![]() The politicians can strut, trumpet and fear monger all they like, but the economy just keeps ticking on.Pretty simple, your team is behind bars awaiting execution and have only an hour to escape, otherwise all is lost! On most other important economic policy areas, like interest rates, the dollar and wage fixing, Edwards notes that the economy largely runs itself, thanks in no small part to those earlier reforms. Arguably, today, there is much agreement between the parties on the need for budget repair. Decentralisation of wage bargaining was harder fought.Įdwards says an important factor driving reform back then was not just having a majority government, but having bipartisanship agreement on the need for reforms. ![]() And the Liberal opposition under John Howard supported both cuts to tariffs and deregulation of the banking sector, rendering a parliamentary majority unnecessary. Floating the dollar was an administrative decision that didn't need parliamentary approval. I put it to Edwards that the economic reforms of the Keating era would never have been possible with such a slim majority or minority government. It's an observation made by the outgoing RBA board member and former economic adviser to Paul Keating, John Edwards. "I think it's hard to conclude that the hung parliament of 2010-13 was especially damaging," says Berkelmans.Īnd there is much more agreement today between the two major parties over a host of major reform issues than there was back then, including the time frame for returning the budget to surplus, the clamp down on super tax concessions, multinational tax avoidance and increasing cigarette taxes. Although it is hard to slate home blame or credit for GDP performance to the government of the day, the Australian economy grew by an average annual rate of 2.77 per cent during the Gillard minority government and 2.84 per cent during the Abbott-Turnbull government. In reality, Berkelmans finds economic growth during the Gillard minority government was about on par with the Coalition's latest term. It begs the question: when are times especially certain?" 'Times are especially uncertain', is their grave assessment. But is Canberra what is really holding them back?īerkelmans again: "After the Australian election, and after Brexit, learned authorities in dark suits are shaking their heads. ![]() But is one causing the other?Īustralia's bloated business lobby groups like to point the finger at government for the lack of innovation and entrepreneurship across our many oligopolistic industries. It's also true that business investment in non-mining parts of the economy has been disappointingly low. It's true that Australian politics has been unstable for a while now, with a period of minority government, a Star Wars senate and numerous policy upheavals. That's certainly the argument the Coalition ran in this election campaign.īut is political uncertainty really so bad for the economy? So, jobs and growth, the argument goes, depend on certainty. Less investment and fewer jobs is the result the economy enters a downturn." What is good for the firm, however, is bad for the economy. It is relatively costless for firms to delay these decisions until the uncertainty resolves itself. "In response to uncertainty shocks, firms delay investment and hiring decisions. ![]() The director of the international economy program at the Lowy Institute, Leon Berkelmans, has followed the debate about the real impact of uncertainty on economies and provides this summary of the mechanism by which uncertainty might be bad for the economy.
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