THE Premier's recent State of the State address, a rallying cry to Tasmanians seeking to assure us we're heading in the right direction.

The reality is it fails to adequately discuss the underlying problems that continue to face us.

That's not a criticism per se, more a comment on the nature of a small state in a much larger federation, where macro settings beyond our direct control have much more impact than anything state or local governments can do.

We need to understand and discuss the broader issues if we are to make real progress for the benefit of all.

Take wages for instance. We all know that wages aren't keeping up with inflation. But it's worse than that. The wages share of the national pie has shrunk. The share of the pie accruing to capital and profits has doubled over the past 30 years.

But that's what makes our system work, I hear others say - we need profits to reinvest into the economy.

That's not what is happening. Profits are overwhelmingly being used to speculate in real estate and other existing assets which in turn demand a return, leading to an even larger share accruing to capital and profits. If it wasn't for public investment in hospitals, schools and roads, as a state we'd be struggling.

A common response is to blame the government for borrowing too much to finance its spending. But that ignores the iron clad reality that governments are running deficits because the private sector is running surpluses.

If governments are to run surpluses then the private sector will need to run deficits.

The private sector would need to borrow more and add to its existing pile of debt, most of which has been used to speculate in real estate and financial assets rather than growing the real economy.

It is mind boggling that we have allowed our economy to become so unbalanced.

What should be important, and our focus, is not trying to place limits on the size of governments or how much they borrow or spend, but to work out ways to reverse the decline in the wage share of the national pie, which in turn will lead to a fairer society. I wish to live in an economy where people come before profits.

The Advocate, Monday 21 March 2022