In today’s media space, with its blend of immediacy and the need for pithy hot takes, experts and talking heads are content providers. They can’t afford to say, “I don’t know”. But we’re entering a period in which there are going to be plenty of times when we don’t know.
Well-known economist Chris Richardson, a former Treasury officer, later a representative of one of the big consulting firms and now hanging out his own shingle, offered an insight into the way economic commentary works in an interview with The Australian Financial Review last week. “You may have noticed, I get my name in the paper a bit,” he said. “I will admit I like that. The economics game is full of big egos, and I plead guilty.” Full marks to Richardson for his frankness.
In a little under three weeks, the Albanese government will deliver the most highly anticipated budget in its four years in office. Of course, we won’t know exactly what’s in it until then, although the government is trailing out a lot of information about likely tax changes and cuts to big programs.
But we can look ahead with a bit more certainty to how it is likely to be received by many economic experts or “top economists” who work for business and financial institutions and are regularly quoted in the media on every new economic statistic released throughout the year. If the general tone and analysis of recent times is any guide, they’re probably not going to think the budget is all that great.
I expect that most of them will conclude that the budget contains too little “reform”. The same will probably go for Treasurer Jim Chalmers’ efforts at boosting productivity. For some reason – possibly that many of the economists work for big companies, but maybe not – the focus is always on the government to improve productivity. Certainly, government has a crucial role, given that it’s in charge of the regulatory framework. But the acid is rarely put on employers to lift productivity via greater capital investment and innovative work reorganisation.
On spending, cuts will be seen to be welcome but inadequate. Unless the government introduces really substantial tax changes beyond tweaks to capital gains and negative gearing, it probably won’t find favour on the tax front either.
This is not an attack on these experts. They have knowledge and qualifications in orthodox economic theory and practice, and they have a job to do. And debate on economic policy is something we have to have at all times. Nor is it to let the Albanese government off the hook; it has a responsibility to produce the best possible outcomes for the greatest number of Australians in the short and the long term. The very mild program of social democratic policies it was twice elected by a majority of voters to implement has not been cheap and spending has been allowed to get away, with negative effects on the cost of living.
But this is an epoch-making moment across the globe, and it’s not clear that the orthodox analysis that’s sustained a lot of the economic commentary until now is going to have the same relevance in the future. We are going through a new set of oil shocks. The previous shocks in the 1970s prompted the rise of the neoliberal economic model in the anglophone West as well as much greater interconnectedness in trade relationships. The added element this time around is a collapse in the international security architecture courtesy of Donald Trump, Vladimir Putin, and the rise of China as an economic, technological and security superpower.
The truth is that with Trump erratically treating the rest of the world as his plaything, nobody knows how things are going to go from here. The conventional world as we’ve known it for 50 years is being smashed to bits.
A rapidly emerging view among the economic experts is that pretty soon Australia will be in the grip of stagflation, defined as a combination of sluggish economic growth, high inflation, and rising unemployment, which is what happened in the 1970s. The world economy is roiling due to America and Israel’s war on Iran.
Of course, the government can’t use that as an excuse. It has an obligation to plough on. Right now, within substantial sections of Australian society there appears to be an appetite for big, serious economic measures, especially around tax and housing. Anthony Albanese’s incremental, steady style has served him well so far, but its use-by date is not infinite.
The government needs to trust itself. Enough listening and canvassing of opinions and perspectives; now it needs to act. After last year’s election, Chalmers held a productivity summit to collect stakeholder proposals, and last month he gathered several dozen private sector economists for a meeting held under Chatham House rules, gave them his spiel and then asked for their views and suggestions. Some were initially fearful that he was pulling off a power move to co-opt and silence them. In reality, he spoke and he listened. He was trying to communicate that if he showed them respect, he expected their respect in return.
Many experts produce proposals in specific policy areas and work on measuring the effects of some government policies. They’ve got a right to exercise their voice on economic matters. But no government can afford to let economists solely dictate its behaviour, because a government’s remit extends way beyond economic management. Every government has a duty to also look after the society and the polity. The business of governing is applying trade-offs between those three obligations. I realise the irony of a newspaper columnist writing this, but perhaps at this moment we could recognise that as much as the government deserves scepticism, so too do the experts.
Shaun Carney is a regular columnist, an author and former associate editor of The Age.
The Opinion newsletter is a weekly wrap of views that will challenge, champion and inform your own. Sign up here.
More:
Shaun Carneyis a regular columnist, an author and former associate editor of The Age.
