Is the Treasurer taking his own good advice?

On the 20 March 2006, when the current Treasurer Mr. Wayne Swan was in the Federal Opposition, he gave a brilliant speech outlining Labor’s policies for business growth and competitiveness. The ALP was on the campaign trail to the following year’s elections.

In that speech, Mr Swan intimated at the current economic crisis. He pointed out that Australia was, then, in a risky economic position. Exports were just 4% of the GDP and only one-third of the OEC’s average, the agriculture and manufacturing industry had declined and Australian businesses were facing stiff competition in the international marketplace.

And, he was spot on.

But, in true Aussie style, his keen eye noticed that despite the downturn there were once-in-a-lifetime-type opportunities Australian businesses could take advantage of.

His plan was brilliant – reduce national spending, increase our domestic savings and, importantly, increase our national productivity via tax reforms and other carefully researched measures. And it made sense, too – times were becoming tough so, we had better tighten our collective belts and get busy and, of course business would take advantage of tax cuts and spend surpluses on increasing their commercial earnings and competitiveness.

Truly, the only way to do Mr Swan’s words any justice is to quote some of them directly. Mr. Swan outlined an eight “pillared approach”:
1. Reform the tax system so that it offers real incentive, is competitive and simpler;
2. Increase our workforce capacity and productivity by investing in skills and education;
3. Remove export bottlenecks by showing national leadership on infrastructure;
4. Get the regulatory burden off the back of business by adopting new simpler, flexible and competitive regulatory models;
5. Remove road blocks to developing and commercialising new products and services;
6. Accept that only co-operative federalism can deliver real reform and deal with state government’s of all persuasions in good faith;
7. Raise workforce participation by strengthening incentives for people to move from welfare into work; and
8. Foster a domestic savings culture and reduce our reliance on foreign savings.

The plan is lovely in its simplicity and direct approach. Any business owner would have been proud to come up with a similar plan to get their own company solvent.

And, here we are...three years on. The ALP is now in government.

Last October the ALP spent $10.4b on an economic stimulus package to pump some life into our ecnomoy.

The money, per the PM’s join press release with Mr Swan, was spent as follows:
$4.8 billion for an immediate down payment on long term pension reform.
$3.9 billion in support payments for low and middle income families.
$1.5 billion investment to help first home buyers purchase a home.
$187 million to create 56,000 new training places in 2008-09.

You can decide for yourself whether or not these marry up with the 8-pillared approach above.
Several months after this money was spent, the IMF predicted a .2% shrinkage of the Australian economy over the course of 2009. They went on to state that it would stall at zero. And, in February 2009, the government announced a revenue (tax) slump of $115b.

Also in February, the ALP began harvesting interest in the provision of a second stimulus package, this time of $42b.

Naturally, some in the Liberal Opposition questioned the provision and effectiveness of more government ‘stimulus’ packages perhaps because the last one didn’t quite hit the mark. Couple this with our high external debt and the IMF’s predictions and you can understand why some would be chary about spending more money.

Additionally, where did the money for the first stimulus package come from? Where is the money for the second packaged proposed to come from?

What happened to the 8-pillared approach?



Not to bang on about it too much, the key thing that Mr Swan spoke of in that speech was increasing productivity. And, regardless of what is happening now, these were his words and words many a businessperson would totally agree with.

High and sustainable productivity in agriculture, manufacturing and services, in essence, are what makes nations and strong ones at that. Per his speech, Mr Swan agrees.

It is well worth reading his speech in full and I’d give you the web address to it, but I’ve found it is currently unavailable while the Minister’s website is being revamped.

So, to promote what, at least, we think is right and to give the Minister our full support, we have included it on our blog for you to read and to decide for yourself upon the direction of current national economic policy (see “Labor’s Agenda for Growth and Competiveness – Mr. Swan’s 2006 Speech” entry).

Of course, you may not be privy to policy formulation, but at least you can know more about the background of what is going on.