Kelvin Thomson (Wills, Australian Labor Party) Share this | Hansard source

In question time this week, the Treasurer had a crack at me for making a statement of the bleeding obvious that growth is not an end in itself. The Treasurer is a 'growth artist'—that is abundantly clear—but someone has to point out that the emperor has no clothes. The member for Griffith, in her first speech, delivered recently, talked about the debilitating effects of inequality. A report by Oxfam a month ago stated that the richest 85 people in the world own as much wealth as the bottom half of the world's population, some 3½ billion people, and that half of the world's wealth is owned by just one per cent of the world's population. Indeed, the situation is getting worse. In nearly every country Oxfam surveyed, economic inequality has increased since 1980. The richest one per cent in the US more than doubled their share of national income. In Australia, the richest one per cent doubled their share. After the GFC, the wealthiest one per cent in the US captured 95 per cent of post-crisis growth, while the bottom 90 per cent became poorer. Growth is not an end in itself. Full employment, work for all who want it, is a better objective.

Treasurer Hockey does not even talk about GDP per capita. More people living in your street is growth but it does not mean you are better off. What is the alternative to this government's budget strategy? Perhaps if I say I am going to spend the next 10 minutes talking about Scandinavian models I will attract a larger audience. I think we should spend more time considering the Scandinavian models. The fact is that the four main Nordic countries—Sweden, Denmark, Norway and Finland—are doing well. If you could be reborn anywhere in the world, you would want to be a Viking, as The Economist said in a report on the Nordic countries. The Nordic cluster at the top of the league tables of everything from economic competitiveness to social health, to happiness. They have avoided both southern Europe's economic paralysis and America's extreme inequality. These nations also have low population growth, with a combined population of less than 25 million, with expected growth of only three million to less than 28 million by 2050. By comparison, Australia is 23 million but with projected growth to between 36 million and 40 million by 2050.

Interestingly, the Oxfam report on inequality shows Australia was second only to the United States on the percentage increase in share of income of the richest one per cent between 1980 and 2012. During that same period, Australia's population grew by over 50 per cent, second only to Singapore. Rapid population growth does correlate with increasing inequality.

Nordic governments demonstrate it is possible to combine competitive capitalism with a larger state and a smaller population: they employ 30 per cent of their workforce in the public sector compared with an OECD average of 15 per cent. They are also transparent, something the Liberal government would do well to emulate rather than hiding in the shadows and using euphemisms like 'green tape'. The West promotes transparency, but the Nordics 'walk the walk'.

The performance of schools and hospitals is measured. Governments are forced to operate in the harsh light of day. Sweden gives everyone access to official records.

There is also an emphasis on the long term, with policies in place to mitigate the harsher effects of capitalism. Denmark, for example, has a system of 'flexicurity' that makes it easier for employers to sack people but provides support and training for the unemployed. An active labour market policy in Nordic countries helps improve qualifications among the unemployed through courses and education, and also encourages the unemployed to actively focus on job seeking. The social security net is not passive, in the sense that all may choose freely between working or not; rather, it provides a secure income as long as the demand for active participation in the labour market is met. Participation in the labour market is also supported by welfare schemes such as child care. An extensive childcare system has a direct welfare effect for families and helps to socialise children. It also helps to ensure gender equality in terms of opportunities to participate in the labour market.

The Liberal government obsessively believes in self-correcting free markets and that workers who have lost their jobs can move seamlessly into other work. The Prime Minister has even referred to this as 'liberating'. But it simply does not work that way. Just ask the workers at Ford, Holden, Toyota, Alcoa or—this morning—Qantas who face the prospect of being added to the likes of the 59-year-old maintenance fitter and turner I told the House about a fortnight ago, who was retrenched back in 2008 and, notwithstanding his qualifications, has only worked a handful of weeks ever since. I wonder what the millions of workers who remain unemployed after 'self-correcting' markets blew up the world economy in 2008 think of the 'liberating' view.

Unlike the Liberal government, which seeks to disparage welfare, the Nordic countries consider the welfare state to be a strength when it comes to economic development. Not only does the welfare state benefit the whole population; it has a positive effect on the economy. The public sector and welfare services have helped the countries to develop a highly skilled workforce and a high level of employment. This, combined with a stable civil society, a strong democratic tradition and an effective regulatory framework, has led to the emergence in the region of extensive social capital, which is one of the main pillars of the Nordic economy.

When it comes to long-term policy vision, Norway's sovereign wealth fund, currently worth $900 billion, is what we should have done years ago and should still do. Set up in 1990, the fund owns around one per cent of the world's stocks, as well as bonds and real estate from London to Boston, making the Nordic nation an exception when others are struggling under a mountain of debts. The fund, equivalent to 183 per cent of 2013 gross domestic product, is expected to peak at 220 per cent around 2030. It is worth $180,000 for every Norwegian man, woman and child. I know that if the Liberal government came to office with something like that, they would sell it off at once. But the Norwegian government uses it to benefit the economy.

As the chief economist at DNB Markets points out, 'The fund is a success in the sense that parliament has managed to set aside money for the future,' which is something Australia should have done but squandered the opportunity. A 2008 paper co-authored by Treasury official Kirsty Laurie found that, from 2004-05 onwards, the Howard government spent 94 per cent of a $330 billion increase in tax revenue from the resources boom.

Norway's management of their resources boom and Australia's management of ours could not be more different. Norway has maintained a much larger manufacturing sector than Australia—currently just under 30 per cent per working age population. Norway has an employment to working age population ratio that is five percentage points higher than Australia's and an unemployment rate of 3.3 per cent compared to ours at six per cent. Between 1980 and 2010, the cumulative current account surplus for Norway was 200 per cent of GDP, while for Australia the outcome was a cumulative current account deficit of 127 per cent of GDP.

Norway has a population growth rate a third of Australia's and little migration. Norway has instead an aggressive industry policy to maximise pull-over effects to manufacturing from resource expansion. This was done by local content targets during resource expansion and operation, and by subsidies, investment support, training et cetera to ensure manufacturing could meet local content targets at minimum cost to the resources sector. Effective taxation of the resources sector was also implemented, which provided funding to support economy-wide education and training programs; knowledge clusters for research, development and innovation; and regional adjustment and infrastructure expansion.

The sovereign wealth fund's investments offshore have minimised the appreciation of the Norwegian currency, in contrast to Australia, where a high Australian dollar has put pressure on the competitiveness of manufacturing, which in 2004 contributed 12.5 per cent to our economic output but today contributes just seven per cent. There is absolutely no doubt that Australia has contracted Dutch disease. Perhaps we should call ours 'Aus-teoporosis'! Mining has grown but manufacturing has shrunk.

Rather than quarantining our windfall gains generated during the early years of the resources boom, the Howard government returned the cash to taxpayers, fuelling a borrowing binge which increased inflation and interest rates, making Australia a very expensive country in which to do business. Ian Verrender recently pointed out in an article on how we squandered the resources boom:

That was exacerbated by a currency surging on the back of the vast capital inflows required for new mine construction and expansion.

In support of sovereign wealth funds, Ian Verrender said:

How could such a fund have helped us? By investing offshore, it could have helped stabilise the currency, partially offsetting the dollar-boosting effect of a resources boom, thereby easing pressure on our manufacturing and services industries.

As the Liberal government's Commission of Audit look for savings in the budget, they would be wise to dispense with the so-called Washington Consensus about the role of government and instead look to Sweden's grand bargain of fiscal virtue alongside a generous welfare state. Among other benefits, it keeps the employment of women at levels most other nations can only dream of and, on most measures, maintains an equal society which is the envy of the Western world. I heard on the radio this morning that the parliamentary secretary for regulation wants to get rid of the gender-reporting requirements for women in the workforce because they are too onerous. They are not that onerous for the Abbott cabinet: you just go, 'One,' and stop—that is it.

The Economist has reported that Sweden has:

… donned the golden straitjacket of fiscal orthodoxy with its pledge to produce a fiscal surplus over the economic cycle. Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus … over the same period.

Sweden's public accounts, in contrast to the rest of Europe, have swung back into balance after the global financial crisis, and it remains one of the few countries in the OECD whose financial assets considerably exceed its liabilities.

It is a country where more than seven out of 10 workers are members of unions and where top CEO pay has not risen nearly as dramatically as it has in America. Not surprisingly given all this, Swedes' trust in government is over 60 per cent, being amongst the highest in the Western world. This is a vindication for a model based on relative equality and supportive welfare that can coexist alongside a balanced budget funded by high taxation in an economy that is performing well for all of its citizens and not just for vested interests. The lesson from the Nordic countries is a practical one rather than an ideological one. The state is popular not because it is big but because it works in practice.

The Liberal government should abandon their economic fundamentalist agenda. For Australia to progress, we need to look less at tired orthodoxies from either the Left or the Right and study the Scandinavian models instead.

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