Australia ‘drifting’ towards decline as reform gains are surrendered, Mathias Cormann warns. By Simon Benson in The Australian.
OECD secretary-general Mathias Cormann, Australia’s longest-serving finance minister, has warned Australia is showing worrying signs of drifting into a slow but relative decline amid a global rule-of-law “recession” and a loss of institutional trust that threaten to undermine the foundations that built Western prosperity. …
“Protection made (Australia) a rich country poorer relative to its peers; openness, competition and the rule of law made it one of the most successful economies on Earth,” Mr Cormann said. “The productivity data now shows what happens when the reform effort stops, and the quiet drift back towards protection shows how easily hard-won gains can be surrendered by increments. …
“There are worrying signs of a quiet drift back towards the instincts Australia once had the courage to abandon. The new protectionism does not look like the old tariff wall; it is subtler, which makes it in some ways more dangerous. It takes the form of industry subsidies, local content rules and procurement preferences, a steady re-regulation of the labour market, and a rising burden of approvals and compliance that slows investment.
“Each measure has a plausible individual rationale: security of supply, sovereign capability, fairness. But collectively, they recreate the exact logic of the old system: visible benefits for the assisted few, invisible costs spread across the many, and capital steered by government preference rather than competitive merit. And beyond this, there is something even more subtle. The perpetual accumulation of outdated rules and regulations.”
He said the drift mirrored a global pattern being observed by the OECD.
“For a mid-sized nation that lives by trade, joining a subsidy race it cannot win, while its productivity engine idles, is a strategy for slow relative decline,” he said.
Mr Cormann acknowledged that from the mid-2000s, under both Coalition and Labor governments, the reform effort had faded. “The mining boom disguised the cost for a decade, because national income kept rising even as the underlying engine slowed,” he said. …
The lesson of Argentina:
“In 1900, Argentina and Australia were twin economies: vast, temperate, resource-rich settler nations, both among the richest countries on Earth per capita, both feeding and clothing the world from fertile plains. An observer at the time might have bet on Argentina. Yet over the following century the paths of Argentina and Australia diverged spectacularly. Australia built durable, impartial institutions — an independent judiciary, a professional civil service, stable democratic transitions — and, crucially, when its post-war protectionist model ran out of road, it found the political means to reform, opening its economy from the 1980s onward and locking in decades of unbroken growth.”
By comparison, Argentina fell into what Mr Cormann called a cycle of institutional volatility with coups, constitutional crisis and a corrupted judicial system, instability of property rights and rampant inflation. “Same endowments, same era, same opportunities in the world economy — but one country made its rules predictable and its politics self-correcting, while the other made both negotiable and unstable,” he said.
“The Argentine case study is the strongest evidence we have that resource wealth and a promising starting position guarantee nothing. Institutional capital must be maintained.”
Rex Widerstrom at The Epoch Times:
Fewer Australians are putting their capital into businesses …
The proportion of working-age Australians who run a business which employs people fell from 13.8 percent in 2002 to just 9.8 percent in 2022, according to the report called “Bricks, not Businesses.”
Over the same period, the numbers of people who own at least one investment property went up by 8.1 percentage points.