Leadership needed to avoid catching eurovirus, says David Murray

FORMER Future Fund chairman David Murray has warned Australia risks falling victim to the same malaise Europe is suffering.

FORMER Future Fund chairman David Murray has warned Australia risks falling victim to the same malaise Europe is suffering as political leaders overcommit public finances and stifle freedoms needed for a truly open economy.

Writing exclusively in The Australian, the former Commonwealth Bank chief executive warns that the state of the nation's public finances is worse than political rhetoric would suggest, that attacks on mining entrepreneurs discourage success and prosperity and that the "eurovirus" is not confined to eurozone countries.

"Britain, the US and Australia have caught it and continue to conduct systems that limit freedoms, overcommit public finances and/or are unsupportive of market capitalism whilst leaders preach the benefits of an open economy," he says.

He says the tragedy for Australia is that it is witnessing the crisis of leadership in Europe and the US, but political leaders here are failing to establish a culture that would protect the nation from the same fate. The sentiments mirror comments Mr Murray has made in speeches to business people and reflect dismay within corporate Australia over the quality of the national debate and concerns that adversarial partisanship is undermining policy-making in key economic areas. On red tape, Mr Murray says business is now labouring under hundreds of new laws at a cost that is "much higher than the dollar cost of compliance" - even though the success of reforms to open up the economy under the Hawke and Keating governments is widely acknowledged.

In areas of the law including employment, safety, environment, competition and tax, company directors can be assumed guilty until proven innocent because a reverse onus of proof has become common - in contrast to union officials who enjoy more limited accountability.

The rights Australians have to property were riddled with uncertainty, with approvals for developing an existing residential dwelling often containing more than 80 conditions and requiring a team of consultants to interpret environmental and other planning laws.

And, while there was rhetoric about free trade, that was often undermined by systems of government approvals.

"One constant signal we get is that Australia's greatness stems from its rule of law and freedom. Both, in fact, are weakened by political leadership simply not facing reality," he writes. "If higher productivity is needed to manage in a more volatile world, then our leaders must give us back our freedom."

On public finances, he says these are very vulnerable to global shocks because of the borrowing in the federal budget, high net foreign liabilities and a permanent current account deficit that exists because Australia has for decades been buying more goods and services from foreigners than it sells.

"It was this vulnerability that required the government to guarantee the banks, not weakness of the banks," he writes.

"The issue is that as a commodity exporter Australia is a price-taker whereas the high welfare bill is a fixed cost. Such a structure does not normally allow for much debt at all."

Former BHP Billiton chairman and National Australia Bank chief Don Argus has also said he is concerned about rising government debt and that it is folly to ignore it because it is lower than that in other advanced economies.

As a share of GDP, the average net debt position of the G7 advanced economies is forecast to reach about 10 times the peak in Australia's net debt.

Treasurer Wayne Swan repeatedly has emphasised that Australia has a AAA credit rating from all three global agencies. But business leaders have been concerned about the cost of Labor's promises and fear they will lose tax breaks.