Over the soft tinkle of China and silverware, amidst the contented purrs as Peach Melba slid from hundreds of spoons, the Lucky Country Central Banker in Chief Governor Phil ‘Lucky’ Lowe cast a spell and reminded all assembled of the central myths of the Australian economy.
First were some helpful “TripAdvisor” tips on spotting some scenic Aussie wonders that a first time visitor might miss between Koala cuddles and feral rumbles with Skippy.
“……….You also find a country that is prosperous and wealthy; Australians enjoy a standard of living that relatively few people around the world enjoy.
You find a country that has grown consistently for some decades now, despite a pretty volatile global environment. Australia’s year-ended growth rate has been in positive territory since 1991.
You find a country that has a strong and stable banking system. We have deep and liquid financial markets. The public here question why banks are so profitable, not why they performed so badly during the global financial crisis………”
Phil then moved on quickly to repeat the “Prayer of the neoliberal faithful”
“…..Australians have also benefited from the relatively free flow of financial capital. Year after year, for more than two centuries now, capital from the rest of the world has helped build our country. If we had had to rely on just our own resources, we would not be enjoying the prosperity that we do today. Our asset base and our productive capacity would be lower, and so too would our standard of living……”
Did you notice the skilful way Phil conflated ‘free flow of capital’ with productive investment?
A true Sith Lord in action – confusing the public – and Penny Wong – with the notion that if we want productive capital inflows we must have completely free capital inflows.
No mention of the fact that most of our trading rivals are acutely aware of the difference between productive capital inflows that add to our productive capacity and the unproductive type that do nothing but bloat our cost base and exchange rate.
Phil will be most popular when he next reports at the monthly gatherings of the BIS that Australia remains wide open for acquisition.
But we must move on as Lucky Phil soon progressed to the TTT section of the night “Talking Tough Turkey” and a hush fell across the room. The list included:
- Productivity – It seems that we have not done much in recent times beyond build even bigger robot mines.
- Asian engagement – Less romance and more selling stuff like “Buy a degree and the Permanent Residency comes free” deals or “Have a Cobber make you Coffee” travel experiences.
- Infrastructure – big ticket stuff that we dont want to pay for and the lack of which Phil noted could deeply annoy the locals (Bill, Richard, Jackie, Derryn, Nick, Cory and Pauline are you paying attention?,)
“………..As I said earlier, our population is growing strongly which is a source of dynamism for our economy. But this growth can put strains on our infrastructure, including on transport infrastructure. These strains can reduce public support for a growing population……”
Touching on the unpleasant topic of things the “Big Australia” big business project needs but the promoters of the project want the public to pay for, Phil had this to say,
“……Infrastructure investment does of course need to be paid for. The positive news here is that there is no shortage of finance for the right projects. The task we face then is to identify the best possible projects, harness the planning capacity of government, design the best deal structures to attract private finance where it makes sense to do so,…..”
Where it makes sense to do so?
What does that mean Phil?
That diffident tone is a bit worrying, surely you ‘know’ that the public sector should ALWAYS rely on private finance – in other words private bank money with an interest rate trailing commission attached.
The Men in Black know the way to Martin Place you know!
Finally, Phil threw the Treasurer a bone – though one he recommended he chew slowly rather than wolf down.
Household debt, the secret reactor of the Australian economy. The network of drunken sailors whose spending has allowed governments since the mid 1990’s to claim to be economic conservatives – as they skim some cream (stamp duty, developer levies, GST etc) from those exploding private bank home loan accounts.
“…….One reason for trying to understand this complex picture is that the level of household debt is relatively high. Overall, households are coping reasonably well with this. But there are clearly risks. So it is a positive development that over the past couple of years, banks have tightened their lending standards in some areas. This tightening was partly prompted by the supervisory measures put in place by the prudential regulator, APRA, and the Reserve Bank and APRA continue to work closely together monitoring developments…..,”
Phil finished off with the traditional loyal toast to fiscal chastity.
“…..Looking forward, we need to make sure that we continue to have this insurance. We can do this by rebuilding our fiscal buffers. This too is a challenging thing to do, particularly given the additional demands being placed on government….”
It is a shame that Phil did not spend a few minutes explaining how households can reduce their risky balance sheets while the federal governments does the same.
But then after dinner horror stories would probably cause the “A50” membership to run screaming to the airport and board then next A380 back to the international centres of capital.