Home > Economic policy > The Smart State saves Queensland

The Smart State saves Queensland

April 24th, 2016

I’ll be talking tomorrow (Tuesday) at the Queensland Jobs Growth Summit organized by the University of Queensland School of Economics and The Australia Institute.

The core point of my presentation is that the resilience of the Queensland economy, despite the end of the coal boom reflects the transition to a knowledge based economy, symbolized by the Beattie government’s “Smart State” strategy and the opposite of the nostalgic and reactionary Four Pillars (agriculture, mining, construction and tourism) strategy pushed by the LNP.

Categories: Economic policy Tags:
  1. James Wimberley
    April 24th, 2016 at 20:53 | #1

    The UQ media office picked a photo that makes you look caught in the headlights in the middle of a triathlon. You are, like it or not, a public figure and should have a stock photo that makes you look Serious, or at least old.

  2. Ikonoclast
    April 24th, 2016 at 21:12 | #2

    I note the Queensland Jobs Growth Summit page at UQ says;

    “Data over the past 24 months shows that the state has reversed a rise in unemployment and has the potential to foster a service industry-led jobs boom.”

    Queensland’s latest labour force report is here.

    http://www.qgso.qld.gov.au/products/reports/labour-force/labour-force-201603.pdf

    The rise in unemployment has been reversed as claimed but it remains high at 6%. Any performance above 2% (frictional unemployment basically) is poor. Why do we now accept 5% unemployment seemingly as our new benchmark? This means 1 in 20 people unemployed and that is just of the group that has not given up labour force attachment.

    There is something fundamentally wrong with Australia’s employment performance since 1975. It seems nobody can work it out.

    1. Average unemployment 1945-46 to 1973-74 was 2%.
    2. Average unemployment 1973-74 to 1980-81 rose from 2% to 6%.
    3. Average unemployment 1980-81 50 2001-02 was 7.5%

    Bit of a phase change there from 1973-74 to 1980-81. Never been healthy since. What has gone wrong and stayed wrong? That is the real question.

  3. BilB
    April 24th, 2016 at 21:32 | #3

    That is a really good direction, JQ.

    My comment might be that a smart state would do well to good hard look at what the near future holds and requires, rather than leave it to unfold serendipitously. The US Defence department has is DARPA which is creating all manner of powerful high tech products that will guide the was future defence unfolds. It occurs to me that Queensland could do well to create a CARPA…Civilian Advanced Research Projects Agency., now that the CSIRO has become something of a headless chook IMHO doing spasmodic projects at the behest of politically connected opportunistic industries. Considering the tight climate change time frame ahead our future is going to require ever more strategic technological deployment with very real paybacks to the community.

    A damned good starting point for such an agency would be to look at renewable energy from the consumption end. There are so many loose ends when it comes to smart consumption much of the solar power produced by households goes to waste (from the users point of view) feeding into the grid, for instance. Most of the inverters that have been installed will have to be replaced once storage gains headway, and there is no clear guidance as to how to pull these systems together in a practical low cost way.

    Such an agency with a mandate to direct development would save the community from massive waste in distributed investment and ultimately serve to stabilise the states grid energy system. That would be technology being put to good advantage, and turn a profit in the process.

  4. BilB
    April 24th, 2016 at 21:40 | #4

    I suggest your “phase change”, Ikonoclast, was to do with the blow out in interest rates when rates got above 20% for a time to decline slowly, complexed with the steady export of production to Asia and major changes in energy costs.

  5. BilB
    April 24th, 2016 at 21:42 | #5

    …oh, and a rising population, all divided by technology based productivity improvements.

  6. James Wimberley
    April 25th, 2016 at 05:21 | #6

    @Ikonoclast
    A few hypotheses:

    1. Efficiency wages (demand side). Employers pay bonuses and overtime rather than hiring new workers. This is a structural shift, not cyclical.
    2. Women’s participation in the labour force (supply side). This could have making job-seekers much more demanding in two-income households. Eg. on child care, flexitime.
    3. More carers of oldies (supply side), making moving for a new job impossible.

    I assume all these have been looked at by somebody.

  7. Geoff Edwards
    April 25th, 2016 at 05:33 | #7

    Ikonoclast

    The ABS has changed the definition of unemployment during the period.

  8. Ikonoclast
    April 25th, 2016 at 07:58 | #8

    @Geoff Edwards

    That’s a good point. Can you elaborate? It’s my understanding that these changes of definition operated to produce lower measures of unemployment than otherwise would have been the case. In other words, the rise in unemployment has been even worse than the figures show. BilB and James Wimberley raise good points too.

    So often, when I go internet-looking for historical data on unemployment and labour force participation rates, I find that the data series start well after the Keynesian era. For example, a “long” series might start in 1978. Often such data series are only given from 1990 or from 2001. Now, it might be that the data series are being given only for recent periods where the measurement definitions have remained constant. However, I cannot shake the feeling that history is being denied and made into un-history in true 1984 fashion. It is pretended that there was no economic history before the neocon era or at least no history that mattered. Thus 5% unemployment is normalised and viewed as the natural unemployment rate.

  9. GrueBleen
    April 25th, 2016 at 09:09 | #9

    @Ikonoclast

    One word, Ikono: NAIRU (and who gets to nominate what value it has at any given point in time.)

    Oh, and you might look up the “Twin Deficits Theory” too.

  10. Ron E Joggles
    April 25th, 2016 at 09:32 | #10

    There is something fundamentally wrong with Australia’s employment performance since 1975. It seems nobody can work it out.

    Structurally high unemployment has to be due to mechanization and IT development, the removal of tariffs and exposure to global markets, failure to plan for these changes, the decline of last-resort employment in govt agencies, the decline of a sense of public duty to employ youth in private sector employers, and the high cost of welfare-alternative programs.

    In 1963 (I was 12), the future looked rosy – mechanization and “office machines” would relieve us of menial work and people would instead be engaged in worthy activities like conservation, sport, arts and culture.

    Gutters were cleaned by men with shovels and brooms; letters taken down in shorthand, typed and posted have been replaced by email; Qld Rail hired all comers in sheeting gangs, we folded tarps and swept wagons and then kept out of sight till knock-off; banks hired school leavers and utilities trained many more apprentices than they needed.

    The Whitlam Govt had the RED Scheme (Mt Coot-tha Botanic Gardens) and later we had the CEP – public-benefit projects of conservation and reclamation all over the country, but at substantial cost.

    And of course, exposure to world markets has destroyed the local manufacture of clothing and footwear, whitegoods, construction materials, steel, petroleum fuels, vehicles – and privatized utilities have set up call centres in other countries.

    Employment in rural industries has fallen dramatically as producer-owned processors (sugar, dairying) have been acquired by foreign corporations and our farmers have become mendicant price-takers.

    We are an urban people living on the edges of a vast continent full of urgent environmental and social issues, while our young people sit idle in cities, disengaged from work and distracted by trivial entertainments.

    So why don’t we have government funded schemes, building infrastructure and tackling the serious environmental and social problems? Why don’t we train and educate our unemployed?

    Because it’s much cheaper to pay them the dole. And if we can sell the notion that’s it’s their own fault, we can minimize the welfare we resentfully hand out.

    And it’s much cheaper to bring in engineers from China, technicians from India, doctors from Africa and Russia, than to train our own.

  11. Ivor
    April 25th, 2016 at 11:47 | #11

    @Geoff Edwards

    Yes

    Where is there information on this change? Is it significant?

  12. Ikonoclast
    April 25th, 2016 at 12:09 | #12

    Again, useful posts and thoughts from GrueBleen and Ron E Joggles.

    Yes, the NAIRU theory exists. Does it usefully explain anything? I have my doubts. When one does basic physical science there is the working concept of STP (standard temperature and pressure), standard conditions or starting conditions. Some statements, like “water boils at 100 degrees C” are only true at standard pressure (1 atmosphere or 101 kPa). It seems clear to me that many economic theories and claimed “laws” are indeed system-conditioned well beyond my physical science example. NAIRU might explain some things under certain strict conditions and these conditions essentially are strongly politically set. Thus NAIRU might have some truth relative to political economy conditions set at a point in time but it tells us nothing at all about the range of real possibilities is we set different conditions for the economy. NAIRU is not in any way an absolute law of any kind.

    Ron makes a lot of good points. I see no problem with “make work” projects if the alternative is pointless, soul-destoying idleness. It turns out, as Ron says, if we look at the total needs of our society on this continent, there is no call for “make work” in any case. There is plenty of real work required in all sorts of arenas. The fact that this current political economy can’t organise this work and can’t usefully employ all people just illustrates how inefficient this economy is. If you can’t fully employ your most important resource, the people, then the political economic system stands condemned. High unemployment has been coeval with neoclassical economics. This has been a consistent feature for 40 years. It’s about time we got rid of all the zombie theories of neoclassical economics which is of course simply unregulated capitalism.

    Do we get rid of capitalism or regulate it better? That’s an argument beyond this post. But we must at least start regulating it better again. The 40 year real world experiment is in. Unregulated or under-regulated capitalism leads to higher unemployment, cyclical economic crashes, stagnation and rising inequality. These facts cannot be denied. The real world evidence is indisputable.

  13. Ivor
    April 25th, 2016 at 12:13 | #13

    @Ron E Joggles

    This:

    the removal of tariffs and exposure to global markets,

    should not by itself generate unemployment.

    The problem, which must be highlighted, is removal of tariffs from products produced by unfair competition, and from markets based on unfair competition.

    I quite like the idea of getting cheaper inputs through imports – but it must be based on fair competition.

    Australia’s trade policy and remnant tariff structures (and visa pathways) are not based on fair competition.

    Quiggin’s floating of some transition to a knowledge-based economy is hackneyed and old-hat. This was the chant of economic rationalists all through the 1990’s if not before in terms of services exports and similar canards – although Australia has done well with education services exports.

    We need practical jobs away from the knowledge-economy. Jobs for air conditioning installers, house renovations, community transport, nursing aides, emergency services, social workers, electricians, plumbers, teachers, shop assistants, food processing, farming, shipping crews, journalists, etc at the current level of training and knowledge.

    Who can say that our shop assistants need more knowledge? Do our plumbers need more knowledge? What is the return on investment if we direct resources to increasing knowledge of our current trades? Did SPC workers or Queensland Nickel workers loose their financial security because they lacked knowledge – or because of the crisis tendencies and greed of capitalism.

    Do you think your plumber, fireman, taxi driver, need more training than obtainable under current arrangements.

    This plea of the knowledge economy is just an admission of after 50 years of unemployment our capitalist academics do not have the faintest idea what the problem is and what to do about it. 20 years ago they chanted “fight inflation first”. Now we get a new camouflage – “knowledge”.

    This is the reality: UNEMPLOYMENT and it has precious little to do with so-called “knowledge”.

  14. GrueBleen
    April 25th, 2016 at 13:03 | #14

    @Ikonoclast

    It wasn’t so much the “scientific truth” of the NAIRU, Ikono, more the hold it has, and has had, on the minds of politicians and other “deciders”. Hence my mention of the “Twin Deficits” theory, which turned out not to be so much a “theory” as a brainfart, but it ruled the Fed. Treasury for many years (and still rules the Productivity Commission, I think).

    If you believe, as apparently some number of “deciders” do, that a NAIRU “value” of, say, 5.7% unemployment is “right”, then you won’t be panicking if unemployment is currently 6%. But also, you’ll be trying to throw more workers out of their jobs if unemployment is currently 4%.

    You should read Ross Gittin’s article in today’s Age/SMH re his contention as to whether Keynes was right about how many avowedly ‘agnostic’ and ‘practical’ deciders are, in fact, largely hostage to the ideas of some long dead economist (including Keynes himself, BOC).

  15. GrueBleen
    April 25th, 2016 at 16:04 | #15
  16. Stockingrate
    April 25th, 2016 at 18:04 | #16

    In my view the economy is not proving resilient to the downturn. Firstly, the economy is smaller from an international perspective – as indicated by the weakened dollar. Secondly economic activity is being propped up by asset sales – not only of housing and visas, but also farmland, industry, public assets (of which not so much in QLD), by growth in PPP liabilities. and by growth in foreign debt.

    Young people are not doing nearly so well as they did:from an international perspective
    “On average, it takes young people 4.7 years from leaving full-time education to entering full-time work. This is significantly higher than the one year it took in 1986. Only 65% of university graduates, and 58% of Certificate II or higher graduates are in full-time work four months after graduating,” Growing Together Report” Guardian Mar 16.
    Perhaps this dramatically worse youth outcome is in part the flip side of good employment for those in the education cum visa sale sector?

    At school level the OECD tests indicate deteriorating educational outcomes for Australia, with Qld lagging.

    As can be seen at Ikonoclast’s reference, Qld lost 27,800 full time jobs in March Seasonally Adjusted, partially offset by a growth in part time jobs to give the outcome as described by the ABS:

    “The largest absolute decrease in seasonally adjusted employment was in Queensland (down 15,500 persons).”

    “http://www.abs.gov.au/ausstats/[email protected]/Latestproducts/6202.0Main%20Features2Mar%202016opendocument&tabname=Summary&prodno=6202.0&issue=Mar%202016&num=&view=

  17. April 26th, 2016 at 01:06 | #17

    @Ron E Joggles

    Yes, the efficiency thing is funny isn’t it. Not actually much use to the average person at all. Its even raised house prices – by making looking after a house easier, its allowed women back into the workforce sooner after having kids, and hence boosted the amount of money chasing houses.

    In general I think what has changed is attitudes. I remember as a young worker in the 80’s that the Fraser government was terrified because there was a rise in the rate of adult make unemployment. I somehow think that after the collective efforts and sacrifices of WW2, that todays climate where the rich are just looking out for themselves, and are quite shameless about it, just couldn’t have existed.

    In those days tariff protection meant business didn’t have to be super efficient. You could employ people who weren’t terribly useful, knowing full well that you were providing a social service.

    But now, WW2 is ancient history, and any feeling we might have had of all being in this together is gone, and we accept that we are all competing against each other. Businesses aren’t charities, and besides, how will we survive if the rest of the world is competitive and efficient?

    I always felt that what Australia desperately needed to export was our attitude to work in the 1970’s. If we could have bottled it and sold it world wide, the world would be a poorer, but happier place today.

  18. BilB
    April 26th, 2016 at 02:14 | #18

    JohnB, this “and hence boosted the amount of money chasing houses (pushing prices up)” is spot on,

    …but this “In those days tariff protection meant business didn’t have to be super efficient” isn’t really correct. The fact is that broad field automation had not yet arrived and plastics where in their very early stage. One factor rarely mentioned is that sales margins at that time were very thin compared to today, and yet the whole thing worked well.

  19. Mitchell Porter
    April 26th, 2016 at 02:25 | #19

    I am unemployed. I only learned of this summit last night, from this blog. I had the notion of spending my last $10 to travel from the Gold Coast to the summit (which is in Brisbane, where I normally reside), in the hope of somehow finding work through it. Among all those powerful people, who are forecasting jobs growth or who have ideas on how to create it, surely I could actually find work somehow.

    But just now (2am) I checked the summit website, and discovered that registration is closed. It’s a real shame, since attendance is otherwise free… I think, nonetheless, I’ll post this message, try to get a few hours’ sleep, and then consider my options again.

  20. Ron E Joggles
    April 26th, 2016 at 20:29 | #20

    In those days tariff protection meant business didn’t have to be super efficient. You could employ people who weren’t terribly useful, knowing full well that you were providing a social service.
    But now, WW2 is ancient history, and any feeling we might have had of all being in this together is gone, and we accept that we are all competing against each other. Businesses aren’t charities, and besides, how will we survive if the rest of the world is competitive and efficient?
    I always felt that what Australia desperately needed to export was our attitude to work in the 1970’s. If we could have bottled it and sold it world wide, the world would be a poorer, but happier place today.

    As BilB says: Spot on.
    In the post-fossil-fuel world, we may yet be poorer and happier.

  21. BilB
    April 26th, 2016 at 23:34 | #21

    So how was the summit, JQ?

  22. John Quiggin
    April 27th, 2016 at 08:15 | #22

    @Mitchell Porter

    I’m really sorry you missed this event. I’ll be posting my slides, and a link to some of the other papers, shortly.

  23. Ikonoclast
    April 27th, 2016 at 08:42 | #23

    I guess a key question is “What can be done at the state level?” If we have an unreconstructed neocon government at federal level then there are going to be significant limits to what a state government can do. No doubt, JQ’s slides and notes will address this issue among others.

    Recently, I had the misfortune to be stuck in a waiting room where the only reading was a Courier-Mail. It had a several page spread on the Queensland economy. This spread was wholly devoted to the single issue of selling government assets to pay for new development. It was very much couched in the terms that selling the assets is the only way to get new developments and services. Clearly, the owner and editorial policy of the paper was to direct a bunch of journos to write all those articles with just that spin.

    So, no matter how much J.Q. and other real economists debunk this sort of nonsense and point out that selling assets with good income streams does not make the government any richer or more able to do other projects, this sort of nonsense just continually gets promoted. They (the neocons and their plutocrat mates) just wait a few months for the sensible analyses to undergo half-life decay in the general public’s brains and then they are right back to promoting the same propaganda. The lies and the propaganda assault are organised and relentless.

    Tedious as it might be we have to continually argue against this neocon bulldust. They are relentless so we have to be relentless too.

  24. Mitchell Porter
    April 28th, 2016 at 04:24 | #24

    @John Quiggin
    I missed about half of it but I did make it in the end. No personal job breakthrough occurred, but I did briefly talk afterwards with someone from Treasury, who had brought up the possibility of jobs in manufacturing from 3d printing.

  25. Collin Street
    April 28th, 2016 at 07:00 | #25

    Recently, I had the misfortune to be stuck in a waiting room where the only reading was a Courier-Mail. It had a several page spread on the Queensland economy. This spread was wholly devoted to the single issue of selling government assets to pay for new development. It was very much couched in the terms that selling the assets is the only way to get new developments and services. Clearly, the owner and editorial policy of the paper was to direct a bunch of journos to write all those articles with just that spin.

    Interestingly… if News Limited goes all-in for the coalition, as seems likely, and the coalition lose, as seems likely… then it means that News Limited doesn’t have the power to keep parties out of government, doesn’t it. No reason not to run a royal commission into media, say.

  26. BilB
    April 28th, 2016 at 08:25 | #26

    What field are you in, Mitchell Porter?

  27. GrueBleen
    April 29th, 2016 at 09:09 | #27

    @Ikonoclast

    You may be surprised and even pleased, that in Victoria, that exemplar of fiscal rectitude, Jeff Kennett, who flogged off Victoria’s State Electricity Commission when he was Premier, has just called on the Andrews (Labor) government to go into as much debt as it takes (upwards of $100billion) to provide a London style underground rail system for Melbourne.

    Oh such fun. It takes me back to the high debt era of Henry Bolte which was the last time any serious infrastructure work was undertaken in this state (other than the desalination plant, of course).

    http://www.theage.com.au/victoria/borrow-to-build-rail-network-kennett-20130811-2rq88.html

  28. Mitchell Porter
    April 29th, 2016 at 14:02 | #28

    @BilB
    Apparently I specialize in being ahead of my time, and then being denied the means to do any good with that knowledge.

  29. BilB
    April 29th, 2016 at 15:03 | #29

    Perhaps this is your opportunity, Mitchell (as one ahead of his time which should give you and edge), to become self employed and an entrepreneur.

  30. Mitchell Porter
    May 3rd, 2016 at 10:46 | #30

    @BilB
    I don’t know… I wrote to the Palaszczuk government a year ago, when it was new to office, saying I’m a Queenslander, I have many neglected talents, I want to contribute rather than brain-drain away to California, and I specifically mentioned job creation, new technology, and A.I. There was no reply for two months, and then the reply that came was so late and so anodyne that I just said the hell with this, obviously there’s no opening for me here. And here we are a year later, and it’s a new era of A.I. since AlphaGo won its match in Korea, and here in Queensland we just had a job growth summit and an innovation summit in the same week.

    Or, another example, I probably know more about string theory than anyone else in the state of Queensland. And for years I have discussed the challenge of superhuman intelligence, and I have long-standing ties to the community of research in North America which wants to design “friendly A.I.” And then a few months ago I had to endure the spectacle of the State Museum bringing in Brian Greene’s heavily promoted roadshow (the “World Science Festival”), with panel discussions on quantum gravity and superhuman A.I. I felt like even Queensland science had been colonized.

    And that’s just from 2016… I must be doing *something* wrong, because I live in a society which finds thousands and millions and billions of dollars to spend on various agendas and entertainments, and meanwhile I struggle to find work as a tutor via Gumtree.

  31. Hammer and Sickle Forever
    May 3rd, 2016 at 14:28 | #31

    Mitchell,
    The best thing you can do is to run away from this groupthink leftist blog. All they can advise you to do is get a taxpayer funded job or (magically) become an entrepreneur, using a taxpayer funded grant of course! Don’t delude yourself you’re “ahead of your time” either. That’s just self pity and victimhood. Hallmarks of the leftist psyche.

Comments are closed.