[Viewpoint] Unexpected depression

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[Viewpoint] Unexpected depression

A curious thing is afoot in Australia: pessimism that’s wildly at odds with the facts.

Looked at from almost any angle, the nation of 22 million is on a tear. Unemployment is 4.9 percent, wages are rising about 4 percent a year, consumer prices are advancing about 3 percent and interest rates have been steady all year. Policy makers in Europe, Japan and the U.S. would kill for those numbers.

Yet consumer confidence is dismal, retail sales are down and a big majority of voters want to kick out the government. Economists, businesspeople and average Sydneysiders seem no happier with their lot than New Yorkers, Parisians or Tokyoites.

What gives? The gloomy global scene gets some of the blame. Noxious politics may provide a better explanation - one that’s found beyond Australia in Japan, the U.S. and elsewhere.

The politics of pessimism is a tried-and-true formula. Blame those in power for every conceivable ill, employing plenty of hyperbole and lots of volume. It’s a sure way to dominate the news cycle.

As 2011 unfolds, though, something feels different, more apocalyptic. Politicians, TV pundits and editorialists are tripping over themselves to call Julia Gillard the worst prime minister Australia has ever seen, today’s economic climate the most dismal and tomorrow’s outlook the most disheartening in history.

Sure, Australia has its share of challenges. It must invest more in infrastructure and education, and figure out what to do with the spoils from the epic resources boom that has pitted Western Australia against the rest of the nation, which faces slower growth.

These are good problems to have at a time when Europe is on course for default. Since the 2008 financial crisis, U.S. and European policy makers have done little to fix the underlying problems that caused the meltdown. Rather than adopting the monumental reforms needed to restore economic growth, those in power act as if the most arduous changes have already been made.

The global financial system is in desperate need of leadership, big thinking and shared sacrifice. Leaders must forget the next election, never mind the next news cycle, and tell their voters what is at stake and what needs to be done to prepare for a future in which China and other upstarts will change everything.

Yet we seem to have reached a turning point in this globalized, real-time, 24/7-news-cycle and jittery world of ours. Although negativity always sells, these days it also seems to take on a life of its own.

In the U.S., for example, the feverish Tea Party has many Americans convinced that President Barack Obama is a socialist bent on ruining the nation, when in fact it’s the congressional stalemate on raising the debt ceiling that may inflict true and lasting harm. In Japan, leaders of the opposition Liberal Democratic Party that put corporate interests and an out-of- control nuclear industry in the driver’s seat claim that any change will precipitate Armageddon.

Australia’s obstacles, by contrast, are far less dire, though you wouldn’t know it from the tone of public discourse. The country needs a transparent debate about harnessing the mining boom, but it’s getting a petty brawl between Gillard and opposition leader Tony Abbott. Anything Gillard proposes, Abbott derides as economic suicide. Although his views resonate with a nervous public, he isn’t offering alternatives. It often seems he’s running a Tea Party-inspired Party of No that’s intent on blocking every attempt at change.

The toxic tenor of politics has a surprising number of Australians thinking the mining boom is somehow bad. China’s demand for coal and iron ore is soaring, and that’s a plus. The question is how this bounty is managed. The last thing Australia needs is a case of “Dutch disease,” whereby the benefits of exporting natural resources lead to the neglect and atrophy of other sectors.

Gillard’s predecessor, Kevin Rudd, tried to answer it with a tax on mining profits that were deemed excessive. When companies dig stuff out of the ground and ship it to China, India and Indonesia, they forget that those commodities belong to the Australian people, too, Rudd argued, not just to mining company shareholders. Rudd was defeated after a huge industry-financed advertising campaign. The airwaves were ablaze with tales of how the tax would kill the economy.

Savoring that victory, Australia’s business community now figures it can dump Gillard. Her sin is making an effort to lead. She is pushing something that’s inevitable globally as temperatures and sea levels rise: a tax on carbon emissions.

The knives are out and the punditocracy is telling Australians they will be homeless if Gillard gets her way. It would be silly if it weren’t so pernicious.

*The writer is a Bloomberg View columnist.

By William Pesek
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