History Repeating?

Labor spent a significant portion of their extended stint in Opposition actively trying to convince the electorate that they’d learned from the mistakes they made the last time they were in office. The “recession we had to have” still haunts the memory of many (including Paul Keating, who has no doubt regretted coining the phrase since uttering those infamous words). Yet voters decided last year that Labor could once again be trusted to manage the nation’s now booming economy. So it’s been alarming this week to hear the new Trade Minister, Simon Crean, talking about the need to improve Australia’s trade balance.

I’ll give credit where credit’s due. Simon Crean did a lot for the Labor party while he was Opposition leader (yes, you might have forgotten, but he was there between Kim Beazley’s first underwhelming stint and the spectacular era of Mark Latham). He initiated some important internal reforms for the Labor party which have helped give Kevin Rudd far more control over the party than previous leaders have ever enjoyed. Significantly, he helped to throttle back the unions’ dominance over Labor’s rank-and-file. Yet the voters didn’t care — navel-gazing doesn’t win votes — and it certainly didn’t make him popular within the party room. Indeed, Crean struggled prior to the election to hold on to his seat, with a brutal pre-selection battle orchestrated by forces loyal to Beazley (now in his second, even more underwhelming stint as party leader). He emerged triumphant, following a passionate campaign that strengthened his local support. When Rudd became leader, Crean was appointed the party’s spokesman for trade.

As an interest fact, courtesy of Wikipedia, Crean has never spent a single day on the backbench. He is the most experienced member of Labor’s team — the only person to have served as a minister in the Labor governments under Hawke and Keating. So, of all the people in the Labor party, Crean should have a greater appreciation of most about how important it is not to stuff the economy up. Sadly, judging by what he’s been saying this week, it’s not clear he’s learned much at all.

The latest trade figures show that Australia continues to record a trade deficit — $2.3bn in November. It is, as Crean points out in attacking the record of the previous government, the 68th consecutive month that Australia has recorded such a deficit. The cumulative total for the first five months of the 2007-08 financial year is approximately $10bn, compared with the $12.1bn recorded during the entire 2006-07 financial year. What does this mean? Simply, we’re importing more goods from the rest of the world than we’re exporting to them. Crean reckons it’s a crisis, and that the government has to work to reverse the trend.

Now, in truth, there’s nothing wrong at all with trying to boost our exports. With our mining sector as strong as it is at the moment, many would expect that we should be doing much better than we are. Some analysts believe that Australia has only been in an investment phase — it takes time to build new mines and increase infrastructure capacity. Now that that’s occurring, new facilities will soon come online which will enable us to dig more stuff out of the ground to sell abroad. Yet agriculture is also typically a large contributor to our exports, and with the continuing drought dramatically affecting farm output, our rural exports have fallen by some 10%. There is little we can do about this — if we can’t grow crops, we can’t sell wheat and other agricultural commodities abroad. Assuming the drought breaks (as it may already be doing in New South Wales and Queensland), exports should be expected to increase, thus improving our trade balance.