Dialling triple zero on our economy

The importance of new entrants is that they keep current market participants honest, even when they do not enter the market. The mere threat of new market entrants is enough. Competition provides the impetus for innovation, consumer responsiveness, more efficient businesses practices that deliver better outcomes for the broader community. In Australia, in key sector after key sector, that underpins the ability of companies to enter the market; our economy is dangerously concentrated.

Anything the Rudd Government can do to reduce barriers to entry will have an immediate impact on Australia’s economy and improve consumer utility.

There is a need to develop a sustainable economy. This is not just about environmental outcomes, it includes incentives that create a virtuous cycle of ongoing improvements. Broad ranging policies that provide incentives to continue innovation to save water, and also fund water saving projects are necessary. We live on the driest continent in the world with some of the cheapest water in the world. Over irrigation, due to cheap water, has made some parts of our land infertile, while harming major river systems. Implementing policies that incentivise water reduction will protect our long-term survival, and reduce damage to our land and river systems.

Demand for water efficiency and solar energy will increase around the world. Australia should lead the world in both areas. Our top researcher in solar energy left the University of New South Wales and set up in China. Our political establishment must ask why people leave this country when they have an innovative idea, why we do not lead the world in water and solar energy, rather than blithely accepting it and leaving it to business magazines to ruminate about.

Ultimately, economies are about people maximising their happiness. There is a growing school of behavioural economics regarding happiness: specifically querying why rising income and wealth has not lead to happier societies. A number of theses have been put forward, some compelling, some less so.

An emerging thesis is that those economies that are flexible, and provide their people with opportunities to explore their potential, tend to have the happiest societies. There does not appear to be one answer: a social democratic society such as Sweden does well, as does a freewheeling capitalist one such as the United States. In both instances there appear to be systems that enable choice; especially around child birth. National institutions that allow for upward economic movement, such as city colleges, or childcare programs, appear to add to happiness.

Australia spends a lot of money on welfare programs - like the baby bonus - that do not enable choice; redirecting these resources to programs that do so, will provide long-term benefits as seen in countries such as Sweden and the United States.

Healing our economy presumes there is something wrong with it. Thus far we have weathered the storm of financial doom from elsewhere well. But there are nagging issues that this moment provides us with an opportunity to explore and experiment with some solutions. Why are we not happier? Why has income distribution skewed away from long term averages? Why do some of our best ideas still leave our shores? Why do we not utilise some of our natural advantages?

The answers to these questions are not easy, or probably obvious, however, we have an opportunity to explore both questions and solutions, and in this moment, not be afraid of getting the answer wrong, knowing only that we will learn more from our failures than our successes.