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Tag Archives: Australian economy

The Economy Is A Flesh-Eating Spider With Wings – Special Offer One Week Only!

“All models are wrong, but some are useful.”

George E. P. Box

Scotty Morrison’s recent analogy got me thinking about analogies.

I mean, for years we’ve been told that running the government is like running a household. You can’t keep putting things on the credit card, because you’re paying excessively high rates of interest, so that means you should never borrow anything and pay cash for your house. Or something like that. Mind you, government’s borrow at much lower rates of interest, the ever-mentioned credit card is itself an analogy!

Well, after years of trying to get my head around which household has several million unrelated people in it, plus companies that come in, use our stuff and then leave without offering anything in return, I discover that there’s more to government than just staying at home doing nothing.

Government – according to our Treasurer – is also like a drive with the family. The driver doesn’t want anyone asking annoying questions like “Where are we going?” or “How will we get there?” or “How did Tony get out of the boot and what’s he doing on the bonnet of the car?”

Analogies are good for explaining things, but they break down if you try to examine them in more detail. As I said to my wife, “Think of me like Brad Pitt.” Of course, when she asked why, I explained that I was taking a leaf out of the Liberals book and just using an analogy, but she insisted on pointing out that Brad Pitt was good looking and wealthy at which point the analogy broke down as did I.

So, if the Liberals want to use an analogy that’s fine, but it’s no substitute for an actual explanation. If I want to suggest that you think of the economy as giant flesh-eating spider with wings, then I’ll probably be asked in what way. When I suggest that it’s scary and we don’t want it to get out of control, then the analogy still makes sense. Even suggesting clipping its wings can make sense, if I’m talking about unrestrained growth.

However, when I make the mistake of thinking of the economy as an actual giant spider and don’t move back into the real world, then I can hardly be surprised if people with arachnophobia refuse to participate in the workforce. Similarly, I shouldn’t keep talking about spiders and at some point, I have to explain how this translates into the real world.

To return to the Liberal idea of the household budget, it’s one of those things that sounds good, but bears about as much relationship to an actual economic policy as my mythical eight-legged creature. Even in terms of their own analogy, there are times when a household should go into debt. Gaining qualifications that enable one to get a well-paying job is an obvious example. Buying the house may be another. And, if the Liberals get it through the Senate, paying for one’s pathology bills.

But the one thing that they constantly ignore in their use of the idea of “living within your means” is that all government expenditure leads to some return in the form of revenue for the government. It may not cover it all straight away, but if you create opportunities for people to work or train, it eventually adds to the tax base. Similarly, if you cut these opportunities then eventually you restrict your revenue in the future.

Think of it like a car, you need to put a certain amount of petrol in, or you won’t make it to the next petrol station, so it’s not a matter of saying petrol’s too expensive this year unless you plan to stop driving altogether and become one of Joe’s poor people. (There’s one that’s almost simple enough for the Liberals.)

(Relax! Competition will mean that pathology companies don’t put their prices up, and adding 5% to the GST won’t lead to higher prices either and Santa will bring all the presents this year so you needn’t buy any!)

For a party that’s slashing so much out of the Arts, they seem great at using metaphors and analogies instead of actually talking about policies. And when you add in all that fiction about what good economic managers they are, it’s a wonder that they don’t see the value of the Arts.

Just in case you haven’t noticed what the Liberals have done to the Arts becuase you’ve been distracted by what they’re doing with bulk-billing, I’ve included this short video from the Arts Party.



With all that is wrong with Australia, all we hear about is boats

I truly detest how this country is treating asylum seekers and I detest the policies of both the Coalition and Labor – none of which remotely consider the onshore processing of refugees who arrive or attempt to arrive by boat.

I also detest how the asylum seeker issue is thrust front and centre by the government as the issue which will most likely decide who wins the next federal election. With nothing else to take to the election, naturally it’s all that the government wants us to be focused on.

And of course, the compliant Murdoch media is an active agent in promoting the discourse in our popular consciousness that we need to keep our borders safe from ‘boat people’.

I live in hope that one day (soon, I hope) that we witness an Australian government adopt both a heart and a humane policy on ‘boat people’ and I would like to see it embraced by most Australians. The latter, of course, would require an absolute turnaround to our popular consciousness.

End of story.

I don’t want to talk about ‘boat people’ any more. With all that is wrong with Australia, all we hear about is boats.

Instead of the government and the Murdoch media telling us what the important issues are, we should be turning it back onto them.

Take away the blather and the bravado about our ‘right to be tough’ towards asylum seekers and dig into the core of what really is important to us and this is what you’ll find:

As at June 2015 over 753,000 Australians were unemployed. In September 2013 – the month of the federal election – the number was just over 706,000. So since the election 47,000 more people are out of work. What is the government doing about the trend? Nothing. What is the media saying about it? Nothing.

Are there more people unemployed in Australia than the number of asylum seekers attempting to come here by boat? Yes.

Housing affordability has gone through the roof (excuse the pun) as have house prices themselves. The median house price in Sydney – our most populated city – is expected to hit $1,000,000 by the end of the year while Australia wide it sits at $660,000. Young people are now struggling more than ever to enter the housing market as the “Australian dream” of home ownership is under threat. But not according to our Treasurer Joe Hockey who insists that houses in Sydney are not unaffordable while the Prime Minister says he wants house prices to rise. That’s right. Rise. With young people struggling to buy a house at today’s prices our Prime Minister wants them to pay even more, despite the fact that housing affordability already represents a long-term structural problem that has been neglected for decades. So, what then can I assume our government is doing about housing affordability? Well based on the attitude of our Treasurer and Prime Minister, nothing. It’s not a problem apparently.

I wonder, are there more people in Australia struggling to or unable to buy a house than the number of asylum seekers attempting to come here by boat? Yes.

Over two and a half million Australians, including over 600,000 children live below the poverty line. That number represents almost 14% of our population. Welfare recipients are most at risk of living in poverty, yet these are the people most likely to be adversely affected by this government’s budgetary measures. So is the government doing anything to reduce the level of poverty in Australia? No.

Are there more people living below the poverty line in Australia than the number of asylum seekers attempting to come here by boat? Yes.

On any given night there are 105,000 homeless Australians with 42 per cent of these being under 25. We do not hear the media talk about this as a damning blight of our society and neither do we hear the government offering any solution to it. But can we expect them to when Tony Abbott says that homelessness is a ‘choice‘?

And by the way, are there more homeless people in Australia than the number of asylum seekers attempting to come here by boat? Yes.

Around one in five women in Australia have experienced some form of domestic violence. These are “epidemic proportions” to the point that domestic violence has now become a national emergency. As has the number of women killed by a violent partner: with at least one women murdered every week. What is the government doing about it? Not much by the look of it.

Are there more people in Australia experiencing domestic violence than the number of asylum seekers attempting to come here by boat? Yes.

Australia is now the most expensive country to live in and Australians are “struggling to cope as the cost of living pressures bite“.  An estimated one in three Australians cannot meet their cost of living expenses on their current incomes. What is the government doing about it? Nothing. What is the media saying about it? Nothing.

Are there more people in Australia struggling with the cost of living than the number of asylum seekers attempting to come here by boat? Yes.

Our economy is “grinding into stagnation” and rather than the three or so per cent growth each year we’ve come to expect, we might have to get used to 2 per cent GDP growth. And as a result, lower living standards can be expected while “everything here is going to be much tougher than before and compared to the rest of the world“. So what is the government doing about it (apart from blaming Labor)? Nothing. “The government neither has no idea – let along any proposal, plan or program – for how to boost Australian growth back up to three or four per cent per year“. They’re not even talking about it. Meanwhile, some of our largest and most potentially-innovative sectors are held back by the Abbott Government’s bureaucracy and regulation.

And will more Australians be affected by a stagnant economy and lower living standards than the number of asylum seekers attempting to come here by boat? Yes.

Oh how I could go on. I only wish the media would too. I wish the media would tell us not only the truth about the Abbott Government but question their appalling attitude towards climate change, the environment, job security, racism, Indigenous Australians, human rights . . . take a pick!

And how about our spiraling debt?

And how about Tony Abbott’s record of lies and broken promises?

Yet, with all that is wrong with Australia, all we hear about is boats.


Who Put The Thorazine In The Economist’s Ovaltine?

You’ve got to love MSM economics editors/experts/commentators. They all sing from the same depressing song sheet – ‘The Deficit Dirge’ or the ‘Surplus Serenade’.

The only thing missing in the lyrics is the refrain of ‘need ya baby, wantcha baby, lurv ya babeee…’

What they lack in vocal skills is usually made up of  through interpretive dance.

This is usually performed wearing a bespoke suit while clutching a pointer, and features a dazzling array of signs arrows and graphs – gotta have graphs, otherwise the audience may cotton on to the fact that what they’re peddling is a slightly more up market version of tea-leaf reading.

Without exception, they all state what is known in common parlance as the ‘bleeding obvious’.

The economy isn’t in too bad a shape, the first phase of the mining boom is over, climate change could be a problem in the future (no kidding???) and that the trade deficit is okay but could be better.

From ‘Kochie’ to Kohler, Greenwood to Gittins, the message rarely varies.

The depressing thing about listening to this flannel is the knowledge that every last one ’em studied economics at tertiary level and understand the premise of fiat currency and how it operates.

They know that government ‘deficit’ is not debt, that pursuing budget surplus is not beneficial to the economy but in fact is detrimental and most importantly, that creating unemployment to have a ‘buffer stock’ of surplus labour in order to suppress wage demands and control inflation is a recipe for disaster.

Nonetheless, like a drunk at a Karaoke night they keep slurring the refrain of ‘freeing up the economy and the job market’ ad nauseam.

In fairness to MSM economists, much of their research material is sourced from the Reserve Bank of Australia reports, and it would seem that at the RBA there’s been liberal doses of Thorazine in the boardroom Ovaltine.

This week, there have been tea-leaf readings from two of the eminence gris of this august institution, John Edwards, who served as an economic adviser during the Keating years (hardly something to boast about), and Chris Kent, an assistant governor at the RBA. Kent has made the amazing discovery that the buffer stock of available unemployed labour so treasured by supply side economics, is actually declining as available jobs disappear!Kent traces this shrinkage to many of the unemployed simply giving up looking for work as they become discouraged by an ever shrinking job market.

The notion that this is usually what happens when there are fewer and fewer jobs available doesn’t seem to have crossed the good assistant governor’s mind.It may also be argued that this is the end result of creating a permanent pool of unemployed when taken to its logical conclusion. Any downturn in the economy, a high dollar and weakening growth in government spending means that the private sector has to make up the shortfall, and the usual method is to reduce labour and cut wages in order to survive.

Nevertheless, under Hockey’s budget the ship of fools sails on toward disaster while the captain and crew are tranquillized to the eye-balls by the cloying miasma of supply side economics and ‘market forces’.

Rather than continue with the notion of a buffer stock of unemployed and underutilized to curb wage demands and inflation, the intelligent solution is to turn this ‘buffer stock’ into employed workers in a ‘Job Guarantee’ program which pays the minimum wage and thereby circumvents the worst social aspects of long term joblessness, while at the same time is able to control both wage demands and inflation via the fixed minimum wage.This buffer stock would expand during times of private sector downturn, and contract when the private sector recovers.

In a recession, the Job Guarantee would serve as a back-stop against rising unemployment and maintain a stimulus for aggregate demand.In times of economic expansion, participants could leave the Job Guarantee scheme for higher paid positions in the private sector.

A Job Guarantee scheme would also replace the current NAIRU (Non Accelerating Inflation Rate of Unemployment) with a NAIBER – Non Accelerating Inflation Buffer Employment Rate through control of the overall wage rate by allowing participants to transfer from an inflating sector to a fixed wage rate sector.

As the architect of the scheme Bill Mitchell argues, this would ultimately attenuate the inflation spiral. Mitchell’s scheme makes immanent sense. It provides not only a humane solution to unemployment, particularly long term unemployment and underutilization but also serves as both buffer zone and stimulant in times of private sector downturn.

In stark contrast, the continued application of supply side economics and ‘free market forces’ merely exacerbate a widening gap of social dislocation and unrest.

Similarly to Thorazine, Chicago School economics has had the long term effect of stultifying employment in Australia to the point of atrophy.

It is well past time that MSM economists, not to mention assistant governors of the Reserve Bank threw out the dregs of the Thorazine in the Ovaltine and embraced the truth of the need for a new economic strategy based on Keynesian economic theory.

As politicians such as Chris Bowen and Tony Burke are aware, nations which issue fiat currency have the means well within their grasp to create a system of full employment and that the commencement of schemes such as the Job Guarantee are only a key stroke away.

If they don’t know this, then they certainly should as should the Greens.

All that is really required to bring about change especially in the light of the current governments mendacious and draconian ideology – is the political will to do so.

If what is termed ‘The Left’ cannot find this will, then perhaps it’s well past time for the public to insist on replacing the Thorazine with Benzadrine and find a replacement brand for the Ovaltine.


Also by Edward Eastwood:

Galileo, Modern Monetary Theory and The Job Guarantee


Conscription by stealth: is cordite the new fragrance for the unemployed?

Contemptuous dismissal

the lucky country


April 28, 2014 • 6:36 am

“I got to wondering why Andrew Neil’s (Spectator Australia) interview with Joe Hockey was a ‘break through’ moment. After all, he didn’t ask any particularly probing questions and he certainly didn’t get any revealing answers – the example given by Joe on the question about ‘entitlement’ was the school kids bonus.

What was unusual was that Hockey got placed in a forum where he was actually asked questions and was expected to answer, which obviously stunned him. I couldn’t think of a comparable situation involving Abbott or his Ministers where they actually have been grilled or even made themselves available to account for their leaks and spin.

The coalition strategy seems to be to leak and work in closely with News Corp, avoid interviews beyond those with friendly outlets where quite obviously the questions are scripted and whatever happens don’t appear on the ABC.”

Funnily enough Terry, I had been thinking about exactly the same things.

There were a couple of things to come out of the interview. Joe Hockey, for all his doom and gloom to local press, was forced to admit that we are actually in a very good position economically – not only that, we are vying for best in the world. Why the hang dog look for Australian audiences, replaced by a satisfied smirk internationally? Why are we even contemplating austerity measures?  Why are you telling us we are in trouble when we so obviously are not?

We have

  • AAA credit rating
  • Debt 23% of GDP
  • Deficit 3% of GDP
  • Growth of 3%
  • 22 continuous years of growth
  • Unemployment around 6%
  • Strong currency
  • Vast mineral resources

No other G20 country is anywhere near comparable.

Hockey says “we have dropped the ball”. I actually like sport but I am sick of hearing sporting analogies rather than factual statistics. From my spot in the grandstand, I look at the score board and see us so far in front that I am heading for the bar.

As you point out Terry, the only entitlement cuts that Joe could come up with were the Schoolkids Bonus and the Low Income Allowance – both of which hit the people who can least afford it, as will the $6 co-payment to see a doctor. All of a sudden the carbon tax and the mining tax don’t look so bad do they?

I too had been thinking when was the last time I heard Tony Abbott interviewed. If you don’t watch Andrew Bolt or Skynews or listen to 2GB then you only get controlled press conferences or cooking shows – very occasionally 5 minutes on the 7:30 report where they try to cram in prepared questions and don’t have time to follow up on anything. Actually I can’t remember the last time even that happened. Matthias Corman pops up everywhere and repeats his standard phrases over and over like a doll having its string pulled regardless of what he is asked.

It is somewhat off-putting to have a Prime Minister who refuses to face the people he represents. In fact it is way more than off-putting. The CEO has an obligation to face shareholders and answer their questions. To continue to avoid it is treating us with contemptuous dismissal and makes one wonder what he is afraid of.

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