Monday, September 12, 2011

Fear is a four-letter word

True or False: This is no time to put a price on carbon when the economy is stuffed and people are doing it tough. False. It’s hard to believe, but the Australian economy is not stuffed, people aren’t doing it as tough as some politicians and the media claim, and things look promising.. “The national accounts for the June quarter provide a salutary lesson on how far popular perceptions can drift from reality,” says Ross Gittins, the economics editor of the Sydney Morning Herald. “Three months ago we were told real gross domestic product contracted by 1.2 per cent in the March quarter. This week we're told the contraction was a quarter less than that: 0.9 per cent. That contraction was fully explained by the temporary effect of floods and cyclones. This week the temporary nature of that setback was confirmed - the economy rebounded to grow by 1.2 per cent in the June quarter.” Retailers and manufacturers are doing it tough and housing activity is weak - but those three sectors account for less than 20 per cent of the economy. Real consumer spending grew by a healthy 1 per cent in the quarter and a bang-on-trend 3.2 per cent over the year.’ Household income is up. Consumer sentiment is down. Why? Because we are a bunch of fraidy cats, easily spooked. EG. We allowed ourselves to be spooked by the industry's threat to withdraw their capital into backing down on charging a super profits tax so the current boom leaves us with something more than a hole in the ground after the miners take the money and run*. As a nation we lack confidence - the Convoy of No Confidence was well named. The pathology of fear explains so much of what we see around us. Denialism is a response to fear. So is Alarmism. Leadership that exploits people's fears is weak leadership. It's easy to lead a lynch mob. It is harder to give people hope and courage.

The mining industry pays less than 14% tax, makes $50bn profit last report, 83% of it going overseas. It employs only 1.9% of the Australian workforce and doesn’t shop locally for steel, which explains the redundancies announced by BlueScope Steel.

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