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We need imagination, not hibernation

Josh Frydenberg is on a mission to try to convince us that we are well-placed to deal with the economic downturn because of the strength of our economy due to their superior economic management.

One thing Josh won’t be talking about is bond yields and specifically, the ten-year bond rate.

Bond yields are still a very good way of working out just how much confidence there is in financial markets.

On June 13, 1982, the yield on the 10-year bond rate reached what turned out to be its historic peak of 16.4 per cent.

In 2008 when the GFC was unravelling, the government bond yield fell to just under 4 per cent.

By May 2016, the ten-year rate was at 2.2 per cent.

And now, according to Trading Economics, “Australia 10Y Bond Yield was 0.84 percent on Wednesday April 15”.

When the Productivity Commission’s report on infrastructure funding was released in 2014, the 10-year bonds were yielding closer to 3.40 per cent.

As rates fell, many were calling for the government to take advantage.

“Forget any other way of raising money like public private partnerships, superannuation funds, or coming up with tax breaks to entice retail investors.

And forget about corporate bonds and bank loans. The cheapest money on offer for infrastructure projects is if the government goes and borrows the money itself.

With such cheap borrowing, now is the time for the government to act.”

But it’s not only infrastructure that we should be thinking about.

As I wrote on Barnaby Joyce’s facebook page after his latest attempt for relevance bemoaning our growing debt, it would take a special kind of idiot to not be able to work out a way to invest money in our society that would bring a better than 1 per cent return.

For example, PwC published an “Economic analysis of universal early childhood education in the year before school in Australia”, which found that approximately $2 of benefits accrued for every $1 spent on early childhood education. Expressed differently, “this is a return on investment (ROI) of 103%.”

We are belatedly realising the need for a strong vocational education sector where people can be trained or reskilled to adapt to and support our changing technology.

A paper by the NATIONAL CENTRE FOR VOCATIONAL EDUCATION RESEARCH lists a few of the positive returns.

“Positive effects on business productivity and profitability. Higher returns where training is highly specific; accomplished quickly and related to new technology or processes.

Education benefits: Improved health, improved environment, reduced national crime and drug use, democratisation and human rights. Adaption to technological change. Produce higher skilled workforce. Initial TVET – better health, membership of organisations and job satisfaction. Non-market benefits of self-esteem, confidence and opportunities for advancement.”

As enrolments drop, now would be the time to prop the universities up and let them devote the time and resources to research and development that bring such a big return

In 2018, a report by KPMG, “The Economic Impact of Medical Research in Australia”, showed that “every dollar invested in Australian medical research returns $3.90 in benefits to the population.”

Also in 2018, Deloitte Access Economics released modelling based on increasing Newstart payments by $75 a week. They found that the annual cost of $3.3 billion would be outweighed by the size of the “the prosperity dividend” – a lift of about $4.0 billion to the Australian economy.

They estimated it would lead to 12,000 new jobs, a 0.2% boost to wages, and that the Federal Government would raise an extra $1.0 billion in taxes, while State and Territory Government revenues would increase by some $0.25 billion plus a boost for the regions.

“There is also a relatively tight correlation between the least well-off districts across Australia (measured using the SEIFA index) and the boost to regional spending from this proposal, meaning that the regional economies most in need of help would receive it were this proposal to be enacted.”

As more and more people study, work, shop, play and communicate from home, we are experiencing increased online traffic, slower internet speeds and higher wholesale costs for providers serviced by the NBN, limiting the amount of extra data these providers can purchase.

As reported in the Conversation, our system is being exposed for the lemon it is.

“In Australia, the Coalition government’s 2013 decision to move to a copper-based multi-technology-mix NBN, instead of Labor’s all-fibre network with fibre to the premises (FTTP), has seen Australia fall down the global broadband rankings. Fibre to the premises is when fibre-optic lines run from the nearest available node directly to a premises.

Currently, low-quality streaming over the NBN occurs for two reasons. Firstly, because of the NBN’s high data charges for service providers, and also because of the second-rate multi-technology-mix infrastructure. And this will only worsen as more people adhere to social-distancing and isolation measures.”

Once again, New Zealand has shown leadership and foresight.

“In New Zealand, an FTTP rollout has been progressing since 2012. Connections to Chorus UFB broadband (New Zealand’s NBN equivalent) cost a flat monthly fee for service providers, don’t incur a data usage charge and have no data usage limits. This has allowed companies to quickly respond to the pandemic, and they have begun offering extra content free of charge.”

Instead of going into hibernation, the government should be going into overdrive thinking about what they could be investing in now and into the future.

What can they employ people to do right now? What training gaps do we have for the short and medium future? What research and development will we invest in? How do we insure against supply chain disruption? What new sustainable industries could we develop?

We don’t need people with small minds who long for the days of coal, copper and austerity. We need people with imagination about the opportunities of where we are headed and the foresight to start preparing now.

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17 comments

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  1. Phil Pryor

    The real talent in Australia is far away from parliament. It resides in the clever and cunning, in tertiary, institutions, departments, some parts of businesses and corporations, etc. Political perverts with egos bigger than a dinosaur’s dicky are full of self inflation, but it has fairy floss density. How can we suppress the upstart turds, e g, the P M or Piltdown Man, and harness the real quality for better planning and results? Leave out most state pollies too, for NSW for example is led by a show pony faded flower fronting a corporate bumboy government, in which some repulsive country party sty residents pollute the intellectual airwaves.

  2. Andy56

    Its a hard ask when 50% of us are stupid. It also assumes education is the key that opens the door by magic. We have to accept that for 50% of the population, education wont be enough. Then what? Factory fodder? Forced into jobs we have no interest in? Slavery by any other name just to survive in someone else’s agenda? these are existential questions and i seriously doubt we are up to it. Maybe people here in this echo chamber disagree, but a bit of honesty is useful .
    Clever country, really? How so? We are all smart? Starting to think the manipulators are the only smart ones.

  3. Kaye Lee

    “We have to accept that for 50% of the population, education wont be enough.”

    Education can take many forms, even if it is how to grow your own vegie garden. I think “factory fodder” will be a dying concept. Robots can do that sort of repetitive work. The future human workforce will be doing things robots can’t and we will all have to adjust to that.

    Perhaps we will recognise the value of the currently unpaid caring work that many people do.

    The future will be different but it doesn’t have to be worse.

    That’s why we need imagination rather than clinging to a past that will never return. And I most certainly am not looking for an echo chamber. We need ideas. You don’t have to have academic qualifications to recognise need or to have a good idea. We need to collaborate.

  4. New England Cocky

    KL, Interesting comments on the too many deficiencies of the Liarbral Nazional$ COALition misgovernment and their lack of any policies to promote the best interests of all Australian voters.

    The destruction of the original Labor FTTP Internet is likely the most damaging action by the RAbbott Turdball partnership … oops!! … also there was the closure of the automobile assembly industry throwing about 200,000 workers onto Newstart and future unemployment in the rapidly declining manufacturing sector …. for no more than student ideological reasons … and remember the loss of PAYG taxation revenue from the Australian workers ,,,,,

    “instead of going into hibernation” the COALition should be going into permanent retirement …. oops!! given the over much foreshortened number of Parliamentary sitting days since 2018 it appears the pollies are already in early retirement … on full pay!!

  5. Michael Taylor

    It’s got me riled up that Morrison won’t have Parliament sit for many months yet, but wants teachers to go back to work.

    That’s a pile of hypocrisy so damn high that I’d be struggling to kick my footy over it.

  6. Ross

    I still struggle with the concept of a currency issuing government being in debt in its own currency.
    The federal government has been telling us for yonks what they can’t do but all of a sudden the bags are open to the tune of around $130 Billion AUD. Where did that come from I hear you ask.
    The RBA, independent but still an arm of the federal government, has been buying federal government bonds (a term deposit) on the secondary bond market.
    These bonds would be listed as an asset on the RBA books, when they mature who pays the capital plus interest? The government has no money, all government spending is new money created by, you guessed it, the RBA. Would it be the RBA who pays the RBA the capital plus interest?
    If that were the case the RBA could then book a balance increase to itself which then remits back to the government which owns it, thus giving the government extra dosh to dish out?
    A plan so cunning it would earn a degree in cunning from Oxford University.

  7. Andy56

    Kaye lee, dont get me wrong i agree with you. But history is a good learn. We dont know how this revolution will end. Past ones havent been so great if you go by percentages. The guys upstairs have tin ears so i aint holding my breath.
    I still havent seen any financial assitance , neither have the fire soaked touristy places. I just dont trust them at all. They are already talking about tough measures.

  8. TuffGuy

    But hey you forgot to mention their biggest achievement yet, last year when they proudly announced we were “back in the black”. About the only thing they have not blamed Labor for doing in the past 7 years, although perhaps they should have since it never really happened outside the wet dreams of one Josh Frydenberg.
    What this country really needs is a counter to all their blatant lies, a flood of media information with the real numbers about the sad state this country is now in after 7 years of lieberal incompetence.

  9. whatever

    Dumb, ignorant people are usually quite satisfied that their spiteful, vindictive view of their own, tiny world adds up to more or less the same thing as an educated viewpoint. Minus the facts and other details, but ever since John Howard ressurected the White Picket Fence as the limits of the bourgeois social sphere….hey, you don’t need to bother with all that ‘knowledge’ stuff.

  10. Martin Connolly

    So while they’re slacking off and hopefully not doing too much damage in secret, we should be organising ourselves.
    Getting together a set of policies of our own, putting them out for comment and critique and getting everyone on board with some sort of consensus.
    When they get back we will have a todo list for them, with the backing of hundreds of thousands.
    First thing for me would be to get the truth about currency creation out in the open, so we all understand that Canberra is NOT like a household, can’t go broke in Aussie dollars, and can afford to pay proper social support for those who need it.
    So many other things come out of that …

  11. whatever

    Just read in the SMH that Scotty is planning to ‘re-open’ and ‘supercharge’ the economy as early as next month.
    In other words he has been TOLD to end the lockdown phase by BigBusiness, regardless of the advice of medical experts.

    The ‘supercharging’ of the economy will be carried out by the Fortescue Mining guy who plans lots of (you guessed it!) Industrial Relations “reform”.

  12. Jack Cade

    In the last coupe of decades of the 20th century, we were told that the headlong pace of technological development would take all the drudgery out of work, that (this was circa 1985) millions of interesting and even exciting new jobs would be generated by increased computerisation, that we would all benefit by increased leisure time and wealth.
    But
    Along came what was called ‘the Nike Paradigm’. Nike twigged that their name was the currency, not their product. They could compete with the likes of Adidas, Puma etc, by having goods manufactured with the Nike name/emblem prominently displayed, but not in Michigan, or Ohio, but in countries where labour could be induced to work in appalling conditions, and for a pittance.
    They weren’t lying. Millions of jobs WERE created. Leisure time WAS increased.
    But the jobs were in Bangladesh, and leisure time was unemployment or reduced employment. It’s called ‘plausible deniability’, as when a minion denies calling his leader at moron’, because he actually called him at f#cking moron.’ Plausible deniability. Not a lie. So when we hear of ‘lower unemployment’ in the developed world, we don’t stop to consider that an hour a week in Sydney means you are not ‘unemployed’. ‘They‘ can deny the lie by referring to the ‘definition’.
    I have four children – my own fault, of course. Who needs four children? And they are all ‘professionals’, i.e. they all have high quality jobs that in my day would have them set for life. But all are concerned about their job prospects; Takeovers.
    Amalgamations.
    ‘Right-sizing’.
    Government selling off public assets to entities that see the first step to profits is rationalising their workforce.
    Welcome to the neo-Liberal world. A world where one conspiracy theory suggests that the CORVID-19 virus was deliberately constructed and released into the world because it seemed it would be helpful in wiping out the useless segment of society which is no longer productive; which spends its savings on cruising, creating easily targeted gatherings. Retirees. Living far too long after retirement, draining the nation’s savings.
    Like all conspiracy theories, it has the kernel of feasibility.
    Sorry about all that. I woke at 4 and couldn’t get back to sleep…

  13. Andy56

    The more i hear and read , the more concerned i become. These guys only understand what they have always done, they only have concepts they are used to. They will press the same buttons they always have. more tax cuts, more GST, more sell offs because you know that worked so well over the last 7 yrs, they will press harder on the same buttons. They have the same level of optimism that they can push harder into IPA territory as we have of reforms that are meaningful. They are ideologes who dont have the capacity to question their own behaviour, eg turnbull, morrison, christiensen, barnaby. They will try to snatch our optimism to forge an austaire protestant junta.

  14. Harry

    Ross, I agree there is absolutely NO need for the fed govt to borrow.no matter how low interest rates are. It and it alone creates money out of nowhere. It can only run out what is available for sale.. the rest is politics driven by ideology.

  15. End of tether

    There’s a lot of fine insights in this thread, which relieves me as it shows not everyone in this odd land of ours is blind to reality. Or, if one wishes to be uncharitable, thick as ten planks – because to observe how the average Joe defeats his own best interests at voting time, there must be a helluva mob of sheeple out there in Coles-land. I completely agree that this pack calling themselves a government are imagination-free and blinkered dinosaurs, when it comes to any vision for Australia. Yes, they will robotically revert to type when the virus epidemic wanes, wanting us all to blame it for the parlous state of the economy. Truth is, and they the hypocrites of the COAL-ition damned well know it, Oz has been in an economic pickle virtually since the eighties. All the hoo-haa when Hawke died made me puke, as he huge damage was done to the labour market with which the silver-spoon brigade opposite Labor must have been secretly delighted. Keating and Hawke, betrayers of the worker and the nation for over ten crazy Bond-Nugan Hand-Skase years. But from then on neolib madness was the game for both major parties, leaving voters no choice between them. Both dud-filled sides treated the joint like a corporation to be asset-stripped using the sick Friedman-Greenspan theory of how to slow down economies, lower consumption and get unemployment up to 10 percent. But also, “brilliantly”, to foster by deregulating banks, a blood-sucking financial system, along with tech and housing bubbles. Why? So as to maintain the popular illusion that all was just doozy economically. Mr Creepy (Greenspan) and ilk are the arch-criminals who, on behalf of the global plutocracy looking down from their St Moritz and Learjet arrogant heights upon mere mortals, made the world safe for utter exploitation and corruption. Howard and all from him onwards, went with the “common wisdom”, they failed to revitalise industry policy, became slavering servants of the global minerals-energy complex, and dragged us down to where Australia wallows now. Banana monarchy project? You’ve all done ve.e.ery well” says Mr Grace.

  16. Andy56

    an loh and behold in todays news, IR reform and Tax cuts will drive the economy.
    Now how did i know that?

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