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Home Features Terry Moran: what does Australia’s ranking slump really mean?
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TAGS Business/Finance, economics, Economy of Australia, International Monetary Fund, Gross domestic product, Economic indicators, Macroeconomics, Committee for Economic Development of Australia, Debt-to-GDP ratio
Is it really all storms ahead? Australia’s relative standing in the global scaling of public finances doesn’t tell the whole picture, says IPAA president and former PM&C secretary, Terry Moran. Where it counts, in outcomes, Australia stands among the world’s leaders.
“Animal spirits” was the phrase that John Maynard Keynes used to remind us that economic decisions are often made for intuitive reasons, rather than the “weighted average of quantitative benefits multiplied by quantitative probabilities”.
This is partly why we measure the state of our economy through a combination of traditional econometric measures and reports of consumer and business confidence levels, even though the latter are intrinsically more subjective and influenced by one-off individual experiences and biases.
Traditional econometric measures, including GDP, are not without their flaws either. From Robert Kennedy onwards, there has been unease about the activities that are or are not counted in GDP and how well GDP growth is really linked to an increase in the sum of human happiness. It was striking that, according to one analyst, the Commonwealth Treasurer’s recent budget speech was the first for 35 years to not include the phrase “GDP” at all.
So the solution, as in many things, is moderation and being aware of which measurements are based on opinions and which are based on some form of measurable fact. The risk is when opinion-based indicators solidify into “facts on the ground”, our ability to make intelligent public policy choices is greatly reduced.
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Terry Moran is the national president of the Institute of Public Administration Australia. He was formerly secretary of the Department of the Prime Minister and Cabinet and the Department of Premier and Cabinet in Victoria. He is an editorial adviser to The Mandarin.
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