ACCESS ECONOMICS

1
The GFC What happened? The implications for
education?

• ACCESS ECONOMICS
• International Group, DEEWR
• 16 March 2009

2
Check those capital gains
3
Australias ratio risk was high but we werent
the only ones
4
But now the dam has burst, and the global
banking system is broken

• The September 2008 breakdown in banking markets
  has left global growth slowing at a scary speed,
  shattering confidence and commodity prices as it
  does.
• And, as almost all nations are slowing, they are
  all weighing on each other, meaning 2009s global
  recession has unstoppable momentum.
• Recession is infectious, and it is sweeping the
  world. Global growth in 2009 will be worse than
  at any time since the early 1980s, and may well
  be the worst in several decades.

5
Asias export slowdown is Australias recession
6
Australians spent the good times
7
And those good times were remarkably good
8
Yet history never showed price supercycles
9
Australian profits jumped in the boom
10
Lost income growth means much pain and a sharp
jump in unemployment here
11
Enormous stimulus, here and around the world
but the job is a big one

• Current conditions are temporary. At some stage
  markets in general and credit markets in
  particular will become less panicked, and the
  wheels of commerce will start to turn once more.
  That is why forecasts of a new Great Depression
  should be treated with a grain of salt.
• But the longer it takes markets to get their mojo
  back, the worse the short term outlook becomes
  for Australia and the world. Interest rates are
  now lower, but confidence is too, and that is
  enough to expect consumer spending and housing
  construction may be even weaker in the near term.

12
Government Is the Budget safe?
13
No with potential implications for education
14
So key national policy choices get harder

• In recent years there was so much money that
  lots of stuff got funded both good and bad
  policy.
• Yes, it was weird that we just got six tax cuts
  in a row.
• Now it is harder Canberras rivers of gold
  are drying up, limiting the money needed to
  finance further reforms. Do we give welfare to
  the car industry, or do we have an education
  revolution? Do we pay the promised personal tax
  cuts or do we achieve Federal/State reform? Do
  we pay the promised increases in age pensions, or
  do we scrape together the money needed to make
  serious gains in water reform and climate change
  policy? Do we continue to pay for the middle
  class welfare of Family Tax Benefit B, or do we
  subsidise a broadband network?

15
Though we still need the 3Ts for now both here
and around the world

• Policy reactions need to be timely, because
  unless we act fast, then the Government action
  will merely beef up the recovery rather than help
  avoid the slowdown.
• Temporary, because there is a risk of overdoing
  it, because we now cant afford big bucks, and
  because demand management lies better with the
  Reserve Bank and interest rates.
• Targeted, because unless the policy action
  results in increased spending a boost to demand
  at a time when the latter is flagging then it
  wont help the economy.

16
The forecasts
17
The signs of recovery What to look for

• A narrowing in credit spreads (that is, the
  global banking system returning to better health
  watch 3 month US LIBOR less the OISR).
• Something else on the front page (a return to
  better business and consumer confidence here and
  globally).
• Stabilisation or even recovery in sharemarkets (a
  traditional leading indicator of recovery).
• Stabilisation or even recovery in commodity
  prices (very important for Australia watch spot
  steel prices).
• An end to falls in housing prices (the largest
  component of our wealth).

18
There is a bigger picture as history reverts
19
Relative productivity and the path to
convergence
20
Here they come
21
David Ricardo and comparative advantage
22
Overseas share of higher ed students in
Australia, 1988 - 2007
23
Training and education are worth it
24
As is evident in unemployment
25
And in participation
26
Share of diploma and advanced diploma students by
field, 2002 and 2007
27
English and business two strong suits
28
Employment growth by occupation type, 1988 - 2008
29
Asias 2009 the weakest in years which will
affect education demand with a lag, though the A
helps
30
The commercial implications

• Be worried. The globe can expect a rolling
  downturn that wont end soon.
• AE may be wrong on the depth of the downturn, but
  there are advantages in (1) adopting a policy of
  least regret while still (2) being as flexible as
  possible.
• Yet this too shall pass.

31
As the global industrial revolution benefits
Australia as well as the developing world
32

While every effort has been made to ensure the
accuracy of this document, the uncertain nature
of economic data, forecasting and analysis means
that Access Economics Pty Limited is unable to
make any warranties in relation to the
information contained herein. Access Economics
Pty Limited, its employees and agents disclaim
liability for any loss or damage which may arise
as a consequence of any person relying on the
information contained in this document. The
presenters views are his or her own, and not
necessarily those of Access Economics Pty Limited.