Archive for the ‘Economics’ Category

« Older Entries

Barnaby Joyce, policy whacko esquire

Saturday, February 6th, 2010

Despite the resumption of parliament, political debate has been muted this week; with the news dominated by a few unfortunate seconds of video footage of a Macquarie Bank worker and a legal case featuring one (or is that two?) of Australia’s favourite national songs. Such is the flippant, transitory and ultimately tabloid nature of modern news.

One intervention into the headlines worthy of debate was made by Shadow Finance Minister Barnaby Joyce. Appearing at the National Press Club for the first time as a seriously senior member of the Opposition, Joyce delivered a performance that undoubtedly left Liberal Party members across the country scratching their heads and squirming in their seats. Michelle Grattan reports on Joyce’s most questionable comments in The Age:

”We are giving $150 million to the World Bank. Fair enough. $50 million of that is to deal with the food inflationary aspects in the Third World. Well, why doesn’t Kevin Rudd deal with the food inflationary aspects in this world, you know? That would be handy,” he said.

…
Senator Joyce said: ”We’ve got to be cautious when we’re borrowing money from overseas to send back to overseas … because we’ve got to pay the money back.”

Putting our Macquarie Bank staffer to shame, in a matter of seconds, Tony Abbott’s right-hand man dropped a whole swag full of clunkers right there. For starters – Joyce’s rant rode roughshod over official Coalition policy on foreign aid, forcing the Opposition Leader and his Deputy to issue terse “corrections” on his behalf. It also raised serious questions about his ability to be the senior spokesperson for such a broad, sensitive policy portfolio. To compare the problems that Australia has with access to food to the problems that countries in the Third World have with access to food is quite simply, outrageous. That Joyce saw fit to raise the prospect of abandoning or reducing Australia’s small obligations to the international needy smacks of narrow, parochial self-interest, reflecting quite poorly indeed upon his character.

The Shadow Finance Minister’s financial credentials also warrant some serious questioning. Particularly in the wake of the financial crisis experienced over the last couple of years, national governments across the world have surged into debt. Some national governments are worse off than others, but what is readily apparent is that Australia’s net financial position, considering our projected ability to repay outstanding debt, is superior to just about any other nation out there. It is not strange, wrong or inadvisable for Australia to be in debt; certainly not any more the case than it is for Harvey Norman or Woolworths to borrow money, or for you or I to take out a mortgage to purchase property, at home or abroad.

Joyce seems to be suggesting that it may be inadvisable to borrow money “overseas” if the money is to be spent “overseas”, ostensibly on people who are not Australians. What sort of short-sighted, hermit kingdom mentality does that betray? What miniscule price does Joyce put on the lives of people that Australia’s aid assists, let alone Australia’s international reputation and renown as the land of the “fair go”?

Frankly, it was a Sarah Palin-esque moment, with a dash of Pauline on the side. As this year’s federal election looms large, Tony Abbott is likely going to come to rue the day that he decided that he wanted Barnaby Joyce to serve as one of his right-hand men. If, as Palin famously suggested, she can see Russia from Alaska, then this week’s events have proven (for any still in doubt) that Barnaby Joyce can really, truly, indubitably see the Third World from rural Queensland.

Evidently, if Australia is in debt, it can all rot.

ELSEWHERE: It’s hard to go past Damien Kingsbury’s surgical dissection of Joyce’s folly folly, also in The Age. To summarise:

Without any prompting, Joyce appears to have wandered off into policy whacko-land.

Tags: ,
Posted in Abbott Opposition, Economics, Liberal Party, National Party | 2 Comments »

Whatever you do, don’t say billion

Monday, May 25th, 2009

It was getting a little absurd and starting to backfire dramatically, so the Prime Minister and the Treasurer were forced to halt their “billion ban” charade in parliament today.

As has been previously observed:

It’s been suggested Kevin Rudd would not utter the phrase ”$300 billion” for fear his words will be used in coalition advertisements during the next election campaign.

…

Mr Rudd said debt would peak at “around about 200, our gross debt at about 300” in 2013-14.

Asked to explain 200 or 300 of what, Mr Rudd responded: “These are billion figures.”

The genius (whoever they are) in Federal Labor’s leadership team who seriously believed that the government could get away with its senior members not saying the word “billion” for the next 18 months or so must be living on Planet Wacky. It’s a little disturbing that this wacky idea was even successfully sold to the men who are overseeing the nation’s response to the financial crisis, and that they ran with the “billion ban” for a day or two. The Coalition would be nuts not to make fun of the Prime Minister’s use of “200″ and “300″ in their election campaign next year.

Madness.

Tags: , ,
Posted in "Economic Conservatism", Economics, Rudd Labor Government | 4 Comments »

Our very own red rooster and his big red numbers

Thursday, May 14th, 2009

Over the course of the last week, the expression on Treasurer Wayne Swan’s face has been even more deadpan than usual; so deadpan, in fact, that its as if someone from Treasury has swung an almighty great frying pan across his gloomy mug. In a sense, that is of course just what has happened. There is no tougher gig to have at the moment. Even before one considers all the election promises that Rudd Labor made back in late 2007, and the bold stimulus measures introduced during the past six months in an attempt to ward off the worst of the GFC, the government is starting behind. The tumultuous financial conditions have reduced profits, spending and incomes across the country, wiping a sizable $210 billion from the government’s anticipated revenue. Let’s be clear: whether the federal government was headed by Labor, the Liberals, or anyone else, it would have delivered a budget in the red in 2009-10 like the Rudd Government has. The buck must stop with the Treasurer, (if not he, then who else?), but its fair to say that a significant portion of the big red numbers being bandied around are not Mr. Swan’s or indeed Federal Labor’s fault.

Casting a considered eye over the opinions flying around in the mainstream media, it would seem that this is a Budget that is hard for people to support. It mixes almost evenly boosts and blows, to the point that some commentators believe it to be a confused budget, a budget that tries to stimulate the economy even as it withdraws funds from some, possibly lulling it back to sleep. There are welcome measures, such as the significant increase in payments to single pensioners, the introduction of parental leave (even if it is delayed until 2011), and the urgently needed $22 billion package of infrastructure measures. On the flip side of the coin, there are a few downright bafflers. The planned lifting of the pension age to 67 is a positively nutty idea, and gives credence to the accusation that Treasurer Swan is living blindly on the teat of the bureaucrats in Treasury. The means testing of the private health rebate is a questionable measure, given that it is likely to encourage people to ditch private health insurance and increase load on the public system. For once, Malcolm Turnbull might be on the right track by suggesting that raising excise on tobacco is a more sensible measure and can deliver the same amount of revenue.

It will be interesting to observe how Messrs Rudd and Swan react to Turnbull’s suggestion, and indeed to see how the public reacts to the Federal Opposition’s constant carping about the level of national debt. One does get the sense that the broader public is quite concerned about the hundreds of billions of dollars of public debt that Australia is now swimming in. This is a real concern, but it is a concern that is being simplistically tended by the Coalition. For his part, Malcolm Turnbull seems determined not to utter a word about the possibility (nay certain fact) that his team would also find itself in billions of dollars of debt if it were in government now. What remains to be seen is whether or not the sheer magnitude of the red numbers here are enough to get some people to lose faith and start to consider the opposition as a viable alternative government.

Make no mistake, this is the start of Malcolm Turnbull’s big chance.

Tags: , , , ,
Posted in "Economic Conservatism", Economics, Rudd Labor Government, Turnbull Opposition | 4 Comments »

Nobody has got the bazooka

Thursday, April 2nd, 2009

As the media breathlessly awaits the anti-climactic results of the G20 conference in London, you really have to pity the poor sods that we have charged with saving the global economy. I don’t think there is a living soul out there who truly believes the cream of the world’s leaders have what it takes to put capitalism back on track, but doubtless we all still hope. It’s a pretty thankless task. It seems that just about every journalist and economic commentator doing the rounds has some advice in hand for the likes of Barack Obama and Gordon Brown and their colleagues, as a pocket full of chaos descends on the square mile. Eminating from about 20 metres from where I emerged from the tube every weekday morning for about a year during 2007/08, the media is beaming in images of blood, death, and stupidity on all sides; the smashing of windows, attacks on police, and the flippant teasing of protesters by office workers.

But wait! There’s more. The Keating watchers among you would no doubt have noted that our beloved former Prime Minister intervention’s into public debate have been rather more rabid and senseless than usual in recent times. The former Member for Blaxland, has emerged once more with some fairly radical advice for President Obama:

“The problem with the Americans is this: that they have a great body of large, systemic banks which are barely solvent or maybe insolvent.

“They have to decide which are insolvent and shut them and for those that are solvent, take them over and recapitalise them.”

…

“The Japanese took eight years before they put any recapitalised money into banks, foolishly,” he said.”The Americans at least are doing it in year one but nobody has got the bazooka and no one wants to fire all the rockets.”

One suddenly gets a mental image of Messr Keating, bazooka balanced precariously on his shoulder, firing a barrage of rockets into the heart of the dreaded GFC. One wonders what Mr. Keating would have thought about all this latter day nationalisation talk of his twenty years ago, when he was flying the flag of centre-right economic policy in government?

Tags: , ,
Posted in Economics, Rudd Labor Government, UK Politics, US Politics | 2 Comments »

Ideology is such a lonely word

Thursday, February 26th, 2009

Kevin Rudd’s 7700 word essay on the global financial crisis, published in this month’s edition of The Monthly, was a remarkable contribution to serious political debate by a sitting Prime Minister. What isn’t remarkable given its length and lack of humor is that it appears to have gone down like a lead balloon. Mentions of the essay in the media seem generally restricted to pointed criticisms of it from members of the Opposition or their sympathisers. A few journalists (such as The Australian’s Matthew Franklin) have even had a go at “Julie Bishoping” the Prime Minister, on the somewhat flimsy pretense that 26 words of the essay’s 7700 words were almost identical to a passage that appeared in an recent Foreign Affairs article. Err… ouch [wet noodle limply falls to ground].

For the benefit of those who haven’t splashed out on the magazine, I am going to try and offer a hopefully more level-headed summary over the fold.

(more…)

Tags: , , ,
Posted in Economics, Federal Labor, Howard Government, Labor Party, Rudd Labor Government, Socialism | 2 Comments »

Well I’ll see your stimulus, and I’ll halve it!

Thursday, February 5th, 2009

Like the Opposition, I actually do believe that the Rudd Government’s blockbuster $42 billion stimulus package should be subjected to a reasonable degree of scrutiny. I don’t buy the government’s line that this stimulus package is so incredibly urgent that the Senate should not be permitted to conduct an inquiry, bargain or make contrary recommendations. On the other hand, given the economic climate, I do believe the Senate should be seeking to maximise both robustness and swiftness of deliberation when tackling the package – mutually opposing principles perhaps, but then we live in rather difficult times.

This is where I part company with Opposition Leader Malcolm Turnbull. I honestly believe that Turnbull’s rhetoric on the stimulus package is out of whack with the majority of his economic policy peers globally, and the general mood out there in the electorate. In most other scenarios, I would agree that tax cuts are a vastly more sensible means of passing excess government funds back to the electorate than one-off handouts. The scenario that the Rudd Government and the rest of the world faces today, however, is somewhat unique. The economy needs additional activity to be fostered now, not incrementally over the coming years. The results are in for Federal Labor’s December 2008 stimulus package, and they seem positive. The Coalition has painted itself into a corner now, with a series of ugly budget blowouts in the coming years the only possible saving grace for their position.

This leads us neatly to the other quirk in Turnbull’s rhetoric. By proposing that the government’s stimulus package be halved, Turnbull is gambling that the fear of the economy tanking as a result of government inaction is less than a fear that the deficit in the budget is going to get out of control and plague federal governments in the years to come. Some folks in the media and Liberal operatives are already trying to frame the current situation as the “deficit we had to have”. This is strangely enough true, although perhaps not in the way that some are trying to frame it. The abrupt reduction in projected tax receipts for the Federal Government as a result of the global financial crisis could not have been predicted in May last year, and even if the Coalition won at the polls in late 2007, it would find itself in the midst of a budget deficit today. This is a deficit that is not of Federal Labor’s making. It may be somewhat extended by their actions, but given their actions are quite closely tied with the prescriptions of the world’s economic orthodoxy, the Rudd Government has some defences in reserve if it needs them.

Politically speaking, this was not the right time for Turnbull to skimp. Unless the Opposition punches some serious holes in the Rudd Government’s package over the next week or so, it is not going to gain any political capital from this odd little diversion into one-downsmanship. I also don’t believe for a moment that the Coalition caucus unanimously backs Turnbull’s stance. They seem to just be biding their time and hoping that Turnbull is going to somehow get lucky by pursuing this approach.

Tags: ,
Posted in "Economic Conservatism", Economics, Rudd Labor Government, Turnbull Opposition | 3 Comments »

Rudd’s reaffirmation of the Third Way?

Sunday, February 1st, 2009

There’s been quite a bit of buzz in the media over the weekend about a 7700 word essay on the challenges posed by the global financial crisis that the Prime Minister has produced for the next edition of The Monthly magazine. Apart from being quite a uniquely direct intellectual contribution to debate by the sitting leader of a nation, the essay looks set to revive hostilities along traditional ideological lines. In seeking to frame the global financial crisis as a signal that the neoliberal economic doctrine popular in recent years is fundamentally flawed, the Prime Minister is opening the door for Federal Labor to make a return to its social democratic roots. One could almost believe that Tony Blair’s nerdy antipodean brother is alive and well and living at Kirribilli House.

Those lovers of ideology over at The Australian have already produced not one but three opinion-based pieces on Rudd’s essay, together with a video analysis from Dennis Shanahan. Both Paul Kelly and Lenore Taylor see the essay as an opportunity for a new era of distinction between Australia’s major parties to begin, with Rudd’s Federal Labor visibly leaning a little towards socialism, and Turnbull’s Opposition staunchly defending the free market liberal agenda. There is more than a hint of the suggestion in both pieces of an unspoken truth; these guys really want Turnbull back in the game, and Rudd’s Labor tarred with the old-school, old Labor brush. Of course, they don’t really give away whether or not they have actually seen the complete essay.

As someone with a fairly inherent social democratic bent, I don’t really see a problem if the Prime Minister makes an attempt in the essay to use the fallout of the global financial crisis to push for a more balanced economic agenda. In an time when the leader of the free world is engaging in large-scale nationalisation programs and propping up insolvent giants, surely only the most deluded observer could believe that something was not a bit rotten in the state of the global economy’s regulatory regimes. At least for me, the need for greater balance in the nation’s economic affairs has been apparent for some time; it’s just plain common sense given the problems we know the world is facing today – an absurd patchwork of rich and poor, and a subliminal devaluation of the common good. To a large extent, Rudd may be seen as getting on the bus far too late, if he really does believe that it is only the global financial crisis that has engendered a need for significant systemic change. I will however reserve judgement on the essay until it is published in full.

The magazine will be available in newsagents this Wednesday. You can read the first 1500 words of the essay online here.

ELSEWHERE: Mark has more at Larvatus Prodeo, as does Jason Soon at Catallaxy.

Tags: , , ,
Posted in "Economic Conservatism", Economics, Rudd Labor Government | 4 Comments »

Must be funny, in the rich man’s world

Monday, December 8th, 2008

This afternoon I visited the local Westfield shopping uber-complex to finish up (okay, inch closer towards finishing up) the Christmas shopping. Even considering the season, and that there are now only sixteen shopping days until Christmas, it really did seem as though the place was just a little bit more nuts than usual.

Interestingly, the handouts started dropping into the accounts of punters today. While I am a little sceptical about the format and actual worth of the government’s stimulus package, its effects are in some respect already plain to be seen. Judging by some of the most popular Google terms that found their way to even this little blog over the last twenty-four hours, it does seem that there are a few excited people out there:

which people receive rudd gov. stimulus
three groups not getting rudd handout
students hit hard by rudd’s stimulus package
words to describe the current economic turmoil
cash injection lump payment
who gets the rudd government stimulus payment
who gets the rudds cash payment??
rudd hopes stimulus package encourages consumer spending
how gets the rudd stimulus package
rudd govt. handout who gets it
labor party stimulate consumer spending
why don’t low income earners get the rudd handouts

I only hope that if there is a second round of stimulus measures next year, it is delivered by the Prime Minister rolling through towns in the back of an open-top car, throwing handfuls of banknotes out of bulging hessian sacks. For the moment at least, that is the image that sticks in mind for me in relation to the government’s response to the financial crisis.

Let’s just hope for the sake of the national economy and those who are really struggling that it goes someway towards delivering the goods. Of course, if the December 2008 consumer spending figures suggest otherwise (even allowing for the usual Xmas boost), the government might just have a bit to answer for in the new year.

Tags: , ,
Posted in Economics, Personal, Rudd Labor Government | No Comments »

Those terrible “d” words

Wednesday, November 26th, 2008

There is no denying that the rhetoric that the Prime Minister has employed to describe the current global economic situation is strong, and the Rudd Government’s actions so far have been tailored accordingly. Over a month ago, when announcing his government’s $10 billion package of stimulus handouts, Rudd described the current crisis as “the greatest global financial crisis since the Great Depression”. This assertion is not entirely unjustified when one considers the extraordinary ramifications we have observed so far, but on the other hand, the Prime Minister was walking on shaky ground by linking the current financial crisis to the word “depression”. It’s something like rhetorical guilt by association. Depression? Did he really say depression? As in, the Great Depression? And, so on.

In short, Kevin Rudd’s personal approach to the economic situation as Prime Minister seems to revolve around straight talking, with a cautiously pessimistic bent. If things could get worse, then the Prime Minister seems to want to make it clear to everyone that they should be prepared for things getting worse. Rather than trying to create an oasis of blissfully ignorant confidence at the head of government – something the Howard Government probably would have done in the same position – the Rudd Government seems hellbent on highlighting the uncertainty that does exist. Nobody really knows just how events are going to play out. Just like other governments and indeed commentators, Federal Labor does not really know if the current crisis is going to take several months or several years to peter out.

It is in this sort of environment that the Prime Minister has elected to finally entertain that great Australian shibboleth for economic “incompetents” – the dreaded budget deficit. Samantha Maiden has the details in The Australian, and the full statement delivered by Rudd to parliament is here:

Kevin Rudd has conceded for the first time that Australia’s budget may have to go into “temporary deficit” if the global financial crisis worsens.

…

“If Australian economic growth slows further because of a further deepening of the global financial crisis, then it follows that Australian revenues will reduce further,” Mr Rudd said.

“Under those circumstances, it would be responsible to draw further from the surplus and if necessary to use a temporary deficit to begin investing in future infrastructure needs including hospitals, schools, TAFEs, universities, ports, roads, urban rail and high speed broadband.”

…

“In fact, failing to do so would irresponsible – and would sacrifice growth and jobs. But any such action would need to be consistent with the discipline of maintaining a surplus across the economic cycle.”

It is probably well past time for one of the most misguided economic conventions of the modern era to be buried. Anybody who owns a home or invests in property will be able to tell you that it often makes sense to borrow money in order to invest for the future. Anybody who runs a business can tell you that it sometimes make sense to borrow in order to grow the business, even if the current bottom line is not healthy enough to support such a step. The doctrine that suggests that budgets deficits are always “bad” effectively is also suggesting that investment for the future should be mercilessly limited, and that important projects too big to be funded by governments should be dumped.

As long as the Rudd Government takes care to ensure that any funds borrowed are spent wisely and on measures that are effectively certain to benefit the national economic situation, I personally see no problem with the government going into deficit. It would obviously amount to poor governance to consistently deliver budget deficits, but the odd one, if put to proper use, can definitely work to the greater benefit of the nation.

Tags: ,
Posted in "Economic Conservatism", Economics, Rudd Labor Government | 11 Comments »

Should Federal Labor consider cutting GST?

Monday, November 24th, 2008

In the current global economic environment, governments across the world are looking for ways to stimulate spending in their domestic economies. Consequently, the beleaguered British Government is set to temporarily cut the rate of their VAT (value-added tax) for a one to two year period, in the hope that it will stimulate spending in the immediate term. Toby Helm and Heather Stewart have the details that are at hand for the moment in The Guardian:

Alistair Darling will make a high-risk bid to lead Britain out of recession tomorrow, when he is expected to cut VAT and entice the British people to go on a pre-Christmas spending spree.

…

Last night, as Darling put the finishing touches to the most important financial statement of Labour’s 11 years in government, there was speculation that he might slash the rate to 15 per cent [from 17.5 per cent], a move that would cost the government about £12.5bn a year.

This is an interesting development because it raises a few questions about the Australian Labor Party’s stance on the local GST. Historically, of course, Labor opposed the introduction of the GST at the 1998 election and fought a second unsuccessful election campaign in 2001 on a policy of GST “rollback”. Now that the GST has been in place for practically a decade and is firmly part of the architecture of federal-state funding, it would appear unlikely that the Rudd Government would seek to manipulate it at this juncture. Cutting the rate of GST in Australia would have considerable implications for state funding, given that all revenue generated by the tax flows through to the state governments. In short, for the rate of GST to be reduced, one would have to think that the existing federal-state funding framework would need to in the least be padded by some non-GST contingency funding from the Federal Government – or perhaps reframed altogether.

The other part of the puzzle worth considering is whether lowering the rate of GST would realistically have any effect on consumer spending at all. Let’s say that the rate of GST was cut by the Federal Government tomorrow from 10% to 5% – an astronomical 50% cut. Consumers presumably would have more money in their pockets every week as a result of their reduced weekly spending – money that may or may not then be reinvested in more goods and services, stimulating the economy. Given present consumer confidence and the vast uncertainty that still exists with respect to the global economic situation, it is questionable as to whether cutting GST would actually result in a positive outcome, a fact that Peter Mandelson points out in the Guardian article with respect to the proposed British VAT cut.

In any case, it would appear that the Rudd Labor Government could not realistically afford a rate cut of anything like that magnitude without going into deficit. The revenue generated for the states from the GST in 2008-09 was projected at $45.5 billion, meaning effectively that funding such a 50% GST rate cut would cost in the ballpark of $22.75 billion; a figure already exceeding the now optimistic total budget surplus of $21.7 billion projected back in the May Budget. Without some credible evidence suggesting that cutting the rate of GST even by a small amount is definitely going to deliver results, it would be a highly risky endeavour for the government to pursue it.

Tags: , ,
Posted in Economics, Labor Party, Rudd Labor Government | 2 Comments »

« Older Entries