Road to Armageddon: could Australia look like this in 2020?

Some people think that if we can all just get through the next 12 months or so then things will return to normal.

Wayne Swan

I GET the feeling that Australian business and politicians have the view the current global and local economic situation fits into a grand design over which we have little control. And that if we can all just get through the next 12 months or so then things will return to normal.

I have no doubt some politicians are "willing" the economy to strengthen in the lead-up to the 2013 election.

Oh, what a dream that would be. The economy "on the up" coming into an election year with a grateful electorate having forgotten the sins of the past.

Not that there were any sins of the past. But if there were then rising prosperity for all would obliterate the memory of past transgressions.

And, of course, the government -- any government -- could then say that the upswing was due to their policies, prescience, fortitude, insight and, frankly, personal brilliance.

Wayne! Wayne! Wake up, Wayne! You're dreamin'.

And I'm sure this is exactly what will happen. By early next year the US economy will be on the mend; things will have settled down in Britain; Greece will have been stabilised.

On the home front, I am also sure that consumer confidence will have returned and we'll all look back on the three years from the collapse of Lehman Brothers as little more than a bit of a bad patch.

But what if the past three years hasn't been a bad patch? What if the past three years have been the precursor to a seismic shift in the world economic and geo-political order? What if we are, in fact, "on the road to Armageddon?" Consider the evidence.

Manufacturing: The Australian manufacturing sector isn't just going through tough times; it is clinging on to an industry and to a skills base that is fundamentally flawed within the context of a globalised world.

By 2020, let alone by 2030, manufacturing in this nation will have contracted to a core of products that cannot easily be replicated and/or made and delivered to the Australian consumer from Guangzhou.

Bricks, beer, timber frames/windows for houses, food processing (eg milk), and hi-tech and bio-tech products over which we retain a competitive advantage come to mind. I might add that this prospect raises critical infrastructure issues with regard to the skills we might need if this nation were on a war footing.

It's probably not a good idea to outsource this entire nation's steelmaking capacity to China. Not that we are expecting to be at war with China in the 21st century, but all the same perhaps there are some manufacturing industries and skills that we should -- and I hate to use the word -- protect for strategic reasons.

Agriculture: The grain and beef sectors in particular have been subjected to global competition for decades, a process which in turn has driven farm aggregation and the subsequent depopulation of the nation's rural heartland.

This trend was never going to be just a "bit of a blip" when it first kicked off in the 1970s.

More than 40 years later, whole districts, villages and towns -- and arguably the confidence of the Australian rural heartland -- have diminished as a consequence. Farming sons and daughters no longer jockey to take up the family farm; instead they have shifted to the city or the coast and probably now work in hospitality or IT.

Armageddon unleashed its wrath slowly over decades in agriculture, inflicting its pain stealthily and by degrees.

At least Guangzhou hits between the eyes with yet another announced factory transfer.

Tourism: Here is a sector that for a decade seems to have lurched from crisis to crisis with serial negative impacts on domestic and international visitor numbers.

High petrol prices, avian flu, SARS, terrorist attacks, disasters in New Zealand and Japan and the rising dollar, to say nothing of the global financial crisis, are all to blame. Maybe. Maybe not.

What if the golden era of Australian tourism was the 1970s and 1980s (when the "worlds" surfaced on the Gold Coast), but by the 2010s this sector, though still important, will never recover to the dominance it once enjoyed.

Just as the wool industry will never have the clout it commanded in the 1950s and manufacturing in the 1960s.

And the reason being that the rest of the world no longer views Australia as a compelling destination.

On the home front, all those motels and theme parks that line the eastern seaboard are predicated on families taking holidays. But with the demise of the family and the rise of two-income households, it is no longer practical for a household to co-ordinate a caravanning holiday up the coast.

Indeed, the household of the 2010s is more likely to take a long weekend here and there or to take a Jetstar deal to Bali or Hanoi. Australians are suckers for exotica and, oddly enough, Bali and Hanoi are seen as more exotic than the Coolangatta caravan park. Yes, really.

Retail: It is fair to say that comparison shopping in particular has been in the doldrums since the global financial crisis.

Conventional wisdom is that this is because of diminished consumer confidence. The punter is scared of calamity and is saving instead of spending. Things will return to normal when consumers reignite spending. Perhaps.

But what if retailing is actually undergoing structural change with the arrival of internet shopping? This is not so much an impact on specific vehicles (although book and music retailing are obvious casualties) as it is on specific goods that scatter across department and other stores.

Perhaps by 2020 there will be proportionately fewer jobs in retail; as with Armageddon's impact on agriculture, death in retail is a long and drawn out process. Hours are cut back, jobs revert from full-time to part-time, and eventually evaporate altogether. The worry with this scenario is that the retail sector delivers employment to the lowly skilled and to every town in Australia.

Geo-political alignment: What if America's current problems lead to a diminished capacity to exert military power in Southeast Asia? What if China's capacity to project military power in this region expands? And what if during the 2020s China is able to marshal the resources of a larger and more powerful economy than the US?

Where does that leave the Australian nation claiming the resources of an entire continent?

Perhaps we are on the cusp of a geo-political realignment that, from the perspective of 2030, was clearly evident from the time of the global financial crisis.

In this Armageddon world, Australia's links with the Western alliance strains and falters.

Manufacturing and retail diminution propel the unemployment rate to 10 per cent and above.

A schism opens in the nation between those with the skills to engage in a global, but China-oriented, hemisphere and those left behind.

This is a very different world to the Australia many will lament leaving behind in the 20th century. The 21st century and Australia's place and role within that world is starting to come into focus.

Then again, this might all be mere speculation, nothing but

an Armageddonist's pessimistic view of the world from within troubled times. Then again, I might just be right on the money.

KPMG Partner Bernard Salt's new book is The Big Tilt

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