The Organisation for Economic Co-operation and Development (OECD) in Paris is the world’s key policy think tank, and Australian economists, trade experts, education specialists, health statisticians etc. are scattered throughout the organisation.
We even have an Ambassador to the OECD feeding back reports to Canberra. When Treasurer Frydenberg announces new spending initiatives or tax policies, it’s likely that OECD research provides the back-drop.
In this context, the latest OECD Economic Outlook serves as an excellent pointer as to how Australian governments – federal, state and local – might plot their way out of this COVID mess. Below are some of its findings.
- Despite huge policy band-aids, the pandemic has damaged the socio-economic fabric of countries worldwide. Output is projected to remain around 5 percent below pre-crisis expectations in many countries in 2021 and 2022. The most vulnerable will continue to suffer disproportionately. Smaller firms and entrepreneurs are more likely to go out of business. Many low wage earners have lost their jobs, with poor prospects of finding new jobs soon.
- Governments will have to continue using their policy instruments actively, with better targeting to help those hardest hit by the pandemic. This is not the time to reduce support, and health and economic policies must work hand in hand.
- Extensive fiscal support is pushing public debt levels to record highs, but the cost of debt is at record lows.
- There are three priorities for policymakers. First, investing in essential goods and services such as education, health, physical and digital infrastructure. Second, decisive actions to reverse durably the rise in poverty and income inequality. Third, international cooperation – the world cannot solve a global crisis through single-country and inward-looking actions.
- The OECD highlights the faltering of international cooperation in recent years, just when it was needed more than ever e.g. border closures and protectionist measures. This is penalising economies that rely on their participation in global value chains.
Australian perspectives
The OECD’s prognostications are interesting when viewed against informal feedback I’ve received over the Christmas break from current and former federal officials and a few Cockatoo members. While booze might have exaggerated the viewpoints, the Aussie collective wisdom broadly supported the OECD view, and can be summed up as follows:
- Australia must drastically reduce our export and import reliance on China, and come to some sort of peace with China.
- Meanwhile we must strengthen our trade activity with the European Community, post Brexit United Kingdom, the United States, India, Indonesia and our near neighbours. But recognise that many supply chains are in tatters.
- We must accept the reality that growth in defence spending will continue, and that federal budgets in the medium term must focus on health, education and social security. Non-core areas like industry and regional development will consequently suffer. In any case, the strong ‘Buy Australia’ sentiment will have more impact than a swathe of government programs.
- The weakening of our labour market will continue viz. stagnant or falling wages and workforce casualisation.
Lessons for local government
The drivers of regional economic development are fundamentally changing.
First, the federal government role will surely shrink in the medium-term. Already we are seeing federal regional program expenditure being delayed. Don’t expect much buy-in from the feds.
Secondly, the boost to regional tourism due to the closure of international travel is creating new regional investment opportunities that could arguably exist for some years. The pandemic has opened people’s eyes to the attractiveness of rural lifestyles, and the shift to home-based work fits nicely with this. Local government can leverage these factors by facilitating improvements in local infrastructure (NBN roll-out, health and education upgrades etc.) and removing red tape.
A simple example of the latter is a pub in East Gippsland – nice old-time publican and a great location on the Prince’s Highway – the only problem is that travellers aren’t aware of his pub until they’ve zoomed past. I’ve suggested that he nail signs to trees at regular intervals (viz. cold beer, great pies, best apple crumble in Victoria). He replied that the local council and/or Roads Victoria would never allow it because it would distract drivers. Que? My response was to challenge the local and state governments to loosen up, and give small business a chance. Or put up the signs, cop a fine and get decent press coverage about the idiocy of the nanny state. Thousands of regional businesses could follow his lead.
Thirdly, investor risk seems to be improving in regional Australia due to city-slickers reacquainting themselves with the Bush. However, the reality is that revenue streams in regional areas can be weak and fickle, and that a mix of public-private finance can be the best option. I often get involved in organising these types of projects, but local government is better placed i.e. championing projects, knocking federal and state heads together, setting time deadlines, finding private sector investors. This can be time-consuming, but it’s so important because projects will otherwise languish.
Fourthly, the OECD’s call for increased international cooperation cannot be left to federal bureaucrats to ponder. The OECD is actually a strong proponent of local leadership, and that’s where local councils can shine. For example, councils in northern Australia should be making overtures to counterparts in Indonesia, Malaysia, India etc. about reciprocal trade and investment opportunities (exports of chilled beef, seafood, engineering services – imports of sandalwood, spices, tropical fruit). The solution is ‘region to region’ – if local councils working with the private sector can highlight these opportunities, then the feds and states will follow.
Rod Brown is a Canberra-based consultant and lobbyist specialising in industry/regional development, investment attraction and clusters, and accessing federal grants. He also runs the Cockatoo Network.
Phone: (02) 6231 7261 or 0412 922 559
Email: apdcockatoo@iprimus.com.au
