Just watched the full Ken Henry interview with Chris Uhlmann on replay. Does anyone else think it strange that he decided to do an interview on the same day that Martin Parkinson gave his set piece budget reply speech?
Anyway it was an interesting interview, though much of it I disagree with. For example, Ken floated the idea that a collapse in Europe could be good for Australia:
If the worse thing happens where does the capital go? It is quite possible of course on this occasion some of that capital will come into Australia, it is quite possible, it is quite possible o this occasion Australia will be seen as offering something of a safe haven for global capital movements. That’ll be the first time in the post war period but it’s possible to imagine it now.
Not really sure hiw this would work. If the world economy goes down then commodity prices will go down and we go down too. In that context it was interesting to see Mike Smith, CEO of ANZ, say to The Guardian on Friday that:
In an echo of the months leading up to the Lehmans collapse, Mike Smith, chief executive of Australia and New Zealand Banking Group, said the turmoil in the eurozone meant Australian banks were being frozen out of money markets when seeking funds.
Where I do agree with Ken is that the Euro is ill conceived and will probably collapse:
But let me make the point that I personally, I’ve never seen how the Euro would work, I’ve never seen how it could be expected to work without a general fiscal union.
… CHRIS UHLMANN: But it’s almost impossible to see how the Euro survives because its fundamentals were never right and retrofitting it now would seem to be impossible?
DR KEN HENRY: yeah well that is my view. Yep.
Does anyone truly believe that the Euro is the best fit for Europe? So if no Euro is the best outcome why don’t we just move there now? Sure it will cause upheaval, but would it best to stop and remove the shackles now rather than hobble along for decades?
Those that influence the debate (politicians, investment bankers, etc) overweight the short term because their votes and bonuses come up in a matter of years, whereas the benefits of moving away from the Euro will only come over many years.
Given that world leaders can’t seem to agree on what to do to save the Euro we may as well just get it out of the way.