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So what is an economy now?

The economic news last week was enough to make the depressed reach for an extra anti-depressant tablet or two. Yes, it was bad economic news, folks; as bad as I have ever heard in my lifetime.

Given that the economic and fiscal update was based on so many assumptions such as Victoria bringing its mess under control within a 6-week lockdown period, it seems more like pure guesswork.

With Victoria’s COVID-19 numbers still in the high hundreds each day, Treasurer Josh Frydenberg and Finance Minister Mathias Cormann are most certainly way off the mark.

The lockdown is now half way into its 6-week period and the amount of cases are showing no signs of abating; therefore is it time to say that the economic statement is just good intended bullshit at best, or incompetent guesswork at worst. In other words all a bit meaningless?

Before I move on allow me to quote the Finance Minister on debt and deficit. When at their joint press conference Senator Cormann was asked a question on the subject, he answered:

“What is the alternative? Are you suggesting that we should not have provided the support we did to boost our health system, to protect jobs, to protect livelihoods? I mean, in the circumstances what was the alternative.”

Greg Jericho, writing for The Guardian pointed out the hypocracy:

“It is an excellent point, and one dripping with as much hypocrisy as any statement that has ever been uttered by a finance minister in our history.

It is exactly the same reasoning that was behind the stimulus undertaken by the Labor government during the GFC.

What was Senator Cormann saying then?

In February 2009, he told the senate: “We have got this $42bn cash splash. What is this going to do? It is going to end up with us having $111bn worth of debt for starters, and even up to $200bn of debt, with a $9,500 debt for every Australian. This is absolute panic stuff.”

The problem with Cormann’s question of “what is the alternative” is not that is it wrong now, but that it was never wrong.

On Thursday, the Treasurer – with Cormann at his side – trumpeted that:

“Without the government’s economic support, unemployment would have been five percentage points higher.”

Back in 2009 Cormann told the Senate that:

“… governments cannot inject new money into the economy. All that governments can do is take money from taxpayers – either today’s taxpayers or, after borrowing money, tomorrow’s taxpayers.”

(I just needed to get that off my chest because just like that debt and deficit no longer really matter. Their hypocrisy is unforgivable.)

To get us out of this problem the government needs to adopt a Keynesian philosophy and borrow heaps of dollars, but in doing so have also to admit that their criticism of Labor for doing the same thing during the GFC (an approach that kept Australia out of recession) was all political bullshit and they were wrong.

This might be far too tempting for their collective egos but nonetheless it has to be admitted. We may even have to forgive them so that they may do the same.

So, how much wiser is the public with regards to the future?

Well they know that in Victoria COVID-19 continues on and 400 cases per day is much the new norm.

And come December there will be an unemployment figure of around 10 per cent or higher, youth unemployment will be around 14 per cent and women will also be worse off than a bad marriage.

Shane Wright’s article in The Age, ‘Long-term scarring’: Young people will suffer their entire working lives from COVID-19 offers a view of the current bleakness:

“Young people have suffered the largest increases in unemployment, and the biggest falls in jobs, since the advent of the pandemic”

In June, the jobless rate for those aged between 20 and 24 soared to 13.9 per cent, with almost 150,000 jobs disappearing since the start of the year. Among people aged 25 to 34, the unemployment rate has climbed by almost 3 percentage points to 7.5 per cent, with 164,000 jobs gone.”

Rather than being in the black – as the government said they would be before the last election – we will be in deficit by $86 billion for the 2019–20 financial years, and by $185 billion in 2020–21, and, writes Paddy Manning:

“Treasury predicts that Australia’s GDP will fall by 3.75 per cent in the 2020 calendar year, and then return to 2.5 per cent in 2021. So, amid the biggest shock since the Great Depression, the government expects the economy will grow at a faster rate next year than the two per cent it recorded before the pandemic in 2018–19.”

That is a brave assumption.

How convenient, neither Frydenberg nor Cormann would say how long it might take for us to have a budget surplus or to pay off the new debt.

It seems they didn’t know much about anything. They couldn’t say if the October budget, which usually includes four-year forward estimates, would include public service cuts.

When Shane Wright, Nine’s senior economics correspondent asked if the dreaded austerity principles of the Abbott years would be adopted, meaning that any new spending commitment in the budget would have to be offset by matching cuts elsewhere, Freydenberg answered “Clearly we’re in a very difficult and different time,” adding it called for a “different approach”.

The public know that there is no way of avoiding unemployment figures never before seen in this country.

The million or so unemployed at Christmas time will be suffering greatly. Some young will return to the family home, stripped of their independence and to yet again be supported by their parents.

In their misery others may choose suicide as a means of opting out.

Charitable organisations wont be able to cope with the masses on the dole.

Others will suffer because they are just too old to worry about.

The government could take from the $120 billion it provides to the rich and privileged in schemes that allow them to become richer but wont because their ideology prevents it.

The Prime Minister will continue to say that they will increase Newstart but not by as much as to discourage people from looking for a job even though there are 13 people looking for the same job.

If you thought that Snapback had disappeared … you would be wrong. It returned as a plan the government took to the last election.

Instead, writes Manning:

“Its JobMaker plan for the recovery included – IR reform, infrastructure investment, skills and training, and cutting red tape – and insisted the Coalition would remain the party of lower taxes.”

If that’s not a Snapback I don’t know what is. But it’s not really a plan. It sounds suspiciously like an economic philosophy.

By now after being inundated with bad news since before last Christmas the general public are well aware of the sadness that confronts them.

However, last week’s economic statement was missing the one vital ingredient necessary in the recipe for our recovery; assuming we overcome the pandemic that seems to have so far, to have confounded us.

Where is the plan, where is the blueprint that marries into the future our society with our economy?

Show me in this ‘plan’ the part that says:

  • In the future there will be less empathises on ideology and more on the common good, equality, and fairness.
  • A complete change in the purpose and application of money.
  • Where in this presentation by the LNP are the daring innovative ideas that might redirect our thoughts for the future.
  • A ministry for the future with greater recognition of science that accepts public submissions and more investment in education.

Could we get fair dinkum about renewable energy and create the many thousands of jobs we know are buried in its construction.

Show me the plans for an Australian electric motor vehicle. We have the expertise, the facilities, and the people. All we need is the will to give it a go.

The true test of a successful recovery will be in the jobs we create and the manner in which we create them.

Insist that private sector aged-care employ more people.

Free childcare for those women who have or are seeking work.

We badly need to hear what the government plans to do.

Those among us who remain vibrant and enthused about the future just need to see the big ideas even taking into account the Jurassic Park thinking of the Coalition.

My thought for the day

We live in a failed system. Capitalism doesn’t allow for an equitable flow of economic resources. With this system a small privileged few are rich beyond conscience and almost all others all the others are doomed to be poor at some level.

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18 comments

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  1. New England Cocky

    JL, I enjoy your optimism on a clod morning, but geez, expecting the Liarbrals to admit that they made a mistake? You may be stretching our imagination just a little too far as long standing political pragmatists understand that Liarbrals know they are borne to rule and are always correct despite all real evidence to the contrary.

    The simple solution to the economic problems created by COVID-19 was to invoke the Rudd Henry Plan; go early, go hard go families. The COALition did exactly the opposite, probably for ideological reasons.

    Now the so-called Treasurer is proving to be as successful as he was in his previous career as a failed professional tennis player. But that is OK because no politicians have lost any salary of claims against the Parliamentary Allowances Scheme.This will NOT end well for Australian voters.

  2. Egalitarian

    John our federal government should start manufacturing the electric car.We would all benefit from that.

  3. Ken

    I agree Australia should start an Electric Vehicle industry.

  4. leefe

    “It seems they didn’t know much about anything.”

    Truer words were never spoken.
    There is much that could be done. It will not be done while the coalition are in power, because the only part of the economy they care about is making themselves and their sponsors richer. The rest of us are nothing more than cannon fodder in their fight for money and power.

  5. wam

    I guessed wrong because I thought josh’s admiration of ronnie and the boss woman would have got a run.
    There must be billion to be made:
    The CSIRO et al could be a great asset to an electric car system.but there are few jobs when
    https://www.youtube.com/watch?v=em09c2WxwQM
    There is great potential for jobs in renewables
    Apr 22, 2019 – E2’s recent Clean Jobs America report found nearly 3.3 million Americans working in clean energy – outnumbering fossil fuel workers by 3-to-1. Nearly 335,000 people work in the solar industry and more than 111,000 work in the wind industry, compared to 211,000 working in coal mining or other fossil fuel extraction.
    ps
    As much as I loathe(“Hang on Kochie, I just brought the manual with me”,, holding up his papers. “I’ll see what it says. It says I should say, ‘polls come and go, but the only poll that matters is on election day’”) fitzgibbon his sky interview confirmed the loonie millstone labor carries.

    pps
    A fruedian slip,NEC?

  6. Kerri

    Under this government’s logic, women should go back to work, women should have more babies, but women don’t deserve free childcare and women don’t deserve decent wages.
    I know we are good at multi-tasking but we are not witches?
    Maybe the Libs should just cut to the chase and burn us all at the stake.

  7. Jack Cade

    Pompeo has just applauded Australia for standing up to China.
    As opposed to kneeling down for the USA.
    Too bad that our adopting the Lewinsky position is fucking up out trade arrangements, allowing Trump supporters to off-load their soya and barley to the hated ‘communists.’
    Ffs

  8. Harry Lime

    It’s an oldie, but worth repeating:A fair percentage of Australian citizens are political mushrooms; kept in the shade and fed on bullshit.
    The Liar’s recent performances only reinforces this.

  9. andy56

    yes the plan is to introduce a plan in october, thats the plan. Its always been the plan, they planned it this way. Clever plan.

    We have to do things more radical than wait for october because ” you can never go back to the garden of Eden, Adam and Eve have sinned, you can never go back again , oh no no no, oh no no no.”

    We need A UBI or some form of wage subsidy for most people then we can rethink many aspects of our economy, the future is coming crashing to earth and our pollies are oblivious to the obvious.

  10. DrakeN

    For once in a while, I would love to get these pundits to describe, in inambiguous terms, exactly what they understand the word “economy” to mean when they use it to describe the material state of the nation.
    Most times their use of it appears to be no more than another meaningless word in a torrent of empty rhetoric.

    Given that the Federal Government issues the currency through its wholly controlled Reserve Bank, just how much money there is in circulation is more or less a known amount.
    How much of that money is circulating, or how much is hoarded, determines how much of it is available for the general activities of the nation.
    Off-shoring wealth reduces that amount, as does excessive hoarding, ergo the unending diversion of large amounts of money into the pockets of the few is a powerful negative on the material wellbeing of the remainder of the population.

    In our country only the Federal Government can “make money”, the rest of us can only get it from someone else.
    In order for the whole community to become materially better off, those few who hold the greater part of the nation’s wealth for themselves must be compelled to return more of it to general circulation: It is thereby beholden on those retainers of wealth to limit their excessive gains, and their holdings in order for the nation to prosper.

  11. andy56

    What we call an economy is just an extention of 14th century surfdom. Sure there have been changes over the years but the basic structure hasnt. Changes have come about the hard way yet every improvement is met with a new type of slavery. We need a drastic rethink of what it means to be an economy. Is it its own entity or a tool? Does the current apparatus do its job? These are more like the fundamental questions we should be asking. While we tool around at the edges, technology is running away from us. Are we dumb as dog shit and never learn to get off the current tread mill. Dont answer that question, it may embarass us all.

  12. andy56

    “John our federal government should start manufacturing the electric car.We would all benefit from that.”. I am not so sure about that anymore. I would have thought keeping the big three in australia would have been the shortcut to electric cars, now they are gone, you need a few billion in reverse engineering, a few billion for espionage and then maybe you could have an electric car worth driving. But if autonomous vehicles are on the way, it could be a massive waste of money. Much better to work on our infrastructure to enable electric cars to start with. I dont disagree with made in australia but i am also realistic to know whats possible here isnt full scale manufacturing. It takes decades to gear up. Technology wont allow us this luxury. in 2020, Nobody will buy a 120y when you could get a range rover.
    Thats not to say we shouldnt try, but pick areas we do have leverage. Rare earths, environmentally friendly hydrogen cycle, solar power to drive down cost which could become an assert down the road to attract new players. Lots of rich pickings but i am talking to the wall. The government has already determined Gas is the future.

  13. B Sullivan

    A plan for economy recovery.

    Australian researchers have just claimed a new world efficiency record for solar panels that can directly split water using sunlight to produce Hydrogen gas that can then be used as a clean green alternative to LNG.

    Farms that have become unviable due to drought and loss of export markets can be re-vitalized as solar farms. Coal and LNG power stations can be replaced by hydrogen gas power stations. No more arguments about base power or intermittent supply.

    Because of its abundance of sunshine and space Australia can become the world leading exporter of hydrogen gas. Australia could not just be energy sufficient, it could be energy rich. With abundant energy, we could have city farms growing fresh food, cheaply and efficiently with reduced distribution costs. There could be enough affordable energy to recycle materials instead of having to mine the earth’s dwindling resources. No need for fracking, no need for burning any more fossil fuels, no need for nuclear power plants, no need for Snowy.2, no need for excessive CO2 emissions. Australia could become the savior of the world.

    Just setting up the infrastructure of this solar hydrogen industry could create enough jobs to guarantee economic recovery, and new green technologies, including the much wished for electric vehicles, could become realities.

    And I’m pretty sure any debt that Australia owes to the mysterious benefactors with the moneybags could be quickly paid off.

    But doubtless our beloved government will reveal a much better plan in the course of time.

  14. TuffGuy

    Their only plan for the future is the NCCC, lieberally stacked with fossil fuel stooges who will do whatever they can to make themselves and their mates richer. Despite a damning interim report on the review of the EPBC they plan to not even wait for the final report and begin stripping environmental regulations for their fossil fuel mates. They are still planning to legislate tax cuts for the rich and big business. They continue to do nothing with regard to collecting tax from those who currently avoid paying any at all. They are planning to continue wage stagnation and further reduce and privatise the public service. They are planning to continue ignoring climate change. They are planning to coerce the states into increasing the GST.
    I could probably just have said they are planning to screw everything.

  15. andy56

    B Sullivan, mass exporter of hydrogen gas. No, thats fairy land and not understanding the economics or technical difficulty of such a venture.

    Where it becomes more feasible is turning air, water and solar power in to AMMONIA. Ammonia holds twice as many hydrogen atoms as liquid Hydrogen. Ammonia is easily transported and stored with current infrastructure. Using ammonia fuel cells to generate power completes the whole cycle. The first step is still in its infancy( making ” clean” ammonia), fuel cells are setting records as we speak.

    Pure hydrogen production is expensive and technically very difficult to store in mass quantities so dont get carried away with the purity of the idea.

    Dont confuse your self with misleading headlines.

  16. New England Cocky

    @wam: I don’t understand your comment.

  17. Andrew J. Smith

    Nowadays the Liberal Party is owned and manipulated (Nationals too by miners, energy and corporate agriculture sectors) to support policies for large local or global corporate entities, and wealthy, through branches’ declining membership being hollowed out and stacked with religious nutters approving policy, informed or dictated by the IPA; NewsCorp, 9Fairfax et al. do the (mostly negative deflecting) PR messaging and communications or selling to voters and MPs.

    How long can this go on for, or like the US GOP, are they planning more permanent conservative measures via the judiciary, electoral system, education, women’s rights, Christian freedoms, nobbling government services etc.?

    Genuine change cannot simply come from (slightly different) middle aged Labor (voters whom also worship prosperity and material goods, also catered to by parties) but from the Liberal centre, including MPs, members and voters pushing the Liberal Party back to the centre. The best place to start could be Melbourne and Victoria where the Liberal Party started with a genuine base and policy development, including many sensible liberal initiatives aka the Hamer reforms of the 1970s on environment, women, drugs, multiculturalism etc. (in turn allowed Labor the opportunity to take government in Victoria with similar policies then federally…)

    The Liberal Party is unrecognisable but worse is how not only that most don’t realise, too many of the same issues are apparent with Labor i.e. individual middle class mobility and aspirations over actual society., helped along by our consolidated media apparatus and continuous agitprop….. plus Howard’s need to rip the heart out of the Liberal Party and become GOP lite from the ’80s.

  18. B Sullivan

    andy56

    Chief Scientist Alan Finkel was really enthusiastic about using fossil fuels to generate electricity to extract hydrogen from water when he appeared on Q&A several weeks ago. He argued that the hydrogen produced didn’t care what fuel was used to make the electricity required to extract it, but failed to answer the obvious question, then why not use electricity generated by solar panels to do it? He clearly knows that green hydrogen is the solution, but seems to want to put off applying the solution for as much as thirty years until all of Australia’s LNG reserves are mined and sold.

    Economics is not a science. It is not even an art, It is more of a faith that at times requires ignoring the realities of physics. Hydrogen is the simplest, most efficient and cleanest fuel in the universe energy-wise and solar hydrogen production is now an incredibly viable solution to the problems of energy security and carbon emissions. Splitting water, H2O, into hydrogen and oxygen is now neither expensive nor technically difficult, and when the hydrogen is burned it reacts with oxygen to become water again. It’s recyclable, clean, simple, cheap, and green. Basic physics and chemistry.

    In my previous comment I shouldn’t have written that Australia could become the world’s leading exporter of hydrogen gas. I should have said leading exporter of cryogenic liquid hydrogen. It’s not fairy land, it is feasible. Australia has enough sunshine and space to become not just energy self sufficient but a world leading clean energy exporter.

    in any case, Green Hydrogen solves the problem of intermittency and base load power, which are the big excuses used to oppose the development of solar energy. Other countries in the world are developing Green Hydrogen power plants even though they get nowhere near as much free sunshine as Australia. But then other countries tend to take the problem of CO2 emissions much more seriously than Australia.

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