Tag Archives: financial services centre

Labor’s Economic Plan: Copy Cyprus And Iceland

19 Jul


Your humble blogger was interested to watch new treasurer Chris Bowen’s speech at the National Press Club yesterday.

Readers may have noticed that resuscitated PM Rudd has immediately distanced his own economic narrative from that of former PM Gillard, and her imbecilic deputy PM and “World’s Greatest Treasurer” Swan. Rather than their mantra-like “Strongest advanced economy / mining boom forever / everything is fine / stop being so negative” tripe, Kevin Rudd has instead begun to offer the teensiest bit of honesty about the problems the economy faces, both now, and in the weeks and months ahead.

So in that vein, I wondered whether our new treasurer might just put a little bit more meat on the bone of Rudd’s rhetoric, by outlining (or even hinting at) just what this “new Labor” under Rudd might have in mind in terms of economic policies. One could be forgiven for expecting so, considering that the title of Bowen’s speech was Labor: Managing The Economic Transition.

Now I grant you, unlike any appearance of Wayne Swan on TV, I was able to quite easily watch all of Bowen’s speech without feeling an immediate boiling of the blood and red mist descending. So that’s something to be said for our erstwhile new treasurer.

Shame then, that nothing good can be said for the content of his speech.

Indeed, it would appear Labor’s grand economic plan is to copy Cyprus and Iceland, by turning Australia into a “financial services centre” (my bold added):

The estimated net contribution of the resource sector to real GDP growth is expected to fall – from contributing to roughly half of Australia’s economic growth over the past two years to around a third by the end of the forecast horizon.

The production phase of the resource boom will also be significantly less labour-intensive than the investment phase.

This brings me to the second transition we face.

That transition is to growth being driven by the non‑resource sectors.

It’s not surprising to see Treasury forecasting that the non-mining economy will make a larger contribution to Australia’s economic growth.

These transitions will occur inevitably.

The question is: will they be smooth or bumpy? Will the Australian economy benefit from them or suffer?

Our challenge is in improving our productivity and competitiveness to assist in this transition.

This is the key economic challenge for the next three years – and lies at the core of Labor’s positive plan to promote competitiveness to spur jobs and investment.

This will mean working with the manufacturing and services sectors to promote investment.

I’m not talking about picking winners or subsidies – I’m talking about breaking down barriers to competitiveness.

What we’re doing in financial services is a good example of what can be done.

Financial services

The financial services sector has seen incredible growth in the last 20 years and it is this growth that we need to harness.

Despite the strength of the local industry, our exports and imports of financial services are low by international standards.

There is a great opportunity for the financial services industry to become more outwardly focused.

Encouraging competition and efficiency would improve the range and choice of financial products available to consumers and promote increased exports of financial services.

Improved economies of scale would reduce the costs of financial products for Australian consumers and businesses.

As our track record shows, only Labor is interested in taking advantage of these opportunities.

In 2009 and 2010, it was pretty unfashionable for Governments around the world to announce that they wanted to promote financial services.

But in January 2010, as Minister for Financial Services and Superannuation, I released the Australian Financial Centre Forum’s report on Australia as a Financial Centre – the Johnson Report as it became known – and four months later, the Government started implementing the key reforms.

Stages 1 and 2 of the signature reform – the Investment Manager Regime – have passed the Parliament.

We have taken steps to create a deep and liquid corporate bond market in Australia. Legislation to simplify corporate bonds issuance has passed the House of Representatives.

The Government has passed legislation to enable the retail trading of Australian Government Bonds.

And the Government recently announced that Australia will be the third major currency in the world to be able to trade directly against with the Chinese Renminbi, after the US dollar and the Japanese Yen, in China’s foreign exchange market.

Why have we done this?

Because Labor knows that increased trade in financial services will increase Australia’s growth prospects and standard of living.

We know positioning Australia as a financial services centre in the region means that we would be able to offer increased job opportunities for a range of skilled workers in the financial sector.

And there is potential to do so much more.

Yes, I can just see all those tradies coming back from the mining construction boom, shedding their Consciences, donning white collared shirts, and learning how to become peddlers of usury products.

Aspiring to be a “financial services centre” is nothing more, and nothing less, than aspiring to copy the economic model of Iceland and Cyprus, both of whom enjoyed an initial “boom” from doing this.

Followed by another one.

If this is what Labor have to offer in terms of “managing the economic transition”, then we really are in deep, deep doo doo.

A final comment.

It is interesting to this blogger to note the complete absence of criticism of Bowen’s speech in the mainstream press, either yesterday or today.

Bowen’s speech contained no indication of Labor having any other new economic policy initiatives. None whatsoever.

A “financial services centre for the region”. That is the great Labor plan, or so it would seem.

After what we have seen happen to other small nations that embarked on this same path, what we should have seen is the media tearing strips off Labor.

Instead, if anything, what we have seen is muted applause.

Methinks the economic commentariat’s left-leaning slip is showing under their skirts.

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