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Rural views to decide election outcome

By Ben Rees - posted Wednesday, 1 September 2010


The role of three rural independents in structuring the outcome of the 2010 elections is generating substantial urban media attention. The main “beef” of urban journalists appears to be the Lazarus type resurrection of rural politics after indecent interment by the architects of structural reforms began by Hawke/Keating in 1983 and continued by Howard. The failure of these structural reforms measured against the original yard stick of full employment cementing the social fabric of society offers an explanation of rural frustration fusing with urban discontent to reject the major parties in the recent election.

Urban voters under the age of 50 are unlikely to understand the deep regional frustrations that have festered as rural communities helplessly watched as industry deregulation and competition policy impacted upon the sector. The fabric of regional communities crumbled as industries declined, employment contracted, communities shrank and young people left to build lives elsewhere. Regions became economically debilitated. Education and health services were systematically withdrawn while rural poverty increased and the incidence of rural suicides rose. Serious problems such as poverty and suicide became relabelled mental health issues to disguise policy failure.

Deterioration from structural reforms of the rural sector is easily demonstrated by a few simple comparative figures from 1983 to2009. In 1983, rural industry terms of trade index was 128.6 (ratio prices received to prices paid). By 2008-09, the index had fallen to 92.6 marginally above the historic minimum 91.1 in the previous year. The percentage of rural debt to output has risen from 50 per cent to 138 per cent. By any commonsense assessment, sectoral decline can be explained only in terms of failed policy or gross political incompetence. The fact that urban media chose to concentrate on their patch of dirt and ignore rural decline explains the hostility now evident among rural politicians in a position to publicly denounce 30 years of urban centric politics.


Employment and political stability

The importance of employment to political and economic stability lies in history. In 1965, the Committee of Economic Enquiry (Vernon Report) defined full employment as a range lying between 1 per cent and 1.5 per cent unemployment. Following the collapse of the international monetary system in 1971, worldwide economic dislocation prevailed for more than two decades. Australian unemployment steadily deteriorated from 1.8 per cent in 1973 to the 6.3 per cent in 1979. In his 1979 Boyer Lectures Bob Hawke described full employment metaphorically as the cement that binds the fabric of society together. Hawke described prevailing political instability as a sign of crumbling “cement”. The 1983 election was about the crisis in unemployment.

In 1961, Menzies almost lost office through contractionary policies that saw unemployment running over a quarter at the annual rate of 3 per cent unemployment. In March 1983, the electorate sacked the Fraser Administration with unemployment at 10.1 per cent of the labour force and rising. In 1996, the Keating Administration was sacked with unemployment stuck above 8 per cent. The Howard spin doctors dropped the Vernon definition of full employment and adopted Friedman’s monetarist natural rate of unemployment ranging between 4.5 per cent and 5 per cent unemployed. Given this historical backdrop, it is politically naïve to ignore the role of unemployment and underemployment in the 2010 election.

Drivers of structural reform

The 1983 structural reforms were made possible by the 1972 development of a general equilibrium (neoclassical) model of the Australian economy; and, three important reports commissioned by the Whitlam government. The 1973 Coombs Committee Green Paper on Agriculture recommended policy move to efficiency based agricultural policy. Inherent in the Coombs Green paper was a recommendation to devalue the currency and move to free trade.

Implicit belief in free agricultural trade by such eminent people as Nugget Coombs begs the question of economic theology triumphing over common sense. Looming large on the international agricultural scene was the European Common Market (EU) and its Constitution: the Treaty of Rome promulgated in 1956. Written into the Treaty of Rome are the rights of European farmers to enjoy rising living standards in line with the wider community. Protectionist’s instruments are laid down to stabilise markets, ensure supply and reasonable consumer prices through regulation of prices, production and marketing aids, storage and carry over arrangements, and machinery to stabilise imports and exports (Sec. 33 and 34).

The 1973 Crawford report recommended the establishment of the IAC. The IAC (Productivity Commission) was established in 1974 to assist in policy analysis and policy development. The IAC adopted the Evans general equilibrium model for policy analysis. Neoclassical economic philosophy became institutionalised in the Australian public service and policy development. Background support to the philosophical positioning of the IAC was the world wide search of a replacement philosophy to the interventionist policies of Keynes. Modern monetarism eventually prevailed.

In 1975, Whitlam had commissioned the Committee to Advise on Policies for Manufacturing Industries (Jackson Report) to examine the economic dislocation pervading the Australian manufacturing sector. Economists on the Committee were, Wheelwright and Brogan (Keynesians) and Rattigan (neoclassical). As could be anticipated by the differing economic philosophies of the economists, a major and minor report resulted. The major report (Jackson Report) found that the Australian economy was suffering a deep malaise that required corrective structural reforms.


The Minor Report (Rattigan report) found that the Australian economy was operating no differently to comparable overseas economies confronting protracted dislocation. Rattigan’s neoclassical philosophy identified information failure responsible for the Australian situation. This was consistent with an identifying characteristic of neoclassical purely competitive market theory: perfect knowledge.

The significance of the Jackson Report lies in his Procedural Recommendations for Structural Change:

  • a hierarchy of Industry Councils to monitor industry performance;
  • Industry Councils established at national level; and
  • membership of industry councils to comprise equal representation drawn across national and state spheres
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About the Author

Ben Rees is both a farmer and a research economist. He has been a contributor to QUT research projects such as Rebuilding Rural Australia. Over the years he has been keynote and guest speaker at national and local rural meetings and conferences. Ben also participated in a 2004 Monash Farm Forum.

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