Feb 8, 2012

Kohler: trouble in a carry trade paradise

Keynesian purists are all clutching their foreheads, but actually it’s pretty fabulous that Australia’s politicians are competing with each other to promise budget surpluses.

Alan Kohler

Business Spectator editor-in-chief

Keynesian purists are all clutching their foreheads, but actually it’s pretty fabulous that Australia’s politicians are competing with each other to promise budget surpluses: it’s so much better than the appalling tax cut and spending competition of the past decade led by J.W. Howard.

Politicians can really only be trusted with emergency fiscal policy, such as when they flooded the world, and Australia, with blind government spending in late 2008. Otherwise borrow only in recession please, and at other times make outgoings less than incomings.

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12 thoughts on “Kohler: trouble in a carry trade paradise

  1. Jimmy

    Good article Alan – the olny issue is “so much better than the appalling tax cut and spending competition of the past decade led by J.W. Howard.” but isn’t that what Abbott has said he wants to go back to? And isn’t that what his policies actually add up to?

  2. Wallace Scott

    “moderate to low unemployment”. The target for full employment should be four per cent unemployment now instead of five per cent. This is because consumer spending patterns have changed and Australians are saving now so lower interest rate will not drive up inflation and we do need more employment to create a bit more demand while increasing government revenue as well as less welfare payment to get back to surplus quicker.

    The correlation in the movement of interest rate raised by the Reserve Bank and the Australian dollar is five cents for every one hundred basis points raised. When the dollar is above a dollar and five cent USD it hurt exports and dampen employments.

  3. Zarathrusta

    It would seem to me that all this printed cheap money is yet another excellent reason to have a Tobin tax. A tax on speculation is a great way to help balance the books.

  4. Steve Gardner

    It’s disappointing to read Kohler repeating the canard that penalty rates are keeping employment capped in the hospitality industry. That claim has been debunked here:

  5. Wallace Scott

    There is also a tourism deficit caused by the high Australian dollar. $9 billions last year because Australians travelled overseas and spent there instead of locally which could have helped employments in retails, hotel and hospitality, travel and tourism here; and overseas visitors dropped due to the high dollar.

  6. Wallace Scott


    The problem is not all employers are tight*ss, many employers do pay generous wages above award level and if you add Sunday penalty as a percentage of what they normally get it becomes a huge amount. Now employers don’t want to cut the wages during the weekdays to subsidise the weekends or so that when adding the penalty percentage on it does not become too high, my friends own business and they like to pay good rate to people.

    They could have a capped Sunday wage unless the employer is willing to pay more or special penalty rate specifically for the restaurant industry. I don’t see why they can’t since there are different work cover rates for different industry. Restaurant industry is quite different, more over it is most labour intensive, they employ most number of workers per dollar generated

  7. Apollo


    It also depends on location if you are lucky. My friend has two restaurants one does extremely well one the other went into decline since developments surrounding it. Some lunch times are hardly worth open, occasionally at nights it is so quiet staff stand around trying to find things to do. In winter he can’t cover the rent he has to take money from the other business to help the slow one.

  8. jeebus

    Let’s be clear, our grossly overvalued dollar is a symptom of two things. One, the monumental amount of resource extraction, and two, the massive inflows of money hot off the printing presses of Japan, the US, and the EU.

    And why is that a problem? Because 5 years ago the dollar was worth 40% less. When foreign producers and exporters are given a 40% price advantage by brazen currency manipulation, how is the average Aussie business expected to compete with that?

    Simply, we can’t. Anyone who is not a miner is hurting. And when we look at why the service industries are also suffering, that is completely obvious. Service jobs do not pop out of thin air. They are created to support the jobs that produce and export things.

    My own niche export industry has shed over 1,000 high paying jobs in the last 4 years, and they will not be coming back even if the dollar swings back the other way. Reason being, most of these people have packed up their lives and moved overseas.

    The value adding parts of our economy are being progressively hollowed out like the dirt we stand on, and once the mining boom is over, our economy will be reduced to a service jobs ponzi scheme with ever diminishing returns.

    America is going through the same hollowing out crisis, but at least they now recognize the problem and are taking steps to bring production jobs back again.

  9. Apollo


    Yup, and they want more QE. Good lord, I betta start subsistence farming.

  10. Peter Ormonde

    Apollo …

    Thoroughly recommend the subsistence farming … any time I feel the need for another bout of QE I just go and pick another bucket of strawberries. My fruit trees seem to be spectacularly indifferent to the screaming value of the AUD while the watermelons regard the funding costs problems facing the banks with at best a casual contempt.

    The hard part is finding enough dirt to grow something that won’t attract the attention of a mining company.

    Don’t we make life difficult?

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