Monday, December 20, 2010
Up against it
The RBA's great experiment of attempting to shift Australia from unproductive investment and overspending to productive investment and saving is about to confront a new challenge.
One of the more powerful sectors in the gun is retail. The rumblings of household heros such as Gerry Harvey and Solomon Lew are congealing into an RSPT-like campaign against the sub $1000 online purchase exemption to the GST.
The first point to make about this is that the campaign is up against it in winning over the public. Anti-RSPT miners had three advantages that the retailers do not. The tax was distant and complex, making it a PR-makers dream to combat. All it needed was a million conflicting 'facts' and the population gets lost, the policy ceases to make sense and, in the confusion, the clear message of risk shines through.
The retailers on the other hand are attempting to increase the price on sub $1000 household goods. For consumers it is a personal and very clear affront.
Second, the RSPT debacle unfolded in a very different political economy. The combination of an election and a post-GFC moment in which mining was at least one part of saving the nation made the anti-RSPT message stick.
The retailers face an environment of higher interest rates and one in which although the economic recovery is reasonable, it is patchy.
Moreover, just about every official and private economist everywhere has been selling the nation the idea that we need to shift economic resources to the resources sector so it's moment in the sun is not dimmed by labour or infrastructure bottlenecks.
Other sectors need to give it up, according to this chorus.
Another difference to the anti-RSPT campaign is that its goal was to prevent a new government policy. The retailers want to create new government policy that will fly in the face of RBA objectives and rhetoric.
If the world is rational, this should be an uphill battle for the rent-seeking retailers. But you never know. Retail is powerful. Former Reserve Bank board member Frank Lowy is already on the record as sympathetic.
This will be an interesting test for combined RBA and government policy. The media will be key and this blogger is keen to see how 'business-friendly' outlets respond.
The combined export sectors of tourism, education and manufacturing have completely failed to impact policy despite being in full-blown recession and being much more important to the nation's future.
Retail certainly shouldn't either. Most especially because any shift to make offshore retail less competitive ipso facto means more money spent locally, which greater inflationary pressures, a higher dollar and more carnage in the export sector.
Retail is part of the over-spending problem and the ideal sector to carry a significant share of the cost of rebalancing toward productive investment drivers for the economy.