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Cheers to the New Year with a Dash of MYEFO Spirit+

By Denis Bright

The projections in The Mid-Year Economic and Financial Outlook (MYEFO 2023) offered a peek into our national financial future for the New Year and beyond.

MYEFO 2023 was released by our financial leaders with strident and confident expectations on 13 December 2023.

These future concerns were offset by the improvements in most indicators since delivery of the Australian budget on 9 May 2023.

The good news enabled our financial leaders to clasp their MYEFO 2023 papers more tightly.

The MYEFO papers were a collective badge of honour for the Albanese Government with the prospect of two consecutive budget surpluses and some evidence that the slow-down in the global economy might result in a softer landing than expected some months ago.

 

Percentage Australian Domestic Economic Projections

 

Walter Frick of the Harvard Business Review (27 December 2023) offered a more positive interpretation of short-term prospects for the global economy. Financial journalists at Reuters (22 December 2023) were also upbeat as the New Year approached. Investors had transferred funds from hedge-funds to other S&P financial options. Nearer to home, China’s economy is likely to grow at close to 5.5 per cent in 2024 according to Forbes Asia (23 November 2023). All these developments make the OECD projections for 2024-25 a trifle dated.

The growth and diversification of the Chinese economy helped to carry Australia and even the US through the GFC more than a decade ago.

These vibes are returning in 2024-25. The Biden Administration seems to be moving towards Win-Win trading and investment links with China again after cooling potential disputes over the Taiwan Strait and those uninhabitable rock outcrops known as the Senkaku/Diaoyu Islands in the Sea of Japan (East Sea).

 

 

Australian investment ties under the federal LNP were increasingly with the financial capitals of the older developed world in the US and Britain. Interested readers may wish to check out the innovative presentation of this data by ABS as released on 3 May 2023.

Despite short-term budgetary improvements, Australian public sector finances still present real challenges.

MYEFO 2023 was cautious about unsustainable trends in our public finances. Our financial leaders have spotted these emergent problems.

Loose fiscal policies would worsen the situation in the event of an economic slowdown in the mid-2020s.

Commentators are now expecting a lighter correction in the global economy than our financial leaders anticipated several months ago.

MYEFO 2023 still justified that optimum balance between government spending, public capital works and essential private sector investment that the budget set in place on 9 May 2023. The caution paves the way for new options in the budget ahead in 2024.

LNP overstates Labor’s commitment to public sector spending. Government spending as a share of the national economy peaked at 31.3 per cent of GDP in 2020-21. It is now 25.7 per cent of GDP in MYEFO estimates for 2023-24.

 

Trendlines in Major Australian Government Spending Priorities

 

For a Labor government that is striving for an extended term in office, the investment multiplier offered by private sector investment is the crucial variable in our economic and community development. Chart 2.8 from MYEFO 2023 showed just why this is a transitional time for the Australian economy in the post-mineral boom era. New patterns of investment are required for changing times.

Strategic considerations on the expansion of our investment ties with China is an inherited liability from the Morrison Government. Such assessments were quite alarmist. Our US strategic allies are quite adept at playing games of economic diplomacy with compliant countries like Australia. Economic diplomacy usually trumps strategic policies as national elections approach in Taiwan on 13 January 2024 and the Primaries commencing at home in the US. Very few voters perceive that peaceful days should be marred by strategic scares and preparations for new conflicts.

Each US administration welcomes purchases of US Treasury Bonds by the Chinese Government. The American Enterprise Institute and Heritage Foundation has highlighted the global distribution of Chinese investment to mid-2023 without any negative comments.

 

 

US commercial symbols are a regular feature of Chinese streetscapes as noted by Business Insider:

There has been at least one bright spot for Beijing when it comes to foreign investment: American fast-food chains have decided a market of 1.4 billion people is simply too delicious to pass up.

KFC China’s parent company opened its 10,000th restaurant in China this month and aims to have stores within reach of half of China’s population by 2026. McDonald’s is planning to open 3,500 new stores in China over the next four years. And Starbucks invested $220 million in a manufacturing and distribution facility in eastern China, its biggest project outside the U.S.

Media monitoring by Google Bard claims that Chinese financial institutions have invested between $A$1.3-$1.5 trillion in US Treasury Bonds to October 2023. This is the world’s second largest foreign equity in US treasury Bonds after Japan.

Public education campaigns by key federal financial departments and the varied Labor-oriented think-tanks might deliver a broader range of investment options for future discussion in Australia.

US economic diplomacy is less timid. The resources of the US Trade Representative in Washington routinely monitor all free trade agreements with countries like Australia for lapses in commitment to neoliberal values which have been embedded into these global trade and investment agreements.

Australia can do better in advancing our own economic diplomacy. This is one area in which Australian Governments could tune into US policies. Australia is a major global economy with a GDP that is half the size of its British counterpart. Our per capita income here is 40 percent higher than in Britain.

Let the lyrics from the Inner Circle foster real change agendas to confront old colonial cringes as proposed by the Inner Circle Band from Jamaica.

 

 

Denis Bright (pictured) is a financial member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to consensus-building in these difficult times. Your feedback from readers advances the cause of citizens’ journalism. Full names are not required when making comments. However, a valid email must be submitted if you decide to hit the Replies Button.

 

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24 comments

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  1. Burleigh Waters

    Australia needs to play more independently in the global economy. We are the future and do not need to trade and invest according to old conventions.

  2. Laura

    Good to hear that 2024 might be better financially for Australians than was expected at the time the budget was delivered.

  3. Even Stephen

    The critically structuralist approach to news analysis is worth taking up to understand our world. American linguist Noam Chomsky and political economist Edward S. Herman proposed a model of how media serves the interests of powerful elites by filtering information and manufacturing consent. Stuart Hall developed the concept of “encoding/decoding” to explain how news producers encode messages and how audiences decode them. He emphasized the role of audience agency in interpreting news stories and the possibility of resisting dominant ideologies. Let’s hope that our leaders also take up these perspectives.

  4. Leila

    The Labor Government has made some small initiatives which can assist everyone in social housing, pharmaceutical benefit costs and climate change to name some of the positives. Only a long-term government can deliver bigger changes and have the courage to stand up to the lobbyists who insist that we spend more of their defence hardware.

  5. andyfiftysix

    I see all this crap and want to puke.

    As I see it, australia has traded wealth in hand for wealth on paper…..super and housing. A few trillion dollars out of the working economy.

    Want to know why china is a power house? They rightly identified the energy revolution and put a lot of eggs in that basket.
    The identified EV production, Solar cell production and Battery production. WTF did we do?

    China’s only stupidity was in imitating the west and our preoccupation with realestate.

    Nowhere in this crap of economic shit do I see a plan to get out of the mess we are in. Instead its more of the same. Hoping things can turn around. The way i see it, you will need not only 2 wages to stay afloat, maybe even 2 generations on the bank drip. Not even covid could get realestate prices down. Untill these poison darts are removed from the economy, we may as well just keep pissing it up the wall. Maga thinking that will bring the world down to zombie levels is horrifying but maybe only because we believe the lies and Assume that authority figures actually know what they are doing. I get the distinct feeling, they are only reactionary having no intellectual input at all.

  6. andyfiftysix

    Just to show my ideas are based on facts, watch how Tony Seba gives us a run down on the very near future.

    https://www.warpnews.org/premium-content/the-naive-tony-seba-has-been-more-right-than-anyone-else-so-listen-to-what-he-says-now/

    we have no idea of whats coming, the media and education systems have failed us. Politicians are just a reflection on our society, stupid is as stupid does. What do the economists think of the issues Tony brings up? crickets…….chirp….chirp….chirp

    If we cant see the crap we have built, what hope with the stuff comming down the line? You honestly think more of the same is going to cut it? Any economist who hasnt studied Tony Seba should be sacked for incompetance.

  7. New England Cocky

    @ andyfiftysix: Sometimes it is difficult to be the black sheep in the mob, but I understand your position (I think) and even agree with it. My concern is that maybe you attribute the cause(s) in error.

    Firstly, I think the too many policies established under Little Johnnie Howard, the great wrecker of Australia, are the cause(s). In order, our ”Lucky Country” had had too many of our deposits of natural resources gifted away by short-sighted, ill-educated COALition misgovernments while refusing to link resource processing in Australia to the mining licences.
    .
    Agreed re PRC China. Australia had disinterest among the Australian business ”leaders” & LIARBRAL$ pollies when the potential for an Australian e-vehicle manufacturing industry was abolished as an ideological brain fart by Toxic RAbbott, throwing about 30,000 persons onto unemployment benefits that adversely impacting national economics. The US automobile industry was encouraged to abandon EVs by the US oil industry in 1994, including the destruction of all e-vehicles and battery technology.
    .
    Something about pollies & economists following the ”doing the same thing while expecting different outcomes” appears to be the applied strategy. Conservatives protect the past where their wealth was created. However, think the re-building of the German economy post-WWII giving German business the newest most efficient technology and the subsequent domination & decline of the English economy using ageing pre-war machinery and business management. Somehow Howard and his wooden-headed puppets lacked the necessary vision to see the future opportunities, preferring to buy the votes of aspiring middle class voters with over-funding private schools and ”sell off the farm” to the lowest bidder.
    .
    Certainly the Australian love affair with ”super and real estate” is foolish economics. Yet the Shorten policies for limiting negative gearing to only one investment property and grandfathering negative gearing, that benefits the few high income mainly medical professionals and corporations, would reduce bank profits and reduce market demand allowing young Australians back into the residential real estate market.

  8. Florence

    Howard’s problem was the belief if the needy received handouts, it was not fair for those who could care for themselves to miss out. Gillard was violently attacked when she attempted to remove some of Howard’s gifts to the middle class. Middle-class & downward envy ruled the day. Howard entrenched the politics of envy.

  9. Burleigh Waters

    Keep up your discussion andyfiftysix. The world can only be changed by mass mobilization of fresh opinions. Australians are reluctant to join in the range of options in the broader Labor Movement. Even in historic Labor strongholds like Barcaldine, the LNP still beats Labor on primary votes and here the LNP vote is built up to over 54 percent on preferences from the far-right parties. Beyond railway staff, the police, teachers and nurses, there are few trade union members in towns like Barcaldine.The Labor Movement has to be quite conservative to hold its current ground. Labor’s current Newspoll Primary vote is only 33 percent nationally and needs Green Party preferences to gain a slender 52 to 48 percent mandate. AIM Network exists to foster more progressive opinions and your comments are most welcome here, andyfiftysix.

  10. James Robo

    Australian and state governments need to promote a better understanding of their priorities. Too many people are opting out to support minor far-right parties who routinely allocate preferences to assist the LNP.

  11. Ivy

    Denis, Thanks for an interesting and well researched article.

  12. Tessa_M

    Many middle sized economies have their government managed invest and sovereign wealth funds. Australia’s Future Fund had tarnished origins when it was seeded from the sale of Telstra. It could also have taken hedge fund investment from the corporate sector. The Fund has a quarter of a triillion dollars under management with separate specialized funds for medical research, advancement of indigenous people, relief from the effects of climate change and disability care. With the support of state investment funds, this public spirited investment should be a key part of our economic diplomacy.

  13. rubio@central coast

    Without needing to use specialized business studies library references, there is some coverage of economic diplomacy and tax minimization from these commentators:

    George Parker: Financial Times senior political writer, known for his in-depth reporting on UK politics and its international implications.

    Ed Luce: Washington Post editorial writer, specializing in US foreign policy and international affairs.

    Katja Weber: The Economist’s senior US correspondent, with expertise in American politics and economics.

    Alan Beattie: Financial Times US trade and economics correspondent, offering insightful analysis of US trade policy and global economic trends.

  14. GL

    And yet we pay disgusting fucking pricks like the Spud hundreds of thousands a year to try wreck the government and divide the rest of the country! Thank Cthulhu that the LNP isn’t in power, Duttonuci would have most likely have put Alicio and his family in detention. Labor, however, is not entirely blameless by being pretty much silent. Probably scared that Der Spud might try (not that he would ever do such a thing…) to do some political grandstanding against Albo.

    https://www.smh.com.au/politics/federal/alicio-speaks-three-languages-loves-science-and-is-popular-at-school-but-australia-doesn-t-want-him-20231229-p5eu7a.html

  15. rubio@central coast

    Just reading Charles Chatterjee on Economic Diplomacy online for my coursework.

    Economic diplomacy is vital for middle sized economies like Australia which are still associates of big powers on the world stage. If the Albanese Government lasts long enough, that might change in the future. There is an interesting recent free documentary from Financial Times on the current transitions from globalization to more traditional economic nationalism. In the case of the US, economic nationalism never really went away and was embedded in strategic policies to assist their military industrial complexes with arms exports : https://www.ft.com/video/9f002882-c330-4c7f-88c0-4cc5112125a2

    FT from the UK but owned by the Japanese owned Nikkei network FT promotes Australia’s Bluey cartoons as a high-profile Australian export. The content is sometimes censored by US networks for being too gutsy.

    Be careful of taking up trial subs with FT . Nikkei uses non-reply emails which don’t count in cancellations of trial subscriptions. Tha’ts dodgy commercial practice and not ethical practice or sustainable economic diplomacy.

  16. rubio@central coast

    Australia and Bretton Woods: More Keynesian Than Keynes
    Donald J Markwell

    June 2000

    Download the Paper 245KB

    Interesting paper from our RBA: It’s a myth that Australia under Curtin and later Chifley always supported US economic diplomacy: That was more a locked on feature of the Hawke era when Australia failed to support NZ over bans on nuclear powered visits to NZ ports carrying nuclear weapons:

    “At Bretton Woods, Australia moved a resolution ‘… that Governments which are to be invited to accept an International Monetary Agreement should be invited to accept con-currently an international agreement in which the signatories will pledge themselves to their own people and to one another to maintain high levels of employment in their respective countries, and to exchange information on measures necessary to prevent the growth of unemployment and its spread to other countries’.[337] This was defeated. The US was strongly opposed, though the UK and New Zealand supported Australia. However, the relevant Commission of the Conference did call on countries to ‘create by cooperative effort the harmonising of the national policies of member States designed to promote and maintain high levels of employment and progressively rising standards of living’. Although the Articles of Agreement refer to ‘the promotion and maintenance of high levels of employment and real income’,[338] Australia entered a reservation to the effect that not enough emphasis was placed on employment.”

  17. rubio@central coast

    Australia and Bretton Woods: More Keynesian Than Keynes
    Donald J Markwell

    June 2000

    Download the Paper 245KB

    Interesting paper from our RBA: It’s a myth that Australia under Curtin and later Chifley always supported US economic diplomacy: That was more a locked on feature of the Hawke era when Australia failed to support NZ over bans on nuclear powered visits to NZ ports carrying nuclear weapons:

  18. andyfiftysix

    NEC, i am not nieve enough to think only one reason is the cause. But its pointless writing a ten page essay. So i highlight whats currently in discussions. I dont dwell on the small stuff. I am more interested in the broader strokes. The strategy rather than the war. What makes retards do the shit they do. Obviously, i see the world in a different light than most people. The things we take for granted, the assumptions we constantly make are far more interesting. Whilst i appear to be totally anarchistic at times, i also believe things are salvageable. But shit man, if you cant see the problem…………

  19. andyfiftysix

    Florence, i agree. but howard has other distinguishing features. He was/is an intellectual retard with no empathy for anyone apart from his own perceived status in society. He was allowed to get away with lots of shit because we were riding a mineral boom. In the end Hubris got him. No recovery from workchoices. However his impact is still felt today. And i can tell you, most people are pretty pissed with how things are going. Unfortunately, the dumb nuts cant seem to join the dots.

  20. rubio@central coast

    The Taiwan elections on 13 January 2024 might be a big game-changer. Taiwan has a two round ranked choice system with a run-off election likely as no candidate is likely to get 50 percent of the vote with support from the TPP helping Kuomintang over the line and bringing a real; change of government to Taiwan. President Tsai lng-wen must retire after two terms. Maybe the Taiwan election will cool relationships with China and save Australia from the financial excesses of the AUKUS deal. which are currently diluting that MYEFO+ spirit discussed in Denis’ article.

    For the Taiwan election details: https://en.wikipedia.org/wiki/2024_Taiwanese_presidential_election

  21. andyfiftysix

    Rubio, there are some very smart people in the USA, not only dog shit…..lol.

    If you want to have any relevance in the future, its not hard to find stuff you should encourage. The electrical revolution wasnt plucked out of thin air. Same as the iphone disruption didnt come out of nowhere. Bio food is just around the corner and all we can do is fight about how the label “milk” fits on a bottle. Can you imagine around 1913 when the car revolution was about to happen. Politicians would have been concerned there weren’t enough stables….

    The dumb country always seems to have a ready supply of bufoons who have no interest in the future, only what they can get now.
    Unfortunately, a lot of them are represented by parliamentarians who are equally dumb as dog shit. EVs will take away your weekends……..Cash and Morrison……..

  22. rubio@central coast

    The dumb representatives sit on both sides of the political aisles in parliament. Large sectors of the population are turned off by their opportunism. Ex-senator Patrick told everyone on RN this morning: Australian funds will be used to support the US Navy’s nuclear ballistic missile submarine program: RN Access:

    https://www.abc.net.au/listen/programs/radionational-breakfast/aukus-nuclear-weapons-united-states-australia/103280298

    Keep up the good work andyfiftysix.

  23. Clakka

    Thanks andyfiftysix,

    Enjoyed the video of Seba …. convergence, disruption, phase change, transformation; s-curve. Gravity: cost curve. Lovely.

    In any analysis, shit input = shit output. From politicians, vested interests and status-quo economists one could almost guarantee shit input. The great blockage of flat-footed flat-eathers.

    As a retired quantity surveyor / cost engineer / forensic analyst esp. risk, delay & disruption (major complex projects), all analysis of baseline, current status and risk and projection is done via variants of the Seba style. Without those means it is just out-and-out intuitive guesswork which will invariably be wrong.

    As the esteemed James Lovelock of the Gaia hypothesis etc. said, “the great failings of humans is that their natural predictions are time linear, when in nature all things occur over time exponentially.”

    All events over time occur logarimthically, and all things in nature grow and die logarithmically. Therefore, s-curves.

    The thing is, we can never underestimate the power of the lazy status quo and vested interests coupled with prevention.

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