The road to recovery – dealing with the global recession
WHEN Australia last experienced a global recession worse than the current crisis, Jim Scullin and Joe Lyons were prime ministers of Australia, Don Bradman had just begun his Test cricketing career and Charles Kingsford Smith had just made his first flight across the Pacific. Of Australia’s current population of 22 million, only 1 million of our number were alive to experience the traumatic impact of the Great Depression.
In its response to the current global recession, Australia has sought to learn some lessons of recessions past. To cushion the impact, the Government took strong, early and decisive action through the Nation Building for Recovery plan to support jobs, small business and apprenticeships today by investing in infrastructure for tomorrow.
The alternatives were to do nothing or, worse, effectively replicate the Premiers’ Plan of 1931 when governments cut expenditure, thereby compounding the problems created by a private sector already in retreat. The result, of course, was an economic rout, appalling unemployment and a decade of negligible growth through the 1930s.
By contrast, the economic data today suggest the Government’s plan is working so far. Australia is performing better than most other economies, with the fastest growth, the second-lowest unemployment and the lowest debt and deficit of all the major advanced economies. And we remain the only advanced economy not to have gone into recession.
The economic recovery, however, will be a long, tough and bumpy road with many twists and turns. We will still see rising unemployment, even after the recovery gets under way, because it takes a long time for positive sentiment to flow through to positive investment and to positive employment. Moreover, as the recovery unfolds, most economists believe that we are likely to see interest rates moving up again from record lows. As the recovery strengthens, the Government will implement its plan to return the budget to surplus, which will mean tough decisions, unpopular decisions and budget cuts.
Just as it was necessary for the Government to borrow and to stimulate the economy while the private sector was in retreat, so too is it necessary for the budget to be brought back to surplus over time, once the economy recovers and the private sector expands. Responsible, conservative economic management is about both these things.
Based on these continuing fiscal disciplines, we must also begin to build for the decade ahead, building a sustainable growth strategy for Australia’s future.
In the past, Australia relied almost exclusively on the rollercoaster of the boom and bust of the mining sector on the stockmarket. Instead, Australia needs to build stable foundations for growth by reforming the economy to enhance long-term productivity growth, the only reliable driver of long-term improvements in national living standards.
That’s why Australia must embark upon a Building Decade, implementing a plan of nation-building for the future, unapologetically based on the sure foundations of continuing conservative economic management.
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