Structural Issues in the Queensland Economy

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STRUCTURAL ISSUES IN TIlE QUEENSLAND EC(X'lOMY ROY DEiCKE Director, llundaberg Sug:lr Co. Ltd. , Bo urbung St. , lIund"berg, 46 70 .

~Ianaglng

lIt the uulset I raise the odd lt y of :I chem ica l e u g ineer add r essing II syml)Qsium hosted by the EconomIc SocIety . It .... ill theref ore be of no surprli'le that my pnper does no t Ilddress economic theory , suc h liS GOP , ~13 ancl uthe r moneta r y policins , gro .... th, you name it. I uudcrstand the mnistl' r for Industry , Small llusincss And Technology addn-'sscd yuu nilrl.ier today. Though not a .... ill'C' of his t opi.c ! would be Kurprised if he did no t r,11 s(' his theurem o f the three Cs ilnd their key role In (/IIC'(·Il.'lland ' s econom), , IJi:; . c u " l, copper and Cime , ~l y theme today relates vcr), "I"Sl'l), to whnt h,' ha.'l frequently exprcssed as c urrcnt co rn e r s t one!; u f Qucensl:l1ld'.'I economy. ~1.G.

Ken d;111 from the Unive r sity of wndun 1111.'1 s" icl

One uf the dlffll' ullies "r l'conol:lics i l> llwt II. Is toO ellS), to "xl' lllin :Irtc r :l I,,,rllcul., ,· cventllil:1 h,l l'I'C"" d, why I~ should have lWPI'cncd ; and tno em;)' to cxpia I n he f 0 r, l'lhy I t ,;huuld not hnppen. In t:llklng ;,hoot s tru c tural ll>l>"~s in the QUC('n,;lnnd econum), I ,10 so of ,'oursc '41lh the hil1d l> ! ght thllt Ken d all hilS so nptl)' descr l b
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foreign deb t is currently of the order of $50 billion and that it t ak e s abou t 1 2<: in e very do l la r earned by e xports in 1994 to service in t ere s t payments on that de bt ; by the end of 1985 off-shore interest will consume abou t 19 0;: of every dollar earned . Ou r per cap i ta nationnl borro'~ings are said nOH to be larger than t hat of Argentina. Interestingly Duncan Hnd Fogarty (1984) have indi Cilted the sobering message of just how eaSily rich \lil t ions can gradually become poor if badly managed . Ocvelopment in Quee nsland has radiated from Brisbane from the time of i ts f i rst settlement . Crazie r s moved out towards the Downs , the coast:ket or ovorho{ld services e . g ., education , police , defence , health, etc . , i . e ., the tertiary employment sector. The number of people employed in producing flale.1ble goods , pllrticularly f or export , is declining . This is a na t u r al consequence oj conti.nuing pressure on costs dictat ed by competitiv(l internatlonill m.)rkets. The usual offset is the i n troduction of new technologies to providc for higher labour efficienCies and access to economies of scale . It is this primDry employment flecto r that feelS the very rCill brunt of the mill-ket forces. If o ur share of export markets i s t o be maintailled, cost competitiveness Is esse ntial . IHthdr:awal [rom export markets is reillly no alternntive si nce domestic markets are li,mited by our small !,opu1
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alternative : the budgetary conseque n ces are such that a whole myr i ad of fil:l ca L factora will , in the l ung te r m, erode internlltional compe t i t iveness even further. It is in effect a self- destruct mechanism. Secondary employment sectors generally a r e not highly responsive to market forces and the tertia r y sector faces no competition for its services. Australia ' s labou r costs a r e relative l y high by lnternlltional standards. Unfortunately lsbour cost increases in one sector feed fairly rapidly through to all others. The adoption of the Acc ord has brought about t he return of the centralised wage fiXation and full wage indexation . The Austr a lian Sugar Producers ' Asaociation Limited in their Annual Report to membe r s this year commented that the Accord has aggravate d the fina ncial pOl:l 1 tion o r many major expo r t industries i n AUat r alia , incl uding the sugar Industry . The co rner-s t one of the Accord is g r owth , with r enl eco n omic gro\nh i t 1s a ss umed f u ll I ndex a tio n o f wages co u ld be outlived wi thout adversely a ffec t ing p r o U ts or the economy . What has been ignurell 1s that not all .indust ri es in lIustralin Are enjoying economic g r owth. Importantly , a l so the rate of increase in wage on-costa in lIustrn l ia hns sIgnifitantly exceeded the 1nf1.1t i on rate in recent years . A ilusiness Council of Australilgnl rl cn nt cost reductions reilltive t o our competito r s. Because Quee n sland (and Austra l ia) possesses IIbundant natur.ll resources , the "Luc ky Country" syndrome has developed. Perhaps we have mnnaged things fairly well for much of our history bu t over the last 15 years or so we ' ve done blJdly. Importantly , our poor pe r formance hili:; been o[ o u r 00..'11 doing . Our share o f world trsde has been ste.1di l y fal11ng, unemployment has risen (Ilarmingiy and our standard of l i ving h a s dropped. Spend a week or so in Jilpnn
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It is a fact that international commodity pdces trend downwnrd in the longer t erril . Therefore the producer' s obligation is to assess a ll those things which wi l l a ll ow him to r emain cost compe titive . Buye r s nnturally cultivate other s uppliel"s to create co mpetition llnd so furth er manage the lIIi.rket to suit their needs ; the J ap;wese have done this vcry effectivcly r elative to both iron ore and cOil l. Interventionist policies of nati ona l gove rn men t s can severely disrupt the smooth o perat ion of the free I\IIl.rket , lind the prices that prev(lil for expo rt s unf o rtunately do not neces sa ril y r elute to costs o f prod uc ti on . The European Economic Commu nit y 's (EEC) common a g ri c ulture poticy Is a good example. It ha s had disast r ous effectli on world commodity pri ceR including sugar; In effect it subsidises the dumpin g of e xports. The Austfllllan s ugar industry knows chis only too well. In othe r words the l'ri c e we receive for our exports, and in f,H:t the quantiti(~s we ,;1111 m,lrket, are determined by influences be yond our cont r ol but the l.e vcl of iabour cOSts Is our own responsibility. Price and ql.aJ ity
iI

The pivotal po int of our political system is the count of heads and, m.; corolla r y , it leads to the conccntration of poli ti cal attentIon on the

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nl(ae populous n~gion8, The task in shaping publtc policy is made more difficult bec,1use of this conundrum , i ,e" a national economy he,'w ily dependent on the dcccnt r illised resource based lndustrtes but with the stl"engrh of the politlc.t1 h,lHC co ncent r ated in caplta.l cities , parric~llarly in the south e.:lst corne r of Australia. ~uggest the business sector has not been sufEicicntiy determined nnd pe rhap s surf icientl y ski lled to influence publ1 c po l icy in a signHicnnt way .

Tllxntlon ove r a l l in Australia is high; the s i. ze of &()vcrnmnnt .md the degnHl ( ) r Interve ntion in t ht> produc ing sectol' is debtl i t ating. Not surp d sing l y, most Austral 1:111'1 have little real IlCrccl'tion of lhe vl'ry many dlfflcul[ie .. that have t o be faced In the export m.1rket. The fault rests in IJllrt with lhC) .. e involved. Littll' W(l>I Jone to dispel th e "boom" lIIenlltlicy of the lllu! 1970s and enrly 19805 ; th€': attitude W1·Ic(! takers. Perhap~ w~· did not fully 1I1'pI'eclilte th e clrc um!H ' lIl ces ourse lves , Gove r nments were cUllvinc(>d th.1l lh" n~souI·ce based Industries we I' €': doing we ll .1nd wC)u L(1 be a Long term source for gov€':rnlllClll I·evenue. Co st I~O I It, c iI.lWi (lice in th e Inllrk€':t place , th ell it iH th e r espons ihility of jH"i v;lte indu"try to explain to the pubJI(" the link between costH nnd empll'),IIK'nt , the [mp,lrtnncc of ~1!\ric\llt llr; d and mining s e c tor,; I'€':maining inLcnwLiunnlly cOlilpetitive , th e need f"r growth Imd the futility in the longe r t('rm of sUjljlorling our sLIlIldards of iivinA Wilh bU I·rowings directed ;It slimul"tillg domestIc sp€':nding and consumption. Th~' debate is simple , su siml'I.C th(lt it Is genC! r ally di s tru s t e d and the thinkin g co ntinues LhaL to ! m : rellse individunl incnmes onl.y Involves a rcdIHtr!bllt!on of wl!n lLh. Ih~ cI III thllt th e numb€':!'s empluyed in produc i ng tradeilble ~oods arc filr less tll/Hl tllC numb€':f s provi d ing non-t r adeable and gover nment ISI'rvices, and th;lt this Imbalance hllll a tendency to increase. 50me of uur cr illcH have predicted th"t if the downward trend in our re:ll per c.1 plt.1 income cu ntinucs ilS it hilS done over the 1.1>;t COUI)lc of de c llde!l and as a cOllsequen('e our In t ern,1 tional competitiveness is furthe r e r oded, in rC"I'\.! c t tn Ht;lIldards of J i ving , we \~ill bufore ye;l1· 2000 bu <.It the bot t om in the westCl'n Pacifi c I'egion . This is sorr.othing i n which we c a ,l not lak e prid,'. .

The recent dram.1tlc c.levaiuutio n of the Australian dollar refle cts p€':rcCl'tiun s of f-shor e of Australio1 ' l; prospective trading per formance. It is how otll(lrs view "ur poli t ic,'} <.Ind lndustrlili stability , o ur e co nomIc po l Icy m;lIlngement
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ne cess ity .... hi ch can move heave n Ilnd eo rth. 1 look down upon it with sco rn.

But if 1 lack passion,

REFERENCES Abe r nathy, Y.J . at aZ. C~XJtitive Putla'!.?

(1983) . I l1dl./st roiaZ Ral1aissartep : fOro I1mel"ica , (Bailie, New York).

Producing a

Duncan, T . OInd FogOlrty. J. (1984). AlIsLI'alia and I1r'r!Cl1 t1~l1a: Paths , (tlelbo urnc Unive r llity Pr ess , ~Ielbourne).

on Pmv:ll.el