As former US secretary of labour Robert Reich, now an academic at the University of California at Berkeley, points out, it doesn't work.
In April, the International Labour Organisation released its World of Work Report 2012. It concluded that 50 million jobs are still missing compared to the situation that existed before the financial crisis.
In 2011, 74.8 million youth aged between 15-24 years were unemployed. Youth unemployment adds to the risk of social unrest. As well as dealing with that, governments face the task of creating 600 million productive jobs over the next decade in order to generate sustainable growth and maintain social cohesion. What are our chances of doing that?
Advertisement
What does the eurozone crisis mean for Australia? If Australia has the world's greatest treasurer, isn't that enough to save us? Statistics suggest we have low unemployment, low inflation, high minimum wages, high household income, a healthy ratio of net government debt to GDP, a mining boom, a strong currency, solid economic growth ... you get the picture.
But there are other issues that rarely get aired, like Australia's gross foreign liabilities.
As at March 7, 2012, Australia's gross foreign liabilities stood at $2.067 trillion. That debt includes all government and private debt, state debt, corporate debt and foreign ownership of shares and real estate - everything that can be sold or called, particularly if banks who are counterparties to bad debts want their money back to cover losses, or if there is a deleveraging contagion.
On the other side of the ledger, Australia's gross foreign assets allegedly amount to $1.212 trillion. If that's accurate, and if my maths is correct, our liabilities exceed our assets by about $40,000 for every man woman and child in the country.
Here's hoping that those assets have no counter-party risks and that people would repatriate straight away even if the Australian dollar is falling.
In December last year, the Reserve Bank of Australia's deputy governor, Rick Battellino, warned that Australia's indirect exposure to Europe, "through the effect on some of our important trading partners, could be significant".
Advertisement
Significant enough for Australia to kick the can for $7 billion? I guess that's only $350 each from me, from you and from every other person in the country, but it's a pity some of it couldn't go to help fend off crises like the coming famines in Africa.
And much of Australia's private debt is locked up in houses. Australia's home ownership rate is frequently quoted as 70 per cent. How many people actually own their homes, unencumbered? It's now about 33 per cent. The other two thirds are subject to the vagaries of the financial markets, like all debtors.
Little wonder that there was such a push for new home owners, such incentives for first home buyers, to sign on for long-term debt commitments at the height of the GFC and its mad uncertainties. And another statistic to cap it off: Australia's household debt as a percentage of disposable income has been stuck around 170 per cent – the highest in the world – for about five years.
Discuss in our Forums
See what other readers are saying about this article!
Click here to read & post comments.
8 posts so far.