They used to claim that unless the economy was growing at a rate of 4 per cent or more there would be no job creation. These days that figure is reckoned to be 3 per cent. Very few countries in the OECD seem able to achieve that consistently over time.
More growth is the mantra of modern economists yet that task is often a bridge too far. While I may have to say it through gritted teeth, Donald Trump’s America seems to be delivering the goods not many others can. Sluggish growth has hampered the Europeans, who will still struggle because of their reluctance to truly embrace any thought of a global economy.
Protectionism has been such a strong thread in Europe for so long that its dismantling is proving a bigger hurdle than many would have thought a few years back.
The French, never short of a president who wants to boast about his nation’s achievements, have been notoriously slow. The Italians got themselves another coalition government the other day, but I don’t bother learning their leaders’ names — by the time I have mastered them they have often been replaced.
The bureaucracy can’t afford to trust democracy in Italy so it continues to run the country while the politicians play their musical chairs. It doesn’t usually take long to catch a prime minister standing when the music stops and a new face bobs up to join the long list of failures.
But Europeans don’t hold a monopoly on protectionism; the Japanese continue to go to great lengths to protect their rice industry, which is hopelessly inefficient but is possessed by a grand tradition older Japanese are keen to continue.
Australian agriculture is far more efficient than our competitors and so its opportunities for the future are massive. The combination of large holdings and technology gives Australia a natural advantage we’re yet to fully exploit. We’ll never produce enough to be the food bowl of Asia but we could take up a large, profitable chunk of it.
As a junior senator I made several visits to Japan in the 1980s. It was considered the great modern economy in the world. At that point we were not aware of the banking scandals where a lack of prudential scrutiny eventually led to a crisis in which land had been overvalued by banks anxious to push money out the door to feed the property boom.
Somewhat chastened, the Japanese began rebuilding with some spectacular success. Banks are always central to a recovering economy and our banks still have a way to go in being prepared to back business properly.
The constant complaint of small business is that banks are incredibly conservative when it comes to business lending. It would seem that the property developers can get $100 million to put up an office tower but small business struggles for a loan of $20,000 to $50,000.
We make it difficult for entrepreneurs to kickstart a new idea. Financial institutions want to take no risks when they lend money, which leaves the bright spark with the new idea looking in with their nose pressed up against the window pane. Apple was founded in a garage and we want to see that fairytale repeated again and again.
Small business is full of risk. Statistically, three out of every four fail. Assuming the idea behind the business is good, then the main reason enterprises fail is a lack of capital.
People tend to be a little starry-eyed when it comes to business start-ups so it is reasonable that banks are cautious. Every time we see someone go broke or bankrupt, we know a bank is taking a bath.
There is no shame in being bankrupt; I know several billionaires who’ve been broke, busted and bankrupted several times before they found the right idea and the right financial institution to back them. There is real pressure on the banks to improve their behaviour too following the findings of the Hayne royal commission.
I feared the banks might wait out the bad publicity and eventually go back to being complete bastards. So far these fears have been unfounded. There has to be little doubt that the reasons we did not see bank collapses here were that we already had proper prudential rules and, of course, our banks were effectively guaranteed by the federal government.
Nonetheless, we really did learn from the AMP fiasco and it is to be hoped that with appropriate vigilance we can avoid any more examples like that.
AMP had been such a big part of Australian life. I can remember when the original AMP building at the Quay in Sydney was a big deal. My parents took me along to stand on the roof of this, as far as we then thought, massive tribute to modern engineering. That building simply proved that AMP was a permanent fixture in our lives.
But sometimes the supposedly great and powerful can be pretty ordinary. In the late 80s as environment minister, I had a meeting with the BHP board in Melbourne. In this room of the supposedly wonderful, I couldn’t work out who I could send out to get the sandwiches. I knew most of them would forget the order by the time the lift had hit the ground floor.
I have often wondered where you would receive the most wisdom. Would Bob Hawke get the most out of a meeting with the BHP board or the mob in the local pub? The truly outstanding thing about Hawke is that he would have been right at home at either gathering. Our leaders should talk to gatherings of this type on a regular basis. Sadly, I expect they talk to their boards much more than they do to the mob.