Australian business doesn’t read very widely these days as it constructs its arguments about the economy, tax and green issues.

The current bleating from business about the resources boom, the strong dollar, the flood levy, the cyclone, carbon tax and anything else is a case of back to the future.

Much of the moaning is along the lines of how tough times are, too tough to introduce a carbon tax, or a mining resources tax will kill the golden resources calf, or consumers are too cautious, interest rate rises are making it tougher.

Little evidence is shown by the business leaders (or unions), their paid-for consultant advisers and the non-thinking business and political media, of any scepticism or any absorption of inconvenient factors or arguments.

For example, business now acclaims the reforms made by the Hawke-Keating governments from 1983 to 1996 and yet at the time they resisted, moaned, fought and complained about the floating of the dollar, the lowering of tariffs, compulsory superannuation and a host of other smaller reforms. That many of these changes were made in the depths of the last big recession in Australia is ignored in the current bout of whingeing.

Some business economists and commentators in the media know the difference but only one or two consistently show any scepticism or remark on the way business (and unions) is blinkered, especially the Business Council and its riding partner, the Australian Industry Group.

Equally the trade unions are currently back in the 1980s and 1990s, fighting the good fights of yesterday. Senator Doug Cameron (ALP, NSW) is a former boss of the Metal Workers Union who can’t let go. Rather than represent the people of NSW, he seems at times to be still fighting the arguments of the 1980s and 1990s and Paul Keating on behalf of the unions and the left-wing of the ALP.

In that he is with the right-wing pin up lad, the  Australian Workers Union’s Paul Howes and his mentor, Joe Ludwig (whose son is a ALP senator from Queensland). Ludwig’s comments and stature recall the late Jack Egerton, an ALP and union heavy in Queensland. Paul Howes writes think pieces for various newspapers (and a book) in an attempt to convince us that he’s a thinker. He’s not convincing. He sounds no different to the current crop of business leaders and CEOs.

There are some very recent and good examples of the way business and its advisers aren’t reading or absorbing other bits of information and modifying or changing their arguments.

On the weekend five CEOs told The Sydney Morning Herald that a capital gains tax on housing would help us “fight” the resources boom:

“The bosses have said the impacts of the boom, including a higher cost of living, a shortage of staff and other industries withering, are the greatest challenges facing Australia.

“But the five leaders, named today at the top of the annual Sydney Morning Herald-East Coles Most Admired business survey, have generally bemoaned a lack of long-term planning about the issues.”

That piece led Fairfax online columnist Michael Pascoe to point out this morning:

“There’s a long history of business people not making successful politicians and politicians not making successful business people. The way five top-flight CEOs suggested a capital gains tax on the family home illustrates the problem.”

And, this morning a survey of business by the Australian Industry group came up with a similar moan:

“The county’s business chiefs are predicting a patchy economic growth outlook for 2011 with trade exposed industries particularly hit by the strength of the Australian dollar.

“A survey of 530 CEOs from a range businesses in manufacturing, services and construction, and with a combined turnover of $26.8 billion, also see the risk of slower demand in the face of ongoing consumer caution, high interest rates and the burden of government red tape.

“Businesses will also be competing with a buoyant mining industry for resources.

“It is only concerted policy action from governments and co-operation with the business community to raise productivity and competitiveness that these impediments can be tackled,” Australian Industry Group (Ai Group) chief executive Heather Ridout said releasing the survey on Monday.”

Yesterday BlueScope Steel CEO Paul O’Malley found a sympathetic ear on the ABC’s Inside Business with this bleat: “The introduction of a carbon price will harm the manufacturing industry and entrench Australia’s dependence on resources, the head of a major steel manufacturer says.

“Bluescope Steel chief executive Paul O’Malley says a high Australian dollar and higher interest rates are creating a tough environment for the manufacturing, education and tourism sectors as Australia rises on the back of the resources boom.

“In that framework you would expect policy to say we need to ensure we have more than a resources economy when the boom breaks,” O’Malley said.”

But if any of our business and union leaders had read a speech delivered last week in Melbourne by David Gruen, federal treasury’s head of Macroeconomics they may have been surprised, so surprised that they might have stopped to have a think about things.

It was in fact Gruen’s second speech in three weeks about the resources boom and what it is doing to the economy. Both speeches have fleshed out comments from RBA governor Glenn Stevens and his economics boss, Dr Phil Lowe, on the same issue.

Buried in the speech were a few truths about the performance of the economy in the past five to 10 years, things you don’t see mentioned in the debate (especially from the opposition, government or a certain Reserve Bank board member economist).

For example Dr Gruen said:

“High resource prices, combined with a high Australian real exchange rate, are currently driving factors of production — both labour and capital — out of non-resource parts of the traded sector (including many, but not all, parts of manufacturing) and into mining and construction.” (Yes, that’s what much of the moaning from business is about)

“The strongly rising share of employment in the mining and construction sectors is a relatively recent phenomenon, dating from the beginning of the mining boom, around 2003-04.

“But the associated decline in the share of employment in manufacturing is not a recent phenomenon. It is instead the continuation of a trend that has been evident for a few decades.”

(Oh, business hasn’t bothered to mention that.)

“Another development has been less remarked upon, ” Dr Gruen said.

“Over the past couple of decades, services sectors have accounted for a rising share of employment, and this trend has been affected hardly at all by the mining boom.

“Taken together, the services sectors now account for over three-quarters of the employment in the economy.

“It is also important to keep in perspective the relative sizes of the sectors of the economy.

“Although there has been strong employment growth in mining and construction, service sectors (particularly health care and social assistance; professional, scientific and technical services; and education and training) have together accounted for far more of the economy’s employment growth since the beginning of the mining boom than have mining and construction,” he said.

(Oh, an inconvenient fact, so let’s ignore it?)

“Even if the terms of trade remain high (which, in turn, may lead to continued strong employment growth in the mining and construction sectors — though this is clearly not assured), it seems most likely that growth in the number of people employed in the service sectors will continue to outstrip growth in the number employed in mining and construction,” Dr Gruen wrote.

(Oh, another inconvenient fact.)

“A related development, and one that is also likely to be relevant over the next decade or more, is increased direct competition in the non-resource parts of the Australian traded sector from China and India, with flow-on effects to employment in those sectors of the Australian economy.”

(This is what business is moaning about, especially the Australian Industry Group survey today).

Dr Gruen said: “The most obvious parts of the Australian traded sector likely to be subject to this increased direct competition are manufacturing – especially as Chinese and Indian production moves to increasingly sophisticated manufacturing goods (for example, automobiles) as their real wages rise, but also parts of the service sectors that may become increasingly tradeable, as a consequence of further development of the internet. The high level of the Australian dollar acts to accelerate these trends.

“It is not possible to predict with any accuracy which of these Australian economic sectors will benefit most from the re-emergence of China and India into the global economy. That is an argument for maintaining, and enhancing where possible, the flexibility of the Australian economy.

“And, regardless of which Australian economic sectors will ultimately benefit most from the re-emergence of China and India, this global changing of the guard seems more like a generational change in Australia’s comparative advantage than it does an example of Dutch disease, in which we might wish to return Australia to its pre-boom industrial structure once a short-lived disturbance has passed.”

So, no going back, but remember, the growth in employment has been driven more by the expansion of the service sector than by the mining and construction sectors. And the country may be undergoing an enormous change in the economy that it will demand social and cultural changes, especially from business, unions, investors and governments. But don’t tell them, they won’t listen until it bites them. So the only way to bring about change is start the process, as the Hawke Keating and Howard governments did.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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