Murray issues 'euro' warning
Former Commonwealth Bank chief executive David Murray says the Australian economy is walking down the road paved by the economies of Europe, unless the incoming Federal Government introduces drastic reforms to lift productivity.
Speaking on the sidelines of the Association of Mining and Exploration Companies conference yesterday, Mr Murray, also former Future Fund chairman, said despite Australia's relative prosperity, it was not "overly dramatic" to compare it to parts of the EU.
He said as a nation Australia could not take its triple-A credit rating for granted.
"In fact, it's a weak triple-A already," Mr Murray said.
"(For example) our high foreign liability to gross domestic product creates a huge vulnerability when we're so dependent on foreign bond holders, and bond holders can revolt.
"We are copying the things that we saw in Europe that have created structural difficulties so they can't grow, or get themselves out of difficulty.
"(In Australia) it comes through over regulation, debt-funded entitlement vote buying by politicians - all the structural rigidities in the system.
"But we have a moment in time now to lift productivity for a great future, before it gets too difficult."
Mr Murray, in Perth to deliver a keynote address at the AMEC conference, steered the Commonwealth Bank through privatisation in the 1990s, and is considered an elder statesman of the banking sector.
He said the imperative for Australia today was to change the shape of government expenditure.
"We need to spend on more valuable things, but reduce government expenditure overall," he said. "We need a major lift in productivity to deal with a global economy that's still lacklustre, a change in emphasis in China and a shift in our fortunes away from massive investment in mining."
Speaking on the WA economy, Mr Murray said promoting a more flexible economy, through rising productivity, should be front-and-centre for WA.
"In WA, where the budget is so vulnerable to a change in circumstances (you) need the most flexible system, and we have one of the least flexible systems in the world," Mr Murray said.
"The prospects for the world at large are not as robust as they were. And for China, its economy is simply maturing. Don't worry that people say 'oh no, China is at 4 per cent growth - that's 4 per cent of a lot.
"There are no problems for us with that. But it is not where our expectations have been."
