

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    9. Doug Fraser

      policy analyst

      In reply to David Thompson

      How interesting. A rusted-on Tory who is prepared to acknowledge that the current Government has made a reasonable fist of managing the economy...

      I know this must be very difficult to explain to someone who believes in really, really simple explanations and really, really simple solutions, but it is actually possible for both propositions to be simultaneously true.

      By the standards of the rest of the world, Australia is indeed doing very nicely just at the moment. (Not so sure where the…

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    10. wilma western

      logged in via email @bigpond.com

      In reply to John Whelan

      partisan distribles don't really illuminate the issue of productivity. Read Colebatch in business Age...reference to Norway's policies aren't so much to do with productivity as with making sure the state gets the profits(or most of them ) rather than multinationals - how the profits are used would then depend on the government's policies rather than decisions of company directors .

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    11. Ian Rudd

      Retired accountant

      In reply to wilma western

      Wilma,

      I know little about how overall productivity is measured but I am wary of the idea that it should be any great measure of how the economy is functioning.

      Surely the aggregate measure cannot take into account changing structures in the economy such as moves away from manufacturing to a service economy or from labour intensive to capital intensive industries Also as I think you noted loss of productivity now can lead to improved productivity later.

      Productivity I presume doesn't take into account risk differentials like for instance putting all your eggs into the mining basket rather than building up resilience by diversification.

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    12. David Thompson

      Marketing Research

      In reply to Doug Fraser

      Doug, "rusted on Tory"? Dude, like how old are you? We live in Australia. And how ironic that it is YOU who wants to bring back the Corn Laws, and you have the hide to call ME a Tory! Too funny.

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    13. David Thompson

      Marketing Research

      In reply to Ian Rudd

      Ian, Australia has NEVER been a "manufacturing economy", so there is no such "move" going on.

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  5. Stephen Ralph

    carer

    There should be strategies, policies, developments and momentum already in place to propel Australia forward over the next 10 - 20 years.

    If the mining boom has peaked for ever or just for the moment, and if we are as intelligent as we think we are, we should be able to have competitive industries and institutions up and running asap.

    Given the climate ramifications, the majority of these "new" enterprises should have sustainability and environment friendly aspects.

    Instead of the bullshit we have been hearing from these dud politicians, we need policies for the future, not echoes from the past. This election is just a sad reflection on the quality of vision and outlook from a bunch of overpaid squabblers who make us all look bad.

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    1. David Thompson

      Marketing Research

      In reply to Stephen Ralph

      Stephen, there are still decades left to the mining boom.

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    2. Stephen Ralph

      carer

      In reply to David Thompson

      Well that only confirms the paucity of fact in the info we are given.

      The drama queens lead us to believe the mining boom will be over next week.

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    3. Mike Stasse

      retired energy consultant

      In reply to David Thompson

      Hahahahahahaha!!!! I give it five years.

      Once the oil runs out in Australia, the cost of mining will make their stuff unaffordable.

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    4. Stephen Ralph

      carer

      In reply to Alice Kelly

      Absolutely.........is anyone looking at the huge potential of wave power?

      As the warnings from scientists get more alarming, it appears as though politicians get deafer.

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    5. Mike Stasse

      retired energy consultant

      In reply to Stephen Ralph

      Humanity's greatest shortcoming is its inability to understand the exponential function........

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    6. Stephen Ralph

      carer

      In reply to Mike Stasse

      Harnessing the ocean's wave power.........I've seen a few things on teev about the huge possibilities.

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    7. David Thompson

      Marketing Research

      In reply to Mike Stasse

      Mike, oil is not running oil. 'Peak Oil' was a myth.

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    8. David Thompson

      Marketing Research

      In reply to Mike Stasse

      "Humanity's greatest shortcoming is its inability to understand the exponential function........"
      Mike, surely HUMANITY has the ability to understand the exponential function. After all, just about everybody was taught it at school; even the slowest of classes. But I agree with you that it is a very powerful force in our lives. The other one of course is compound interest, and related time value of money.

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    9. David Thompson

      Marketing Research

      In reply to Stephen Ralph

      "The drama queens lead us to believe the mining boom will be over next week."
      Back in 1970s, the drama queens had every believe we would run out of food by the 1980s. I followed us some of the references posters on TC have made about that time. Have a read of "The Population Bomb" by Paul Ehrlich If you've never seen download two movies - "Soylent Green", "Z.P.G" (Zero Population Growth), "Logan's Run". Even though the look of these films is a little tacky by today's standards, the 1970s must have…

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    10. Mike Stasse

      retired energy consultant

      In reply to David Thompson

      See.... compound interest IS exponential growth. And not even you seem to get it. Correct me if I'm wrong.

      The trouble with exponential growth is that if you hear something's growing at 1, 2, 3, 4 percent..... it doesn't EVEN SOUND like exponential growth.

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    11. Mike Stasse

      retired energy consultant

      In reply to David Thompson

      THAT's not even true........ back in the 70's, the drama queens as you call them predicted COLLAPSE WITHIN ONE HUNDRED YEARS......

      http://greatchange.org/ov-simmons,club_of_rome_revisted.html

      Please get your facts right....

      and collapse is bang on target to occur well before 2070.... in fact latest studies following on from the Club of Rome's work show that population will start collapsing ~2025

      http://damnthematrix.wordpress.com/2012/10/16/are-we-on-the-cusp-of-global-collapse/

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    12. David Thompson

      Marketing Research

      In reply to Mike Stasse

      Mike, look I wasn't even around when your generation of kooks was flipping its collective wig, so as you clearly are having memory problems or acid flashbacks, let's here it from King Kook himself. In 1968, he publishes "The Population Bomb" with this rational and sober piece of science:
      "The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate."
      Paul Ehrlich.
      And just in case there were folks not paying attention, in 1974, he drops another howler about "The End of Affluence"
      This vast tragedy, however, is nothing compared to the nutritional disaster that seems likely to overtake humanity in the 1970s (or, at the latest, the 1980s) A situation has been created that could lead to a billion or more people starving to death”

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    13. Mike Stasse

      retired energy consultant

      In reply to David Thompson

      So he got the timing wrong.......

      Ehrlich clearly wasn't expecting lashings of cheap and abundant fossil fuels to be pored all over the land to grow more food.... the result of which is poisoned soil turning to desert at an alarming rate.

      In fact, because Ehrlich's predictions were postponed, they will be even worse. MORE people available for the dieoff.

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    14. Ian Rudd

      Retired accountant

      In reply to David Thompson

      The mining boom relies on China. How many decades of high, or even any growth has it got left as non renewable resources become ever more scarce? Who knows but I doubt they will see out the next two decades in the way they have done in recent times.

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    15. Ian Rudd

      Retired accountant

      In reply to David Thompson

      We do have millions starving to death right now. Maybe not billions yet but it's not going to get better especially if we carry on this business as usual thing.

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  6. Lee Emmett

    Guest House Manager

    Summarising Roy Green's article, for convenience:

    ' ... the global economy is going through major structural change, but this is less about commodity price fluctuations than innovations in technology and business models and the changing patterns of international trade and development ...

    the most common measure of productivity performance is labour productivity, (which) ... slowed in the early years of this century ... This was less a result of the waning of the 1990s microeconomic reform…

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    1. Craig Myatt

      Industrial Designer / R&D

      In reply to Lee Emmett

      This is the problem...Norway clearly doesn't have the same gullibility we have, when it comes to dealing with multinational corporations like BHP, Woodside, et al. Norway laid down the rules to them, however, it appeared the other way around here, at the time of the much touted super profits tax, which petered out into the MRRT mining tax.

      A powerful democracy, where the people have strong control, would be a situation where the people could choose the Norway kind of outcome. If only we would learn to do that...

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    2. Alice Kelly
      Alice Kelly is a Friend of The Conversation.

      sole parent

      In reply to Craig Myatt

      Norway's super profits tax is 75%? ( I read somewhere) . They developed hydro, we have plenty of sunshine. They have used their money wisely. We do not , John Howard funded middle class welfare, tax exemptions for wealthy, stripped money from the poor in real terms. Norway taxes wealthy more, funds poorer better, does not have the same problems we are encouraging here. (MC and wealthy, entitlement) They are smarter. We are not.

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  7. Mike Stasse

    retired energy consultant

    " ... the global economy is going through major structural change, but this is less about commodity price fluctuations than innovations in technology and business models and the changing patterns of international trade and development ... "

    Yeah right........ that "major structural change" is called LIMITS TO GROWTH.

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    1. David Thompson

      Marketing Research

      In reply to Mike Stasse

      Mike, WHAT limits to growth?

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    2. Mike Stasse

      retired energy consultant

      In reply to David Thompson

      Peak Oil
      Peak Water
      Peak Phosphorus
      Peak Debt
      Peak Lead
      Peak Halfnium
      Peak Coal (YES.... by 2017!)
      Peak uraniuPeak Soil
      Peak Fish
      and last but certainly not least Climate Change........

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    3. James Hill

      Industrial Designer

      In reply to Mike Stasse

      Bravo, Mike, you are trying to get them to avoid running around like chickens with their heads cut off when the change comes.
      More than they deserve.

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    4. In reply to Alice Kelly

      Comment removed by moderator.

    5. Alice Kelly
      Alice Kelly is a Friend of The Conversation.

      sole parent

      In reply to David Thompson

      Really, is that so, and you know this because... I've watched with interest the debate all the way down the page because it's an interesting discussion. Your input seems a little rude and ignorant.

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    6. Ian Rudd

      Retired accountant

      In reply to James Hill

      They are beyond help. Unfortunately a good majority of the population share the same blinkered view of the state of this planet and its future.

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  8. Stephen Ralph

    carer

    Do we really need the relentless pursuit of economic growth at ALL costs.

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    1. Mike Stasse

      retired energy consultant

      In reply to Stephen Ralph

      ONLY because of the monetary system we have now abused to death........

      Nearly ALL money is created as debt. At the time this money is created, there is not enough of it lying around in the economy to repay that debt plus interest. So MORE money has to be created... and the only way this can be done is if someone borrows some more, and the reason more money is borrowed, is to make/build 'stuff', AKA Economic Growth.......

      This idiotic system is called fractional banking. The dog chasing…

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    2. Stephen Ralph

      carer

      In reply to Mike Stasse

      Thanks Mike.......not exactly a comforting scenario.

      We've energised ourselves to death.

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    3. James Hill

      Industrial Designer

      In reply to Mike Stasse

      Mike, can you envisage a scenario where, when an Abbott government cements wall to wall conservatives all around the country and "labour" seeing the untrammelled power of "capital" made manifest, has no compunction but to bring the system down, then the end will come faster than expected?
      Will the global system survive the example of the collapse of the Australian economy?
      Or be tipped over that edge, on which it still teeters, by an Abbott ascendancy?
      Time to dust off those contingency plans:
      "Surviving the Conservative Economic Apocalypse".

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    4. Mike Stasse

      retired energy consultant

      In reply to James Hill

      I'm of the opinion that collapse has already begun....... unlike a bridge collapse though, it occurs in slo mo...

      The election of Abbott is the next nail in the coffin... though in truth it really doesn't matter who's in power, because they are really not in power at all. The future is now cast in stone. It's too late to do much about it, adaptation is the only thing left to do, and so many people are not in any way knowledgeable of the issues at hand that they will do nothing to prepare..... so they will simply become collapse fodder.

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    5. James Hill

      Industrial Designer

      In reply to Mike Stasse

      Mike, the precautionary principle, would require a contingency plan for such a "disaster", which is the only correct term to use for the inevitable result for the many who will be hurt by the change.
      Yet we see a false faith being promulgated among the future victims, which is sickening to behold.
      Whatever happened to the concept of insurance against a "rainy day" or even worse?
      Blind faith indeed.

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    6. Mike Stasse

      retired energy consultant

      In reply to James Hill

      Humans are basically selfish and greedy..... and possibly from millenia of evolution during times of environmental scarcity when resources (like food) were consumed to total depletion, we have become programmed to max out whenever good times are available to be had....

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    7. James Hill

      Industrial Designer

      In reply to Mike Stasse

      Well selfish and greedy would explain the opinions of some posters.
      But perhaps the artificial environment of so-called civilization would be a better explanation for that behaviour.
      That, civilization, has only been around for a relatively few generations in evolutionary terms at least. and yet researchers have been able to distinguish genetically between early townspeople and hunter gatherer people.
      In which case, intriguingly, the possibility of the greedy and selfish, and almost limitless exploitation of incoming hunter-gatherer types by "city" types as a genetic trait cannot be discounted.
      No wonder you are escaping to the Wilderness Isle!

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    8. Mike Stasse

      retired energy consultant

      In reply to James Hill

      About ten years ago, I had an epiphany.... and it finally started to make some sense for me. It was not the technology, philosophy or scientific method. It was not the economic theory, political viewpoint or religious upbringing. The problem is us. The problem has always been us. The great human flaw. If it is us that is the source of the problem, is it the absence of us that is the final solution?

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    9. Jenny Goldie

      president at Sustainable Population Australia

      In reply to Mike Stasse

      Mike

      I'm not sure that we have to become extinct in order to save the Earth but we sure have to reduce our footprint on it. That will require a significant reduction in numbers, perhaps to less than a billion, in fact, probably to less than a billion and possibly a tenth of that. If we could do it humanely it would be nice, but I fear war, pestilence and famine will do it for us.

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    10. James Hill

      Industrial Designer

      In reply to Mike Stasse

      Mike, perhaps the biosphere has an energy problem, because energy or food is the first need of life.
      Hungry creatures abound, humans are in the same boat as every other life form.
      So the focus an energy is the right one.
      If there is going to be a final, sustainable solution

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    11. Mike Stasse

      retired energy consultant

      In reply to James Hill

      The only members of the biosphere that have a problem are US.... though it can be argued WE give the rest of the biosphere plenty to worry about.

      In nature, EVERYTHING's powered by the sun. Only humans use other sources... even though even they (fossil fuels) are concentrated solar energy created over many millions of years.... a timespan no creature in the biosphere has the ability to deal with.

      The biosphere has plenty of food....... without the presence of humans, at least in our current numbers.

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    12. James Hill

      Industrial Designer

      In reply to Mike Stasse

      Yes, Mike, expanding on your theme and applying the principle of ecological sustainability, those humans who wish to merely survive will have to measure their plans against what energy is naturally available.
      The spectre of apocalypse does seem to have many if not most of them paralysed into inaction.
      Meanwhile nature will be what it seems to be for most creatures, red in tooth and claw.
      still the sensible one could be measuring up their contingency plans, couldn't they?
      For the best of all possible results?

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  9. Dr Graham Lovell

    logged in via Twitter

    Perhaps some accepted "the false belief that resources- driven growth had become such a permanent feature of the Australian economy that manufacturing and other sources of growth could safely be abandoned." However, it was always a false promise.

    Any country that abandons a diverse economy condemns itself to become a version of a banana republic.

    Paul Keating served the nation very well when he made that famous (infamous) comment on the radio. (He was also right about the "recession we had…

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    1. Wade Macdonald

      Technician

      In reply to Dr Graham Lovell

      In the Holden situation subsidies won't work or bailouts either. GM funnel profits from Holden to invest in overseas car making and the American auto sectors. GM in the USA got the old daewoo plant purchased with the Aussie profit from the sales from vx vz.

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    2. David Thompson

      Marketing Research

      In reply to Dr Graham Lovell

      "the false belief that resources- driven growth had become such a permanent feature of the Australian economy that manufacturing and other sources of growth could safely be abandoned."
      Wrong. Resources-driven growth will continue to be a feature of the Australian economy, just as it has been since 1820. Manufacturing was only ever a very fleeting feature of the Australian economy, and a net growth deflator. I
      n between all those profits sent back to the owners of "Australian" manufacturing in Japan, UK, and US, our taxes had to be constantly doled out to these foreign companies, because their national monopolies (built with government regulation - tariffs, etc) removed the incentive to innovate and improve productivity

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    3. Dr Graham Lovell

      logged in via Twitter

      In reply to David Thompson

      I agree with you that resources will continue to be an important part of the Australian economy. They have been since SA was rescued by finding copper in Kapunda in the 1840s, with Burra also being the site of an important copper mine, after which we can consider the Victorian gold bonanza of the 1850s, which brought unprecedented prosperity to that state.

      Mineral wealth comes and goes, but in Australia agriculture has kept on producing. Yet without manufacturing Australia could never have supported…

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    4. Ian Rudd

      Retired accountant

      In reply to Dr Graham Lovell

      I agree. Developed counties only began touting free trade once their own protectionist policies had led to diverse wealthy states. the Asian Tigers like South Korea and Taiwan gave their budding industries a leg up by protecting them and supporting them.

      On another tack any economy that relies on just one sector to drive economic wellbeing gives up the resilience that a more diverse economy offers. Less resilience equals higher risk.

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    5. David Thompson

      Marketing Research

      In reply to Ian Rudd

      " the Asian Tigers like South Korea and Taiwan gave their budding industries a leg up by protecting them and supporting them."
      And so did we. I am a HUGE supporter of smart government hand-ups and support to domestic companies and industries owned by Australians. But that hand doesn't stay out for too long. They have to learn to fly. And that was precisely what the Tigers did.
      We just huge foreign MNCs, who were way beyond the start-up stage. In return for the Australia state to grant them a national monopoly, foreigner manufacturers basically copy and pasted the same national monopoly companies, they used in other companies. The Tiger governments would never have copped that.

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    6. Dr Graham Lovell

      logged in via Twitter

      In reply to David Thompson

      I can see that you do not have much time for multi-national corporations, and there are certainly some aspects of MNC behaviour I also do not like.

      I am not in a position to defend (or attack) the behaviour of GM-Holden, but it would seem that Australia has benefited from their presence. Have they provided well-paid jobs in Australia? Certainly! Have they paid taxes on the real earnings in Australia? As far as I know. Have they given Australian industry a leg-up with technology brought in from…

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    7. Jenny Goldie

      president at Sustainable Population Australia

      In reply to Dr Graham Lovell

      I think 15% general tariff internationally applied is the best idea out there! It would protect local industry without moddle-coddling them too much. Hopefully it would be a brake on dumping by other countries. But what will happen when the cost of transport inevitably rises as the price of oil goes up? It may have the same effect as a 15% tariff. That's OK - the more self-sifficiancy the better.

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    8. Dr Graham Lovell

      logged in via Twitter

      In reply to Jenny Goldie

      Thanks for the support you offer for this idea.

      Yes, you are right. Freight costs are a natural barrier to international competition.

      It is also one of the changes that have happened over the last 30 years: freight costs have come done.

      Whether the cost of fuel will go up in the years to come is a moot point. Everything points to this happening, but there is massive scope for efficiency improvements in the use of oil-based fossil fuels, we just don't have the technology yet. Will it arrive in time? We will have to wait and see.

      Anti-dumping activities are a dead end, at least for Australian companies. By the time they are able to mount a case, the disadvantaged business is likely to be already in a financial crisis. The EU are pushing this, but I don't like their chances for a productive outcome. The US are a different case - they do their things their own way.

      Dumping hurts everyone, but if each nation is given a fair go, I think you are right that it will diminish.

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  10. robert roeder
    robert roeder is a Friend of The Conversation.

    retired

    The federal and state governments along with all government bodies are now corporate entities. The sift from sovereignty to corporation has allowed the gutting of ownership of Australia's wealth and assets. Both major parties have been complicite in allowing and at times encouraging the sell off, we now find that our wealth is stripped and sent offshore without receiving even the small benefit of fair taxation.
    If we are a corporate entity we should act like one. No CEO in his/her right mind would…

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  11. Jenny Goldie

    president at Sustainable Population Australia

    Larry Elliott, Economics Editor of the Guardian has said much the same thing this week: http://www.theguardian.com/world/economics-blog/2013/aug/18/ashes-economy-australia-facing-new-collapse

    This is not the time to be increasing our population by nearly 400,000 a year. A bit of belt-tightening is in order. We have to phase out natural increase (156,000 or so) ASAP by encouraging smaller families and we have to reduce net migration from its current 238,000 or so). Other measures (sovereign funds etc) are of course necessary but getting rid of debt seems critical if we are to have few future means of paying it back.

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    1. Dale Bloom

      Analyst

      In reply to Jenny Goldie

      I have heard from my Irish assistant, that there was a significant movement of immigrants into Ireland (mainly Poles) when Ireland was booming.

      In the eventual bust, most immigrants moved out again, and it is ironic that Australia is now a favoured place for Irish youth to travel to, work and live.

      “As Ireland's economy struggles to recover from the global financial crisis, more Irish than ever before are coming to Australia.”

      http://www.abc.net.au/news/2013-08-24/irish-migration-to-australia-increasing/4910116

      It is unknown if Australian youth will also flee the country in the eventual bust of Australia, because there are few places left to flee to.

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    2. Dr Graham Lovell

      logged in via Twitter

      In reply to Dale Bloom

      I doubt that we have to fear an "eventual bust of Australia". I think the Australia polity (the voters) are too smart for that.

      We will find ways to adapt to the changes in the world.

      We have the resources, we have the people, and we have the will.

      Let us have a bit of jingoism, and less gloom and doom.

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    3. Mike Stasse

      retired energy consultant

      In reply to Dr Graham Lovell

      What a pity we haven't got the oil........

      Or the infrastructure to switch to gas........

      And never mind the fact if any civilisation exploits its resources at increasing speed, the faster it runs out...

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    4. Dale Bloom

      Analyst

      In reply to Dr Graham Lovell

      My Irish assistant is actually a young female teacher who can’t find work in Ireland.

      We normally get over 100 hours per week work (much of which is at overtime rates) , but the work is quite physically demanding and working conditions can be harsh.

      It is actually difficult to find Australians willing to do the work, particularly young Australian women, and so we employ the Irish.

      Apparently the Irish tolerated the influx of immigrants into Ireland, because the immigrants would do low paid work the Irish didn’t want to do.

      Then the Irish noticed the unemployment rate climbing, and then the property bubble burst.

      The unemployment rate eventually climbed so high most of the immigrants left, and now the youth of Ireland are also leaving to look for work in places such as Australia, and doing jobs many Australians don’t want to do.

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  12. Pat Moore

    gardener

    Under the ultimatum of global warming, overpopulation, resource depletion, spreading wars etc this politico-economic ideology we live under, neoliberal economic "rationalism", a global empire's pyramid ponzi get rich quick scheme is anything but "rational". It is the engine powering the Titanic. The globalised corporate elite structure via captured functional bodies like national governments, IMF, World Bank etc has geared various economies into various ratio drives of its massive engine designed…

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  13. Bernie McComb

    retiree

    "less about commodity price fluctuations than innovations in technology and business models" Surely it's obvious that new jobs growth and high productivity will continue to come from expanding the financial services sector.

    Either that or further tax cuts and incentives to house buyers, to encourage the kind of price speculation that added so much to GDP for Mr Howard.

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  14. Theo Pertsinidis
    Theo Pertsinidis is a Friend of The Conversation.

    ALP voter

    There are numerous start up ventures but only a few make it.

    There's the start up subsidy help, the subsidy help through the trough cycle, the market correction subsidy help.

    Picking winners is important.

    Governments subsidies ventures that reflect their own idealism.

    Unfortunately because of change of governments... consistency fades.

    It's just as much about stopping throwing good money after bad as picking winners.

    The ALP have set an agenda course for technology as this is a…

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    1. Mike Stasse

      retired energy consultant

      In reply to Theo Pertsinidis

      "The ALP have set an agenda course for technology as this is a driver of the pace of industry."

      No it isn't. ENERGY is the driver. Cheap and abundant energy, energy DENSE energy..... once it's gone, innovation goes with it.

      It takes 250kg of fossil fuels just to make your computer.... let alone to power it once it's finished.

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    2. Theo Pertsinidis
      Theo Pertsinidis is a Friend of The Conversation.

      ALP voter

      In reply to Mike Stasse

      Reminds of the scene in the movie The Challenge.

      The Americans are trying to find an angle to discredit the winged keel design based on it's citizenship of the designer and locality of it's design.

      When being interviewed by members of the New York Yacht Club, the CEO of the testing lab where Ben Lexcen did his work in Holland, stated... "Who is the designer of a house? The architect or the draftsman? The only answer you'll get from me is Ben Lexcen designed the winged keel".

      Kind of like splitting hairs.

      I do take your point Mike.

      Thanks for the jog of memory to 1983 :-)

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    3. Ian Rudd

      Retired accountant

      In reply to Theo Pertsinidis

      I quote you. "For example, anybody arriving in Australia illegally will not be settled here... is good... the remaining piece is to destroy the boats... if that's how they arrived."

      I thought this comment was uncalled for and not at all pertinent to the discussion. Asylum seekers are people you know, just like you and me.

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    4. Theo Pertsinidis
      Theo Pertsinidis is a Friend of The Conversation.

      ALP voter

      In reply to Ian Rudd

      At the risk of being censored myself if it's seen as straying off course...

      Agreed Ian... Asylum seekers are human.

      My point being... destroy the boats after they get off the boats not while they're on them.

      That way the boats aren't reused illegally again.

      I do read the bible and often Jesus spoke in analogies and parables.

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  15. Henriette Vanechop
    Henriette Vanechop is a Friend of The Conversation.

    retired

    Quote from Piers Akerman page 107 , Telegraph Sunday 25.08.2013 :

    "Gina R. and Clive P. (both job creators)"

    Australia has vast natural resources. - ONLY useful as long as they are NEEDED. When sun, waves, etc, replace coal, what will Australia use to pay for imports ?

    Are MINES job creators ? How many jobs ? Is the mining machinery built in Australia, or adding to the external debt ?

    For our customers to pay for our mineral resources, we MUST buy their manufactured…

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    1. Henriette Vanechop
      Henriette Vanechop is a Friend of The Conversation.

      retired

      In reply to Henriette Vanechop

      Norway's Government did it..
      Maybe Australia could do it with co-operation from the rich miners who have been exempted from super profit taxes ?
      Would they consider setting up suitable industries, providing australians with employment and themselves with interesting challenges and still a return on their investments.. Wouldn't it FEEL GOOD, bringing security of work with adequate living conditions to a few million people ? (the true figures of unemployment + under employment ?).

      Should…

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    2. Stephen Ralph

      carer

      In reply to Henriette Vanechop

      In Victoria many farmers are ripping out their fruit trees to sell their land. They can't even afford to do it themselves and are relying on volunteer help from the Farmers Federation.

      And yet we import fruit - it just seems the height of stupidity.

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    3. Ian Rudd

      Retired accountant

      In reply to Stephen Ralph

      Of course it's stupidity. The question is whether it is top down stupidity or bottom up. Why do,our farmers and workers allow our governments to govern in such a self destructive manner? They obviously do allow it judging from the results of this and previous elections.

      Does the fear of being overrun by refugees displaced from their own regions (often by wars in which our government is a party) trump common sense economic and social management? So far it seems it does for 90% of the voters.

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  16. wilma western

    logged in via email @bigpond.com

    This seems to be only half of an article. Interesting one by Colebatch in Business Age outlines differing measures of productivity and reasons there are fluctuations relating to whether for example mining is in a big contruction-investment phase or or expanded production phase .Who owns the mine would be irrelevant to those measures.

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  17. Matthew James

    Video Editor

    Its amazing how economists are still persisting in Growth as paramount above everything else. And some of the feedback advocating lower wages? Typical business sector fiscal bullying. What about all the banks, Macquarie the worst by far just doing nothing but investing? They go on and on how crucial a role banks play in industry because they are pretty useless in their current model hence the need to grind it in. Industry needs sound money management, not this constant drive to generate wealth just…

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    1. Ian Rudd

      Retired accountant

      In reply to Matthew James

      Spot on Matthew.

      On the question of lowering wages, flexible wages that is, economists forget that labour is not just a variable cost and wages not the just the price payable for that input but labour also consumes so the less they receive the less they spend. If the goal, tragically, remains more consumption and more growth then cutting wages=cutting expenditure=cutting demand. Henry Ford new that.

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