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May 5, 2012
 
Peter Hartcher

<em>Illustration: Rocco Fazzari</em>Illustration: Rocco Fazzari

Politicians have only themselves to blame if Australians give them no credit for the stellar performance of the economy.

The Wall Street Journal ran a startling story this week about the US-based General Electric, one of the world’s biggest and most profitable multinationals. Its opening line: “For General Electric Co., Australia is the new China.”

What could it possibly mean? “The continent of 22 million people is set to generate more revenue for the industrial conglomerate this year than will the Middle Kingdom, with 1.3 billion,” the paper reported.

It wasn’t that the US-based firm was doing badly in China or giving up on the place. Indeed, it sold $US5.7 billion worth of products and services there last year.

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But GE did even better in Australia, where it reported revenues of $US5.8 billion. And it expects its Australian business to outstrip its Chinese one again this year

For Australians reading this, it’s a through-the-looking glass experience, a giddy moment of cognitive dissonance. It upends our verities – we are told again and again that China is the country we rely on for our prosperity.

So how could the periphery of the Chinese growth zone be more profitable than its centre?

“Australia is in an extraordinarily fortunate position,” GE’s chief executive in Australia, Steve Sargent, tells the Herald. “Developing Asia is the growth engine of the world economy, but Australia is its fuel.

“We are going into our 21st year of growth – there’s no other developed country on the planet that can say that. We have a unique opportunity to set this country up for a couple of generations.”

The Sydney-born Sargent is keenly aware that it’s unfashionable of him to say so, that he’s outside the national narrative of complaint, disgruntlement and anger: “Australians over our history had a fairly healthy attitude of self-criticism – that made us realistic, not too engrossed in ourselves, it drives a culture of continuous improvement – but at the moment we’re taking that a notch too far.

“I have this conversation with colleagues – I was at the business dinner with the Prime Minister the other night – and I say that though you may think the economy is not performing well, I ask a simple question: ‘If you don’t want this one, which one do you want?’

“I get that it’s not perfect, but it’s one of the best performing economies in the world.”

And what answers does he get? “No one yet has said, ‘I want the economy of some other country’.”

The perversity of the great Aussie whinge-fest is so plain and so persistent that even the governor of the Reserve Bank, Glenn Stevens, remarked on it in a speech in Hong Kong last month.

Australians, he explained, used to see their country in a happier light than the outside world did, but that now has been reversed. There is, he said, a “tendency to focus on the difficulties, rather than the opportunities, which come with our situation … For most of my career the difference has tended to be in the opposite direction. We always seemed to struggle to get foreign observers and investors to give us credit for performance we thought was pretty reasonable.”

Why do Australians today see their country in a much darker light than the rest of the world does? There are three main reasons.

First, there are real problems. The value of the dollar puts tremendous competitive pressure on the non-mining sectors of the economy.

And most Australians hear about a mining boom yet tell pollsters they see no personal benefit whatsoever, which probably generates a sense that they’re missing out.

Second, company bosses routinely complain about the business environment and demand that governments accommodate their needs. This is normal and natural, though it has intensified with the legislation for a carbon tax and a mining super-profits tax.

Sargent has a view on this too: “We have to look at these things through a positive lens, not a negative lens.” Indeed, GE counts as a positive for its Australian business the fact that, as Sargent puts it, “Australia has strong forward momentum on climate change legislation. It’s driving investment in renewables, it’s driving energy efficiency.

“People have this mindset that lower emissions mean more cost, but it doesn’t have to be that way.”

By way of illustration, GE last week signed a deal to sell Qantas the engines for 78 new Airbus A320 planes. The engines deliver a cut in fuel consumption of 15 per cent, in carbon output of 15 per cent, in nitrous oxide of 50 per cent, and in noise “footprint” of 75 per cent.

The third reason for Australia’s outsized pessimism is its politics. The advent of the first minority federal government since Federation damaged the country’s confidence.

The Australian National University last October found that satisfaction with democracy fell by 13 percentage points after the 2010 election to its lowest since 1998, the year of John Howard’s GST election and Kim Beazley’s mighty scare campaign.

Professor Ian McAllister, the man who supervised the poll and a respected political scientist, said: “When we drilled down we found it was people who didn’t like minority government – they were worried about accountability and efficacy.

“I think there’s a fundamental dissatisfaction and discontinuity felt among a significant minority. It’s not about issues, it’s going beyond issues – it’s about how things are working,” says McAllister.

Tony Abbott’s opposition responded to the uncertainty of the minority government to wage a hyper-aggressive campaign against the government, and this too affected confidence.

Stevens observed last year that “increasingly bitter political debates” were damaging consumer confidence.

The Westpac-Melbourne Institute survey of consumer confidence in March found that overall confidence was about 8 per cent below its average since 1989.

Reporting on this survey, the Financial Review’s David Bassanese observed that there was an “unusual situation where households think everyone else is doing better than they are. They see a solid economy, driven by the mining boom, but remain especially worried about their own hip pocket.

“But the biggest standout is the collapse in confidence among Coalition voters compared with Labor voters. Their confidence has fallen relatively harder in recent months and is notably below their average compared with that of ALP voters.”

Next Tuesday the Treasurer, Wayne Swan, delivers the national budget. It’s his big opportunity to declare his accomplishment of balancing the national budget.

This is in itself an act that should create confidence – confidence that the government can keep its word, and confidence that Australia can live within its means.

But Swan has a chance to do more than that. It’s his big chance to try to arrest the national dirge, to engender some confidence. As the country’s first economic officer, it’s part of his job description.

So far, Swan has failed.

His predecessor, Peter Costello, the man who repaid the national debt and put Australia in good stead to face the global financial crisis, has some helpful advice on how he can do better.

“The decision of the federal Treasurer, who has responsibility for economic management, to go to war against the wealth creators who propped up his tax receipts is, in fact, unparalleled,” Costello tells the Herald.

“Why a treasurer would get into a slanging match that demeans him and demeans his office is beyond me. The government should be about creating confidence in the economy rather than sowing division and conflict.”

Swan launched a tirade against “vested interests” who were interested in themselves rather than the national interest, he said, naming three mining billionaires – Clive Palmer, Gina Rinehart and Andrew Forrest. Palmer countered by announcing he’d stand for preselection for the conservatives in Swan’s Queensland seat of Lilley. Swan continued the argument.

He has also taken to attacking the banks for failing to pass on to borrowers the full effect of cuts in official interest rates – on the opposition’s count, on more than 50 occasions.

“Australian company tax receipts essentially come from the four banks and two or three mining companies,” Costello says.

”He’s gone to war against the people who pay the Commonwealth company tax, the banks and the miners. In aid of what?”

But Costello, as treasurer, also liked to critique banks for their mortgage lending rates. Costello claims a distinction. He was doing it for the good of the economy, he says, where Swan’s motive is different:

“He’s using envy politics to win votes. He’s playing grubby retail politics to try and help him save his seat of Lilley. The most important thing for him to do is to rise above that and talk seriously about economic issues.”

GE’s Steve Sargent won’t talk about individual politicians, but he is aching for a more responsible and unifying political debate.

“We hear a lot of divisive language – between government and business, government and banks. Rather than more divisive debate, let’s have constructive debate.”

It’s most unlikely that the opposition will tone down its angry attacks. But Swan is the treasurer in the world’s most successful economy. The budget gives him a new opportunity to act like it.

Peter Hartcher is the political editor.

Read more: http://www.smh.com.au/opinion/political-news/whingers-in-wonderland-20120504-1y4i8.html#ixzz1txRhpoWh

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