No short cuts on education and training

ONE consistent theme to have emerged from talking to people in business is the declining investment in education.

While it was a subject of discussion even before the financial crisis, it has become even more pressing because of the concerns that falling state and private sector revenue will curtail spending in this area.

In the past week, a few business leaders have highlighted to me the fact that the past boom exposed our previous lack of investment in training and skills development in areas critical to our future. Engineering, trades and health were the sorts of areas where we've seen big skills shortages.

Despite a $145 million federal initiative to subsidise apprenticeships across Australia, there is concern that, traumatised by the global financial crisis, Western Australia's government and private sector industry will axe training expenditure.

That could sow the seeds of another skills shortage when demand for WA's commodities undoubtedly revives after the current crisis.

Unfortunately, the next boom in the economy looks a long way away, especially for those thinking in terms of an electoral cycle and needing to find ways to slash a budget.

This fear is similar to the more universal education message businessman Michael Chaney was spruiking not long ago when the Australian Institute of Company Directors gave him a platform to voice his concerns about our school system, and the quality of teachers in particular.

"I think we should all be very concerned about whether we are producing a future workforce with the necessary skills to compete successfully in an increasingly competitive world," Mr Chaney said.

It is worth noting that he made that call last September, before the true extent of the current financial crisis had emerged (WA Business News subscribers can read an extended extract of that speech on our website).

It is also worth noting that Mr Chaney's concerns were raised at the end of a five-year period when educational spending had risen 42 per cent.

But to some, the focus on tertiary level education - such as skills training and university - and even the school system misses the biggest opportunity to educate our population and best prepare the nation for the future.

This week I heard calls for more funding of early childhood development at a Committee for Economic Development of Australia talkfest.

The prevailing view was that the pre-school mind, especially up to the age of three, is when much of our adult ability is formed.

If we could invest more in education and development at that stage when motor and language skills are being developed, the returns would be immense in the future because these children would learn more during their schooling and be better placed to contribute to society in the future.

All the speakers I heard - University of Melbourne chair of Early Childhood Education and Care, Professor Collette Tayler, WA Chief Scientist Professor Lyn Beazley, and WA Commissioner for Children and Young People Michelle Scott - voiced pretty much the same thing.

"Skills beget skills," Professor Beazley said.

Yet it was clear to me that the speakers knew the sort of uphill battle they faced. As usual, they pointed to Scandinavia where several countries have policies targeted at this area, compared to Australia where access to this service is poor.

And in Australia, WA is being left behind. Ironically, there is a strong argument that education at this level is quite cheap, especially given the pay-off in the future. However, as Professor Tayler showed, investment in education per capita is almost opposite to when it will have its greatest impact on the brain's development, creeping up slowly from age six to hit its peak at tertiary level.

Just as we know that early childhood healthcare can dramatically affect the future of its recipients, so too may specialist education at that stage make a big difference.

The risk is that we continue on as we are while other nations better prepare their young populations to meet the challenges of the next generation.

This is a hard message for politicians to sell when people are desperately focused on their hip pockets and economic policy revolves around handouts for people to spend in shops.

To make it consumable to the electorate, perhaps our leaders ought to remind voters that it will be the newly born of today that will be paying off the bills we leave them to deal with when we plan to retire.

This is one investment that may pay for itself.

MORE PETROL PROBLEMS

I'VE always known of the dangers inherent in being an amateur economist, especially when you mention oil prices.

My column wasn't out for long last week before I had feedback from the experts, so I'd best clarify for the sake of keeping readers informed.

Firstly, it was pointed out that a better guide to oil prices for Western Australia was out of Singapore, rather than the Brent crude price I used. Fair enough, though the overall trend was what I was after and Singapore prices aren't as easily accessible as other world indicators. While I can't dismiss that factor altogether, I can live with it.

The second criticism was more fundamental - the fact that I didn't convert the US dollar oil price.

I was told: "The plot you published ignores the AUD exchange rate and tells your readers little, and may have resulted in a baseless conclusion."

Again, fair point, and certainly one I can test.

I did do a bit of back-of-the-envelope stuff using the same arbitrary dates as before and that could vaguely prove my previous case but, as one reader suggested, converting the Australian dollar price of a barrel of oil to cents per litre provided a very clear picture.

See the graph (above) and draw your own conclusions.

The correlation is obvious. Even though, to the naked eye, the gap still appears to be widening, the difference in percentage terms is negligible over eight years.

So I guess there's no case to answer in terms of oil price exploitation, with the market appearing to work very efficiently.

It goes to show that, despite thinking about the Australian-dollar impact every day, it's easy for those of us whose businesses are purely run in Australian-dollar terms not to consider that factor; until we plan a holiday that is.

One saving grace in my failure to account for exchange rate movements is that, from what I've seen of many businesses in the past, I'm not alone in that respect.

Thanks for the feedback, there is much benefit in going through the process of understanding why you made a mistake.