WHERE WE WEREWHERE WE ARE

WHERE WE’RE GOINGWHERE WE SHOULD GO

Economics

Where we were

The creation of a private economy was essential to the viability of the colony.

Agriculture was established through giving

land grants to senior officials and emancipated convicts.

Since Colonisation (1788 – 1820)

Government was central to the economy. It supplied

goods, money and foreign exchange1820s onwards; economic growth was driven by the

production of fine wool and other rural commodities for Britain and Europe

The expansion of transport,

communication and urban transportation needed British finance

Back to the past (1820 – 1930)

Economic expansion required significant

immigration to meet demand for workers

Rule of law, secure property rights and democratic political systems nurtured growth.

1901: The commonwealth government had a strong capability to intervene in

private markets.

Still in the past

An essential foundation for Australian manufacturing was the introduction of the

first protectionist tariff in 1907.

The Great Depression of 1929 had serious effects for Australia: record high

unemployment, lack of foreign investment and a severe

drop in value of exports.

Wars past (1930 – 1970)

During WWII and after, manufacturing growth did accelerate and the following sectors emerged: Cars; Chemicals Electrical equipment Iron and Steel.

Instability in the world economy and

weakness at home ended the post-war boom.

Forward to the future (1970 – 2005)

By the 1970s, economic reform was well due

Sweeping reform was brought in by the Hawke and Keating Governments and built on by the Howard Government

Up the the present (1970 – 2005)

Floating of the dollar;

deregulation of the financial system;

Removal of protection of manufacturing and agriculture;

Dismantling of the centralised system of wage-fixing; tax reform

Privatisation and elimination of

government monopolies.

Where we are now

Not going anywhere

Primary Industry ≈ $12, 953 millionRetail Trade Industry ≈ $18, 101 millionManufacturing ≈ $34, 368 millionServices ≈ $215, 585 million

Haven’t left yet

NSW’s major exports have moved away from agriculture and

manufacturing.

Now services are the major export.

Exports are currently worth over $47 billion to the

economy

We’re still here

Australia’s Economic Growth (as of Sept 2008) is

3.7%NSW’s Growth is approximately half of that.

It is the lowest of all states.Inflation Rate (basically the rate at which prices are rising [alternatively, the rate at

which the money you have loses its value]) ≈ 4.3% (Sydney)

It is desired to keep this rate between 2-3% so that it does not distort the economy in any significant way.

Still here

In September 2008, the Reserve Bank of

Australia reduced the Cash Rate to

7.0% after 12 consecutive raises.

The Average Per Capita Income is sitting at ≈ $39, 000 up from approximately $30k in 1999

Not gone yet

Servicing a Home Loan now costs

37.4% of your Gross Income. Worst in 22 years.

That’s $3 out of every $8 that you earn!

But after tax, up to 50% of your income can go into your Mortgage.

Looking back

Manufacturing was one of the major industries in Australia from 1913 till post-World War 2

when it was making up 1/3 of GDP.

Natural Resources remained the

most important suppliers of export during this time; Wool ≈ 40% of total exports

Minerals ≈ 10% of total exports

Wheat/Flour = 20% of total

Financial Crisis (in brief)

Lender’s income is proportional to the number of loans they sell = increasingly

risky loans sold.Housing prices/income are deliberately

overvalued to create the illusion of a stable loan.

Loans can’t be re-paid. People forced

to foreclose. Banks run into debt.

Financial Crisis (still briefing)

People lose faith in market; withdraw money; furthering the downturn.

Most loans to Australian Banks are

recalled; forcing a downturn.

Where we’re going (prediction)

Exports will change once again. Will be

worth less to Australian economy due to

sharp increases in fuel prices.

More goods will remain domestic.

Economic growth will begin to slow.

Interest rates will rise again once the current crisis is over

Where we’re going (predictions)

Climate change to create major problems economically. Increase of 2°C = livestock carrying capacity decrease 40%.

Increased road maintenance costs by 31% by 2100.

711, 000 addresses and billions of dollar from coastal damage.

More severe weather including drought.

2006-07 drought slowed economic growth by 0.75%

What can stop us

Australia, and NSW in particular, is still very

reliant on the finite natural resources still available to us.

While resources like coal apparently have

200 years of supply left, global resources (oil) have limited years left.

We can use this as an excuse for not investing as much, as quickly into

renewable sources.

Where we should head

Carbon Pollution Reduction Scheme (2010)

Requires industries to buy Carbon Credits (CC) for each tonne of carbon they produce.

Each credit allows for 1 tonne of COx to be produced.

Allows companies to buy CC off other industries

No Missed exits?

$25 per tonne (based on 2010 nominal terms).

Expecting to make $11.5 billion in 2010-11 in CC sales.

You could build the North West Metro for that

All revenue used to assist homeowners

and small businesses transition to energy efficiency.

Wrong turns?

Increased power bills $4 a week if CC set at $25 a tonne.

Greater assistance to lower/middle income households

Pushes the price of coal higher.

Causes renewable energy options; solar, wind, wave; to be relatively

affordable technologies to pursue.

Follow the rest of the world

The size of the Carbon Market in 2007

was $US 64 billion.Not a new concept.

In 1991, Sweden put a $US100 per tonne tax on carbon emissions. Forced changes in energy use.

That’s 4 times the Australian cost and wasin place almost 20 years ago!

A new hope

There is hope on the horizon.Australia needs to speed up. We may be a

young country, but we can’t let that be a reason anymore.