To me it doesn't seem all that long ago, but looking back I have to
admit the economy has changed hugely since my first day as an over-age
cadet journalist on February 7, 1974. Some things are worse, but a lot
are better.
What strikes me most, however, is the roller-coaster
ride we have been on to get from then to now.
In those days, just eight
years after we moved from pounds, shillings and pence, TV was still
black and white and my new employer had a five-digit phone number. Gough
Whitlam was prime minister and Billy Snedden was opposition leader.
An
ambitious young suburban solicitor named Howard was preparing to take a
seat in Parliament at the election to be held three months later.
(Outlasted you, John.)
As a cadet I earned about $100 a week, a
big comedown from my former pay as a chartered accountant, but a lot
better than the $45.50 a week paid to married pensioners. It would take
me some years to get up to the top tax rate of 66.7 per cent, which cut
in at $40,000 a year.
Child endowment was 50c a week for the first kid and $1 for the second.
The
standard interest rate paid on passbook savings accounts of 3.75 per
cent doesn't look too bad today, and the mortgage interest rate of 8.4
per cent probably isn't as low as you expected. But remember that the
inflation rate was 14 per cent.
A few years after I joined Fairfax
we bought a not-so "ideal first home" in the inner city for $27,000.
Its value would have increased at least 20-fold since then. Incomes have
also increased a lot, of course, there are a lot more two-income
families, and even established houses get ever bigger and better. But,
even allowing for all that, we have bid up the prices of houses and
units relative to other things.
The rate of unemployment was 2.4
per cent in 1974, which was up from 1.8 per cent the previous year and
so considered high. It would hit 4.6 per cent by the time the Whitlam
government was dismissed in November 1975.
Almost two-thirds of
the labour force was male and only one worker in eight was part-time.
Today women account for a bit less than half the labour force and almost
one worker in three is part-time. The number of people in jobs has
almost doubled to 11.6 million.
These days, a higher proportion of
students stay on to year 12 and a high proportion go on to uni. Biggest
difference: females have a higher rate of "educational attainment" than
males.
Then, almost one in four workers worked in manufacturing
(which in those days included John Fairfax Limited, manufacturer of
newspapers) whereas today it's about one in 12.
The big jobs
growth has been in health, education and all manner of "business
services". The fastest-growing occupations have been managers,
professionals and associate professionals. Beats blue-collar work.
The
value of the Australian dollar was fixed at $US1.49 but, in those days
before the advent of the jumbo jet, overseas travel was much more
expensive, relative to other things, than it is today.
Forty years
ago imports accounted for 13 per cent of the value of all we bought.
Today it's more than 21 per cent. But then we exported less than 13 per
cent of all we produced, whereas today it's almost 21 per cent.
Thanks
particularly to the efforts of Paul Keating and Bob Hawke, our economy
is these days a lot more open to the rest of the world. Less of our
trade is with America and Europe and a lot more is with Asia - China,
Japan, South Korea and India.
When I started my economy-watching,
the value of all the goods and services Australia produced in a year was
$54 billion. Today it's more than $1.5 trillion. But don't forget
consumer prices have increased by 700 per cent since then and the
population has gone from less than 14 million to more than 23 million.
Even so, Australia's real income per person has almost doubled, so there's no doubting we are far better off materially.
What
price we have paid for this in strained relationships, stress and
mental ill-health, greater inequality and damage to the environment is
another matter - one we prefer not to think about and put too little
effort into measuring.
From the viewpoint of economic news, the
timing of my arrival at Fairfax was perfect. In 1974 the postwar Golden
Age of low inflation and full employment throughout the developed world
came to an abrupt end.
It was ushered out by the first OPEC oil
price shock, which hit in late 1973, and the advent of an ugly word to
describe a new and ugly state of affairs - stagflation, the combination
of high inflation with high unemployment.
It was a turning point
in the history of the world economy and the Whitlam government had no
idea what hit it. It was undeterred in its efforts to correct 23 years
of perceived Liberal backwardness within a three-year term.
But it
wasn't just the politicians who didn't get it. It took the world's
economists at least a decade to work out why things had gone wrong and
how economies should be managed so as to keep both inflation and
unemployment low.
It took the rich world's governments even longer
to get their economies back in working order and it took longest in
Australia, mainly because of the Whitlam government's excesses, which
took longer to work off.
When I arrived at Fairfax the economy was
booming, with wages set to rise by 25 per cent in a year and prices
headed for an inflation rate of 17.7 per cent.
But before the year
was out the economy was contracting thanks to a Treasury-inspired
"short, sharp shock". Despite Dr Jim Cairns' frantic efforts to revive
it, the Whitlam recession had begun.
Malcolm Fraser happily echoed
all the "smaller government" rhetoric coming from Maggie Thatcher and
Ronald Reagan, but didn't really believe it. He thought it was just a
case of not doing the things Whitlam had done and everything would get
back to the way it had been before the arrival of the interlopers.
It
didn't. He dismantled Medibank because it annoyed the doctors so much,
but couldn't bring himself to cut government spending hard. Unlike his
treasurer, Howard, he was no economic rationalist.
The economy did
pick up a bit. The inflation rate fell, but by September 1982 it was
back up to 12 per cent. There was talk of a mining boom, but instead we
got the severe recession of the early 1980s, with unemployment reaching a
peak of 10.3 per cent just a month or two after the election of the
Hawke government.
Hawke's timing was perfect. The drought broke
and the recession ended within months of his ascension. He used his
Accord with the union movement to cut real wages and the result was very
strong growth in employment.
The election of March 1983 gave
voters no indication that Labor's treasurer, Keating, was about to
completely remodel the economy - though, as Keating reminded the ABC's
Kerry O'Brien recently, he did spell out his intentions in an interview
with me within a few weeks of taking the job.
Labor floated the
dollar, deregulated the banks, reformed the tax system, largely removed
protection against imports, privatised most federal government-owned
businesses, ended centralised wage-fixing and moved to enterprise
bargaining.
It was most un-Labor-like behaviour and many
supporters hated it. But with their new-found freedom the banks went
crazy with their lending to business, the economy boomed and
unemployment got to a brief low of 5.9 per cent in late 1989, which was
when the government's frantic efforts to slow the economy took mortgage
interest rates to 17 per cent.
The result was the severe recession
of the early 1990s, in which unemployment peaked at 11 per cent in the
first half of 1992. Because so many businesses had borrowed so much to
buy assets now worth a lot less than they had paid, the recession was
particularly protracted and the recovery painfully slow.
After Dr
John Hewson muffed things, Howard was perfectly placed in 1996 to
benefit from all Keating's economic reforms as well as the "recession we
[didn't] have to have". Inflation got back under control late in
Keating's term, but Howard didn't get unemployment back under 6 per cent
until late 2003.
He made few further reforms apart from granting
policy independence to the Reserve Bank, introducing the Goods and
Services Tax and over-reaching on industrial relations.
Peter
Costello steered the ship steadily until the revenue flooding in from
the resources boom led him to go crazy with tax cuts and unsustainable
superannuation concessions, thus laying the foundations for the present
chronic budget problems now being blamed solely on Kevin Rudd and Julia
Gillard.
Their failings are too recent to need repeating, but
already we've forgotten Labor's greatest macro-economic achievement:
limiting the fallout from the global financial crisis to a mild
downturn. Anyone could have done it? Don't believe it.
