Sweet spot – Australia's unsung success

This is after Hartcher has quoted from the OECD, IMF and UN to show that Australia has one of, if not the, highest standards of living in the world.

The rest of the book restates these themes and looks at whether this has happened by "luck" as Donald Horne's The Lucky Country argued, or whether it is a combination of inherited institutions and attitudes from Australia's earliest days being channelled and redirected by Labor and Liberal governments since 1983.

He comes down on the side of the latter.

This is a book that should be compulsory reading for every federal member of parliament as it comes as close to proving as you can in an argument about economics and social development, that the policies of the period 1983 to 2007 were the right ones.

Although this is not quite what Hartcher says in his book, and therein lie some other faults.

What Hartcher doesn't seem to appreciate is that the achievements of the last few years are the result of the momentum that built up before Kevin Rudd took power.

Since then government policies have tended to slow, and will eventually reverse, that momentum, precisely because not enough members of the current parliament, and the bureaucracy, understand how the success was wrought.

Two issues which tend to suggest that neither does Hartcher both relate to mining.

While he quite correctly falls on the economically liberal side of the debate he doesn't really seem to understand the mechanism by which it works, so he buys into both the "Dutch disease" fears about mining and the idea that the Mining Resource Rental Tax is good economics.

The Dutch disease argument is that if you have too much of your economy in an export industry it will push up the exchange rate and damage import competing industries, gutting domestic capacity and leading to a crash in the economy when the particular export industry collapses.

This is not a particularly good theory, and in the case of Australia the numbers that Hartcher uses demonstrate it is not pertinent.

He points out that the entire energy and mining sector of the economy only amounts to 8 per cent of the economy, and that mining employs just 1.5 per cent of the workforce. It is a long way from dominating.