Economic nostalgia won't solve Australia's problems

I argue that even the most recent economic policy trends have little relevance if we are to deal effectively with the policy difficulties ahead.

This is despite my past support for freer trade, albeit with a qualification that such an agenda should be questioned by liberal democracies if their standard of living 'declined to the point where they cannot compete effectively with nations that have an abundance of cheap labour' (Quadrant, November 2006, p. 54)

In other words, while Australia had good reason to reject an earlier emphasis upon high tariff protection and a White Australia policy, the shift away from such protection has downplayed negative aspects of recent policy trends.

Since the 1980s, Australia adopted policy reform in line with the demands of a much more competitive and open international economic environment while successfully maintaining social consensus through greater social welfare assistance.

Like many other nations, with capital and production more easily flowing around the world looking for a greater return or to reduce production costs, Australia (in general terms) has sought to promote investor confidence by promoting balanced budgets, lower tariff and taxation levels, and labour market deregulation.

To a large degree, both Labor and Coalition governments achieved considerable success. In terms of economic growth, Australia has been one of the best performers amongst OECD nations, recently ranking 5^th in the world in terms of per capita GDP (IMF 2011). Australia also managed to maintain a similar level of inequality since the early 1980s, in contrast to a majority of OECD nations.

But do not be fooled by such achievements as future economic policy difficulties may be evident, a possibility that will complicate Australia's ability to adopt a reasonable economic, social and environmental policy mix.

Take the importance of trade given that the exports of merchandise goods alone constitutes around 20 per cent of Australian GDP and is deemed crucial to uphold the viability of many Australian industries.

To some degree, Australia has succeeded. In an expanding global economy, Australia was fortunate to benefit from mining and fuels being the fastest growing export sector between 1990 and 2011 (see Table 1).

Table 1: World merchandise exports by major product group, (sourced from WTO)

By 2011-12, coal and natural gas contributed around $60 billion of Australia's total goods and services worth around $316 billion, along with around $63 billion for iron ore and concentrates exports, and $50.5 billion of services.