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Economy and Hockey on a Slippery Slope

For many it’s something we have known for some time, but for the broader community the evidence became crystal clear this week with the release of the latest private investment data from the Australian Bureau of Statistics.

The March quarter showed that new capital expenditure fell by 4.4% (5.3% for the year to March 2015). It also showed that investment in buildings fell, along with investment in equipment, mining and manufacturing.

What makes it worse is that expected future expenditure on capital, on building, on equipment, plant and machinery is lower than that indicated by firms for 2014-15, in some cases by as much as 27%.

What this data reveals is that Joe Hockey’s May fiscal statement (budget), suggesting that non-mining investment would grow by 4% in 2015-16 is deeply flawed. Therefore all the associated assumptions on revenue stemming from that are also flawed.

Economist, Professor Bill Mitchell, who like many others was highly skeptical of Hockey’s forecasts, is convinced we are heading for a recession. “Now that we have more data, the reality is starting to look like recession if the Government does not rather radically alter its fiscal settings (from austerity to stimulus).”

The figures paint a grim picture for the March quarter GDP numbers due to be released this week. They could show a negative figure. If it does and it is repeated in the June quarter we would be officially in recession.

If that happens, Joe Hockey might well reflect on his own behaviour as a partial cause. He must surely rue the days he spent talking down the economy prior to the 2013 election.

His subsequent bluster about lifters and leaners and his reckless 2014 budget, convincing everyone to stop spending and start saving, has had a dramatic impact on the present position.

After more than three years scaring people with talk of a budget emergency, he suddenly emerges with a new message urging us to start spending. Really?

How simple is it? If you frighten people into thinking they will have less disposable income, what are they going to do? Stop spending of course. If, twelve months later, you then tell them all is well with no evidence to back it up, what will they do? That’s right. They won’t believe you.

Joe Hockey has snookered himself, shot himself in the foot, demonstrated all too clearly he doesn’t know what he’s doing and now expects us to trust his management unquestionably.

All this while he accepts $270 a night from the taxpayer, for accommodation in a house part-owned by his wife, while he criticises people claiming paid parental leave from both government and employer.

The hypocrisy is astounding and he should not be treasurer.

When the country goes into recession as it surely will and people lose their jobs because their firms cannot move product, what will he tell us then? That’s right. It’s all Labor’s fault?

That will be the mother of all excuses. But will he then propose a stimulus to restore employment and growth? Unlikely.

rossIn today’s Age newspaper, Ross Gitten’s exposes more flaws in Hockey’s fiscal statement (budget). The “illusions and padding” outlined include real growth in spending estimated at 1.1% through to 2017-18.

John Daley of the Grattan Institute says, “This would be remarkable restraint given long-term growth is more than 3 per cent each year,” he says. “It would be particularly remarkable in a period that spans an election year.”

Saul Eslake, from Bank of America Merrill Lynch and Dr Mike Keating from Insight Economics Pty Ltd have also pointed out that from 2020-21 Hockey has annual net earnings from the Future Fund counted as revenue rather than an increase in the fund itself.

In other words, Hockey is raiding the Future Fund.

This accounts for more than half of Hockey’s highly questionable surplus estimates for 2024-25 and 2025-26 and makes Tony Abbott’s claim that the budget is on a credible path back to surplus, a mockery.

And this is what we call having the adults back in charge.

 

22 comments

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  1. kerri

    Hockey is incapable of stimulating the economy because he doesn’t believe the poor deserve to spend,. He has no concept of how to create jobs other than to tell everyone else to do it for him. We have been headed for recession since the day a majority of Australians fell for the LNP lies. It’s in their DNA. They don’t know how to budget because their beliefs get in the way of common sense, in the same way they all believe in the fairy man in the sky. They want to punish and still have growth. They want the smallest group in society, the billionairres, to get richer without recognising that growth comes from massed wealth rather than massive wealth! Hockey is like a man who wants to go to the moon by jumping up and down in one spot. He believes he will get there one day and it will be possible if all those astronauts just got out of the way!

  2. stephentardrew

    John a factual precise article.

    You simply confirm what progressives knew before election of the L-NP. The only difference is that now we have glaring empirical evidence of the incompetence of Hockey and his cohorts. He may be treasurer nevertheless he relies upon total support of his party and their ridiculous neo-con trickle down theory of austerity and deregulation which are clearly demonstrated failures.

    If Hockey and Abbot are eventually rolled by the party the new leader will claim ignorance and deny complicity when we all know they must have party consensus too enact policy. Turnbull’s turncoat on the environment is a clear indication of the type of expediency he uses to keep his position within the party rather than follow his moral responsibility.

    We are left with a dysfunctional compromised Labor Party who’s silence is deafening. Shorten is also the master of compromise when it comes to the hard moral issues so who do we have to actually lead this nation towards a more just and equitable society? It should not be forgotten he is a master of the dark art of factional assassination and a numbers man willing to embrace a bit of backstabbing. What a CV for someone who want’s to be leader of this country.

    We now have the L-NP with a noose around its neck while Labor vacillates. Labor may win the next election however it will not be through moral probity or open party room politics accountable to ordinary members. Labor factions have torn the real values of the party apart.

    No matter what happens we need a viable alternative to the entrenched status quo captured by failed neo-con rhetoric.

    As for stimulus Hockey and Co could not stand the shame of admitting failure even as the economy dives into recession.

    What the hell is treasury thinking?

    A perfect case of Catch Twenty Two.

    The L-NP are on a lose, lose trajectory.

    The point is have the oppositions parties formulated viable alternatives.

    I am still listening.

  3. kerri

    Worst thing the ALP did, choosing Shorten over the vastly more experienced and more grass roots Albanese, just because Bill was prettier.

  4. Here we go.

    Stephen,

    I agree. I would not be surprised if we are witnessing the beginning of the end for the Laborals. I would not be surprised if we were also witnessing the end of the 2pp system, an oddity on the world stage.

  5. Pingback: Economy and Hockey on a Slippery Slope | THE VIEW FROM MY GARDEN

  6. brickbob

    Hockey and Co will never ever introduce a genuine stimulus package,it is not in their DNA and never will be as they are slaves to the Thacther and Regan neo con ”’ trickle down bullshit that has helped to put us and the rest of the world into the position we now find ourselves in. Thank you John for an exellent educated piece of writing.”””

  7. Rosemary (@RosemaryJ36)

    When people hunger for power but lack the skills to govern wisely guess who suffers?

  8. Möbius Ecko

    I’ll count the recession when it hatches. Not all economists, nor all progressive leaning ones, are saying we will soon have a recession. Some are saying the talk of a recession is overblown.

    Like the split of those in every month who predict interest rates will go up, down or remain the same, I will call a recession when there is one officially called.

    But the government must be in trouble as there’s been a sudden significant increase in tax payer funded party political advertising and blame Labor lately along with Abbott appearing for his I’m in trouble media stunts.

  9. Harquebus

    Political and economic ideology meets physical realities. The growth deadheads will not succeed. The laws of physics and nature are against them. Growth is exponential, not linear which, is why it gets harder and harder to achieve.
    The problem at the moment is to try and minimize the damage being caused by these morons until, a) they realize the absurdity of perpetual growth and reverse course, very unlikely, or b) the system eventually collapses causing widespread hunger and conflict from which, the survivors will then have to deal with climate disruption. The Second Dark Ages.
    I hope for a) but, honestly, I can only see b) coming. Joe Hockey et. al. are all the evidence one needs.
    The ideology of infinite growth is the problem and failing budgets and austerity are just two of many manifestations of this fatally flawed concept.

  10. Aortic

    Good article John, thank you. I am an economic Luddite but I know enough to dismiss out of hand any economic statement from either Hockey or Abbott. Neither of them would be capable of running a country pie shop. It’s the old adage of ” how do you start a small business in Australia”? “Start a large one!” Have a go indeed.

  11. stephentardrew

    Mobious Ecko:

    True enough however the indicators are not good. No one can infallibly predict markets however the lack of stimulus in an austerity budget is a formula for disaster. Interest rates have not gone up with quantitative easing as assumed by many economists. These guys are full of shit. Since the L-NP have been in power things have gotten substantially worse and they could well continue.

    Regardless of whether or not we go into recession we need action now to stop this government in its tracks.

  12. Jexpat

    The data as set out by Business Insider really is impressive.

    Check out Figure #2, which is a chart showing the year-on-year estimated contraction in spending is the worst on record and at levels greater than previous recessions.

    http://www.businessinsider.com.au/ubs-just-dropped-the-r-word-in-a-note-on-australias-growth-outlook-2015-5

    The odd thing is that people who you’d expect not to be surprised by this are indeed expressing some surprise. I guess it just goes to show what happens when people buy into the ideological propaganda, rather than relying on the observation and application of basic macroeconomic principles.

  13. mmc1949

    I for one am more than happy for “investment” in buildings to fall if it means a slow-down (or preferably a halt) to the sub-standard (in every sense of the word) towers with which we’re being cursed by Chinese money.
    I can’t believe that skills in the construction industry are less transferable, or less suited to re-training, than those in other industries ….. and how vastly improved Melbourne, for one, would be if there were a commitment to new, extended train tracks and rolling stock.

  14. Royce Arriso

    Kerrie at 9.52am Beautiful. Don’t you just know of what you speak! Hockey’s belief that the poor don’t deserve to spend is a succint precis of an entire toxic philosophy, upon which too little light is shone, however many glimpses we’ve all had. We see it in the BBQ harangues of yet another conspicuously affluent self-made man launching, unbidden and half-pissed, into how he worked his way up from next to nothing, unlike (insert scapegoated lower income cohort here);in the social Darwinism of the business windbag assuring reporters that labour market ‘reforms’ for which his lobbyists are pushing, must always mean there there will be ‘winners and losers’, a tawdry neoliberal cliche employed to paper over the human suffering it represents; in the philosophical underpinnings of Abbott government policies, (displayed to perfection in Pyne’s tertiary education for rich kids scheme), which imply that once it is accepted that fabulous wealth is proof not only of great talent, industry and perspicacity, then its accompanying socially-destructive greed ought to be quietly excused away as mere human frailty rather than the proper target of outrage and disgust; in the way neoliberal cardsharpers have taken from us the very words in our mouths then handed them back as excrement, so that against our better judgement we now accept factory closures and mass unemployment as evidence of genuine ‘reform’, the whole point surely of so Orwellian an exercise; and in the way all of this reveals a deeply embedded contempt in The Tribe for those lower in the food chain who rightly buck at being on the receiving end of a dog-eat-dog outlook which guarantees success in advance to the greedy, amoral and sociopathic, flouting rules they so sanctimoniously insist the rest of us must observe. Got that, Maurice Newman?

  15. claude

    Economic estimates and all their underlying assumptions are done by Treasury & the Dept of Finance – and they’re just that, estimates. More often than not, they’re wrong and everyone knows that except for people on this page apparently. This is because we cannot predict the future. For example, we don’t know what price our mining resources (amongst many, many factors) will be, otherwise we would all be rich.

    Forecasts are not Hockey’s. He simply made a budget based on the economic estimates Treasury & Finance gave him. This is standard in every economy in the world. Even in every business in the world. These facts have escaped people in this page as well.

  16. John Kelly

    Mikestasse, have just finished watching the full Richard Wolfe interview. A five year old could clearly understand what Richard is saying. This ought to be shown in years 11/12 BEFORE they go on to study economics. I’m convinced generational change is the only way true reform will come.

  17. John Kelly

    Claude, I realise that Treasury and the Dept of Finance prepare the estimates, but the final document is subject to the Treasurer’s sign off. If, however, a treasurer sees the possibility of a minor adjustment to Treasury’s estimates that he/she knows will result in a more favourable outcome, i.e. a revision of, say 1or 2 percent up or down, in estimated growth, then he/she can make that change. It’s precisely because we cannot predict the future that treasurers are able to skew the figures in their favour, knowing that anything might happen subsequently that they can use to explain a blowout. Treasury and the Dept. of Finance prepare the foundations, but government determines if those foundations are changed.

  18. Kaye Lee

    Claude,
    2013 MYEFO
    “One area where Mr Hockey has followed through is on his word prior to the election to ‘fix’ Treasury. It is disappointing to see Treasury humiliated and bullied into applying Mr Hockey’s (or his office’s) forecasts to the economic parameters underpinning the budget numbers.

    He has, in effect, told Treasury to calculate the budget revenue and spending numbers using unrealistically weak assessments for GDP growth, inflation, wages, employment and the unemployment rate. They are not Treasury forecasts, they are Mr Hockey’s forecasts.”

    http://www.abc.net.au/news/2013-12-18/koukoulas-hockey-is-saving-the-good-news-for-may/5163646

    Abbott also sacked Treasury Secretary Martin Parkinson despite advice from Howard and Costello that he was highly respected. Parkinson was the former head of the Department of Climate Change and a victim of Tony’s petty revenge. If someone like him can be sacked on the whim of the PM then only yes men need apply.

    http://www.smh.com.au/federal-politics/political-news/tony-abbott-ignored-john-howards-advice-on-sacking-treasury-secretary-martin-parkinson-20140311-34kg1.html

    2015 budget

    “MICHAEL BRISSENDEN: Okay now the figures that you’ve based this on, the growth figures have been described as “heroic” by some…

    JOE HOCKEY: Well, that’s a foolish comment because they’re not heroic.

    MICHAEL BRISSENDEN: Okay, they are Treasury figures as well, aren’t they?

    JOE HOCKEY: Well, they’re not just Treasury figures. They’re in sync with the Reserve Bank, and credible economists like Bill Evans at Westpac and Alan Oster at the National Australia Bank are saying they look perfectly credible.”

    http://www.abc.net.au/am/content/2015/s4235448.htm

  19. Graeme Henchel

    Hockey of the over blow

    The treasurer’s name was Hockey, a big buffoon quite stocky
    Though some had come to call him Smokin Joe
    Him and mate Mathias were barefaced blatant liars
    and had no idea of how to run the show

    Joe would break into a sweat as he lied about the debt
    and the “Age of entitlement as over”
    But he didn’t have the guts to tell the poor they’d get the cuts
    While he and all his mates still lived in clover

    He had a sham review with a hand picked right wing crew
    A strategy that had worked for them before
    Duly said the stacked committee, that things were not so pretty
    Then Joe’s promises were promises no more

    On the best day of his life, Joe was dancing with his wife
    before delivering a budget most unfair
    But Joe went much too far when he smoked a fat cigar
    and the stench of Hockey hubris filled the air

    Joe thought he’d pulled a swifty, but he quickly looked quite shifty
    as the cuts all clearly targeted the poor
    Sure they’d cut the carbon tax, but if you looked into the facts
    the poorest in the land were paying more

    Though he started out quite cocky things went pear shaped for Joe Hockey
    as the senate started blocking his key plans
    At first he tried to bluster, blowing hard as he could muster
    but the senate simply sat upon their hands

    With the budget really smelling, Joe tried to do some selling
    but his comments only served to make things worse
    “The poor don’t drive a car” said the man with the cigar
    as his tone became belligerent and terse

    As the public came apprised of Joe and the Thug’s lies
    the polls went into terminal decline
    Though the Thug took most the blame, it was often Hockey’s name
    that was mentioned in a sentence with “resign”

    After months of changing tune and with policies marooned
    the Thug’s fate started coming under question
    It was suddenly okay to negotiate away
    but the senate held their ground on the suggestion

    So Joe kept his head down, some were calling him a clown
    while the Thug talked of barnacle removal
    They announced some half arsed flips but before they’d left their lips
    they were met with more howls of disapproval

    So after 18 months of farce, Joe was out to save his arse
    Through pursed lips he said, he may have overblown
    Now as a last resort he’ll abuse the inter generational report
    but it won’t be enough for Hockey to atone

    With a new budget is due, they just didn’t have a clue
    As the Thug and Joe posed for a photo opp
    No longer matching ties, but still the matching lies
    As they work upon another budget flop

    And just few weeks on, we can start to see the con
    As data shows we’re heading for recession
    Whatever plan they had is quickly turning bad
    And soon we’ll hear new talk of a succession

    Hockey’s fate is tightly tied to the Thug who always lied
    So the futures not too bright for Smokin Joe
    It now won’t be too long before the Thug is gone
    and takes with him “Hockey of the Over Blow”

  20. Pingback: Who’s the Clown, Joe? | THE VIEW FROM MY GARDEN

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