Australia is Heading for Economic Disaster

The Australian economy is heading southward and this does not mean we are moving closer to Antarctica. Our financial health is still in primary products. The price and demand for iron ore and coal still drives the economy. At the moment the foot is really off the accelerator and we are idling downhill. We will eventually reach the bottom. Then the country will have big problems.

Tax revenue is already falling due to lower demand by China. US demand for Chinese good remains sluggish. As the world economy falls it impacts strongly on Australia. We have not made the move away from agriculture and manufacturing. This is mainly because our resource bowl has kept wages high. Manufacturing countries always have a wage differential advantage. In time, wages will rise in China as they have in Japan. Then companies will probably move to Southeast Asia.

The hope that Australia will have a increase in IT start-ups to offset the fall in resource exports is not well founded. Products in the Internet sphere have short lives, a few years at most. IT moves on the initiative of individuals. It never will be a mass employer. We need to forget this pie in the sky and concentrate on something else.
It will cost to improve employment. Government will have to subsidize companies to keep jobs here. Politicians make the same incorrect assumption over and over again - the free market will solve all economic problems. The free market has never done much without human input.  International trade exists due to comparative advantage. If a country does not have this in a sector, other sectors that do must pay.

A start would be tax breaks for enterprises who bring home their support services from India and the Philippines. To allow mining employment to fall without stimulation elsewhere is economic suicide. The country will fall into a very deep hole down the track. Opening more shopping centres is not the way go. This is not increasing the capital base. It is dividing up the market between too many sellers.
Economics by Ty Buchanan
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