Bush Politics
November 12, 2008

RADIO 2CBA FOCAL POINT COMMENTARY BROADCAST ON FRIDAY Feburary 4th, 2000 ON RADIO 2CBA FM.

The Prime Minister has been touring the Bush. He is seeing at first hand the anger in the Bush.

The country on the other side of the Blue Mountains is a different world. Too often the decision-makers on Australia’s coastal strip assume that the hinterland is the same as the coast.

A good example of this blindness is the Reserve Bank’s decision this week to increase interest rates. The Bank claimed that the economy was over-heating and an example of this is the increase in Sydney house prices.

However, on the other side of the Blue Mountains, the economy is not over-heating, If anything, it is getting much cooler.

Australia is still following the export formula that worked so well a century ago: close to two-thirds of Australia’s exports are still rural and mineral commodities. This is a risky strategy. More export revenue is now to be made in services (such as banking, insurance, tourism, and education).

The world needed what Australia exported in 1901; that is not necessarily the case today. As societies get richer, their proportion of expenditure on, for example, food stuffs declines (there is a limit, say, to the amount of bread that a person can eat) and instead their tastes run to services (such as overseas travel).

International commodity prices are very low and Australia’s two and half decades of economic rationalism has reduced the feather-bedding still enjoyed by its competitors.

For example, Australia could export coal to Germany (which is a better quality than German coal) at a lower price (even including shipping costs) than the current cost of German coal. But the German Government prefers to subsidize each miner on the basis that it is better to subsidize the miners than have them sit around all day on unemployment benefits. Australian Governments are much more reluctant to have any subsidies and so we have worse unemployment problems.

Getting back to this week’s decision of the Reserve Bank, many homes in the rural sector are not escalating in price like those in Sydney. Indeed, as the rural sector continues its decline, so the prices are actually going down.

For example, in Gunnedah, the closure of the some of the rural activities means that young people are leaving the town in search for work elsewhere. There are 500 homes on the market – out of a town with 10,000 people.

In Broken Hill, a home can be bought for $15,000. This means that South Australian people living on welfare benefits can afford to buy a home while receiving unemployment payments. Banks are willing to issue these mortgages.

Therefore some rural towns are becoming rural ghettoes.

In Britain, there is concern about the creation of two nations: the rich south around London and the poor north (where the factories are closing down). In NSW, we run the risk of two nations divided by the Great Dividing Range. The Prime Minister has been getting a direct education on this risk this week.