The two Australia’s. The economic divide between the major mining areas and the rest of the country could not be better illustrated than in the gross domestic product figures released this morning by the Australian Bureau of Statistics.

In the year ended December the trend change in state final demand was at its highest at 12.9% in Western Australia and at its lowest at -0.1% in Tasmania.

A referendum on Abbott. In my campaigning days we used to think the best approach was not to mention your opponent by name. How things have changed. The Labor Party seems determined these days to make Tony Abbott the centre piece of its re-election efforts.

The new Foreign Minister, Senator Bob Carr was at it with a vengeance in his speech to the New South Wales right wing faithful yesterday.

“If we make Abbott the issue we will win. Our strategy at the next election needs to be a referendum on Abbott. If we drive that message home, we will win.”

Given that Julia Gillard is every bit as unpopular as Tony Abbott, it seems a risky strategy to me to try and make leadership the major election issue.

Letter of the day. I am grateful to The Monkey Cage (via Ezra Klein’s blog) for drawing attention to this letter to the editor.

Gina Rinehart should have learned from her dad. That investing in the media in an effort to influence public opinion is a sure fire way to knock off your money is something that Gina Rinehart clearly did not learn from her daddy Lang.

I had great fun years ago helping the then fledgling iron ore magnate waste his money on the Sunday Independent in Perth in a futile effort to do what his daughter is now trying to do by investing in Channel 10 and Fairfax.

The effort proved completely futile and I’m sure that it does not take efforts by Treasurer Wayne Swan for history to repeat itself.

What’s half a trillion euros between Germans? If you say it quickly and don’t think too much about it, not much really. It might be more than one-and-a-half times the size of the country’s annual budget but it’s only a paper entry on the books of the central Bundesbank. As long as, reports Der Spiegel, the European monetary union continues to exist.

The magazine this week reports on research by Munich economist Hans-Werner Sinn “TARGET2” – the payment system between the continent’s central banks. He found:

Since the 2007 financial crisis, immense imbalances have formed within the otherwise harmless payment system that exists between the central banks of the 17 euro-zone member states. While Italy, Spain, Ireland, Portugal and Greece, all hit hard by the debt crisis, show deficits totalling over €600 billion, the claims owed the Bundesbank have climbed to €498 billion.

As long as the monetary union continues to exist, this isn’t a catastrophe. The money is virtual, created by central banks, and its existence doesn’t mean that an equivalent amount is lacking elsewhere. But as soon as a country leaves the euro zone, or the currency union collapses entirely, things get critical.

“We’re caught in a trap,” Sinn says. “If the euro breaks apart, we’re left with an outstanding balance of nearly €500 billion, owed by a system that no longer exists.”

Just a little something to contemplate as you try and determine what the Australian Reserve Bank meant when it said yesterday that “the acute financial pressures on banks in Europe have been alleviated considerably by the actions of policymakers, though there is more to do to put European banks and sovereigns onto a sound footing for the longer term and Europe will remain a potential source of shocks for some time yet.”

Peter Fray

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Peter Fray
Editor-in-chief of Crikey