US economic recovery strengthens our own prospects
I have just returned from the continental US, and from New York in particular. As a result I can confirm — unambiguously and once and for all — that the US economy is back with a vengeance.
Unemployment in the US sits at just above 5 per cent. Most countries in the world would kill to have that jobless rate.
Jobs have been created in the US in every month on a net basis for the past five years. This is a huge achievement
US consumer spending is up — and that’s a good thing. It is pleasing to report that American consumers are back in the groove, and that economic growth is broad-based and stable.
Exports — both of services and of goods — are also on the up. US exports are in positive territory in large part because, after years of companies having left the country for lower-cost destinations, manufacturing is returning to the US. The prime reason for this is that, increasingly, companies are favouring the high quality of machinery and labour that they can source in the US.
But despite all this good economic news, the greatest risk to the US economy at this time is the zapping of confidence.
There is a sure-fire way that this can happen. The US presidential election candidate selection has the capacity to undermine investor and consumer confidence. In particular, threats to close the government down — a frequent catch-cry of the far-Right Tea Party — are not helpful to anyone.
Republican House Majority Leader, Kevin McCarthy, suddenly dropping his bid to succeed John Boehner as Speaker of the House, demonstrated that confusion reigned in Washington DC. And the reverberations of that chaotic day in Washington were felt throughout the country.
So politics affect the economy, and undermine economic confidence.
But, what does this mean for Australia?
At a minimum we need to do all we can to shore up support for the US. Let there be no doubt, a strong US means a strong Australia. And a stable US, means stable markets for billions of dollars of our exports.
Consider these facts. The US is still Australia’s largest foreign investor. Although, given current commentary around foreign investment, few if any, of our citizens would think that this is the case.
In fact, US company Chevron is our largest foreign investor, employing 17,000 people in Australia. Chevron’s investment will help position Australia over the next five years to be the world’s largest exporter of Liquefied natural gas.
As LNG is mostly traded on contract, rather than on a spot market, much of the economic dividend of this is already locked in.
And the good news from the US is just not about resources. Australia exported 398,000 tonnes of beef to the US in 2014. To put this in perspective, that’s enough to make well over a billion Big Macs.
Importantly, the investment from the US in Australia has been focused around innovative and high-tech areas — the very areas in which Australia is crying out for investment.
To give one example, we have seen, in the last decade, a quadrupling of investment by the US in Australian scientific, technical and professional services. The reality is that US investment in this area is now worth over $8 billion.
Why has Australia been able to build these strong links with the world’s biggest economy?
A good deal of this has to do with the foresight shown by John Howard and his Coalition government in signing the US-Australia Free Trade Agreement in 2004.
This agreement has created thousands of new jobs for Australian families. In particular, it has created increased employment in agriculture, in manufacturing, in mining and in services.
But what was the view of Bill Shorten on the matter? In 2004, as national secretary of the powerful Australian Workers Union, the then rather rambunctious Shorten told a World Economic Forum that, “Free trade is bullshit. They (the workers) know there’s no such thing as fair trade. They only want their jobs.
As Shorten should have realised over the past decade, the best highway for new jobs is free trade. If workers want their jobs, the answer is more free trade, not less. So if only out of self-interest, Shorten and the ALP should be strong supporters of Australia’s free-trade agreements.
Right now, primarily thanks to the ambitious work of Tony Abbott, Joe Hockey and Andrew Robb, Australia has three new free-trade agreement either in place, or awaiting parliamentary tick off.
As was the case with our agreement with the US, these crucial agreements with China, South Korea and Japan will mean thousands of extra jobs in new industries for Australian workers and their families.
These historic free-trade deals deserve to be remembered as some of the best economic reforms enacted by any government of any persuasion in Australia.It is crucial that they all receive bipartisan support.
Professor Ross Fitzgerald is the author of 38 books, including his memoir ‘My Name Is Ross: An Alcoholic’s Journey’.
The Weekend Australian, October 17-18, 2015, Inquirer, p 24.