Paul Keating, both as Treasurer and Prime Minister, has prided himself on being across the economic debate and capable of addressing Australia’s economic problems. For a long time he carried credibility among opinion leaders and respect (if begrudging) from the public. Over a decade, the credibility and respect have eroded as Mr Keating’s name was associated with the banana republic, the J curve, bringing home the bacon, effervescence, the big canvas, the economic levers, the soft landing, the recession we had to have, and now sustainable economic growth.
In that decade Mr Keating derided the commentators as they began to see it differently from him. And now he is impatient with the masses for not seeing the economy in the same light as he does. That was revealed on the John Laws talk-back radio program _ one of the largest mass audiences in the country.
The trouble for Mr Keating is that the masses are showing themselves to be dangerously more economically literate than he might like. In short they are seeing through the rubbish that Mr Keating keeps spouting. In particular, they have worked out that the foreign debt is not something that will just go away or is just a series of individual debts so will not affect Australians collectively. They now understand, as Mr Keating understood in 1986, that unless something is done about it, Australia is in danger of becoming a banana republic.
Like Mr Keating they understand the consequences of not dealing with foreign debt _ that economic growth is unsustainable because any growth causes more imports, pressure on the currency and higher inflation that can only be controlled by higher interest rates. The foreign debt means Australia has only one effective economic lever.
Unlike Mr Keating, however, the masses who question Mr Keating on the John Laws program see what needs to be done and accept it must be done. It must be galling for the Prime Minister, who has avoided general press conferences for months because he does not like economically literate questions from journalists, to find the masses so economically literate.
There are several critical elements: reduction in government spending; reform of the labour market; micro-economic reform (things like transport and electricity); tax reform; financial deregulation and tariff reform.
The Keating Government has dealt with some of them and is dealing with others. But its idea of reducing government spending is to shift much of the burden to the states and to refuse to touch what it sees as many vote-catching sacred cows. Its idea of labour-market reform is to keep the national-union-dominated system alive but call it enterprise bargaining. What reform it has begun on micro-economic reform is being eroded by the fact our international competitors have not stood still.
If Mr Keating’s performance in the aftermath of the Queensland election and on the Laws show is any guide, he does not recognise that he might be even slightly wrong about the Australian economy and that the people who voted against Labor in Queensland or say in opinion polls that they will vote against Labor federally might be even partially right.
Time is running out for Mr Keating. There is no joy on foreign debt, little joy on employment and what joy there was on inflation now seems under threat. If Mr Keating wants to paint big pictures on things like native title and the republic, he has to be sure the easel is first placed on firm economic ground.