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Federal

Jul 29, 2014

Business Council goes back to the '80s for its latest warning of woe

The BCA's latest economic vision -- its second in a year -- is a return to the sort of thinking discredited in the 1980s, write Bernard Keane and Glenn Dyer.

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The head of the Business Council of Australia has declared Australia is at a crossroads, unveiling an economic plan for the country that calls for major reforms in a speech widely covered by the media as business demanding long-term vision …

Oh, wait … we’re a little confused. Which Business Council head? Which economic plan? It’s a bit over a year since Tony Shepherd rose to deliver an eminently predictable Business Council “vision”. Now Shepherd’s successor, Catherine Livingstone, has delivered another, very different, vision. What happened to the Action Plan for Enduring Prosperity unveiled by Shepherd last year? It’s not clear. The solitary reference to it yesterday was that the McKinsey report unveiled by Livingstone “followed on” from it. In the “perpetual present” of the media, the Shepherd-era plan — with its 93 amazing recommendations across nine great policy areas — is now forgotten (much of it ended up in the Abbott government’s Audit Commission, which sank like a stone), while the new plan is covered in the same breathless terms.

Of course, much of it is not new. Shepherd insisted last April that “the next six months will be critical.” Fifteen months on, Livingstone says Australia “is at a crossroads”. For the Business Council, Australia always needs to urgently adopt the reforms demanded by the Council. Australia is, as usual, a “high-cost” economy. And — you’ll never guess — the new paper says we must overhaul IR laws to strip penalty rates, make life more difficult for unions and introduce that “flexibility” the BCA has always wanted.

We don’t need to go on — you know the drill from this crowd.

But the new plan differs in some ways. One way is quite remarkable. The Shepherd-era paper actually acknowledged climate change exists, saying “an effective, sustainable response to climate change” is needed to “ensure that we have a stable investment environment … Ultimately this means moving from our current high-emission global economy, of which Australia is part, to a low-emission global economy.”

“‘Let us be absolutely clear that the approach we describe is not about ‘picking winners’’, [Livingstone] said — a phrase that guarantees the said approach is indeed about picking winners.”

Yesterday, climate change was entirely absent from Livingstone’s speech — she went 3500 words without mentioning it — and it’s absent from the BCA plan. The McKinsey report on which it’s based mentions it once in passing. Going right back to May 2000, the BCA has been talking about greenhouse gases, urging the then-government to have “a mature and productive debate about the establishment of a greenhouse trigger and other greenhouse measures”. Livingstone’s speech managed to go backwards on climate change, not merely from the time of Tony Shepherd but to the council’s pre-2000 position.

Another difference is equally interesting. Shepherd was the muscular advocate of rugged individualism that we saw in the Commission of Audit. His plan proposed “placing a hard cap on the size of the federal government”. Government’s role was to “facilitate an environment in which wealth is created and distributed”. But the Livingstone-era plan is very different, with a strong focus on a new role for government “taking a more active role in setting the national direction for economic growth, incentivising and enabling the competitiveness of businesses … using specific national sector strategies to develop and take forward a structural reform agenda …” In her speech, Livingstone referred to “a more thoughtful role for government in facilitating and co-ordinating economic development and social progress”.

Setting the national direction? Sector strategies? Co-ordinating development? Has socialism come to the BCA?

Livingstone is aware of what this sounds like. “Let us be absolutely clear that the approach we describe is not about ‘picking winners’”, she said — a phrase that guarantees the said approach is indeed about picking winners. That’s why she lauds New Zealand’s strategic intervention in its dairy industry as an example to follow (ignoring a host of country-specific reasons why that works in NZ, but can’t in Australia) and cites a long list of government sectoral interventions in other countries.

Shepherd, for all his egregious faults, at least had the courage of his reactionary convictions when it came to government: he disliked it and wanted to reduce it. Livingstone is hiding behind an old trick of industry interventionists, one they learnt in the 1980s as old-style protectionism was rolled back. Instead of talking about the role of government as protecting and nurturing local industries, they began using words like “co-ordination” and “strategic planning”. But it was the same old stuff: industry assistance, merely delivered beneath new packaging, aimed at propping up noncompetitive but influential industries like automotive manufacturing. It’ll be music to the ears of lazy employers and trade union officials.

When you press such advocates for what “co-ordination” or “strategies” actually mean, how they’re going to grow jobs or build exports, it comes down to more money — more business welfare. Actual industry strategic plans that have helped develop Australian industries are few and far between, and usually relate to small industries that had significant export growth potential that could be brought forward with some marketing expertise and research funding — like Australia’s wine industry in the 1980s. And the 1980s is when parts of Livingstone’s speech sounds like they were written, a flashback to the wonderful days of the Button Car Plan and the musings of Barry Jones. The one consistent success of the Abbott government so far has been to see through this sort of special pleading and reject further interventionism.

Instead of Australia being “at the crossroads” and needing to either curb government or hand out more business welfare, here’s an economic narrative the Business Council will never tell you. Australia has low inflation, low interest rates, growing labour productivity, a healthy debt position compared to its international peers. The Australian economy has been growing for over two decades, the previous government managed the historical feat of landing a mining investment boom without an inflationary surge, business profits are growing while real wages (and the minimal level of industrial disputation) are actually falling. Some of our economic problems — like a strong currency — are the product of our success, not our failures. Other problems — like needing to plan for where our workers will come from in coming years — are the kind many developed countries would love to have.

As far as the BCA, in either guise, is concerned, none of that has happened. We’re permanently poised on the edge of destruction.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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