My SMH op-ed today is on the economic phobophobics.
Nothing to fear but merchants of gloom, Sydney Morning Herald, 7 June 2012
In the 1970s, psychologists uncovered an unusual phobia: patients who were scared of the possibility of having a panic attack. They called the condition phobophobia – a phobia of having a panic attack. It could be debilitating. One sufferer quit his job, and refused to leave his home.
Opening the business pages of the Australian press some days, it feels like some of the noisier voices in the land are suffering from phobophobia. This is despite the fact that unemployment, inflation and the RBA cash rate are below 5 percent (a rare thing in the post-war era). The prices of what we sell to the rest of the world – relative to the prices of what they buy from us – are at once-in-a-century highs. For the first time, Australia has a AAA rating from the three major credit agencies.
Internationally, the OECD and IMF have lavished praise on Australia’s economic policy settings. Like Paul Keating, Robert Rubin and Manmohan Singh before him, Wayne Swan won Euromoney magazine’s prize for the Finance Minister of the Year. In a hearing of the House Economics Committee, I asked RBA Governor Glenn Stevens to put our economic performance into a global context. He replied ‘I sit around the table with my counterparts from 40 to 50 countries a number of times a year, and I have not yet found one whom I would want to swap places with.’
But you wouldn’t know it from listening to a few of Australia’s more vocal business leaders. Retailer Gerry Harvey claims that the government has created a climate where people have ‘no faith’. Lender John Symond says ‘Business confidence is at its lowest and what sort of commitment can business have based on promises by this government and Wayne Swan? There’s no confidence whatsoever.’
Even among miners, the cry ‘we’ll all be rooned’ is sometimes heard. After making a record $23 billion profit last year, BHP’s Jac Nasser suggests that the Australian taxation system is neither competitive nor stable. Rio’s David Peever says ‘We are at the mercy of the global economy’. Clive Palmer claims that the federal government is ‘destroying the wealth of this country’. Fortunately, half a trillion dollars of planned investment proves that these views are in the minority, but a provocative sound-bites have a way of finding their way into the media.
And yet most of the economic policies of Federal Labor have been straight out of the textbook. When Tony Abbott said in 2009 ‘If you want to put a price on carbon, why not just do it with a simple tax?’, he was reflecting the basic insight that carbon is a negative externality, and the best way to have less pollution is to put a price on it. A profits-based mining tax was a central recommendation of the Henry Tax Review – indeed it was the Minerals Council of Australia who proposed it. Taking on some debt to save jobs in 2008-09, and then paying it back after the crisis, is straightforward Keynesian macroeconomics.
Business confidence isn’t like a cake that the federal government bakes in the oven, slices up, and hands out. It is the product of responsible governments, responsible oppositions, and responsible business leaders. The minority of corporate leaders who choose to score points rather than present a balanced argument may find that they’re kicking own goals.
As for the federal opposition, they seem to be doing less scrutineering and more scaremongering. Virtually all of their policies are secret, they asked few questions at the latest Senate Estimates hearings, and they have reneged on the promise to put their costings through the Parliamentary Budget Office. Whipping up fear about Australia’s economic fundamentals isn’t hard to do – it’s just that most politicians choose not to play the fear card. Scaremongering may play well in the short-term, but in the long-run all of us have to live with the consequences of diminished business confidence.
Everyone is entitled to their own opinions about government policy; what they are not entitled to is their own set of facts. In Australia’s case, those facts must include our low debt, unemployment and inflation, the fact that we have cut real government spending (something the Howard Government never did), and the fact that our economic reforms sit squarely in the economically liberal agenda of Hawke and Keating.
As Franklin D. Roosevelt once said, ‘the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance’. It’s time the phobophobics took a few deep breaths.
Andrew Leigh is the federal member for Fraser, and his website is www.andrewleigh.com.