As the nation heads for the silly season of an election year, it’s only appropriate to recognise the wisdom of Tony Abbott and the folly of Barnaby Joyce in their respective relationships with our top public servants.
Glenn Stevens and the RBA team continue to demonstrate the reason for supporting the independence of these genuinely civil servants and their continued capacity to put the interests of the nation ahead of the short-term aspirations (or is that aspersions?) of our publicity seeking personas.
Stevens is to be congratulated for his Sun Tzu-like capacity to retain the element of surprise. This week he defied all pundits, including this blog, by heeding Gary Morgan’s call to keep rates on hold as unemployment and under-employment rose and consumer confidence fell.
Gary Morgan now says: “The weekly Roy Morgan Consumer Confidence Rating is virtually unchanged at 127.9 (down 0.3pts) for January 30/31, 2010. Interestingly, a rising number of Australians (32%, up 5%) say they are ‘better off financially’ than they were at this time last year while a falling number of Australians (43%, down 4%) say they expect to be ‘better off financially’ in a year’s time.”
Earlier, Stevens was the first to raise interest rates during an election campaign, back in 2007 and to confront the notion that the RBA wouldn’t raise interest rates while unemployment was still climbing.
He was also the first RBA chief to raise interest rates three months in a row from last October as things began to look a bit too good to be true, and then held up an economist guaranteed rise when that turned out to be the case before an uncharacteristic collapse in the equities market.
Stevens has also won approval for lifting the shroud of secrecy over the RBA’s deliberations, ensuring interest rate decisions are now made public the day they are made along with a short explanation. The full board minutes are now published, a little later, for all to see.
Saul Eslake, a program director at Grattan Institute and former Treasury economist says: “He’s not hidebound by tradition, he does what he thinks he needs to do, I think he’s done an outstanding job.”
There is no doubt that the Ken and Henry show has been the underpinnings of the visionary and unprecedented central interventions that have served the nation outstandingly well.
The next step in nation building will come with Ken Henry’s independent and long-sighted view of required taxation revisions is likely to require moves that will have special benefits for smart companies and an encouragement for greater labour market flexibility, productivity and life long savings.
Henry proposes removing barriers to people who are considering work, raising the possibility of lower tax rates for older Australians, and changes that would cut the effective tax rate facing mothers who want to return to work.
His report favours savings and investments that increase productivity but still fails to tackle the disincentive of payroll taxes and the need to encourage a substantial venture capital market aimed at small- and medium-business employment expansion.
Gary Morgan says his January Roy Morgan employment estimates showing the continuing high level of unemployment and under-employment in Australia means the RBA’s decision to leave interest rates unchanged at 3.75% earlier this week has been fundamentally vindicated. Despite more people in jobs, real unemployment is significantly higher than a year ago at 7.5% — 875,000 and under-employment — is also higher at 7.2% (845,000). This larger pool of potential employees (1,720,000 Australians unemployed or under-employed) means there is little likelihood of a wage push causing wage inflation.
The hot tip for smart companies is to batten down the hatches by ensuring that only those costs that cannot be reduced are held at current levels for their best customers, slightly increasing prices for specialist services for casual customers and training and retaining sales teams that are out and about in a very difficult market place for the first half of the year and one that is likely to get much worse after the inevitable election season.
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Dr Colin Benjamin is an entrepreneurship and strategic thinking sonsultant at Marshall Place Associates which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship.
Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099
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