Save
Recession is not the answer, will lead to ‘destruction’: RBA
The Reserve Bank of Australia has slammed claims that a recession is the only way for the Australian economy to improve, saying recessions engender “destructive destruction”.
Recession is not the answer, will lead to ‘destruction’: RBA
The Reserve Bank of Australia has slammed claims that a recession is the only way for the Australian economy to improve, saying recessions engender “destructive destruction”.
Speaking in Melbourne on Wednesday (15 November), the RBA assistant governor Luci Ellis said Australia does not need to wait for an external trigger to kick-start the economy. Nor is there a need for “an identifiable engine of growth” like mining or housing.
“The ‘engine of growth’ mindset also seems to divide industries into the worthy and the unworthy. Only ‘good growth’, we are told, is truly sustainable. And ‘good growth’, I can't help noticing, always seems to be defined as ‘goods growth’. Services don't count,” Ms Ellis noted.
However, she argued that health and education can promote sustainable growth as long as investing in those sectors translates into “better outcomes”.
The growth engines will be fuelled by all the sectors that lagged as mining took off, she added while pointing to the fact that tourism and manufacturing suffered as the exchange rate appreciated.
As for productivity and innovation - or lack of, as commentators including wealth management firm Koda’s Brigette Leckie claim – Mr Ellis said the “drivers of creativity … are hard to pin down”.
“But the literature does provide some pointers to them,” she continued. “First and perhaps most important is simply to grow: growth is more conducive to innovation than recession is.
“Recessions do not engender ‘creative destruction’; they produce liquidations, which are destructive destruction.”
She said that plentiful labour means “not much incentive” to invest in technology designed to promote productivity, nor is there incentive to invest when sales are weak.
“There is nothing quite like a tight labour market to make firms think about how to do things more efficiently.”
The ability for start-ups to enter the market and the likelihood of existing companies to adopt new business practices and technologies are also factors where Australia’s innovation will come from.
Acknowledging this, Ms Ellis contended that Australia “can become more prosperous without identifiable external triggers”, through growth in innovation and productivity fuelled by competition.
“So next time somebody asks you: ‘Where’s the growth going to come from?' You can answer: ‘From all of us, trying new things, and gradually getting a bit better at what we do.’ We don't need to wait for something external to make it happen,” she added.
Ms Ellis’ comments are in contrast with those made by Ms Leckie last week.
Speaking in Sydney, Ms Leckie said: “The only time you get decent policy change is when your back is against the wall.
“We escaped the last two global recessions for a lot of well-known, documented reasons but in order to get genuine, real, reformist policy out of Canberra, we need to have a fully fledged recession.”
Part of the problem, Ms Leckie explained, is that Australia is “way behind” in the science, technology, engineering and mathematics fields (STEM) and worse: “That’s really where the future is whether we like it or not.”
This area needs reform because all jobs in the future will have a (STEM) element, she said, arguing that “the whole education debate is going the wrong way”.
“My view is that in the next global recession Australia will not be immune, I think we’ll really come unstuck.”
Expenses
Price no longer the prime factor for energy bills
Many Australians are intrigued but unconvinced when it comes to greening their energy bill. ...Read more
Expenses
1 in 2 Aussie pet owners spends on their pets more than themselves
Does owning a pet eat into your monthly budget? You’re not alone. ...Read more
Expenses
The real reason Sydney’s petrol prices are so high
Sydney fuel prices may seem like they’re soaring, but a recent study indicates that they may be cheaper than you think. ...Read more
Expenses
Morrison backs big pharma, turns back to developing countries
Big pharma is currently fighting to maintain intellectual property protections over COVID-19 vaccines, with Australia refusing to act despite having no pharmaceutical companies. ...Read more
Expenses
Half-price flight scheme launches today
Aussies are being offered half-price flights as the government looks to spur domestic travel to regions it has defined as key to economic recovery. ...Read more
Expenses
Insurance prices rise despite payout falls
The COVID-19 pandemic has seen insurer payouts fall by $500 million, but Australian consumers are continuing to pay more, the consumer watchdog has revealed. ...Read more
Expenses
CBA cops civil proceedings for overcharged interest
ASIC has commenced civil penalty proceedings in the Federal Court against the Commonwealth Bank over the bank charging an interest rate on business overdraft accounts that was substantially higher tha...Read more
Expenses
What are the top 10 most expensive cities in the world?
Logistical issues and currency fluctuations caused by the COVID-19 pandemic has seen the most expensive cities in the world drastically change, new research has revealed. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Expenses
Price no longer the prime factor for energy bills
Many Australians are intrigued but unconvinced when it comes to greening their energy bill. ...Read more
Expenses
1 in 2 Aussie pet owners spends on their pets more than themselves
Does owning a pet eat into your monthly budget? You’re not alone. ...Read more
Expenses
The real reason Sydney’s petrol prices are so high
Sydney fuel prices may seem like they’re soaring, but a recent study indicates that they may be cheaper than you think. ...Read more
Expenses
Morrison backs big pharma, turns back to developing countries
Big pharma is currently fighting to maintain intellectual property protections over COVID-19 vaccines, with Australia refusing to act despite having no pharmaceutical companies. ...Read more
Expenses
Half-price flight scheme launches today
Aussies are being offered half-price flights as the government looks to spur domestic travel to regions it has defined as key to economic recovery. ...Read more
Expenses
Insurance prices rise despite payout falls
The COVID-19 pandemic has seen insurer payouts fall by $500 million, but Australian consumers are continuing to pay more, the consumer watchdog has revealed. ...Read more
Expenses
CBA cops civil proceedings for overcharged interest
ASIC has commenced civil penalty proceedings in the Federal Court against the Commonwealth Bank over the bank charging an interest rate on business overdraft accounts that was substantially higher tha...Read more
Expenses
What are the top 10 most expensive cities in the world?
Logistical issues and currency fluctuations caused by the COVID-19 pandemic has seen the most expensive cities in the world drastically change, new research has revealed. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
