Queensland’s new beggar-my-neighbour state purchasing policy, apart from being a dog whistle to neo-protectionist One Nation voters, guarantees falling living standards for all of us.
The policy, preferring local suppliers, might sound intuitively good, but it cuts across everything we know about economics from our own history.
By giving up to a 30% price preference to “local” suppliers the policy will most obviously increase government costs, and therefore taxes. Some local businesses will benefit, but at a substantial cost to those on low and fixed incomes, along with exporters.
Recent research by Deutsche Bank shows that over the last 10 years prices set or influenced by the public sector have risen 60 per cent – 6 times those for private-sector goods and services.
Queensland just added another 30% as an election bribe. Pity those on the edge of financial oblivion. Perhaps the new state government supported payday lenders can help them out.
Other governments are just as bad.
Most local governments in Queensland have local purchasing policies – no wonder that Council rates have been rising faster than inflation.
The federal government has recently threatened price controls in the gas industry, and insists on building expensive warships in South Australia which is only marginally better than the federal opposition - it wants to set prices for everything from wages to electricity prices.
It seems that when you live in one of the most successful economies in the world it is easy to take it for granted and be tempted by “new” ways of getting ahead.
Except that the new ways are really the bad old ways that had to be abandoned in the 80s and 90s to ensure our economic survival.
After World War II Australia had a boom based on reconstruction, population growth and world-wide technological innovation. There was also high demand for rural commodities like wool.
It didn’t matter much that we had increasingly high trade barriers, an inflexible labour system and currency and interest rate controls – lots of our competitors did too.
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