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									  A DISTINCTION                            with a        DIFFERENCE
 RECENTinathe daily business condi-
           surveys of
                      press and else-
 where give rather rosy impression of
                                               may be due to highly favourable ex-
                                               ternal influences of a temporary or un-
                                               certain kind rather than to any in-
 the business outlook in Australia. So         herent virtue in the policies or efforts
 long as the limited character of these        of the country itself.
 surveys is properly appreciated by
 those who read them, they can be
 highly useful to the business man and
 the community in assessing short-run
 prospects for trade and employment.
                                               S OMEtendency to skate in Australia
                                                      of the recent appraisals of
                                                   business conditions
                                               show a                  over under-
 There is a danger, however, that many
                                               lying economic forces which, sooner or
 people may read into them more than
                                               later, must inevitably assert them-
 they are meant—or should be meant—            selves. The economic or business com-
 to convey.                                    mentator is naturally desirous of plac-
     It should be made clear that there is     ing an optimistic interpretation on cur-
  an important—although not sharply de-        rent conditions whenever he reasonably
  fined—distinction between business con-      can. To spread unwarranted pes-
  ditions and economic conditions. This        simism is, admittedly, the unfor-
  is a distinction which it is only too easy   givable sin on the part of the
  for the ordinary reader to overlook,         writer on business conditions. But to
  and which is perhaps not always kept         avoid committing this sin, some com-
  clearly in mind by commentators on           mentators appear to be leaning over
  business conditions themselves. For          backwards in their eagerness to paint
  instance, it is possible for the immedi-     a glowing picture of almost unbounded
  ate outlook for business and trade to be     and unqualified prosperity. A neglect
  reasonably good, even though under-          to look unpleasant facts in the eye,
  lying economic factors may give real         whether or not the neglect arises from
  cause for disquiet. A survey of busi-        ignorance of their existence, or from
  ness conditions that paints a bright         sheer reluctance to do so, could in the
  prospect may thus be taken to indicate       long run prove to be dangerous and re-
  a sound basic economic position when         prehensible.
  the true situation may be far other-            Commentators on business conditions
' wise.                                        usually concentrate on the short-run
                                               factors. What is the outlook for trade
     To take an extreme case, it is pos-       and employment for the coming six
  sible for the short-term outlook for         months ? How good are the prospects
  business profits to be satisfactory, for     for business profits? Is the return on
  business turnovers to be heavy, and for      invested capital likely to be better this
  employment to be high, even though           year than last? Is credit going to be
  the economy is suffering from a general      tight or easy? What are we getting
  malaise of low productive efficiency and     for our exports? Are savings bank
  of unsatisfactory standards of living.       deposits increasing? Are retail trade
  Business conditions, too, can be bol-        turnovers better this month than last?
  stered up in the short run by artificial     How are stocks moving? And so on.
  stimulants which, in the long run, may
  inflict serious harm on the economy.           All these indications, of course, are
  Or, again, a prosperous state of trade       important. But economic conditions
  and employment in a given country            are concerned with more fundamental

  Page 39
A DISTINCTION       with a       DIFFERENCE   (continued)

desiderata: Is the immediate prosperity        housing and motor-cars). Supplies of
soundly based ? Is it likely to be long-       basic goods such as coal, steel, power
continued? Or does it depend on for-           and cement have expanded notably ; the
tuitously favourable circumstances             shortages and bottlenecks of twelve
which could change rapidly for the             months ago have vanished and in some
worse? And if these favourable cir-            commodities surpluses have appeared.
cumstances should change, is the               The tempo of retail trading is fair to
economy of the country well placed to          good—but not by any means exciting.
meet the new conditions ? Is- the level        The rampant inflation of 1952 seems,
of man-hour or man-year output satis-          for the moment at any rate, to have run
factory by overseas comparisons? How           its course and there are now hopes of
do costs compare ? If inflation has            reasonable price stability.
been checked and price stability
achieved, is the stability likely to be          The influences behind this improve-
maintained, or will inflation take over       ment are mainly three—the high level
again in the near future? Is it pos-          of export prices (much higher than
sible that serious deflation could set in ?   most people had hoped for) combined
Is there a sound balance between the          with greater volumes available for ex-
different forms of production?                port; the import cuts which have played
                                              a major part in the balance of pay-
  These are considerations to which           ments reversal and enabled businesses
surveys of business conditions some-          to correct the stock surpluses of last
times devote no more than a passing           year without grave financial embar-
glance. But they are basic to the cor-        rassment ; and the more realistic finan-
rect assessment of the true health of         cial policies pursued by the Common-
the economy.                                  wealth Government
                                                 All this is certainly grounds for satis-
                                              faction. But even on a strictly short-
RECENTconditionsthe improvementre-
          surveys place a great deal
    of emphasis on
                   over the 1952
                                              run business interpretation of the posi-
                                              tion, two points are perhaps not ade-
                                              quately emphasised.
cession. Prime place of importance is
given to the remarkable statistical             First, while the price spiral seems to
transformation in the balance of pay-         have been arrested, for the time being
ments position. This has brought with         at any rate, prices are on the whole ab-
it an easing of the tight money condi-        normally high. That this fact is hav-
tions of the last six months of 1952—         ing a serious effect on consumer pur-
bank deposits have increased, business        chases, particularly in middle class
stocks are now close to normalcy, and         trade, is beyond dispute. Buyer resis-
all-round liquidity has improved. Em-         tance here continues to be stubborn and
ployment has, in recent months, tended        the prospect is that it will continue so
to increase. Despite the cuts in the          unless prices can be scaled down to a
public works programme, public invest-        lower level. Excessively high prices
ment is still remarkably high (in money       produce their own purchaser resistance
terms only 5% below last year). The           regardless of the income-price ratio.
investment intentions of private busi-        This resistance is especially evident in
ness look reasonably good (although           such things as higher grade clothing
there has been some decline in private        and in the better quality food served by
capital expenditure on durables such as       reputable hotels and restaurants. Hotel

Page 40
dining rooms and cafes crowded to               the Australian economy, the man-year
capacity not so long ago are today half         output, whether in a public utility con-
empty.                                          cerned with 'transport, the building of
                                                a bridge across the Yarra, customer
   Second, while the statistical indicat-       service in' many fields, or a decision on
ors of trade and employment look pro-           a site for a great sporting event, is far
mising enough, there is a disturbing            lower than it could be and lower than
absence of real buoyancy. Buyers are            in other English-speaking countries.
wary. Caution rather than adventure
is the keynote. Trade is not by any                The plain truth is that too many Aus-
means dead, but it is a trifle flat. The        tralians, by and large, do not work hard
froth is off the glass. Business and            enough. Effective working hours
consumer psychology, 'in spite of the            (after deducting holidays) are very
improvement from 1952, is not over-             much shorter than in other countries,
flowing with confidence. There is cer-          and there is often not the same inten-
tainly no excess of Keynesian "animal           sity or seriousness of purpose on the
spirits". To take one example, the              job. This comment does not apply ex-
stock exchange still lacks life and fire        clusively to any one section of Aus-
despite the overall improvement in              tralians. It applies to all sections; to
monetary conditions. By and large,              employers as well as employees ; to the
the Australian public appears to be tak-        typist as well as the technician.
ing a rather more cautious view of its
own economic position than the profes-             That the tempo of work is generally
sional commentators.                            slower than in many overseas coun-
                                                tries is partly due to the fact that Aus-
  In this the public's instinct may be          tralians are able to enjoy a compara-
sound.                                          tively high standard of life for a com-
  For while the immediate business              paratively low standard of effort. In
outlook seems fairly satisfactory—if            Britain the Australian visitor is able
not quite so satisfactory as some com-          quickly to sense- the fight that goes on
mentators appear to think—the longer            day by day for economic survival—a
term economic prospect cannot yet be            fight to preserve a standard of living
viewed with equanimity. The surface             which is, today, not high relative to
symptoms of the health of the Aust-             that of other countries. In Britain
tralian economy may be on' the whole            there is a sense of strain and urgency
favourable, but deeper diagnosis gives          entirely absent from the Australian
cause for some uneasiness.                      scene.
                                                   The Australian attitude to work is
                                                largely a response to an unusually bene-
                                                ficient environment. The Australian
THERE are several grounds for this
                                                possesses natural facilities for recrea-
                                                tion and enjoyment which are prob-
   First, the Australian economy, in            ably unequalled in any other country in
spite of improving productivity in some         the world. If the Australian worker,
directions, is still basically an inefficient   unlike his American counterpart, lacks
economy. This does not mean that                a refrigerator and a television set in
there are not many efficient industries,        his home, he has on the whole more op-
efficient even by the highest world stan-       portunities for sun-bathing and sport.
dards. It simply means that, taken as           Australia can, for , the present, afford
a whole, the rate of achievement in             the luxury of short hours of work and

Page 41
A DISTINCTION      with a     DIFFERENCE (continued)

get by. Britain cannot. In Britain          low productivity. The visual evidence
the labour movement has embraced the        of rapid economic expansion is indeed
aim of high production and accepted         impressive. But several qualifications
the need for incentive schemes, because     must be borne in mind. First, the ex-
of the grim alternative of a declining      pansion of the post-war years must be
living standard for its members. In         viewed against the background of an
Australia the trade unions are able to      increase of population of 20%. Second,
persist in their opposition to industrial   development on the scale that has oc-
methods of this kind only because con-      curred would not have been possible
ditions of life are easier.                 without the fortunate conjuncture of a
                                            succession of good seasons and abnor-
  The Americans work harder, and            mally high prices for the products of
more intelligently, because of a differ-    the soil. High returns from exports
ent national philosophy which is            have buttressed development not only
summed up in the phrase "the Ameri-         by giving Australia a greater command
can way of life." The essence of this       over the resources of other countries,
philosophy is the constant striving for     but also by encouraging overseas in-
self-advancement and self-improve-          vestors to take an optimistic view of
ment on the part of the individual. The     Australian prospects. To what extent,
American, therefore, looks always to        too, new capital construction has been
the future which he is certain can be       at the expense of existing capital re-
better than the present or the past.        sources — for instance, the running
The Australian seems more concerned         down of capital invested in roads and
to preserve what he has. He is not so       transport facilities, and city buildings
intent on acquiring the latest model        —will never be accurately known.
motor-car, as he is on ensuring that
his weekly excursions to the football or       A second serious weakness is the
the races are not interrupted.              high level of costs. There is a gaping
                                            disparity between British and Aus-
   The problem of Australian produc-        tralian costs of production. Hourly
tivity is thus, at root, a matter of        wage rates in Australia for male work-
national psychology and environment.        ers average about 8/-. Average rates
All this does not necessarily mean that     for British workers are 3/10 (sterling)
the American approach to living is          or about 4/10 (Australian currency).
superior to the Australian ; it means       Hourly wages in Australia have in-
only that it leads to harder work,          creased 149% since the end of the war,
greater efficiency and productivity, a      compared with increases for Britain
higher standard of living for the           of 59% and for U.S.A. 71%. The post-
American people, and a stronger, more       war inflationary gallop has proceeded
flexible economy.                           at a much faster rate in Australia than
                                            in other English-speaking countries.
  To the casual observer the large
numbers of modern factories that have
sprouted like mushrooms around the
outskirts of Sydney and Melbourne,
the spectacular industrial progress of
provincial centres such as Geelong and
                                                       disparity of these propor-
                                            A COSTcreates a fundamental out-
                                            of-balance situation in the economy
Dandenong, the many massive public          which suffers from it. It can be sus-
projects at present under construction,     tained only by virtually excluding all
may seem to contradict assertions of        overseas competition from the home

Page 42
market (which has, in effect, been done      projects and private industrial expan-
through the import restrictions) and         sion is a third disturbing feature. The
only so long as prices for major exports     savings famine is partly a consequence
remain sufficiently high to return a         of a tax structure which saddles en-
margin of profit over the excessive          terprise with a burden ill-suited to a
costs of export producers. It is true        young country striving to grow to full
that the import cuts were originally in-     industrial maturity.
troduced to cope with a sudden and un-
expected collapse in Australia's over-          Finally, the rather tenuous character
seas reserves ; but the restrictions could   of Australian prosperity serves to em-
not now be removed without bringing          phasise further the' distinction which
chaos in many Australian industries.         it is imperative to draw between basic
Unless Australian costs move closer to       economic conditions and immediate
world levels, the import restrictions        business prospects. A steep fall in
imposed as a temporary expedient, may        prices of wool and wheat (which have
have to be continued much longer than        fortunately remained firm) or a
is desirable.                                drought year (not unknown in the
                                             past) would have unpleasant conse-
   To claim any intrinsic virtue in the      quences for Australia's over-inflated
import cuts is, of course, absurd. They      economy and would compel far-reach-
are, at best, a highly unpleasant neces-     ing re-adjustments. The dependence
sity and they are achieving their pur-       of Australia on a continuance of high
pose of •bringing Australian purchases       prices for wool and wheat, especially
from • the rest of the world into line
with what Australia is able to obtain        the former, reveals the shaky founda-
from its sales to the rest of the world.     tions on which Australian stability and
A nation that is forced to do this is in     prosperity rest.
the same straits as a man who is com-           Experience since the war only con-
pelled to cut his purchases because he       firms what was well known before the
cannot afford to continue to live on the     war ; that is, the unique reliance of the
old scale. In the nation's case as in the    Australian economy on one product,
individual's, it means, among other
                                             wool. This alone should prevent us
things, a lower standard of - living. The
import cuts, while they remain, are          from accepting without reservation the
therefore a symbol of economic weak-         optimistic assessments of the business
ness and unbalance.                          outlook which have recently appeared.
                                             If the short-term business prospect is
  The scarcity of savings as evidenced       fair to good, the basic economic posi-
by the difficulty of obtaining adequate      tion continues to give cause for some
monies for financing developmental           unease.

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