Australia should stop “pretending” it can compete against the low-wage economies of Asia and instead focus on productivity, Reserve Bank governor Glenn Stevens has told the Prime Minister’s Economic Forum.
Last night, Prime Minister Julia Gillard kicked off the forum with a keynote dinner speech, in which she said the forum is designed to generate “some detailed policy discussions”.
“We’ll talk about some of the concrete things we can do together, identify specific problems, some of them big ones, develop new approaches and specific solutions,” she said.
The forum continued today with five sessions, including Australia’s Patchwork Economy and the High Dollar.
The other sessions were Economic Transformation: Innovation and Collaboration; Investment in Productive Infrastructure; Building the Workforce: Skills and Education; and Competition and Deregulation Reform Agenda
Small business representatives – including small business lobbyist Peter Strong – were among the 130 leaders of Australian business, unions and the community invited to attend the forum.
Today, RBA governor Glenn Stevens told the forum Australia should stop “pretending” it can compete against the low-wage economies of Asia, and instead focus on productivity gains.
“Better productivity is the imperative to survive,” Stevens said.
“The test really is how many of those enterprises can get the productivity up, because that’s really the way out in terms of coping with a high exchange rate.”
Stevens issued a challenge to business leaders to adapt to the new economic environment, and for governments to ensure there were no barriers to this adaptation.
He also warned businesses to refrain from wishing for a lower exchange rate.
“Every time we put petrol in our car, every time we go to a store and buy consumer durables or clothing – a lot of which is imported – every time we travel overseas, we are benefiting from the high exchange rate,” Stevens said.
“The exchange rate is one of the devices that is imparting to us the higher wealth that the mining boom brings.”
Stevens also said that, in the past few years, there has been a significant shift in household spending away from the unsustainably low levels of saving before the global financial crisis.
However, he admitted many retailers are suffering in the current conditions.