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How to fix a two-speed economy

Simon Sharwood
24 May 2011 2 minute readShare
My Business

Australia, we are told, has a two-speed economy. That’s a bad thing. Someone has to do something about it. Like harden up, suggests Editor Simon Sharwood.

Australia apparently has a two-speed economy and something must be done to fix it.

It’s not an argument I’m enjoying, for a few reasons:

Nanny state dependence syndrome

What, exactly is the government supposed to do about a two-speed economy?

Handouts aren’t the answer, given our national desire to return to budget surpluses. We know that picking winners or propping up industries in difficulty so they eventually come good distorts the economy and throws good money after bad: anyone remember how we propped up Mitsubishi but it left Adelaide anyway?

There are always a few levers that could usefully be pulled to improve business conditions, but just what is it that you feel should be done to deal with the two-speed economy?

Plenty of folks will tell you that government should get out of the way, rather than doing more, to make business and consumers more confident.

Given that we generally distrust politicians to the point of loathing it seems mighty odd that we’re also crying “Fix it” so long and loud?

Surely the economy always has hotspots and flatspots?

I recognise that the resources industry is doing very well at present, but if the rest of the economy isn’t enjoying a boom why is that so bad?

I’ve spent most of the last 20 years working in information technology, an industry in which the leaders generally clock up more than 10 per centgrowth each year. Some have done so for a decade or more. We never whinged about that representing a two-speed economy, did we? Nor do we whinge about seasonal fluctuations in business or other factors that mean some industries or regions are up while others are down. Or that Tasmanian tourism struggles in winter while things go gangbusters in Cairns.

My point here is that there are always bits of the economy doing well and bits doing badly. Why are we so grumpy about it this time?

The world is a scary place

A quick reminder here: three big European nations have been fiddling their books and/or overspending for a decade and need tens of billions of dollars to prop them up so the global money system doesn’t slip down the s-bend.

That steaming mess is just the tail end of a thing that happened back in 2008 called the GFC. In case you don’t remember, it was the worst economic slump since The Great Depression of the 1930s.

When I get sick, it takes me a week or three to get back up to full speed. Three years out from the worst of the GFC, which put the global economy flat on its back for the better part of a year, perhaps it’s reasonable to expect a few flat spots in the economy and realise we’re working our way out of this?

It’s also probably reasonable to let consumers cocoon a bit. We’ve all seen what happens when the world gets a bit too cocky with easy money. Is it any wonder Australian consumers have decided to do a spot of saving?

If we’re whingeing about this, what are we going to do when things get really tough?

I entered the workforce in the early 1990s. Unemployment hit 10.7 per cent. Interest rates were at 6.5 per cent - after a cut!

Today interest rates are at 4.75 per cent and unemployment hovers under 5 per cent. I understand that housing in particular is more expensive than it was in the early 90s, and that there are some nasty cost-of-living pressures burbling through the economy thanks to overdue investment in electivity infrastructure and other issues.

But overall, things are pretty good in Australia right now. How much better do they need to be before we express gratitude?

I’ve got that off my chest: what do you think about the two-speed economy? Go nuts in the comment field below.

How to fix a two-speed economy
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Simon Sharwood

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