It’s getting harder and harder to shake off this feeling that Australia is entering a new golden age.
It happened again this week as we watched the starkly contrasting developments on health care here and in the US: Prime Minister Kevin Rudd clearly won a debate with Opposition Leader Tony Abbott on a plan to restrict spending on health to make it more affordable; President Obama signed into law a bill that will cost an already-empty US Federal Treasury at least a trillion dollars over the next decade.
That’s not to suggest US health care reform is a bad idea. The fact that major illness or an accident could bring on personal bankruptcy has been a moral blight on America.
It would also be good if the passage of the health care bill announced the beginning of the end of Reaganism as a political emblem in the US, but it’s not yet clear that it does. To get it through Congress President Obama had to pretend that it won’t cost anything, since it is not paid for by a new tax – even an inadequate one like Australia’s Medicare levy.
That’s patently not true and it will cost a lot. As a result, the health care reform bill will worsen an already horrendous fiscal gap, especially as the population ages.
Meanwhile in Australia we are moving towards national case mix funding and local control of hospitals to control health care costs… because of the ageing of the population.
It is the system Victoria has had for 15 years, in which health funding is directed at procedures, not hospitals, and the hospitals are managed by local boards, not inefficient state bureaucracies.
The part of the plan that has grabbed the headlines – that the feds take over 60% of the funding – is relatively unimportant. It simply involves taking GST revenue off the states so they stop wasting it, but it’s not central and looks negotiable.
In yesterday’s debate, the Opposition Leader Tony Abbott could only complain that the Rudd Government might muck it up, as it mucked up the insulation scheme. The core of the policy, which was introduced in Victoria by the Liberal government, is almost certainly bipartisan.
So while in the US we have the spectacle of so-called Democrats voting against universal health care, in Australia we have a left of centre government proposing a decentralised and more tightly targeted health care system to control costs as the population ages and becomes higher-maintenance.
Meanwhile, in the United States there are five people looking for work for every job available, five million families are behind in the mortgage payments, 19 million houses or flats are empty, 30% manufacturing capacity is sitting idle, and the average American has seen his or her wealth decline $100,000 over the past two years, even with the rally in the stockmarket.
Europe’s problems, in many ways, are even worse. At least the US has ready buyers for its government debt: Europe is beset by an existential crisis caused by the bankruptcy of outlying states and their inability to persuade bond markets to support them.
In Australia house prices rose 14% in 2009, auction clearance rates are surging, unemployment is 5.3% and falling, and household wealth has been almost entirely restored after the GFC.
Even the trial of Rio Tinto’s Stern Hu is going well for the national interest: he has surprisingly pleaded guilty, which takes the diplomatic heat out of the issue for both Rio Tinto and the Australian Government. As a result, Rio is back doing deals with China.
Australia’s only problem is the currency, at a 25-year high because of the new resources boom and because interest rates are, almost uniquely in the world, going up.
The result is what Treasury Secretary Ken Henry calls the two-speed economy, referring to the fact that as the resources sector does well, other exporters and import-competing businesses do very badly.
But offsetting that is the fact that booming business investment in Australia is not only about resource projects, as colossal as they are. The housing shortage is now producing a residential construction boom as well, so notwithstanding the US92c Australian dollar (and higher?) unemployment is likely to keep falling.
The only way to stay glum in Australia at the moment is to read foreign newspaper websites.
This article first appeared on Business Spectator.
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
