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John Kelly is 69, retired and lives in Melbourne. He holds a Bachelor of Communications degree majoring in Journalism and Media Relations. He is the author of four novels and one autobiography. He writes regularly for The Australian Independent Media Network and on his own blog site at: The View from my Garden covering a variety of social, religious and political issues.

Website: http://johnbkelly.wordpress.com

Incompetence and Expediency

Despite overly optimistic, but what should be called laughable forecasts in the budget, wage growth in Australia is now the lowest it has been since the mid-1990s. And it’s not hard to see why.

Private-sector annual wages growth, at the March 2017 quarter, was 1.8%. The latest labour force data released yesterday by the Australian Bureau of Statistics shows a modest decline in the unemployment rate from 5.9% to 5.7%.

The reason is, full time employment fell by 11,600 jobs, and part-time employment increased 49,000. As a consequence total hours worked fell by 0.12%. But here’s the kicker. Underemployment rose by 0.1% and there are now over 1.8 million Australians who a) want to work and b) want more working hours, but are under-utilised.

In seasonally-adjusted terms, 58 per cent of the net jobs created in Australia in the last 12 months have been part-time. When one grasps the reality of this depressing state of affairs, it is not hard to see why wages growth is so low.

When Scott Morrison brought down his fiscal statement (budget) last week, he predicted wages growth over the forward estimates to be 3.5%. This then, is factored into the tax revenue estimates and the broader bottom line. His projected surplus in 2020-21 is based on a wage explosion. That is the stuff of fantasyland.

It is laughable to the point of negligent. It’s as if a bottom line figure was established first and the rest put together to justify it. This is the way of it with the present government. It is incompetence and expediency played out to mask any realistic plan for job creation.

They simply do not know what to do, or do not want to. Either way, they are traitors to the nation they govern. The participation rate while steady at 64.8 per cent is well down on the most recent peak in November 2010 of 65.8 per cent when the labour market was still recovering from Kevin Rudd’s fiscal stimulus.

The answer, therefore, is blindingly obvious. Unless the government undertakes a significant spending program, targeted to soak up the idle capacity in our workforce, Scott Morrison’s budget estimates will not be realised.

There is no evidence that there is sufficient activity planned in the budget that will make this happen, even allowing for the additional infrastructure allocation announced last week. It is too little and too remote.

Despite the bluff and bluster coming from both Turnbull and Morrison, the economy is going nowhere. In the meantime, a debt burdened private sector is drifting precariously toward a precipice that has the capacity to cause a monumental economic collapse.

And we can’t say we didn’t see it coming.

A Budget Primed to Backfire

We will know pretty soon, probably next week, how Scott Morrison’s fiscal statement (aka the budget) has gone down with the electorate. Trying to judge the mood of the voters today is fraught with difficulty. It is safe to say, however, that at least 52% will not be swayed by this so-called Labor-lite document.

Some would even see it as a complete capitulation of long standing Liberal values in their desperation to remain in power. For indeed that’s all it is; a pathetic attempt, not to balance the books, for they now know that is a bridge too far, but to give the impression that they can make the right call given changed circumstances. They will fail.

Initially, the swinging voter, however, might be impressed. Such is the ignorance at street level of what is really required despite what has been thus far, a fairly spirited reaction from Labor. But of one thing we can be certain. Any bounce in the polls for the government will be short-lived.

They now have too much baggage, both in what they have failed to do and what discontent exists within the party with this and other issues. All this means further displays of discontent that will, from time to time, spill over onto Main Street where those swinging voters, ignorant and ill-informed as they are, will recognise a government in disarray and revert back to their pre-budget position.

Taking a swipe at the banks is good politics, but Labor won that initiative a couple of years ago. By taxing the big four, the government has legitimised and strengthened Labor’s call for a Royal Commission. By forcing students to pay higher fees they have placed a generation at odds with a government full of graduates who received their degrees for free.

By drug testing welfare recipients, they not only demean the unemployed but clearly show their deep dislike for them. This resonates with all of us. This is blame shifting designed to disguise their inability to provide sufficient jobs for all those who want to work. It will end badly.

Bill Shorten has rightly emphasised the lack of fairness, the inequality of taxing the poor to service the wealthy. It is not a two day headline grabber. It is something that will become increasingly apparent as families continue to struggle meeting mortgage payments.

On Insiders this morning, Scott Morrison stated that the next likely move in interest rates would be up. He is right, but does he have any idea what that will do to the outer suburban mortgage belts of Sydney, Melbourne and Brisbane? For him, and his government, it will become like a festering sore that won’t heal.

As for the attempt to placate those trying to buy into the property market by offering salary sacrifice incentives, this too will fail. Who has the flexibility, in the short term, to establish a home saving account with sufficient funds that could keep pace with prices today?

The government knows, that to introduce a program abolishing negative gearing, the one issue we all know is fuelling the housing market, would mean most of their own members would be disadvantaged. They can’t bring themselves to do it. The rewards have been that good and they all want them to continue.

But they will pay for it in the long run.  It’s not that hard to see how an increase in interests rates will hit investors just as savagely as it will the average homeowner, now mortgaged to the back teeth.

This fiscal statement may well prove to be worse than Joe Hockey’s first effort in 2014. And wouldn’t Joe salivate at the thought of that.

The Budget…an ongoing lie

As a political commentator, I probably shouldn’t admit that I’ve given up on Q&A. I came to the conclusion late last year that it had lost its way. I felt it was pandering more to ‘gotcha’ moments for entertainment purposes rather than in-depth political analysis and holding politicians to account.

I haven’t watched a full program this year, tuning in only at the tail end to see if anyone had imploded or proclaimed Australia a Republic. None of that happened last night, but what I did witness toward the end was the Minister for Veterans Affairs, Dan Tehan, give us his view on how we were going to repay the national debt.

He went on with some rubbish about having to get the budget back into surplus before we could begin paying down the debt. “Until you can get your balance sheet right, you won’t be able to (address the debt),” he said. His comment reaffirmed how right I was to stop watching Q&A.

Tehan said we needed to get the budget back into surplus, before we could start paying down the debt and I have no doubt he actually believes this. Most government and opposition members do. And therein lies the problem. They are economic illiterates.

How does one cut through on this issue? How do we go about explaining the reality that is a fiat currency? How do we explain in words of one syllable, that a government bond purchased by an investor and held in an account at the Reserve Bank as a deposit for that investor, is not a debt repayable by the people of Australia?

How do we explain that money received by the Reserve Bank for bond sales is not spent providing services? How do we explain to our politicians that all government spending is new money issued by the Reserve bank and electronically transferred to the commercial bank accounts of those who provide government services?

How do we explain that taxation receipts are monies drained out of circulation to enable the infusion of new money to keep the economy turning? How do we explain that a budget surplus is not a saving to be spent at some later time?

How difficult is it for a politician or the average person to grasp this reality? How much better would a platform like Q&A be if it were to confront politicians with this reality and call them to account on their failure to address poverty and inequality?

What is the point of having those who receive welfare payments, those who are public servants, pensioners and so on, believe that they are the beneficiaries of someone’s taxation receipts?

How much better would the conversation be if we were no longer tortured with comments such as, “my taxes are paying for this” or “taxpayers’ money is being wasted,” or other such absurdities?

Tonight’s budget will be, as it always is, the greatest lie a sovereign currency issuing government can tell. And the lie is perpetuated day in, day out, on an unsuspecting public who don’t know any better.

Tonight’s budget will be a chest-beating, blowhard of fiscal allocations that are meaningless to most people because they will neither understand the language used, nor be sufficiently informed to make a judgement on its value.

Good and Bad Debt from Dumb and Dumber

Finally something of interest came forth from the mouths of our good Prime Minister and Treasurer this week.  They began talking about good and bad debt. It sounded a bit like funny money, at first, coming as it did from two staunch economic conservatives who hate debt of any kind while having little understanding of it.

What they were trying to tell us, albeit quite badly, is that they see no way out of the debt (so called) spiral they have been taking us and want to redefine it in such a way that shelters them from the harsh realities of their own incompetence.

They have looked into the crystal ball, sought to find a way out of the mangled economic mess they have created and save some of what they think, is their credibility. In doing so, they have exposed their ineptitude even further.

As a former banker, Malcolm Turnbull would make a good janitor. As a former tourism director, Scott Morrison would make a good cleaner. Neither indicates that they have the slightest idea how money works.

This latest move on trying to explain the difference between good debt and bad debt is like a parent explaining to their five-year-old why they have a mortgage. The detail is right, so is the reasoning.

The problem is that the parents forget the number of times they told the child that money doesn’t grow on trees and how some things are not affordable. The result is an utterly confused child who thinks it’s all too hard and goes outside to play. And anyway, didn’t money come from daddy’s bank and mummy just kept it in her purse?

If ever we had proof of the level of incompetence Turnbull and Morrison have sunk to, Thursday’s announcement delivered it.

“It can be very wise for governments to borrow, especially while rates are low, to lock in longer term financing and invest in major growth producing infrastructure assets, such as transport or energy infrastructure,” Mr Morrison said.

Has it really taken them over four years in government to realise that? Where was this sort of thinking when they were crucifying Labor over the cost of the NBN? Where was this sort of thinking when Joe Hockey boasted he would return the budget to surplus in their first year? And how’s that working for them these days?

If yesterday’s announcement had come from Bill Shorten, just imagine the outcry from the unadventurous, mean-spirited, let’s screw the little guy to help our rich friends, conservative camp. How quickly would they have warned the nation against the reckless, high-spending, debt laden foolishness that we have come to expect from Labor governments. But there’s more….

“But to rack up government debt to pay for welfare payments and other everyday expenses, is not a good idea,” Morrison continued.

No, it’s not. So why don’t they do something about unemployment beyond talking about it? Why not put welfare recipients’ to work with a job guarantee? Why not demonstrate, in practical terms, how utilising idle resources (the unemployed and underemployed), by creating value-adding projects, can stimulate an economy and benefit the nation as a whole?

If last Thursday’s announcement about “investing in major growth producing infrastructure”, was a genuine mea-culpa from this mindless duo, one could be a little magnanimous and say better late than never. But that’s not their plan or their vision.

Like everything else they do, it’s all just cheap politicking. Their inability to articulate a sound platform for arresting the housing spiral has run its course and now they are trying something else. It sounds suspiciously like the budget numbers are revealing a bigger deficit than projected in the forward estimates and this has to be explained somehow.

So, without admitting their inability to stop the debt spiral (so called), they have decided to redefine debt. Their jealousy over state governments’ taking the credit for infrastructure projects financed with federal money is their first target. They want some (perhaps all) of the credit.

What hypocrisy! After spending the last four years flogging off anything that moved, these princes of privatisation want some equity in infrastructure. They now want to own stuff. Really? What brought about this 180 degree shift in thinking?

It’s the fear that the upcoming fiscal statement (the budget), will expose them as failures. They have looked into the crystal ball and seen their legacies trashed. They have decided to embrace debt rather than demonise it.

Well, that’s fine. Better late than never, but they still don’t understand it. They still think it has to be repaid. They still think money they create has to be repaid to someone. They still have such a long, long way to go and they will never get there until they understand the power of a sovereign currency issuer. They probably never will.

 

What They Say, Is Not What They Do

“He’s a can-do prime minister,” she said, “He’s got a vision for this country, he’s got a lot of issues to deal with but he’s performing strongly and he will retain the support of the vast majority of the party room in order to lead us to the next election.”

These are the words of Foreign Affairs Minister, Julie Bishop on 26th March when asked if the Government might dump Malcolm Turnbull as party leader. Let’s unpack this seemingly simply statement and juxtapose it with the March 26th Fairfax-Ipsos opinion poll.

The poll puts the government 10 points behind Labor, (55/45%) on a two-party preferred basis, so one might expect a show of support for an embattled leader. But to say he’s a ‘can-do’ prime minister is ridiculous.

If Malcolm was a can-do PM, we would have marriage equality, we would have an emissions trading scheme, we would be heading toward becoming a Republic. Most likely, we would have a state of the art NBN, not the second rate one he was forced to cobble together when he was Telecommunications Minister.

If Malcolm has a vision for this country, it has not emerged thus far. What has emerged is his willingness to cave in to the far right of his party in an effort to keep his job. Not a good look from an electoral point of view.

When is it going to become apparent to the MSM that the Federal government’s “Jobs and Growth” mantra is a farce? In fact, it’s far worse than that. It is an utterly deceptive political stunt to give the impression that they have a plan and the plan they have, is working.

And this seems to have become the standing mantra. The constant reminders that they are doing the job that will lead us back to prosperity. The only problem is, what they say, is not what they do.

“In last year’s Budget, I said we needed to focus on jobs and growth … Since last year’s budget, we’ve made good progress,” Scott Morrison told the AFR Banking and Wealth Summit on 6th April. What rubbish. There has been no improvement this financial year.

Unsurprisingly, the March Labour Force results as analysed by Bill Mitchell confirm this….

“I repeat my standard monthly warning – we always have to be careful interpreting month to month movements given the way the Labour Force Survey is constructed and implemented.

Today’s figures show that the Australian labour market has improved in March 2017, although we have been led down this path before in recent years.

Total employment rose fairly strongly, relative to its recent history – by 60,900 but it was the strength of full-time employment (up 74,500) that is welcome.

The curious fact is that despite the strong full-time employment performance, total monthly hours barely moved.

But the analysis shows that employment growth over the last few years has been zig-zagging around the zero growth line on a more or less monthly basis with some positive spikes such as we saw in March 2017.

So it is too early to form a view that this month marks a turning point in a positive direction.

Over the last 12 months, Australia has gained 67.8 thousand full-time jobs (in net terms) and gained 78.1 thousand part-time jobs.

Overall, employment has grown by only 145.9 thousand jobs (net) – a fairly modest annual figure.

While this month’s surge in full-time work represents a break in the dominance of part-time work, we need more months like this before we can reject the obvious conclusion that Australia has become a nation of part-time employment growth with all the attendant negative consequences – poor income growth, precarious work, lack of skill development etc.

Underemployment remains high at 8.5 per cent and taken together (unemployment and underemployment) there were 14.7 per cent of the labour force counted as broadly underutilised (1,890.3 thousand).

The teenage labour market remains in a poor state even though this cohort shared in the full-time employment growth in March 2017.

Overall, the state of the Australian labour market is tenuous verging on weak.

It is clear that the current restrictive fiscal policy position adopted by the Federal government is not sufficient to redress the inadequate non-government spending growth.

It is also clear the cutbacks the Government is planning in the May Fiscal Statement are unwarranted.”

So where is the growth? Where are the jobs? Overall, the labour market is weak and showing no signs of improvement. Yet Malcolm Turnbull continues to spruik his government’s commitment to job creation. He is either a supreme optimist, or a very poor salesman. Either way he is spruiking rubbish.

His hapless bunch of Coalition cohorts put on a brace face but can clearly see the writing on the wall. In the coming months look for a diversionary campaign. Something, anything to distract the voters’ minds from the bleeding obvious.

There have only been 52.4 thousand jobs (net) added in Australia over the last six months while the labour force has increased by 82.2 thousand. Furthermore, employment growth over the past twelve months has failed to keep pace with population growth. We are going backwards and the Coalition government are a monumental failure.

They simply do not know how to arrest a declining economy.

Dysfunction and Disunity: The End is Nigh

“Those who fail to learn from history are doomed to repeat it,” is a near perfect description of what is going on inside the Liberal party right now. They don’t just appear to be disunited and dysfunctional, in reality, they are all of that.

No matter how hard Malcolm Turnbull tries to convince us that he is succeeding where Tony Abbott failed, the truth is otherwise. He is proving to be as big a failure as Abbott was, the only exception being that he is able to articulate his failures.

Who would have thought after the debacle that was the Rudd/Gillard/Rudd dysfunction, that this government would be journeying down the same path? Yet here we are, witnessing an internal donnybrook every bit as fierce as that which brought an end to the Labor government in 2013.

What is it about politics that lets this happen? What is it about politicians? What is it about us as a people, that we breed such mongrels? We shouldn’t be surprised, I suppose; it has been going on since Adam and Eve. Never though, has it been so open.

The Turnbull government is in deep trouble and they know it. Their policies are shallow, their vision is non-existent, their judgement is pathetic, their inability to deal with relatively simple issues like marriage equality, climate change, the economy, education, health and welfare is indefensible and the polls show the electorate has lost confidence in them.

Little wonder they are fighting each other. Labor members watching from the sidelines can’t believe their good fortune. What they see is a mirror image of their own behaviour just three and a half years ago. But this one is nastier.

The government’s problems are clear to those of us watching from the balcony. Their inability to think for themselves has allowed outside forces, the ones that fill their coffers, to dictate the terms. These external forces want to maintain the status quo and continue to broaden the gap between them and the working man and woman.

Hence, there is no room to serve the people.

Winning a pay cut for the lowest paid in our society says it all. While politicians, state and federal, feather their nests, taking advantage of rules of their own making, that encourage them to bleed money from the system and while those in the corporate sector pay themselves obscene salaries, those that work on Sundays are being penalised to advance the cause of inequality.

Governments around the world have been dismissed for less. There’s not a spin doctor alive that can fix this.

It’s what happens when one loses control. Someone else steps in to fill the void. The federal government are just pawns playing out a script, backed into a corner with no means of escape. The plutocrats have taken over.

The Coalition will lose the next election by a landslide. Mind you, a landslide in Australian elections might be as little as 53%. For some reason, mostly to do with a flawed electoral system, it only takes a few percent to create a huge imbalance in party representation.

At least when Labor were defeated in 2013, they were governing well. But the electorate saw through the disunity and exacted a price. This time the electorate can see bad government in addition to disunity and the Coalition will suffer for it, big time.

When the level of despair and dysfunction has escalated to a point where Peter Dutton is being considered as prime ministerial material, you know the end is nigh. But changing governments every six years is not good for the country.

Labor needs to learn the lessons of the Rudd/Gillard/Rudd disgrace. Sound leadership, sound economic policies, embracing equality and not being intimidated by the media or the plutocrats, will endure, provided the party, as a whole, works as well on the inside, as it does serving the people.

It’s Labor’s to lose.

Catholicism and the Liberal Party

So Cory Bernardi has finally made his move and put his career where his mouth is. A brave move whatever one might think of his politics, but one where at least his job won’t be at risk for another five and a half years.

He leaves the Liberal Party no worse off really. He’ll still support them. But it’s not a good look, electorally. At the moment it’s easy to watch the Liberal Party imploding. But it shouldn’t come as a surprise to those of us who have witnessed the party’s evolution over the past 50-60 years.

The decay has come from within. It has come because the ultra-conservative wing of the party, Cory’s wing, feels the party is losing its grip on values it believes are central to its raison d’être.

The irony though, is that those values, now under threat, were never part of the party’s original platform, not Menzies’ party. They came in by stealth and quite recently at that. They are essentially Catholic Church values. They are Opus Dei values.

Around 30 years ago, the Liberal party began a covert transformation, so covert in fact, that few inside the party even noticed it was happening.

It began with a disproportionate influx of Catholic members that traditionally, would have been more comfortable in the Labor Party.

This new membership came primarily as a result of encouragement from within the Church, which saw its traditional influence in the Labor Party falling away. It was coming from within Opus Dei.

Traditionally, the Liberal Party was a bastion of Protestantism. At one point when Sir Robert Menzies was Prime Minister there was only one Catholic Liberal member in the House of Representatives.

By the time Tony Abbott became the first Catholic Liberal Party Prime Minister, nearly 50% of his cabinet was Catholic; all this added influence, when only 25% of Australians claimed to be Catholic.

The disproportionate nature of this representation is even starker when one realises that only 15% of Australian Catholics are actually practicing Catholics, i.e. those who attend church regularly.

Church teaching opposing communism, divorce, abortion, gay marriage and euthanasia has been progressively under threat since the 1970s and as local parish congregations continued to dwindle, the need for the Church to have strong parliamentary influence became paramount.

To the Catholic Church, power is everything.

The current disproportionate representation is by no means accidental or coincidental. But lately, things have not been going well for it. The elevation of Malcolm Turnbull to the leadership has upset the cosmic order of things and the conservatives (aka, hard-right Catholics), see themselves on a collision course with irrelevance.

The defection of Cory Bernardi from the Liberal Party is a symptom of this malaise. This image of him as Australia’s Donald Trump is misplaced. Bernardi is nothing like Trump. If anything he is the opposite of Trump.

But he can see where the populist shift is going. And that is what concerns him.

Bernardi is not a populist, he is a committed Christian conservative concerned that a populist movement in Australia, as might be witnessed with the rise of Hansonism, is gaining momentum.

Primarily, Bernardi is concerned with the threat Australia’s secular lifestyle and the influence of Islam, means to traditional Christian values. His defection won’t weaken Catholic influence within the Liberal party but he did not think it was doing enough.

What he thinks he can achieve out on his own is not known, possibly even to him. But clearly his idea of where Australia should be heading is at odds with Liberal party agenda.

What we do know, is that the Catholic agenda within the party comes at the expense of rational policy decisions, something that will do the party no good at all.

Therefore, we can expect that the crumbling of the party will continue.

A Race to the Bottom

Firstly, Donald Trump and the future of the world……

Here’s my take…….Donald is possibly the most narcissistic person I have encountered in public life. From history I have concluded that John Paul II, Nixon, Hitler, Bismarck, Lincoln, Napoleon, Henry VIII, Pope Innocent III, all the way back to Augustine and Alexander were narcissists. They all caused, to some degree greater or lesser, serious upheaval within their sphere of influence. Trump will do the same. How serious this upheaval will be is hard to say, but I do not rule out some military conflict and certainly some global economic consequences. He might pal up with Putin but if China is the target, make no mistake, Russia will side with China when the spaghetti hits the fan.

What has that got to do with Australia? Ask Malcolm Turnbull. He has first-hand knowledge.

Who would have thought 2017 would be the year of the narcissist and the amateur? But here we are. Donald Trump is President of the USA, Malcolm Turnbull is our Prime Minister and Pauline Hanson’s One Nation Party might poll better than the LNP in the upcoming Queensland and Western Australian state elections.

If that wasn’t enough, Cory Bernardi is tipped to form a breakaway Conservative party that will be further to the right of the Liberal Party. Mind you, it’s not altogether clear if Cory’s party will be further to the right of One Nation.

If you thought that was depressing, take note that “fake news” is the latest genie out of the bottle. The chances have never been higher that a flood of unbelievable rubbish oozing out of Canberra, Washington, the right wing MSM and certainly social media will be forthcoming in spades.

One can barely imagine the level of mis-reporting, fake news, lies and deception that is about to be unleashed upon the poor unsuspecting citizens of the world this year.

It will be unprecedented. Little wonder some are feeling like Alice through the looking glass. It is humorous enough watching Senator-no-longer, Rod Cullerton refusing to accept the decision of the Federal Court and vowing he won’t vacate his office, but that is small chips.

On more serious matters, as much as the Coalition partners here will try to hide it, or limit themselves talking about it, our government is between a rock and a hard place with The Donald in the Maison Blanche.

Beware though. This Liberal/National Coalition are a bunch of opportunists and rednecks without a vision beyond perpetuating their own existence.

Trump is a Republican president; their kind of people. He’s a Reagan man, again, their kind of people. But he’s a loose cannon and they are going to be bullied in ways they have never experienced before.

How on earth did it all come to this? That’s an easy question to answer. What we are experiencing as we observe these unexpected outcomes is a worldwide revolution against inequality.

The Americans who voted for Trump, however, have shot themselves in the foot. If they were looking for someone to restore equality to America, they should have chosen Bernie Sanders.

Instead, they have put a filthy rich guy in control because they were sick of filthy rich guys hoarding all the money.

But let’s not concern ourselves with them. What is likely to happen here? As Trump begins to legitimise crassness, political incorrectness and post truth, you can be sure our government will be paying close attention and attempt to capitalise on what he gets away with, by doing something similar here.

If the Queensland and Western Australian state election outcomes show strong support for Pauline Hanson’s One Nation, it will be at the expense of the conservative side of politics.

Coalition members will feign displeasure, of course, but quietly use this lurch to the far right to push for the repeal of Section 18C, call for harsher adjustments to their border protection policy and their immigration intake.

And perhaps, as the doors of the conservative media fly open, ready to embrace public mood swings, they will begin attacks on any minority group that One Nation targets. Trade Unions will also come in for some special attention. Anything to reverse the current disastrous polling figures.

So, get ready to witness the race to the bottom as lobby groups and spin doctors are brought in to soften us up and proclaim closet racists and rednecks as the new normal.

The Coalition will do whatever it takes to recover from their current poor polling in readiness for an election in 2018, a year earlier than required, but necessary to bring the senate timeline back into sync.

 

Unlike Turnbull, Trump Holds No Fear of Debt

Whatever one thinks of Donald Trump, there was something he said in his inaugural address today, that Malcolm Turnbull should note well.

Trump said, “We will build new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation. We will get our people off welfare and back to work, rebuilding our country with American hands and American labour.”

This could be a blueprint for Australia as well. Does anyone think The Donald would be concerned about where the money comes from? Not likely. One suspects he is already ahead of the game.

Speaking a week ago to CNN’s Chris Cuomo, he said, “First of all, you never have to default because you print the money, I hate to tell you, OK?” He was answering a question on the $20 trillion of US bond issuance and added, “I understand debt better than probably anybody. I know how to deal with debt very well. I love debt.”

Compare that boldness with the Australian government’s obsession with debt and bringing the budget back to surplus. Whatever one thinks of The Donald, he is right. He certainly has no fear of private debt and realising, as he clearly does, that sovereign debt is altogether different from private debt, one can surmise he will use it to, “make America great again.”

Furthermore, Trump has no fear of the American media.

How we yearn for someone like that here in Australia. Take the latest labour force figures released by the ABS. They paint a dismal picture.

As Professor Bill Mitchell repeatedly warns us, “we always have to be careful interpreting month to month movements given the way the Labour Force Survey is constructed and implemented.”

What Prof. Mitchell tells us though, is that the latest employment figures for December suggest, “the Australian labour market remains in a weak state and confirms that the September-quarter GDP figures, which showed real GDP growth being negative were probably part of a downwards trend.”

Unemployment increased in December to 5.8% making a mockery of the Turnbull government’s “jobs and growth” mantra. Furthermore, the underutilisation rate (underemployed and unemployed) is at 14.7% unadjusted.

Over the last 12 months, Australia has produced only 91,500 (net) jobs with 125,500 of them being part-time jobs. In other words, full-time employment has fallen by a disturbing 34,000 (net) jobs over the same period.

The disturbing trend toward part time work continues at an alarming rate where today, one in three Australian workers are part time, compared with one in five in 1988. This has serious ramifications for demand, for tax receipts and overall growth.

If ever our mainstream media had the ammunition they needed to press for a Trump like approach to drag our economy out of the doldrums, they have it now. Will they use it? Not likely.

Will our government cast aside their obsession with deficit spending? Not likely. Unlike Trump, our government fears the media. Every thought-bubble they have is followed by the question, “how will the media react?”

It may well turn out that while the world looks the other way, waiting in fear for how Trump might manage China or ISIS or immigration or any other of his more outrageous claims, the man himself might just reconstruct American infrastructure and in the process, restore its flagging economy.

And it probably won’t cost a sovereign cent.

The Economy an Impending Train Wreck

If you were on a fast moving train and someone came through the carriage and told you that the train had no brakes and only a brick wall would stop it, how would you feel? What would you do?

Right now, Australians are heading at full speed into an economic brick wall and the government won’t do what’s needed to stop it.

We boarded the train in the late 90s and early 2000s when mining was the buzz word and Peter Costello started producing surplus budgets. Everyone gave him a big pat on the back and told him what a great job he was doing.

Peter probably felt justifiably proud and continued doing what he thought was the right thing, i.e. producing more surplus budgets. Mind you, he was receiving shiploads of money from the mining sector, so it wasn’t all that difficult.

Unfortunately, only a select few at the time realised that Peter’s surpluses were sucking money out of the economy. He thought he was deploying it to pay down the Hawke/Keating government debt, which had grown to 18.1% of GDP by 1996.

But in doing that actually, he was forcing the private sector (you, me and the corporates), to replace that debt reduction with debt of our own using the credit card, the mortgage and corporate loans. The train had pulled out of the station.

Nobody played much attention to that though. Everyone thought Peter was a genius and by 2007, he had paid down all net debt although, in gross terms, $58 billion of government debt remained.

All the while he was doing that, Newton’s Third Law of Motion was kicking in and private debt was on the rise.

Then, those nasty Labor people were elected once more. Just 12 months later the greatest economic upheaval since the 1930s depression exploded in our faces.

Banks collapsed along with the stock market and property values. Demand fell sharply as unemployment soared into the tens of millions across the OECD world.

A brief period of stimulus in Australia proved to be a masterstroke. Labor’s economic management was hailed worldwide. Yet internal bickering became its undoing despite maintaining the nation’s unique record of continuous economic growth.

By this stage, however, private debt had reached record levels as Australians continued leveraging up on inflated housing prices, buying up anything and everything they could get on their credit cards.

By September 2013, Government gross debt was a miserable $278 billion, just 25% of GDP. The new conservative Coalition government won office through a compliant media who convinced people that Labor’s debt would send us broke. Austerity was the new buzz word.

The new government promised a return to surplus budgets. Despite a fall in demand, rising unemployment and low wage growth, the government assured us they were on the right path.

More than six years later, none of their promises have produced the slightest indication of improvement. Unemployment, low wage growth crippled by a continued fall in demand is sending our fast moving train closer and closer to that brick wall.

The national government debt has skyrocketed to $465 billion, something the Coalition once thought would send us broke and our debt to GDP ratio has risen to above 36%.

The first negative quarter of growth (September -0.5%) was unexpected. The next quarter (December 2016) won’t be known until March 2017 and all the economists are saying it will bounce back to positive territory. That is Bollocks!

The train won’t slow down just because they say so. By March it will already be obvious to the private sector that demand has not improved. They will begin laying off people in February and Australia will be in recession.

Even if the March quarter produced a small albeit unlikely amount of growth (say, 0.2%), the 12 month figure will still show growth at a miserable 1.7% for the year 2016.

This follows 2015’s result of 2.6% and 2014’s of 2.3% and 2013’s of 2.8%. This is the reason unemployment won’t come down, why underutilisation of the work force is close to 2 million people.

None of this needs to happen. The economy is tanking. It is being starved of money that should be coming from the government, that doesn’t need to be borrowed, that should be spent on nation building infrastructure projects, on interim stimulus injections and a job guarantee.

Yet what do we hear and read about daily via the media? The Health Minister, Sussan Ley tells us she didn’t plan on spending nearly $800,000 on a Gold Coast apartment while on an official trip paid by the government, Senator David Leyonhjelm scolds pensioners for being pensioners and now Centrelink, using a suspect algorithm, is advising people traumatised by demands for the reimbursement of welfare payments, to call Lifeline.

That train crash is getting closer and closer. What will the media say when it happens?

Our Government’s Misguided Ignorance About Debt

On October 11, 2009, during the post GFC  wash-up, American economist Paul Krugman wrote in the New York Times under the heading, “Misguided Monetary Mentalities”:

“One lesson from the Great Depression is that you should never underestimate the destructive power of bad ideas. And some of the bad ideas that helped cause the Depression have, alas, proved all too durable: in modified form, they continue to influence economic debate today. What ideas am I talking about? The economic historian Peter Temin has argued that a key cause of the Depression was what he calls the “gold-standard mentality.” By this he means not just belief in the sacred importance of maintaining the gold value of one’s currency, but a set of associated attitudes: obsessive fear of inflation even in the face of deflation; opposition to easy credit, even when the economy desperately needs it, on the grounds that it would be somehow corrupting; assertions that even if the government can create jobs it shouldn’t, because this would only be an “artificial” recovery. In the early 1930s this mentality led governments to raise interest rates and slash spending, despite mass unemployment, in an attempt to defend their gold reserves. And even when countries went off gold, the prevailing mentality made them reluctant to cut rates and create jobs.”

Today, our Australian government is doing exactly what Krugman argued against, with the exception of raising interest rates. This time, however, it is not to protect our gold reserves. We have none. Peter Costello sold them off years ago at bargain basement prices.

This time, it is to protect us from the myth of public debt. And just what is this debt? The Australian Office of Financial Management displays this debt as a permanent fixture on its website for all to see. As at 31st December 2016, the total issuance of treasury bonds and notes is $464,791,000,000.

This is gross debt. This is the figure upon which interest is paid. These days it is more common to hear government members quote net debt because it enables them to subtract the value of the Future Fund (currently around $125 billion) and so doesn’t sound quite as frightening.

But gross debt is the big ticket item, the one those same government members were all too willing to quote when Labor was in power, the one that supposedly costs us $1 billion in interest per month.

This debt comes about because Treasury runs our economy as if it were a household. If the incoming flow of tax receipts does not cover the outflow of government spending, it directs the AOFM to tender for the sale of government bonds to cover the expected shortfall.

But this is no more than an academic exercise. The government is not a household. It is the currency issuer of Australian dollars and can never run out of money. It never needs to borrow any more than it needs to collect taxes.

The bond issues are purchased by a variety of institutions both here and offshore. But they are only ever issued in Australian currency and are therefore never at risk of default. They can always be repaid independently and regardless of the state of our economy.

Furthermore, they do not fund government spending. All government spending is new money issued by the Reserve Bank of Australia (RBA). If you doubt this, ask anyone who has bought these bonds to show you their certificate. The money they have given the government in exchange for that certificate sits in an account in their name at the RBA.

So, the Treasury documents that are issued as part its accounting responsibilities and which reflect an accounting sheet balance of income and expenditure plus debt issuance, are no more than a mythological construct to give the appearance of good housekeeping.

There is no debt. Furthermore, the interest paid on the bonds is also newly created money. It is shown in the budget papers as an expense but it should, more accurately, be an RBA transaction like any other bank and not a part of the national budget.

If the government were really looking for savings, they need look no further than the $12 billion per year the RBA pays its bondholders.  That money could be removed from the budget expenditure side, immediately. So why don’t they? The answer to that question takes us back to Paul Krugman’s article.

The government, like all western economies, still maintains a ‘gold standard’ mentality. It’s a reflection of its collective macroeconomic ignorance. And in maintaining this ignorance, it is overlooking the real threat to our economic well-being: that of private debt.

In acting this way, they are playing right into the hands of the super-rich who want a permanent pool of unemployed workers, a low paid workforce and less government interference in corporate oversight.

It’s high time we brought an end to this deception and the fantasy of government debt.

MYEFO, a tale of incompetence

What a tale the 2016/17 December MYEFO tells. And it’s not what the Treasurer is saying. Firstly, Scott Morrison is projecting a return to surplus in 2020/21 which is unchanged from the pre-election update.

What he isn’t saying though, is that the likelihood of this actually happening is next to zero. Thankfully, that’s not an issue because a surplus budget is the last thing the Australian economy needs right now, or indeed in four years’ time.

Next, the budget deficit is projected to fall by a paltry $600 million this year to $36.5 billion. That saving comes at the expense of pensioners, the disabled, the Green Army and the unemployed. But again, it probably won’t be realised.

That $600 million saving would otherwise have been spent by the recipients buying food, household items, travel, transport and other demand driven needs. That saving does even more harm to the economy.

Next, net debt is projected to peak at 19% of GDP by 2018/19. Who cares? Our debt is issued in Australian dollars and can always be repaid. We can continue to issue bonds till the cows come home and never run out of money.

We can, however, run out of resources. That’s where growth comes from. That’s what we should be looking at, not the debt. Our unemployed are an unutilised resource who create additional demand and a boost to our productive output. The fewer people working the less demand for goods and services.

Meanwhile real economic growth estimates have been revised down. There’s a contradiction here that seems lost on the Treasurer. Tax receipts are down $3.7 billion since the June pre-election budget. That’s because wages growth is virtually non-existent and with the increase in part-time work, people are working fewer hours.

The contradiction?  The government has fought tooth and nail to prevent wage increases for the lowest paid and is now suffering the consequences of revenue write-downs in tax receipts from low wage growth. Talk about scoring an own goal.

What is of no concern is this constant talk about what the ratings agencies might do. Who cares? The ratings agencies are irrelevant to the success or otherwise of the Australian economy.

The interest rate for our bond issuance is determined by the government, not the ratings agencies. Regardless of any determination by the ratings agencies, our bonds will always attract both local and international support, whatever rate the government sets.

Not that we need to issue bonds in the first place, but that’s another story.

What this MYEFO tells us is that the government and Scott Morrison are incapable of managing our economy in a way that will bring an improvement to the living standards of most Australians.

They are collecting less and spending more but not where it actually leads to anything. Where is the investment in the future? How often have these pretenders been falsely warning us that today’s debt is a burden on future generations?

The reality is the reverse. Today’s lack of infrastructure spending is the burden we leave future generations. It is our grandchildren who will suffer the burden of ageing infrastructure, insufficient hospitals, poor public transport and communications.

With this kind of thinking, our economy is destined to decline further, with or without any international events impacting.

The world is changing…and not in a good way

It seems unnecessary even to say it, but that’s the truth of the matter. The world is changing and not in a good way. It’s the story of the frog in the saucepan.

The water heats up but it’s so comfortable that the poor frog doesn’t realise, until it’s too late, that the ever increasing temperature of the water is slowly boiling him alive.

We are like the poor frogs and the changes in our lives have been, and are, so subtle we don’t catch on until it’s too late. What we have failed to notice is that our so-called democracy has been ripped out from underneath us and replaced with an obscene form of plutocracy.

The truth is, democracy in Australia began to die some thirty years ago. We didn’t cause it. That honour goes to the United States. Richard Nixon set the virus loose when he took America off the gold standard in 1971.

It was Ronald Reagan who lay the groundwork for the virus to spread and spread it did. Western economies followed suit adopting fiat currencies and suddenly the greedy race to the bottom was on.

Fiat currencies are not evil in themselves. They can and should be employed for great good. They can provide full employment, raise living standards; they can eliminate hunger and poverty.

But in Ronald Reagan’s world there was a different agenda. The result is that we now live in a world dominated and controlled by corporate greed.

We don’t know if Nixon or Reagan intended the virus to spread across the globe the way it has, but neither introduced any regulatory barriers to stop what actually happened.

So, those two presidents were at best incredibly naïve or at worst, criminal.

The introduction of fiat currencies opened the way for a paradigm change in the distribution of wealth and power. Then, when Bill Clinton repealed the Glass-Steagall Act he made it so much easier for the crooks to flourish. It has resulted in a measure of inequality not previously experienced by any former civilisation.

Today, democratically elected governments are no more than agents, one might even call them servants, of the super-rich. They do the bidding of those that pay them to keep the masses in check.

In Australia, we only need to look at the list of political donors from the 2013 election to see where the big money came from and where the control lies. And this is only what was declared. How much more and from whom, that went undeclared, we may never know.

And why do they donate? Just take a look at the economic policies of the two major parties, both of whom skew their preferences toward their funding base.

There was a time when economic policies were built within a framework that put people first, that cared for the social consequences. Not anymore. Today, it’s all about serving the interests of the financiers and industrialists to the detriment of communities, of social cohesion.

Today, more than ever, factories are shutting down, car manufacturing plants are closing, engineering plants, that once employed successive generations of the same family are sitting idle, while governments across the country call for even more labour reform.

There are devastating signs all around us of Ronald Reagan’s neo-liberal train wreck and yet, while we feel the water in the saucepan getting a little warmer, the comfort levels are still reading ‘cosy’, blinding us to what is coming.

Three major events this year, Brexit, Trump and Renzi’s failed referendum would have us believe the people are finally saying they have had enough. We might even include Hansonism in that revolt but that would be foolish.

That right-wing conservative shift is little more than a bump in the road. Conservative rebels will soon see how wrong they were, how their protest voice will in fact empower the forces of neo-liberalism even further.

Have we learned anything from the GFC? Watch and listen to these pathetic, opportunistic, mongrel, neo-liberal apologists as they scramble their way out of the ditch they have built.

In the long term, nothing will change except the rhetoric and everything will go back to the way it was beforehand.

The world has changed and not for the better. The inequality gap grows wider and wider. Control of our future is contracting to fewer and fewer.

While we listen to politicians telling us about the debt burden we will hoist upon our grandchildren, little do we realise that the super-rich are already planning our grandchildrens’ future.

The trend is toward longer working hours and lower wages.

The sweat-shops of Asia, the child labour in India and the meagre trickle-down offerings western society has been blinded by today, will pale in comparison to a late 21st century world of total subservience.

Unless those duped by neo-liberalism’s trickle-down fraud, can rise from their present artificially constructed comfort zone and claim their rights beyond a simple Brexit or Trump, western living standards, for other than the super-rich, will continue to decline. The frogs will have left it too late to escape.

Do we now have a budget emergency?

The adults have been back in charge for over three years now. Our economy has been saved from the debt and deficit decimation and everything is back to normal. Scott Morrison take a bow. You have achieved something Joe Hockey couldn’t.

Oops! Hang on. Something’s not quite right here.

The September Quarter national accounts have thrown up something that can’t be right, can it? A negative growth factor of 0.5% could only occur under a Labor government, surely. An annual growth rate of just 1.8%? Doubtless there are people out there who will still blame Labor for it.

And it appears Scott Morrison is trying to. He is demanding that Labor must now support the government’s $48bn tax cut plan because the economy needs it. It’s the same old ‘trickle-down’ rubbish conservative governments have been preaching for years.

“This is the ticket to the next 25 years of growth,” he said on Wednesday. “But we cannot achieve that if we cannot get the partners in this parliament that will engage with us in the national interest, that won’t be engaging in party political games, that won’t engage in negative politics and wrecking and destroying, but will engage to lift the burden on business so they can invest and employ more people.”

Can you believe the economic fantasies this man entertains? He actually believes that a $48 billion tax cut for businesses is in the national interest. The cut is over a 10 year spread, let out in dribs and drabs that business will hardly notice. The savings in most cases will probably pay for a Christmas break-up party, but little else.

The modelling shows the corporate tax cuts will deliver an increase in the GDP of 1% in 20 years’ time. Compare that to a GDP loss of 0.5% in the last three months. Morrison thinks that this is going to save the Australian economy from disaster and set up the next 25 years of prosperity. Talk about delusions of grandeur!

And this is what he is banking on to save his economic record. To those of us who have been warning a recession is immanent, that increased government spending, not tax cuts for business, is what is needed, we say, “we told you so.” But Morrison is not listening.

“To regain our competitiveness, and therefore create and sustain jobs, we must encourage our businesses, which employ most Australian workers, to invest and grow,” Morrison said at a press conference on Wednesday.

For the record, the nine Australian governments are collectively the country’s largest employers to the tune of 2 million workers and it is the government who should be leading from the front. Business is waiting for government to show the way.

1467195256008They will thank Morrison for the tax cuts but won’t invest the proceeds. To think otherwise is sheer fantasy. If Morrison wants to encourage business to invest, then he should lead by example.

Let’s start by constructing the world’s biggest solar plant in South Australia, let’s build a fast train service between Sydney and Melbourne, let’s restore the NBN to its original design (FTTH) and get it finished by the end of 2017. Let’s upgrade our urban transport systems.

There’s plenty of other projects just begging for attention. But no, this government is determined to bring the budget to balance. That’s code for surplus. They won’t spend because they think that deficit spending creates debt and debt is bad.

All of which is sheer bollocks!

How do we get it through their thick heads that the only way out of the mess they have created, is to spend? Even the IMF has changed its mind. After being a major contributor to the economic disaster that is the Eurozone by preaching austerity, they have now decided that infrastructure spending is the new austerity.

maxresdefaultProfessor Bill Mitchell was quick to react. He writes, “The Australian economy has been marching inexorably towards recession for the best part of this year and government refuses to budge from its attempts to impose fiscal austerity. Madness is a euphemism for their policy conduct. Incompetent also comes to mind.”

Hello! Is anyone in Canberra listening?

 

Morrison is not up to the job

It is extraordinary how the mainstream media is protecting the Coalition government by not exposing the true state of the economy.

Right now, the government is between a rock and a hard place and has no idea which way to turn. The latest ABS figures for the Wage Price Index show a further deteriorating trend in the most important category of taxation revenue, wages growth.

The flat wages drift continues and growth is being driven by private sector credit.

In reality, wages growth is important in terms of tax revenue but irrelevant in terms of getting Australians back to work. But our Treasurer can’t see that. His answer for low wages growth is to give corporations a tax cut.

On the ABC’s 7.30 last night, Scott Morrison was asked how the low wages growth issue could be fixed. He replied by saying, “Australians need to earn more AND companies need to earn more.” He then went on to say that the government’s corporate tax plan was necessary to give companies more “headroom” to give their workers more hours.

What utter nonsense! By “headroom” I presume he meant more after-tax profit. But businesses must first make a profit before they pay any tax, so how would a lower tax rate help it earn more? It is a ridiculous suggestion, all the more vindicated when one compares how many of our major corporations pay no tax at all.

3c70f5c030283bb617c5726f4316b763Leigh Sales put it to Morrison that Australian companies were already fairly profitable, therefore why shouldn’t they pay their workers more. Another ridiculous suggestion. What she should have asked is, “why doesn’t the government find jobs for the 1 million plus who are underemployed and the 700,000 who want work but can’t find it?”

There were 1,011,100 workers underemployed in August 2016.

More jobs would create more hours as well as exponential revenue by helping drive greater demand. The depth of questions asked of our government ministers is pathetic.

If Morrison was a Labor treasurer, he would be vilified by both the Murdoch, and Fairfax media outlets and the ABC, mercilessly.

Morrison is not up to the job. He waffles on about corporate tax rates in the U.K. and Donald Trump’s plans to cut the US corporate tax rate to 15% believing this is what drives an economy. He needs to speak to business more forcefully.

Professor Bill Mitchell says, “The suppression of real wages growth has been a deliberate strategy of business firms, exploiting the entrenched unemployment and rising underemployment over the last two or three decades.”

That strategy continues today with the government trying to pass its anti-union legislation through the senate. Productivity growth used to be shared with the workforce, creating higher rates of spending which then created more jobs.

Today, the gap between productivity growth and wages growth is widening. Morrison could lower the corporate tax rate to zero and it won’t do anything for wages growth.

o-greed-900The workforce will not increase their spending on the credit card forever. And companies will not employ new labour if they cannot sell more of the goods and services they currently produce. It’s not rocket science.

Morrison doesn’t have a clue.

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