Sunday Sanity Break, 17 September 2017 - Eight years without sensible narrative
The fathers of Federation worked hard for a decade to persuade people living in our Island-continent to vote to form of a new nation to be called Australia. In the end, each 'Australian' colony agreed to join, although New Zealand declined.
During both world wars, Australia's leaders persuaded men and women to travel overseas to fight with the British and American nations in their great struggles against Germany, and in the second world war also Japan. Our untrained conscripts were sent to PNG to unload ships, and when it was discovered that Japanese soldiers had landed these untrained lads went up the Kokoda Track to slow down the Japanese invasion.
In each great war, and other smaller struggles, our political leaders had to persuade people to agree to join the British and American allies. During WWII Prime minister Curtin persuaded the people that we needed to rely more on America than Britain, a strategic choice that has persisted.
In 1983, Prime minister Hawke ran an economic Summit to persuade Australians to cop wage restraint, and generally spoke of the need for better sense in economic policy. With Treasurer Paul Keating he agreed to float the dollar and persuaded people to agree. The persuasion included general commitment to financial deregulation and other economic reforms that boosted Australia's growth.
In 1986, Treasurer Keating persuaded the Labor cabinet to turn the growing bugdet deficit into a surplus. The PM persuaded the union movement to cop a cut in real wages with a falling Aussie dollar. Keating's brilliant warning that unless we agreed to these changes Australia would become a 'Banana Republic' was another example of a narrative that worked - shock treatment as it seemed to be at the time. This Labor government's decisions were agreed as sensible by ordinary Australians. They even re-elected a Labor government in the midst of a serious recession, described as 'the recession we had to have' by Paul Keating, a great creator of effective narrative.
John Howard's government continued economic reform, including giving the Reserve Bank 'independence' from political control and a mandate to contain inflation. Again appropriate explanations were given and accepted by voters.
Since the defeat of the Howard government, political narrative has been confused and unconvincing. Prime ministers Rudd and Gillard followed by Abbott and Turnbull seemed more interested in climbing and hanging on to the greasy pole of politics than improving the lot of ordinary Australians. Admittedly it was a confusing time, with the global crisis followed by slow recovery, but the main economic theme was completely wrong. I summarise it as 'She'll be right, Mates', especially about a quick return to (tiny) budget surplus.
There has been no attempt to craft a more accurate economic narrative about the need for hard work and belt tightening. Instead the idea has been that Australians should spend up to help the economy recover, the net result being one of the world's highest amount of household debt relative to household income. As global recovery continues, rising interest rates will create stress on highly indebted households. Should the near manic east coast house prices fall substantially - an outcome more likely than not - stressed households will produce stressed banks.
The next Australia government needs to craft a far more accurate and compelling narrative. In 2009, as a candidate for the Federal seat of Kooyong I presented a first draft of such a narrative, presented here with appropriate modesty. (As I as not selected.) Previously as the central banker who persuaded the Labor government to change direction in 1986, I saw at close hand how an appropriate narrative could change a dire situation. Sadly, after Mr Keating's budgetary fix, the Reserve Bank, against my advice, and apparently (as he told me at the time) against Keating's advice, reduced interest rates to fuel a boom that eventually had to be ended by extraordinarily high rates of interest.
Good to see the Weekend edition of the Australian newspaper's lead editorial focus on the need for an appropriate narrative. Go for it, Mr Turnbull, but for goodness sake be honest. Jobs growth is good, but inability to turn the budget deficit into a surplus, and to stem the manic growth of household debt, will kill your government stone dead if you do not adopt a more sensible narrative and get on with the hard task that lies before your government and all Australians.
Fiona Prior visits Glorious at the Art Gallery of New South Wales and experiences earthly pleasures and heavenly realms. More here
A great weekend's sport. The Matildas beat Brazil. The Rugby team ran over the Argentines, and the All Blacks handed South Efrica a Rugby lesson. Winx had another great win, again running from way back in the field - what is this horse trying to prove?
In Aussie rules (AFLM that is) Geelong, widely predicted to tumble out of the contest, flogged the Swans, in one of the great turnarounds in recorded history. GWS dealt with the West Coast Eagles with a stellar 6 goal performance by recently discarded Stevie Johnson.
Next week Geelong faces Adelaide and GWS gets to play a scary Richmond. What a feast of footy, just when Henry and Mrs T are on the road to the deep north.
Image of the week