Deputy RBA Governor Andrew Hauser used a cute horse-racing analogy to explain the Reserve Bank’s monetary policy at the UBS Australasia Conference. Unfortunately, the analogy was almost as far removed from reality as the economy he was describing.

This RBA narrative is convenient for both the government and the Bank itself, because it ignores the serious problems created by their own policies.

Hauser’s message was that Australia is in a good position – recovering and operating near full capacity – but constrained by supply. If business simply invested more and lifted productivity, we would, in his words, be “off to the races.”

But if not, he warned, we could end up like the Melbourne Cup favourite Presage Nocturne – “boxed in at the rail.”

Away from the Cup fumes, here’s the economy we actually face.

Far from being in recovery, Australia has recorded declines in per-capita income for the past two financial years. The only thing keeping headline GDP positive is record levels of net immigration.

There are several reasons why the economy appears to be at full capacity – and none are cause for celebration.

One is the strain created by rapid immigration. Another is the lack of incentive for business investment: firms are running ageing plant and equipment as hard as they can, rather than expanding capacity.

The government’s announcement that our super funds will invest $1.44 trillion in the USA by 2035 is effectively an admission that there aren’t enough viable investment opportunities in Australia.

Meanwhile, business closures are rising. ACCI reports that 30 per cent of small businesses fear they may be forced to close within the next year.

The current government’s union-friendly industrial-relations changes are strangling productivity and innovation, while the Fair Work Commission is being overwhelmed by a flood of unfair-dismissal claims.

Employers can no longer manage their staff effectively – or even insist they attend the office.

Growth has come mainly from the public sector, which is crowding out the private sector. This inflates government payrolls at both state and federal levels, driving up debt and guaranteeing future tax rises.

In industries such as health and child care, the government has imposed wage increases and even mandatory staffing ratios, which reduce productivity while lifting costs.

Its botched energy transition has pushed up electricity prices – a cost that ripples through every industry, further cutting profitability.

And while the transition is nominally driven by private capital, it relies on government subsidies for profitability, diverting investment from genuinely productive areas — a form of crowding-out not captured in official ABS statistics.

Hauser boasts that Australia has the second-highest median wealth in the world, yet this is less a triumph than a measure of housing unaffordability.

Housing is the RBA’s and the government’s greatest failure. It is now twice as unaffordable as it was just six years ago – the product of:

• years of artificially low interest rates that encouraged excessive borrowing and inflated prices;
• government regulation that constrains supply; and
• unprecedented immigration that turbocharged demand.

Add to this “rich Uncle Albo’s five-per-cent deposit and shared-equity scheme”, which lures young Australians into what amounts to debt bondage.

Hauser appears to think the mining industry will save us. It could – but not under the current or proposed Environmental Protection and Biodiversity Conservation Act, or the layers of state, federal, and First Nations red tape.

Australia has slipped down the list of desirable mining jurisdictions, and the average time to develop a mine is now around 20 years, according to S&P Global Market Intelligence. Western Australia and Queensland remain the best of the bunch, but Queensland recently sabotaged its position by imposing the highest coal royalties in the world.

These are deep structural flaws. They make it improbable that Australia will restore productivity growth even to the modest levels of 2010–19, let alone the stronger rates of the 1980s.

If those running the country – especially officials of “independent” bodies like the RBA – cannot acknowledge the obvious and correct course, Australia will remain trapped.

The real lesson from horse racing isn’t that some horses get boxed in; it’s that winning jockeys learn from their mistakes.

Our RBA jockey, however, shows no sign of reflection. He seems to believe that if he just applies the whip harder, the economy will surge forward.

That isn’t good economics. It’s cruelty – and futility.