Economics is commonly perceived as mind-numbing and driven by numbers. But can it not better be considered as humanity’s perennial attempt to deal justly and wisely with one of the most fundamental realities, scarcity?
Calibrating limited resources against unlimited wants creates the most crucial free market imaginable, the contest for ideas. It is where politics, business, community, technology and creativity intersect, a frightening yet fabulous frontier of potential progress or regression.
Illustration: John Shakespeare
Various policies are advocated, but their proponents tend to share principles and goals including equality of opportunity in education and employment; reward for work and investment; providing for those in genuine need; fair taxation; and efficient and effective public spending.
In recent days, politicians have sought to twist key economic statistics measuring income, wealth and spending. The ALP, having staked its electoral bid on inequality, argues Australia is more unfair than it has been for generations because of an increase in the gap between the wealth of the richest and poorest among us. That gap was born of inheritance and has grown primarily because of superannuation and rising house prices, both of which receive tax breaks that favour the wealthy.
The Coalition argues inequality has fallen, because, depending on which start and end points one selects, the incomes of the poorest have risen relatively more than those of the richest. This is largely because of Australia’s carefully targeted transfer (welfare) system, and is despite an extended period of flat real wages and of buoyant profits.
Both sides are technically right. Both sides are zooming in tactically. The big picture is more nuanced. And a big part of that complex canvas is household spending, which, other fresh figures show, has in recent years shifted from discretionary items to necessities – particularly housing and energy – that have become sharply more expensive.
Squeezed and anxious households reduce their spending, which puts a drag on the entire economy. The risk of this is growing as households take on unprecedented levels of debt. But so far, Australia’s quarter-century of unbroken economic growth continues, albeit less vigorously than it might, and jobs are being created.
The main things that drive growth are productivity and consumption. As the Reserve Bank of Australia has been warning, it is in the interests of the entire nation that wages stop stagnating. Both sides of politics should advocate that on the grounds of fairness.
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