Wednesday 29th March 2017 - 6:12 pm

Postscript 2

by Alan Thornhill

 

 

What to do now

 

Malcolm Turnbull’s first contact with the new American President, Donald Trump,  in that now famous telephone call, was followed by an embarrassing leak on trade policy.

 

The president was furious and said fhe paper had lied.

 

 

But all the Australian Prime Minister would say, when tackled on he issue, was tha he did not discuss “private conversation.”

 

Mr Trump was pleased.

 

He has shown signs of moderating his language. since then.

 

 

But he is still, very much, an unknown character.

 

 

 

However his unique approach to government still presents Australia with problems.

 

 

We look here at what they might be  and how they might be approached.

 

Theresa May’s speech in January outlnining plans to take Britain out of the European  Union

 

 

It offered many lessons for world leaders facing similar issues.

 

That was not deliberate.

 

 

She spoke merely as Britain’s new Prime Minister  when that country was trying to  preseve its prosperity.

 

She had argued that Britain should stay in the EU.

 

 

But when last year’s Brexit vote went decisively against  that option she said it would be respected.  There were to be no half measures, either.

 

 

Ms May spoke of a new “global Britain.”

 

A trade deal with Australia would be “a priority.”

 

Australia’s response was encouraging.

 

Alexander Downer, its High Commissioner, in Britain, said “We certainly welcome the fact that it will be possible to negotiate a free trade agreement with the UK which will be in our own self interest.”

 

 

A former Australian Prime Minister, Tony Abbott, has been even more enthusiastic, in advocating that prospect.

 

Some, in Australia, see this as evidence that Mr Abbott, is still thinking that he might, one day, regain his old job.

To be followed, perhaps, by similar deals with New Zealand an India.

 

Even Donald Trump was encouraging.

 

 

He said Australia “is not at the back of the queue for a trade deal with the United States, but front of the line.”

 

 

 

 

But what we do here to improve our own economy?

 

 

 

Before entering politics,the shadow assistant treasurer, Andrew Leigh wrote

 

a string of six books based on his   studies of the Australian economy.

 

He had also worked as a lawyer for Minter Ellison, in Sydney.

 

One of his books, Battlers and Billionaires, written in 2013, reports on income in-equalities in Australia and how they came about.

 

Tax had a lot to do with it.

 

Leigh noted that extremes of inequality in income in Australia  are nowhere near as pronounced as they are in Chile an the United States.

 

But they are above those in both Japan and Italy.

 

And they still command attention.

 

Especially when wage and profit growth figures are published.

 

The most recent, for the December quarter, showed that our terms of trade, in that quarter,  profits are now 15.6 per cent above those seen a year earlier.

 

That was due largely to higher prices for our coal and iron ore.

 

But while profits were up, wage growth has been very  subdued, or has even gone into reverse.

 

So an attack on government policies was inevitable.

 

Especially as Mr Leigh estimated, in Battlers and Billionaires “that one third of the rise in top incomes is due to cuts in top tax rates.

 

Tha came in parliament when Labor MPs, including the Opposition Leader, Bill Shorten, demanded to know if there is a  connection between cuts in penalty pay rates on Sundays and new austerity measures on welfare and the latest tax cuts

 

Big companies and middle to high income earners stand to pick up $50 billion, over 5 year, under that plan for those:

 

And the Prime  Minister, Malcolm Turrnbull, defended it with gusto.

 

He said there had been a time when Mr Shorten had been “ a persuasive—indeed, passionate—advocate for reducing business taxes.

 

“He stood here and he said that, if you reduce company tax, you increase investment, you increase productivity and you increase employment and, if you do that, of course, businesses will grow, they will be more profitable and you will see an increase in company tax receipts. “And, indeed, that has been the experience in Australia. “ Mr Turnbull said.

 

But our question persists.

 

 

Could we do better in anything like our present circumstances to make that happen?  One group thinks so.  These economists re urging the previously sceptical Treasurer ,Scott Morrison, to act.

 

The truth is that repeated raids on Federal funds, particularly before elections, have left Canberra poorly placed, to pay for the  better roads, bridges an sientific research it will need, to become a richer, more prosperous country.

 

The  distguished jounalist, Laura Tingle, admitted that she had been excited by what  she saw  on a recent visit to Norway.

 

Speaking on the ABC, with Philip Adams, she left no room for doubt that she was speaking about what has been called the Nordic way of runnng an economy.

 

Like Australia, Norway has a reource based economy.

 

It has extensive reserves of oil and gas, as well minerals, timber and seafood.

But there  are important differences between the industrial cultures of the two cultures  as well.

 

Tax avoidance is not tolerated in Norway.

 

In Australia avoidance – or at least minimization – is too often regarded as a national sport.

 

This gives the Norwegian government cash reserves that our own Treasurer, Scott Morrison, now admits he would like to have.

 

That would have to be preferable, at least, to ratings agencies constantly threatening to cut our tripleA credit ratings.

 

But the benefits don’t stop there.there, in times of crisis.

 

 

So what, if anything, does all this mean to us in Australia?

 

 

Well the poverty, which has come with uncertainties in the job market,

has produced some surprising poll results lately.

 

 

What have they done for us?  Let’s get rid of them, is a common cry among workers who have been left behind

 

 

The government is being urged to head that off.

 

 

The Reserve Bank Governor, Philip Lowe, says borrowing more, to spend on roads and railways, is not necessarily a bad idea, in times like these.

 

 

What’s this?

 

 

Echoes of Keynesianism?

 

 

Ms Tingle, admitted that she had been excited by what  she saw on a recent visit to Norway.

 

Speaking on the ABC, with Philip Adams, she left no room for doubt that she was speaking about what has been called the Nordic way of runnng an economy.

 

Like Australia, Norway has a resource based economy.

 

It has extensive reserves of oil and gas, as well minerals, timber and seafood.

 

But there  are important differences between the industrial cultures of the two cultures  as well.

 

Tax avoidance is not tolerated in Norway.

 

In Australia avoidance – or at least minimization – is too often regarded as a national sport.

 

This gives the Norwegian government cash reserves that our own Treasurer, Scott Morrison, now admits he would like to have.

 

That would have to be preferable, at least, to ratings agencies constantly threatening to cut our tripleA credit ratings.

 

But the benefits don’t stop there.

 

All this has left Norway taking first place, among142 nations on the Legatum prosperity index and top spot, among 187, on the human development index.

 

 

Of course tthe Nordic model isn’t’ the only way of boosting aan economy’s performance.

 

 

China ohose, instead, to become “the workshop of the world.”  It did that by competing vigorously with it’s rivals, at fiirst on price and  ;ater on quality as well.  That saw China , once a poor country ,displace Japan as the worldl’s second biggest econmy., within a single generation.

 

 

This lesson has not gone un-noticed in the United States where Mr Trump has let it be known, clearly, if not coherently, that a certtain amount of cheating was involved, mainly through  trade deals.

 

 

And Americans were prepared to listen, even if the forces behind Mr Trump spoke of “truthiiness” rather than  the truth and ”alternative facts” rather than literal ones.

 

So where does all that leave us?

 

 

in an awkward situation, certainly.

 

 

China is our biggest customer, but America is a big one, too.

 

 

Then there are traditional ties to be considered.

 

 

Mr Trump has shown signs of moderating his language.

 

 

But he is still, very much, an unknown character.

 

 

And we can’t forget that


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Alan Thornhill is a parliamentary press gallery journalist.
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