The realities of Australia's future: two key books

The 'Age of Oversupply' is a fundamental text for the realist future.

Dog Days: Australia after the Boom, Ross Garnaut. (Redback 2013)

As an analyst of the Australian economy Ross Garnaut is as good as it gets. Having advised Prime Minister Hawke in the early days of reform, and been Ambassador to China, he is much more than a theoretician or ideologist.

He can be faulted for having the non-global realist idea that population growth is inherently good, though he does admit to counter arguments. And he does occasionally take the rest of the world as a given rather than a set of changing realities, but that is forgivable in this book focussed on the current state of the Australian economy.

The book has three parts. First there is a brief history of world economic forces, such as China's emergence into the global economy, since the 1970s and Australia's economic policy responses. He focuses on the reform era of the 80s and 90s, then, as he calls it, 'The Great Australian Complacency'.

Part two is a series of policy prescriptions ranging from how to lift productivity and employment to ways to better mange the Federation, and finally what to do about climate change.

Part three attacks the failings of political parties, private sector leaders, Treasury and the general culture for the collective failure to see Australia's situation realistically or to pursue serious remedies to our impending problems.

The core theme of the book is the decline of the terms of trade since 2011 and their likely continuance, resulting in declining living standards for Australians. Garnaut argues we are inevitably going to get poorer and how well we manage that reality will determine how badly we are affected and who takes what share of the pain. He is appalled that governments of both sides spent most of the proceeds of the China boom as soon as they arrived and built up voter expectations that could only be satisfied if the boom continued for decades. His main solution is to drive down the exchange rate but there are many good ideas proposed in various areas of policy.

Notably he advocates following China in spending money on transition to the post carbon economy, providing present and future benefits for the economy.

He concludes with implications of dire consequences if we get economic policy wrong over the next few years. His analysis makes it clear this is the most likely outcome.

This is a readable book aimed at providing practical advice to government, and to people who think about these issues in realist ways. Alpert's book helps put Garnaut's ideas into a global perspective.

The thinking about our future is becoming clear, but action seems a long way away.