Mark commented on the plummeting dollar, and makes an overall economic
assessment :

> Tim Hughes (Opinion, 26 March) superbly draws attention to the manner in
> which the insurance crisis is harming communities - especially those
> outside the capital cities.

> It is apparent that our present system of
> government - with its massive levels of regulatory and bureaucratic
> duplication and coordination burdens - is simply unaffordable, and
> incapable of facilitating economic, social and environmental
> sustainability in an increasingly competitive and unforgiving world.

> Our plummeting dollar (which makes a total lie of the absurd claims of
> "miracle growth levels"), corporate and market failures in the aviation,
> telecommunications and insurance industries, the massive problems
> associated with water and land degradation in the Murray Darling Basin
> and elsewhere, health and education systems increasingly under strain,
> and still significant levels of unemployment, all prove beyond doubt
> that our so-called "system" of government is hopelessly broke.

> Few households can sustain themselves financially if they operate more
> cars than they need.  Likewise, we as a country can afford just a single
> national government.  We need strong communities supported by strong,
> well resourced local governments.  State governments are too big in
> population and/or land area to provide true accessible democracy or any
> benefit in any way whatsoever, and their retention will continue to drag
> us down.

> If the present system accommodates $30 billion per annum worth of
> "costs" or "frictions" that could be removed under a better system, then
> as this is 5% of GDP, it that the decline in Australia's
> "economic/financial integrity" is around 5% per annum.  This strikes a
> chord with the 4% per annum average devaluation of the Aussie dollar
> relative to the US dollar over the past 20 years.

> Australia is in something of a gradual freefall state of
> being, which will persist unless there's change.

This engendered some discussion of the applicability of looking at the
exchange rate in assessessing the health of the Australian economy.
This was something of a diversion away from Government reform, was of
sufficient interest that I thought I'd include it.

Simon wrote :

> Growth in an economy does not need to take account of foreign exchange
> rates.

> A low Australian dollar means imports are more expensive than under a
> high Australian dollar, but means our exports are cheaper for other
> economies.

> If disposable income increases by 45%, you can spend it on what ever you
> like, imports or domestically produced goods, or indeed save it.  If
> imports rise due to the local currency falling against foreign
> currencies, then you might be more likely to spend that extra income on
> locally produced goods.

I wrote :

> What we're debating is the significance of the trade off between imports
> being more expensive and exports being cheaper.  Its arguable that the
> more we _need_ imports, the worse off this puts us.  Essentially, what
> can you get for your effort ?  The worse the exchange rate, the less you
> get.

> Sure, our exports are cheaper, but I'd suggest that industry is a means
> to an end.  What's important is what we get for our efforts.  The ideal
> situation would be a reasonable exchange rate (so we get a lot for our
> efforts) AND good export volume, not because of the exchange rate but
> because others actually want our goods.

> Sure, "simply factoring the growth rate by change in a foreign currency"
> does not capture the full picture, but it _does_ capture a significant
> element.

> If disposable income increases, that good, but surely its a better
> situation if you want to buy locally produced goods because they're
> worth buying, and also have the option of buying imported goods without
> a price disincentive ?