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21 responses to “So how about that economy thing?”

  1. Jarrah

    A good graph. Interestingly, it tells us that ‘stimulus’ has little to do with employment. How does that sit with the claims Kevvie saved us from recession? Not well.

  2. Brian

    Jarrah, I can’t see how you come to that conclusion. From memory unemployment was forecast at the time to go above 8% but stayed in the fives. The usual figure quoted is 200,000 jobs saved, but Lenore Taylor and David Uren in their book Shitstorm put it at 350,000. Uren is an experienced financial journalist, so that’s probably right.

  3. Shaun

    Well interest rates are one factor Jarrah. Australia had room to move. The US has been stuck around near 0 for some time which is a problem for a stimulus.

  4. Lefty E

    Good graph Brian. Like to see it on an ALP ad.

    I suspect the LNP resurgence would end with a quick dull thud.

  5. Nickws

    I said it on the other thread—Abbott ‘passed’ in the other debate becuase he displayed familiarity with many different topics. Now mastering one topic, like the economy, that’s another matter. That’s not something he was asked to do. (The reason Gillard didn’t squash him like a bug was because she in turn was forced to take too much time to estalish herself as a prime minsterial character. Seriously, even I was unfamiliar with her alpha-dog-in-charge style. Good work calling that snap election, Julia).

    Get him onto the subject of employment, get him onto the subject of the Libs less-than-meets-the-eyes accounting for their bugget savings RE scrapping the NBN and selling Medibank, get him onto the subject of the two-tiered business tax, point out that the RBA is less anxious about inflation now than they were in ’07, role out some economic modelling about where we’d be if the Libs had been in power during the GFC. He’ll flounder. He’ll respond to every challenge with “er… turn back the… er… boats.”

    In the last debate Gillard was a bit too obvious in scoring points off of him on Work Choices. So much so that I think the meeja probably didn’t even score that portion of the debate for her, for reasons of ‘balance’. The bit that most impressed me was her surprise hit on him with the migration stats from BIS Shrapnel.

    I’d like to see her do that again, repeatedly, within a debate that was geared towards a coherent narrative of economic management. Not a game of dueling party manifesto headlines/character establishment as we saw last time.

    This is the big chance.

  6. Kim

    @5 – and I wonder if the Coalition knows it, too, Nickws.

    Even Hockey must realise he talks shite on the economy.

    But, if the Libs continue to squib, can the ALP get the message out? Remember that the Coalition are (most undeservedly) ahead in the economic management poll stakes. Again, if you’re in front, you don’t want to be challenged on that point.

    I would’nt mind seeing some fact rich, simple but stark graph heavy ALP leaflets on the economy in my letter box. And full paper ads in the tabloids.

    With a bit more substance than just a slogan or two.

    Remember how the Libs’ nonsensical tables worked a treat in 04?

    Fight back with facts!

  7. Jarrah

    “unemployment was forecast at the time to go above 8% but stayed in the fives.”

    Which forecast? The IMF predicted Australia was going to be just fine back in 2008.

  8. Kim

    @7 – Treasury.

  9. Lefty E

    Gillard could hold the debate anyway – invite Bob along. Brown will turn up.

    Why not? If Abbott doesnt show its over, basically, there’s no toehr story for two weeks, ALP wins.

    Call his bluff.

    (of course, risk is the likelihood that Brown will wipe the floor with JG… but lets face it, that’d be worth price of entry!)

  10. Kim

    I wonder if Barnaby’d turn up?

  11. Jarrah
  12. Lefty E

    Or whatshisface from the Nats – invite him on board. Truss or whatever.

    that’d really set cats among pigeons!

  13. Jarrah

    “@7 – Treasury.”

    And we know how well they do. Anyone remember the Howard years and the difference between forecast surplus and actual surplus? Wait… wasn’t there a bunch of posts on this blog on that very subject?

    Also, is anyone here aware of how Treasury was pwned by an obscure academic in more recent times? Bonus points – that Treasury fail was stimulus-related.

  14. Nickws

    Remember that the Coalition are (most undeservedly) ahead in the economic management poll stakes. Again, if you’re in front, you don’t want to be challenged on that point.

    Kim, I distinctly remember Labor in the opinion polls challenging Abbott/Hockey on economic management, both at the beginning of the year and again during the all-too-brief Gillard honeymoon.

    I don’t think the Coalition is anywhere near strong enough in that one area, not compared to the One Recent Historical Litmus Test—their long dominance over the final years of Keating Labor in the nineties. One blow and their ‘superior economic manager’ house should collapse.

    Jarrah @ 11: I haven’t clicked on your link, but my spidey senses are tingling in agreement with your thesis that President Obama couldn’t possibly use his stimulus spending to reduce unemployment in Australia. We’re both very wise in spotting that.

  15. Jarrah

    “my spidey senses are tingling in agreement with your thesis that President Obama couldn’t possibly use his stimulus spending to reduce unemployment in Australia.”

    Hahahahaha! You are so clever and witty! My link to the correlation between ‘stimulus’ spending and unemployment in the US is sooooo irrelevant to the correlation between ‘stimulus’ spending and unemployment in Australia. What was I thinking? Obama isn’t PM! I should go back to my reality-based community and shut the hell up!

  16. Nickws

    Jarrah, google what Glenn Stevens had to say last year endorsing the Rudd government’s stimulus. He even went as far as to say it would be unwise to end said stimulus too early.

    I should go back to my reality-based community and shut the hell up!

    Heh, I think I see what you did there.

    You’re either mocking the Paul Krugman-allied US progressive bloggers who’ve spent the last half decade calling themselves the “reality based blahblahblah”, or you’re doing some kind of libertarian two-step to claim that you’re inherently against the big-government conservatism of the Bush era.

    Both possibilites are sooo very applicable to the Australian scene. Just like your link to analysis of the Obama stimulus…

  17. Brian

    Lefty E @ 4, it’s Robert Merkel’s post!

    Agree about using the graph in ads, along with others about debt and deficits.

  18. Jack Strocchi

    Robert Merkel said:

    Perhaps we could have a serious talk about the economy at some point during the election campaign? Did the government maybe do something right at some point? And how did policies along the lines of the Coalition’s (such as they are discernable) turn out?


    “Serious talk about the economy” would probably back-fire for the Left as it would wind up improving the image of the (previous) L/NP government as competent economic managers. The fact is that the Howard-L/NP deserve the bulk of credit for putting the AUS economy on a sound footing. With significant credit going to the RBA and the CCP. An honorable mention to the RUdd-ALP.

    The sound economic policies pursued by the L/NP through most of the noughties more or less bullet-proofed the AUS fiduciary system. Being handed a bullet-proof economy meant that the subsequent ALP government had very little to do in order to dodge the GFC bullet. This fact has been studiously ignored by Left-wing commentators who seem to have an intellectual blind spot whenever Howard’s actual record comes up for examination.

    The basic reason why AUS avoided the sub-prime GFC is because our bank mortgages were blue-chip rather than sub-prime. Over the noughties the Howard-L/NP ramped up the the Asian student immigration rate causing a massive build up of underlying demand for metro rental accommodation. This rental income serviced the debt taken out by AUS extraordinarily large Residential Investment Property sector.

    The result was that though the middle and latter noughties the AUS banks had very little in the way of bad debts and actually won credit up-grades during the GFC unlike virtually all other banks throughout the Anglosphere. When the GFC hit, well before the stimulus took effect, our banks got up-graded, not degraded.

    I stand on my predictive record on this, which is the only way to substantiate scientific credibility. On 23 OCT 2008 I predicted that AUS would escape a recession:

    Owner resistance to liquidation pressure is impressive. At the moment a recession appears to be odds-off. Even then the govt and populace will throw everything at the property market to keep a high floor on prices. More home grants, tax breaks, bail-outs, raids on super, infrastrucure splurges – you name it.

    My prediction that AUS would likely avoid a recession due to the underlying strength of our property market proved correct: both in theoretical explanation – the flow of financial funds remained a solvency crisis (real estate crash) or liquidity crisis (credit squeeze). And empirical confirmation – no AUS banks went belly-up and thus we had no serious recession.

    The AUS property market held well because over the naughties the Howard-L/NP got the fundamentals of AUS economic management right in factoral, financial, fiscal and foreign exchange policy.

    factoral: the astronomical post-mineral boom immigration rate put a strong floor of (mostly metro-based Asian student) rental income which serviced the debt underlying the growth in property prices;
    financial: from the early noughties onwards the RBA was always six-12 months ahead of the curve in alternatively easing and tightening monetary policy; APRA in the post-Wallis era tightened prudential regulation of bank lending; the RBA also constrained the Big Four from merging and securitizing credit.
    fiscal: the slashing of Capital Gains Tax in 2000 brought many well-heeled residential investment property owners into the market who were much better credit risks than owner-occupiers; Costello ran a series of surpluses plus asset sales which amortised Commonwealth debt, which, together with the Future Fund, put federal fisc in a good position to withstand the gathering financial storm;
    foreign: most people seem to forget how the free-floating exchange rate acts as a shock absorber whenever there is a fall-off in foreign demand for our exports; the AUD slumped during the latter part of 2008 which greatly improved the lot of domestic exporters.

    I certainly acknowledge that Rudd-ALP reinforced and added to the good economic management of Howard-L/NP. Particularly, and in no particular order, the guarantee of depositors funds, the fiscal hand-out, the infrastructure stimulus, the beefed up first home owners grant and, last but not least, the 2008-09 massive increase in Asian student immigration to further bolster housing demand.

    Mention must be made of the gigantic PRC fiscal stimulus which I also predicted in FEB 2009 would pull China out of the hole and put a floor under the world economic system.

    The record of the AUS commentariat in this matter is appalling, including virtually all economic pundits who constantly predicted property crashes which never happened, talked darkly about recession which did not eventuate and talked endlessly about the imminent collapse of the PRC economy which did not occur. And everyone except a few brave journalists studiously ignored the reason for the sub-prime crisis, which was politicised lending standards to promote Bush’s minority out-reach Ownership Society.

    All those who did not make confirmed predictions about the GFC have drastically reduced intellectual credibility on this matter.

    I expect better on this from you, even though economics is not your field.

  19. Don Wigan

    Very good, Robert. And I think you show the point that it can be made very clear with graphics. Employment and economic growth vs the rest of the world. Employment and interest rates vs the last 3 years of Howard. And that’s even before you get to costing and assessing the damage of Abbott’s policies.

    I hope that Labor’s campaign team are not too inept to grasp this and run TV ads on it, albeit you’d never know on current efforts.

    With the Reserve Bank announcement on interest rates due out today, Labor will be ready to go full on on the economy and the indicators.

    As Imacca said over at Poll Bludger, watch Abbott swing back to the Boat People. Sure enough in today’s Age, Abbott announces his first acts will be to get Nauru restarted and to reinstate temporary protection visas. There’s nothing else for him to talk about. No surprise that he’ll run away from any debate on the economy.

  20. carbonsink

    The economy is old news. The GFC is old news. Australians now believe they are economically invincible having sailed through the GFC like it didn’t happen. Whatever happens in America or Europe, China will save us, as long as the ALP doesn’t kill our world-beating mining companies.

    A discussion about what happened over the past 2 years will have zero impact on people’s voting intentions. Rising interest rates and cost-of-living pressures (read: electricity prices) are today’s big economic issues.

    Its because of this belief in our economic invincibility that Abbott’s message on waste and mismanagement is resonating. The GFC was over years ago, but the government is still spending money like crazy on school halls and the like.

    Regardless of the reality, this is the perception out there, and showing people graphs about how well we are doing relative to the rest of the world will only reinforce the belief we are invincible and the government should stop spending money.

  21. moz

    Having just seen the mad monk on TV rabbitting on about the debt, I wonder if there’s amusement to be had asking just how serious he is about reducing wasteful spending. The following up by suggesting that there’s a government department with a history of over-spending, inventory loss and outright loss of control of their procurement process under the ALP. Surely the Liberals would rein that in, audit it and impose an efficiency dividend? On the military.