There are some lessons in how to spin economics floating around at the moment, for those willing to learn them.
New Treasurer Chris Bowen will be painfully aware that Wayne Swan, despite presiding over an outstanding economy and being internationally recognised for his economic management efforts, struggled to sell voters on Labor’s economic competence. Bowen is an effective communicator who is close to the last treasurer from western Sydney, Paul Keating. He won’t be short of advice on how to cut through. But he and his new Prime Minister won’t be trying to differentiate their economic competence from their predecessors — why would you want to with an economy like Australia’s?
Instead, the narrative they’re pushing is that the economy is in transition and faces significant risks from overseas (and thus a steady, experienced hand is needed, like someone who’s been through a financial crisis). Bowen is thus using the word “transition” quite a bit — transition in China, transition here.
Former prime minister Julia Gillard earned opprobrium when she had an over-the-top reaction at the CEDA conference last week to some of the sillier commentary on the March quarter national accounts. Some analysts erroneously claimed the economy had suffered a domestic recession — ignoring the impact of exports and depending on the wholly inadequate statistical series called State Final Demand. A couple of sensitive media types suggested the PM was trying to dictate what they should write.
That suggestion was pretty rich given the agendas pushed by the daily national newspapers, where the economy under Swan and Gillard was routinely talked down.
Gillard had a point about commentators talking the economy down but should have remained silent. Despite the forlorn hopes of treasurers through the years, not to mention Reserve Bank governors, it’s a case of remain silent in public and moan in private — as former treasurer Peter Costello did, especially to The Sydney Morning Herald’s economics editor Ross Gittins.
Speaking of the RBA, yesterday the bank issued the usual end-of-monthly meeting statement from Governor Glenn Stevens explaining the interest rate decision. There’s some parsing and semantic semaphoring to be deciphered. Much of the commentary was about how the RBA had indicated it could cut rates in the future. That wasn’t new news, but the economic commentariat is desperate to grab something new. What made it particularly absurd was the use of the RBA decision to explain the funny 2.6% rise in the local stockmarket yesterday, after a 1.9% fall on Monday. So what then will the market gurus make of this morning’s 1.6% fall? The economy hasn’t changed one bit from Monday or last week? It underlines much of the absurdity of the commentary over the past few days.
“That wasn’t new news … but the economic commentariat is desperate to grab something new and reframe it for deadlines and market positions.”
Much of the commentary was about how the RBA had indicated it could cut rates in the future. That wasn’t new news — the Bank said the same after the June board meeting — but the economic commentariat is desperate to grab something new and reframe it for deadlines and market positions. What made it particularly absurd was the use of the RBA decision to explain the 2.6% rise in the local stockmarket yesterday, after a 1.9% fall on Monday. So what then will the market gurus and their fellow crystal ballers make of this morning’s 1.6% fall? The economy hasn’t changed one bit from Monday or last week. It underlines much of the absurdity of the commentary on Monday, yesterday and this morning.
But the important thing is that we can read it and report it — and thereby make ourselves look clever, or silly, depending on our interpretation. And we can talk to senior RBA officials and get a sense of why the decision was made and the thinking on the way the economy is going. The openness is invaluable. That applies to statistics from the ABS — the May retail and trade data out this morning will be crunched to produce ideas about how the economy is travelling.
But in China, no such reticence or trust from those with authority — when the cash is crunched, the media have to toe the line. As the Financial Times reported:
“With a cash crunch roiling the Chinese economy, propaganda authorities have told local media to tone down their reporting to help stabilise financial markets.
“In a directive written last week and transmitted over the past few days to newspapers and television stations, local propaganda departments of the Communist party instructed reporters to stop ‘hyping the so-called cash crunch’ and to spread the message that the country’s markets are well stocked with money.”
“First, we must avoid malicious hype,” Chinese media were directed. “Media should report and explain that our markets are guaranteed to have sufficient liquidity, and that our monetary policy is steady, not tight.” Such direction is standard across the Chinese media, but rarer in the financial media. “Second, media must strengthen their positive reporting. They should fully report the positive aspect of our current economic situation, bolstering the market’s confidence. Third, media must positively guide public opinion. They should promptly and accurately explain in a positive manner the measures taken by and information from the central bank.”
The directive was issued last week after the Shanghai market dropped 10% (into correction territory) in a day and a half, and fears that more big falls would occur as the financial system froze from the central bank’s attempts to force up interest rates and curtail speculative lending by banks. Those fears have seen the central bank issue at least five statements in the past week about how it was leaving cash in the system, how it was being prudent, how the system was strong. These statements have been increasingly played up on Chinese media websites, starting with the two main mouthpieces — Xinhua and the People’s Daily (English versions).
Another recent client note from Barclays Capital last week coined a new word to describe Chinese economic policy — “Likonomics”. As The Economist put it:
“Pronounced lee-conomics, the term has nothing to do with Facebook’s economy of endorsements. It refers instead to the emerging doctrine of Li Keqiang, China’s prime minister, who has overseen the country’s economy since March. The old command economy — ‘you shall report what we tell you to!'”.
Of course, any similarities with the editorial conferences of the daily national newspapers here are entirely coincidental.