The Organisation of Economic Cooperation and Development this week praised the economic management of the Australian Government.
The OECD said that good economic management — marked by reducing government debt, low inflation and low interest rates — had enabled Australia to weather the Asian economic crisis. Continued good management would result in falling unemployment rates, down to 6.5 per cent in 2001.
That is the good news.
The not so good news is that the inflationary effect of the GST will require a watchful eye by the Reserve Bank. That in turn might lead to a need to raise interest rates. Higher interest rates can be a blunt weapon. They can stifle economic growth quite suddenly. It means that the introduction of the GST will present a risk and require careful management. However, the OECD praised the introduction of the GST and other tax reform.
The other concern on the horizon was expressed by Treasurer Peter Costello. He thought another Asian economic crisis, or even an international one, was possible and that Australia needed to keep up the economic reform agenda in order to be in a position to weather it.
By and large, however, the OECD’s appraisal of Australia’s recent economic performance has been favourable and the Government has a right to take a great deal of the credit.
But the question must be posed: why do we pursue these economic goals? Surely, we do not do so just to please the OECD, or just for their own sake. Rather we do so, or should do so, to give people more fulfilling lives. The trouble is that the economic indicators are only a partial measure of that. True, a good economic performance can mean that fewer people are in poverty and that more people have educational opportunities and access to health care, but it is not necessarily the case.
There is a lingering suspicion that many people have missed out on the fruits of Australia’s improved economic performance and that most of the fruits have gone to the big end of town. There is a further suspicion that the fruits of the economic reforms have gone to Sydney and Melbourne whereas the costs of them have been felt mostly in rural and regional Australia.
Another concern is that the fruits of economic reform have come with non-economic costs. These are not hidden costs, as the cliche goes, but obvious costs. People are working for more hours in the week with its attendant cost on family life and in some cases health. Further the cost of moving from welfare to work under present tax structures mean many people (particularly women) are working for very little return, but they want to be in the workforce to keep up their skills and for social interaction.
And then there is the spiritual and natural elements of life that economic indicators ignore. “”Improved” economic outputs might be making life worse, not better. It might be increasing unsatisfying consumption at great cost to the environment and spiritual well-being.
Before Mr Costello launches on a new round of economic reform with such things as lower pay rates for rural Australia, the Government will need to convince people that this will not lead to further inequality between regions and between income levels. It will also need to convince people that their lives will be made better.
The Government has done well with economic management. It is now time to widen the horizon and have a debate and an inquiry into how this can improve well-being.
The Government will not and should not be judged by economic indicators alone.