A NYT editorial has slammed Goldman Sachs for its role in the financial crisis, Ten must work out what to do with Australian Idol in 2010, how the media downturn will affect higher education, newsreaders get emo, and more.
Data, recession, Turnbull and a load of old experts
|
The IQ of Australia’s economists, analysts and commentators surged exponentially yesterday afternoon as they instantly explained what was obvious to us all: we’re in recession. As of 11.29am, Australia was, according to most commentators, poised to strongly out-perform the rest of the world by maintaining positive, albeit weak, growth. After 11.30, we were mired in recession — and everyone was busy explaining why. There’s the definitional debate, of course. Some say it doesn’t matter too much how you define it — if it walks and talks like a recession, it is one. Others appeared annoyed that the September quarter figures hadn’t been revised into the red. “We’re in recession right now,” Michael Stutchbury was shrieking by mid-afternoon. Tim Colebatch produced GDP per capita with a flourish this morning to declare we were going down at the same rate as everyone else. “Most economists declared the nation to be in recession,” said the AFR. Instant experts. Just add data. And then there’s the bogus savings issue, which Glenn Dyer unpacks elswehere in this Crikey edition. Malcolm Turnbull insists that it is all evidence that he was right about the first stimulus package. Mark Riley on Seven News last night nailed him on this, reminding viewers of Turnbull’s initial enthusiastic support for the package. It’s not Turnbull’s opportunism that’s the problem. Complaining about a politician — particularly one in opposition — being an opportunist is like complaining about teenagers’ bad taste in music. As Leader of the Opposition, Turnbull doesn’t have to be consistent or even particularly principled. But it would be handy if he was occasionally right. This is Turnbull a month ago: “Every other country in the world, comparable country that is undertaking stimulus measures has included tax cuts. Australia is the only one that hasn’t.” Let’s do a quick check on that, because — I may be wrong — but I have the impression no-one has challenged this. The Bush Administration’s stimulus package in February last year included one-off tax rebates, not permanent tax cuts of the kind demanded by Turnbull. The recent Obama package includes tax cuts for 2009 and 2010 only. The UK Government announced one-off tax rebates last May and sales tax and further one-off rebates in November. The Germans went for business tax breaks, infrastructure, energy efficiency and boosting credit. No tax cuts, permanent or temporary. Nicolas Sarkozy’s stimulus package included tax breaks for business and plenty of investment in research and infrastructure, but no tax cuts or handouts. The Japanese went for one-off handouts. So who permanently cut taxes? Who was so enamoured of the “permanent income hypothesis” that they undermined their fiscal base permanently because that money would be spent more readily than one-off rebates? Only the Harper Government in Canada did, as a small component of its stimulus package, which is primarily infrastructure investment and funding for social housing. Sounds a bit familiar. This argument over the spendability of permanent tax cuts versus handouts, upon which Malcolm Turnbull has built his entire strategy for the economic crisis, is an academic parlour game, a w-nk for economists to pursue in the common room and economic journals. It has zero real-world significance. If Australians saved their handouts — and spending seemed to go up an awful lot in December for a country that was saving — they would’ve done so regardless of whether they were tax cuts or handouts. They saved because they were scared about their economic future. There were and are plenty of grounds for critiquing the Government’s stimulus packages. The lack of tax cuts for business is probably the biggest one. But instead Turnbull has gone for the most arcane and irrelevant debating point, which fails to explain why Australia still outperformed just about every other country in both GDP and demand in the December quarter. The Government’s first stimulus package was aimed at retail and construction jobs (the Coalition strangely rarely mentions the increase in housing construction activity that came from the First Home Owners’ Boost). The second is similarly aimed, but with a greater focus on infrastructure. Rudd and Swan have pursued a different mix of stimulus from those adopted in other countries. So why are we streets ahead of the Japanese and the British and the Americans? Why aren’t we going down like the Canadians, at 3.4% annualised, or the Americans at 6%? Mind you, we could yet achieve that, given the enthusiasm of the media to make sure no one is under any misapprehension about how badly we’re doing. Constant headlines about recessions will make damn sure we do have one. It feeds directly into consumer and business confidence, devouring whatever positive sentiment might be left. Still, bad news sells. And mainstream media definitely needs more sales at the moment. Some people always do well out of recessions. |
|
|
8 Comments
“Still, bad news sells. And mainstream media definitely needs more sales at the moment. Some people always do well out of recessions”
no mater what happens, Crikey always manages a crack at mainstream media, i.e. the press (the press, largely it’s dribble coming out of the rest) ….it must irk you guys that you’re such small fry…probably 1/1000th of the daily readers of newspapers
I would like to see one more caption, next to Malcom Turnbull that shows Rudd saying “I AM DOOM.”
Rudd has no feel for economics. He only has a feel for the politics of the situation. Unlike previous strong Prime Ministers, he is too scared to challenge his bureaucracy’s advice, with respect to both the early 2008 inflation genie and the late 2008 chance of dodging a recession. His initial thought was to try to hold back the tide because he was frightened of being blamed for the recession. Then he learnt what King Canute had always known: that he couldn’t hold back the tide. His cash splashes may only be $20 billion out of a $200 billion post-recession government debt, but that is one to two years of added burden on future tax payers. The moral hazard was that tax receipts which had been banked were then randomly disbursed, not on the basis of need, nor to those who necessarily deserved them.
Rudd’s other 2007 claim was to make Australia a high-skilled, high-wage, productive country. Now he would rather protect jobs at any cost, for example the current Holden attempt to reduce executive salaries and to a lesser extent reduce middle manager salaries and freeze worker salaries to protect jobs in a dinosaur industry. Rudd is trying to keep our economy exactly as it is, even if that means becoming a low wage economy. Shades of the old USSR. A stronger PM would accept the need for change. Old industries must be allowed to wither and new industries will arise and absorb re-trained workers.
Turnbull may not know all the answers, but he knew that inflation was only big in the rear-view mirror, that the recession was visible through the windscreen in the distance and that you can’t spend your way out of a recession, especially with helicopter drops of cash splashes. Turnbull argued for incentive giving personal and company tax cuts, as well as government funded productive infrastructure. Under Turnbull, we would be able to point to a government funded piece of economic infrastructure. Under Rudd, we smoked it, drank it, gambled it and spent it on stuff.
I am really dissapointed in Malcom. I was hoping he would bring some intellectual honesty to federal politics that was totally lacking in Brendan and his tricky predeccessor JH. Malcom has turned out to be as bad if not worse than them. Gross political opportunism is not really neccessary given the hollow policy opportunities Rudd and his less than gifted front bench provide. But Malcom seems to prefer silly populist rubbish as political ammunition rather than solid policy positions. It makes me think you couldn’t push a cigarette paper between him and Rudd on any issue of any substance you chose to mention. It is almost as if the major party political system is dead and the only way out are independents or the Greens.
Good article Mr Keane with a sound intellectual serving.
Good reminders for those whom think they know it all.
Media savvy and all.
Can I say that with many exceptions generally the bulk of the media can’t tell the difference between their genitals and that centre of excellence housed in the retentive zone known as anal? Therefore they can’t tell whether they are moving forward or back and direction is just a dirty word. Thinking just has to feel good whichever feeling.
Morality starts with discrimination … ooops lost them. Oh well?
Nice article, agree with RJG’s comments, can’t wait for the Crikey trolls to jump on him.
Watching the media/economists beat the hell out of this has been very frustrating. And, as usual, everyone seems to be trying for a “fresh angle” etc. Where’s the measured observation? Are things really that bad?
I’m reminded of ex US President (and Nobel prize winning economist, don’t try to tell me he’s fictional) Jed Bartlet’s observation that economists were put on earth to make astrologers look good.
Why is it that I get the feeling neither Kevin Rudd, nor Malcolm Turnbull understands what it is like to be faced with poverty. Yet this is the state in which many of their voters live. Sometimes I wake up in the middle of the night screaming for a single unified nation. There are the politicians, the bureaucrats, the show biz millionaires, some surgeons, and what’s left of old money on one part of our land. All the rest of us are on another part of it. Like two reverse magnets the two hemispheres drift relentlessly in opposite directions.
Meanwhile Malcolm has no philosophy, except to achieve whatever power he can get, and to waffle on in a million words until ones eyes glaze over. Kevin, on the other hand, has an extraordinarily rich wife. How could he ever conceive of a life without money?
It would seem as if our top economists share the views of Rudd and Turnbull. I hadn’t realized they were so well paid.
Hands up anyone, anywhere who has ever heard guessperts & economystics get their entrail readings within cooee of a bull’s roar of reality?
If they’re so rich, how come they ain’t smart?
Remind me again how the GFC occurred with such genii at the till.