Voyage to disaster

No one saw it coming, though the signs were there. They stacked up quietly, covered only on the business pages and the financial cable news shows with their meagre viewerships. Mortgage lenders filing for bankruptcy; house prices beginning to slip.

Then, everything went quickly. And when Lehman Brothers collapsed on September 15, 2008 – bloated with debt – the firm dragged the sharemarket down with it.

The crisis spilled across America’s borders, crippling economies in Europe, Asia and beyond. Meanwhile, a world away, the lucky country prospered.

A decade on from the crisis – its chaos forgotten, its lessons unlearnt – the narrative has been cemented: no one saw it coming.

But we now face our own accumulation of troubling signs. On Tuesday, the International Monetary Fund cuts its growth forecast for Australia to 1.7 per cent, twice the global downgrade.

In parliament, the prime minister shrugged off calls from the opposition leader, Anthony Albanese, to debate growing economic concern. “I know that the Labor Party’s penchant is for panic and crisis,” Scott Morrison said. “But honestly – he’s got to try to resolve the panic and crisis that is going on within his own party on so many issues.”

It seems an odd set of priorities when faced with repeated warnings from economists and business leaders. When interest rates are at a record low while wage growth is stagnant, debt is rising and consumer confidence is non-existent.

Our leaders continue to cling to the things that once shielded us from disaster – a surplus to spend and resources to export – a tunnel vision that only serves to exacerbate the problem. Theirs is a slavish dedication to the status quo. A conservatism that has just one plan: we’ll do what we have done because we did it before.

It’s an approach that has rendered Australia one of the world’s least complex economies. We dig things up; we ship them off. Investment in innovation is negligible, our natural opportunity to become a world leader in renewables ignored. The CSIRO finds itself kneecapped and precariously understaffed.

Our economy now resembles that of a developing nation, almost entirely reliant on resources with few opportunities for growth, according to research from Harvard. This is no hangover of the mining boom; it has happened in the past decade, when we have slipped 22 places to 93rd in the world on a 2017 index of economic complexity.

Signs suggest everything will start to move quickly now. Australia has been relegated to the bottom half of the world for the next decade’s growth forecasts. With interest rates approaching zero, our central bank must consider quantitative easing. This government, it appears, is allergic to the term stimulus. But when the trouble comes, of course, no one will have seen it coming.

“It is now more important than ever that we stay the course with considered, disciplined and responsible economic management,” Treasurer Josh Frydenberg said this week.

If ever there were a moment for something bold, this is it.

This article was first published in the print edition of The Saturday Paper on October 19, 2019 as "Voyage to disaster".

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