Monday, 18 May 2020
Hon. Larry Anthony
Last week the National Cabinet signalled in earnest the rehabilitation of the Australian economy out of its induced coma.
An anaesthetist once told me that it’s a lot easier to put a person into an induced coma than it is to awaken them safely. Never has this been truer than it is for the Australian economy. Navigating our way out of a total economic shutdown and ensuring the nation revives and survives is far more difficult than it was to put it to sleep.
In Canberra during the last week, the challenges confronting our Parliamentarians have been enormous. As the nation wrestles the sudden explosion in debt, created by Jobseeker and Jobkeeper, the daunting task facing the Cabinet now is how this is going to be paid for and what debt legacy it will leave for the next generation. Compounding the economic woes - rising unemployment, reduction in GDP, falling investment in capital, stock markets and now housing – are the ratcheting trade embargoes by China.
The flow-on effect from the Government’s stance to prosecute an independent inquiry into the origins of the coronavirus are having real repercussions.
Australia, with a population of 25 million, derives over 35 per cent of its export earnings and much of its prosperity from the delivery of goods and services to China, a country of over 1.3 billion people. In other words, they’re 70 times larger and have 70 times more muscle than Australia Inc.
Whatever the real cause of the argument, which I’ll leave to the reader to surmise, the fact is that words matter, and one has to be adroit in both business and government if you’re counterparty is 70 times larger.
It also reinforces that it is perilous to have all of your eggs in one basket, or in this case the economic fortunes of Australia, that have risen dramatically with our dependency on China for hard currency – whether it’s in the mining sector, the agriculture sector, education or tourism sectors, with the latter two suffering terribly due to COVID-19.
If there’s a moral to be learnt from this story, as it is in business, it is critical to diversify one’s revenue and customer base so as not to be vulnerable to the vagaries of national politics or big countries.
The other observation is that the usual GDP split of 30 per cent Government vs 70 per cent private will no longer stay true as the private sector rapidly contracts and inversely the government sector picks up the slack. This may be useful in the short term, but a bad outcome for patient Australia in the long term. The private sector has always generated the wealth and taxes of this nation.
At the SAS Group, our clients are predominately in the private sector and industry associations. Never has it been more important to adjust to the new reality. The key to the nation’s revival is to finesse the economic recovery out of the induced coma along with the critical need to diversify our export markets.