Labor's view of Australia - a nation of shopkeepers?

Suddenly faced with an economic crisis, the Rudd Government swung into action determined to convince the Australian electorate that the economy under Labor's dynamic management was strong and supported by a banking system the envy of the developed world.

Adding support to the rhetoric, Rudd distributed billions of dollars to the electorate,with the call to "spend, spend, spend".

A nation of shopkeepers

One's impression from this "bold initiative" was that Australia's economy was reliant on being a nation of shopkeepers and that such spending would produce jobs, jobs, jobs and revitalise the economy.

The billions would circulate through the economy and much would return to Treasury in the form of various taxes and go back out again.

The Rudd, Gillard, Swan Labor Trio obviously failed to research the true meaning of Adam Smith's Wealth of Nations:

To found a great empire for the sole purpose of raising up a people of customers, may at first sight, appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers, but extremely fit for a nation, whose government is influenced by shopkeepers.

Great Britain was by no means simply a nation of shopkeepers. It was a global economic and military power with an empire of far-flung colonies, hugely rich in resources.

Goods imported from the colonies fuelled industrial Great Britain that exported its engineering skills, steel, and products around a rapidly developing world. They were not reliant on selling Nike's, Nokia's, iPods, or wide plasma HD screens.

The Australian economy can, by no stretch of the imagination, be compared with that of Great Britain as a nation of shopkeepers. Australia's economy is reliant on revenues from exports of raw materials to other nations that in turn provide the "jobs, jobs, jobs" chorused by the "Rudd, Gillard, and Swan Labor Musical Trio".

Without resource and down line revenues, Australia appears the nation of shopkeepers upon which the Labor Government is reliant to revitalise the economy. Labour appears to have overlooked that there are real limits to this warped vision.

Wool, once Australia's leading export, will further suffer from this global economic downturn, inflicting yet more pain for our already hard hit rural sector.

Consumerism in Australia, like elsewhere in the developed world, is now reliant on debt and lots of it in the form of an apparently limitless supply of cheap credit. Dumping the two tranches totalling $43 billion into Australian consumer's pockets contributed little if anything to revitalise the economy. True, retail sales did increase but nowhere near anything meaningful. Much of the small rise in turnover was due to massive price cuts by the major stores helped by massive inventories in the manufacturing countries and more debt. In many cases, the money did however grant some temporary reprieve for those with credit card debt and pressing mortgage repayments. There were however, no new jobs, and many "shopkeepers" closed, adding to unemployment.

The Labour Trio presented no data showing how much of the billions failed to recirculate. Because of the high imported content, several billions left Australia to benefit foreign economies that produced the consumer goods.

Rhetoric or credibility?

The Labor Trio at least acknowledges that Australia is approaching recession, and that unemployment will rise to record levels. It is reasonable to assume from events unfolding around the world that Australian will be recession and the economy is facing a crisis. So what does Labor do in a crisis?

Solve the crisis with rhetoric.

When taking time to interpret the rhetoric, one can only wonder if our bold and dynamic leaders who deliver such powerful and stirring rhetoric ever read or understand the words before assaulting the senses of unsuspecting interviewers and the electorate.

One must express admiration for those brave souls in the media who venture forth to interview the Rudd, Gillard, Swan Labor Musical Trio. Once given an opening, the interview becomes a one-sided repetitive monologue interspersed with inevitable multiple choruses of "jobs, jobs, jobs" and "spend, spend, spend" that consumes the allotted time slot. Malcolm Turnbull on the other hand has less to say, and although keeps repeating it, takes up less time.

Just who is the lyricist for the Rudd, Gillard, Swan, Labor Musical Trio?

Let us take for example one of Rudd's G-20 related speeches on solutions for our economic woes interspersed with phrases to stir the blood and prepare one to man the barriers with shouts of "Security, liberty, and prosperity" plus a good dose of "equity, sustainability and community."

The musical Les Misérables is no longer playing in Australia, the French Revolution is history, so is Lenin and the Eureka Stockade.

Equity

In what?

Rio Tinto? BHP-Billiton? Fortescue Metals? Oz Metals? Vegemite? Arnott's? Campbell's, Bonds? Does the Trio mean local or foreign equity?

There is of course the new "not fully costed high-speed broadband", the multi billion dollars plus project that will draw a "flood of foreign and local investment", somewhere in the future.

Questions remain if the expert panel did in fact recommend this new Rudd initiative as claimed.

Sustainability

In what?

Outside the resource-reliant chain, just who are these major employers of Australia's manufacturing industry with the untapped potential to provide these "jobs, jobs, jobs"?

Community?

Which means?

What the Rudd Trio fails to sing about, or even comprehend, is balance and reality.

Credibility and the Australian electorate

Labor has yet to learn the Australian elector is not a mushroom (kept in the dark and fed b---s--t).

Crisis management

Australia is facing an economic crisis and needs a realistic crisis management plan and the Labor Musical Trio's reliance on consumer spending to revitalise the economy is out there with the fairies.

Jobs

So, where are these jobs, outside the retail trade?

As always, hospitality is experiencing yet another downturn. There is of course the yet to be costed high-speed broadband project that will provide "thousands of new jobs" over a yet to be defined period in the yet to be defined future.

So again, what industries will create these jobs?

Our once vibrant manufacturing sector, decimated from outsourcing and low priced imports, is no condition to respond to the Trio's challenge.

With demand for resources in decline, support industries for this sector are experiencing increasing layoffs, not creating new jobs.

So where will the new jobs be found?

Graduates

In support of Rudd's G20 solo chorus of "security, liberty, and prosperity etc", Julia Gillard resurrected the "clever country", promoting the drive for more university graduates to defelct criticism about disappearing jobs.

It would appear that graduates and postgraduates are the answer to Australia's diminishing skills base, although Rudd did refer to "techies".

Commitment to such a grand design can have the potential for disaster and requires scrutiny.

University was for China's elite, beyond the financial reach of the average Chinese. In 1998 China launched its "Kuo zhao" graduate program, promising highly paid work for graduates. Enrolments jumped from 1 million in 1998 to 4 million in 2004. Responding to oversupply and rising unrest among large numbers of unemployed graduates, Beijing froze enrolments in 2005.

China's economy then boomed and Beijing wanted more Chinese graduates. In 2008, the number of graduates rose to 5.6 million and by March 2009 graduates numbered 6.1 million.

Beijing ignored the fact that China's labour demand was for millions of cheap skilled and unskilled labour, not graduates lacking work experience.

Less than 15 per cent of China's graduates find qualification related work and the numbers of unemployed graduates, continues to grow year on year adding to despondency and rising civil unrest in China. Masters and PhDs are applying for employment from street cleaners, drivers, retail sales assistants, hospitality staff, bank tellers and so on. The return of increasing numbers of professionals laid off overseas is exacerbating the situation for new and unemployed graduates.

The poorer sectors reflect the human side of disaster where families secured loans to meet the high cost of university fees. Graduates future income is crucial for the financial welfare of the family and loan repayments. The rapidly rising rate of graduate suicides in China reflects the human pain of financial burdens on families and the personal shame of those unemployed.

Australian shopkeepers will be relieved to know that they will be able to employ a wide range of skilled professions in the future.

Real innovation not herd mentality

The Labor Musical Trio and some noted economists proclaim that the solution to the problem is creating consumer confidence in the economy.

That sounds reasonable, but only in circumstances where employment provides the money for mortgages, hire purchase, and credit card debt allowing the consumers to "spend, spend, spend". If that is the case, then "jobs, jobs, jobs", it is.

But one has to ask, which industries can provide the jobs for those made redundant or facing redundancy?

The retail industry is reliant on consumers with readily disposable income or ready access to credit.

Retail on its own cannot revitalise the Australian economy because of the imported foreign content, size of the population, and escalating government debt. Going down this path involves a Federal Government with a credit card mentality and increasing deficits.

The other option of course is a budget for weekly Powerball tickets.

Australia has evolved into a debt-reliant consumer economy focused on cheap imports. Reliance on debt and low savings levels has removed the individual's potential to amass the necessary savings that will be crucial to qualify under new standards on lines of credit for homes, motor vehicles, education, holidays, health, emergencies, and so on.

Responsible fiscal management is crucial for Australia's economic future.

The $14 billion deficit of December 2008 is expected to surge to $22.5 billion by June 2009. That does not include the impact of plummeting revenues from the resource sector, corporate taxes, GST, PAYE nor the $43 billion-plus high-speed broadband.

With our near future planned deficit estimated at around $200 billion, that $43 billion stimulus package would assist in saving considerable interest.

With a total population of only 21 million, household debt of more than $1.2 trillion and household savings in negative territory, repaying that debt under the Labor Trio strategy will require one big mother of a shop-keeping nation.

Meanwhile Swan urges the banks to "lend, lend, lend", to stimulate an economy in which consumers are at risk of redundancy, and desperately trying to reduce, not increase debt. Without cheap and readily available credit, that ask just will not, and should not happen.

Bank lending is finally returning to "normalcy" in which factors for lending require equity, secure employment, and ability to repay. This will restrict approval of loans and credit card extensions.

Housing

The Labor Musical Trio has referred to a resurgence of first homebuyers as a sign of confidence and compared that with what is happening in the US. But there is no comparison. The rise in the US first time homebuyers is due to house prices plummeting by one third and more, and those with savings are cashing in.

US first-time buyers can no longer secure loans on 3.5 per cent deposit insured by the Federal Housing Administration. New conditions require verification of two years minimum employment history. Borrowings are limited to around 31 per cent to 43 per cent of income depending on other debt.

In Australia, house prices are still too high relative to earnings and the spectre of unemployment plays a crucial role in bank lending. Foreclosures are steadily rising and lending restricted.

Despite acknowledging a substantial rise in unemployment, the Labour Musical Trio suggests that events in the US are "not seen as a risk in Australia".

Rising unemployment in risk-related industries in Australia will in turn restrict lending to those employed in those industries as well as the industries themselves.

For the Labor Trio

Australians can do without the rhetoric, waffling and political expediency. Australia needs a reality check and a clear crisis management plan.

Mr Rudd, forget about saving the world singlehandedly, focus on Australia.

Forget the all singing and all dancing show. Define the real priorities and get on with it. There will be pain, and that will include electoral pain, but nothing in comparison to what will happen without positive, decisive, and responsible action.