Terms of trade rocket.

'PRICES paid for Australian exports jumped sharply in the second quarter, increasing the heat on the RBA to raise interest rates further.

'The big rise in export prices highlights the impact that booming commodity receipts will have in turbo-charging the economy through comings years.

'Merchandise exports surged 16.1 per cent in the second quarter, easily outstripping a 1.9 per cent rise in imports, the Australian Bureau of Statistics said today.

'The data produced a net 13.9 per cent increase in the country's terms of trade, representing a huge income stream for the commodity-rich economy and helping to ensure it will continue to be among the fastest-growing developed nations.

'Australia's terms of trade are quickly closing in on the 50-year highs last seen just before the global financial meltdown in 2008'.

More grist for the 'rate hike soon' school.

Henry's editor fails to gain commendation for painting of Cradle Mountain

Oil on canvas
60 cm x 90 cm
signed bottom right Jonson '10

Exhibited in the Savage Club art show (amateur division) in 2010, where it failed to receive even a commendation, possibly because the artist failed to buy sufficient drinks for his fellow members.

When someone criticised the birds, the artist replied: 'My boids are just a good as Boyd's boids'.

More paintings here.

A rural Twenty-first party

Another family member has been drinking too much but not whilst driving, thank goodness.

Here is his report.

Cartoon of the week

Better than expected corporate earnings results and good economic data gave Wall Street a kick overnight.

Those companies exceeding expectations included Caterpillar, 3M and United Parcel.

More generally, Dow Jones Newswires reports: 'The gains followed encouraging economic data from the euro zone -- its composite purchasing managers index and industrial orders both unexpectedly rose -- as well as a smaller-than-expected drop in US existing-home sales.

'In addition, investors found the latest round of data particularly encouraging because a number of bellwether companies posted revenue that topped analysts' estimates and climbed from the prior year, reversing a trend seen in recent days of companies missing revenue expectations even as their earnings beat estimates.
 
'Investors' worries for the economic outlook were soothed somewhat by a smaller pace of decline than economists had forecast in reports on US existing home sales and leading indicators.

'Reports showed that the euro zone's private sector expanded at a faster pace in July, boosted by an unexpected pick-up in the manufacturing and services sectors, while retail sales in Britain also beat market expectations'.

No silver lining lacks its cloud, however. The Wall Street Journal points out that the slowdown in China's headlong economic growth, while moderate so far, is reverberating through global commodity markets.

'Since China's government started cracking down on its overheating property market in mid-April, global prices for aluminium are down 18 per cent; for copper, 13 per cent; for lead, 19 per cent; and for nickel, 27 per cent, though prices for all of those metals have stabilised somewhat in recent weeks.

'Steel prices in China are down about 15 per cent over the period. Analysts say there could be further declines, as growth in China's huge construction sector continues to ease.

'The construction boom in China has played a crucial role in global demand for raw materials, to the enormous benefit of resource exporters such as Australia, Brazil, Canada and much of Africa'.

Interest rates

Whoever wins the election will inherit an economy growing at well above its sustainable rate, says Peter Martin, making further interest rate rises inevitable, according to the latest Westpac-Melbourne Institute leading economic index.

On the other hand, Glenda Korporral says that Ben Bernanke's latest speech gives RBA Chief glenn Stevens 'breathing room' on rates unless (of course) the CPI data is rather worse than currently expected.

One admits to hearing heavy breathing from the gnomery at the top of Martin Place. It would be a sad thing to have to give Ms 'Moving Forward' Gillard one in the eye, especially as it looks as if she might just win the bloody election.

You've done it again, Barnaby.  Delivered a half-baked idea - low tax or no tax for Aboriginal Australians living in 'remote indigenous communities'.

Half-baked is arguably better than 'buried and cremated', because at least it might be possible to put a half-baked meal back in the oven for some gentle further cooking.

Like the controversial welfare refoms for Aboriginal Australians living in the Northern Territory, the idea becomes more palatable when applied to all Australians regardless of skin color or ethnicity.

A more fully-baked version of Barnaby's idea would be lower tax rates for all Australians living and working in remote parts of Australia, or doing jobs such as fruit picking that struggle to find workers. (Here is a report from young David Jonson on the joys of fruit picking.)

How about a 10 point cut in the rate of income tax for income earned in remote, unpleasent or dangerous jobs including for Australian men and women on the front line in Afghanastan or needed to man submarines.

Given all the money sloshing about in Australian government coffers now and prospectively, no doubt such a scheme could be paid for without putting additional upward pressure on interest rates.

And it would give a significant boost to regional Australia and to the defence of the realm.

Reserve Bank undercuts Abbott

'RESERVE Bank Governor Glenn Stevens has undermined one of the key Coalition election policy planks', say Peter Martin and Clancey Yeates, declaring Australia has "virtually no net public debt".

'As Tony Abbott was in Melbourne pledging [a further] $1.2 billion in spending cuts and a "complete focus on getting debt and deficit under control", the Reserve chief was in Sydney preparing to deliver a speech that countered some of the debt arguments point by point.

'But in an unwelcome sign for Prime Minister Julia Gillard, Mr Stevens indicated the Reserve would raise interest rates at its meeting on August 3 - less than three weeks before the election - if circumstances required it.

'Mr Stevens said the board would "consider all the issues for the economy and do its job. What else do people expect?"  (The speech itself is linked here.)

The key to whether there will be a rate rise during the campaign, say Martin and Yeates, will be next Wednesday's inflation figures. 'Yesterday the RBA took the unprecedented step of nominating the underlying inflation figure that spells danger for Labor: 3 per cent'.

This is fair comment, but we suggest readers review the state of play as it was in November 2007.

Then the Reserve was playing catch-up and arguably had no choice at all.

Now after six interest rate hikes to a normal level for Australia, and continued uncertainty elsewhere, to hike or not to hike may be less obvious than it was in late 2007.

Henry's authoritative analysis will be here on the morning on August 3, as it was on Melbourne Cup day 2007.

'Not without widespread debt default or general, damaging inflation' seems to be the answer.

Historian Niall Ferguson, visiting Australia soon to present the Bonython lecture at the Centre for Independent Studies, concludes an article for The Financial Times/Business Spectator as follows: 'The evidence is very clear from surveys on both sides of the Atlantic. People are nervous of world war-sized deficits when there isn’t a war to justify them. According to a recent poll published in the Financial Times, 45 per cent of Americans “think it likely that their government will be unable to meet its financial commitments within 10 years”. Surveys of business and consumer confidence paint a similar picture of mounting anxiety'.

Ferguson believes that confidence will be killed with budget deficits that are a record for peacetime economies.

The key is effects on confidence.  'In 1981 the US economist Thomas Sargent wrote a seminal paper on “The Ends of Four Big Inflations”. It was in many ways the epitaph for the Keynesian era. Western governments (not least the British) had discovered the hard way that deficits could not save them.

'The remedy for such fears must be the kind of policy regime-change Sargent identified 30 years ago, and which the Thatcher and Reagan governments successfully implemented. Then, as today, the choice was not between stimulus and austerity. It was between policies that boost private-sector confidence and those that kill it'.

'With double-digit inflation and rising unemployment, drastic remedies were called for. Looking back to central Europe in the 1920s – another era of war-induced debt explosions – Sargent demonstrated that only a quite decisive policy “regime-change” would bring stabilisation, because only that would suffice to alter inflationary expectations'.

While Ms Gillard and Mr Abbott trade insults, and increasingly obscene advertisements - themselves doing nothing for the confidence of voters - other western nations are seeking economic salvation in record peacetime deficits. 

It is the legacy of the Howard government that the Labor government has not piled up unmanageable debts, despite its reckless and poorly administered stimulus programs. However, poised as we are between inflationary developing nations and western nations facing debt default or inflation, we too are suffering inflation that could yet severely damage our 'miracle economy'.

John Mauldin this week has addressed America's 'debt supercycle'.

The following graph shows total US debt since 1870, close to the start of the so-called 'Long Depression', usually dated at 1873.

The upward twitch in the 1870s is clearly visible, as is the far larger increase - a surge, not a glitch - in the Great Depression of the 1930s.

The scary thing is the far larger and more entrenched surge that began in the 1950s and accelerated substantially from the start of the 1980s.

(An equivalent graph for Australia is discussed here.)

The size of the task facing the USA is shown by the next graph, which has the heading 'This cannot be.'

John Mauldin says, like Niall Ferguson, the choice for American voters, and indeed voters in all the other highly indebeted and recessed western nations, is between prolonged fiscal austerity and a major surge of inflation.

'It's all well and good to say that you want fiscal rectitude. It's another thing when it is hitting budgets near and dear to you. And to get back to a remotely sustainable deficit is going to take pain in every corner. It is going to hit near you, gentle reader. Some will get hit harder than others.

'And this is the case in every country running large and out-of-control deficits. It is not just a US problem. The Irish are in what can only be called a depression, along with the Baltic states and Hungary. Greece will soon be there, once they have to meet market rates for their debt, or force their labor markets to endure a very serious deflation to make themselves more competitive.

'So, can we know how The End Game will turn out? The short answer is no. Each country will have to make its own political choices. Could we see hyperinflation in the US on Britain or Japan? It is possible, with bad policy decisions. I doubt it that it gets to that. But could we see inflation? The answer is yes.

'That has been the traditional method of default for many countries over the years. Instead of outright default, they simply inflate away debt. And the logic is compelling'.

I agree that 'the logic is compelling' for inflation if the alternative is a decade of fiscal austerity, partial dismantling of the welfare state and slow growth of spending on health, education and defence. (See my February 2010 column on this matter.)

Of course, individual countries may find a 'regime change', as the UK did with Mrs Thatcher at the helm and the US with President Reagan.

But for most, including possibly the mighty USA, inflation may be easier path.

Inflation, if allowed to become too serious, is itself a regime-changer.

But what would the prevailing regime look like if inflation is preferred to great fiscal austerity?

Edited version posted next day on The Australian website.

The federal election campaign is underway as the major parties launched new advertisements yesterday.

The Liberal Party’s first major ad is entitled ‘real action’ and commits them to cutting government waste, ending budget deficits and halting illegal immigration.

Similarly, Labor’s ad ‘let’s move Australia forward’ echoed Julia Gillard's reformist speech from last week.

Links to both advertisements can be found in the new Federal Election 2010 section.

Although there are some clear differences between the parties – such as the federalization of healthcare – both Tony Abbott and Julia Gillard are now trying to court to moderate swing voters.

Both the Libs and ALP agree on the need to return the budget to surplus, stop illegal immigration and promote sustainable population growth.

Abbott says the Libs will return the budget to surplus faster than Labor, but the ALP has announced it will end the deficit by 2013.

But neither party has explained exactly how they will cut government spending and pay off the debt.

The Libs say they will cut spending, yet they have promised new spending on mental illness and paid parental leave. Tony Abbott has ruled out introducing any new taxes, which begs the question – how does he expect to pay for new social spending while returning the budget surplus?

The Labor Party has locked itself into the same position. The government says the budget deficit will end by 2012-13 (this forecast comes from the Treasury and, given its track record, should not be relied on), but its’ promise to federalize healthcare will cost billions of extra dollars every year.

And how can anyone seriously believe Gillard’s austerity pledge after her role in Rudd’s disastrous stimulus spending that bribed the electorate with $1000 cheques, killed several insulation installers and gave private schools much needed new indoor swimming pools?

Both parties have therefore moved towards the centre on economic policy. Abbott realizes the economy is the Liberal Party’s strongest card, but he has not promised any significant tax cuts. Likewise, Gillard changed the mining tax to help pay off the deficit because voters had woken up to Kevin Rudd’s smoke-and-mirrors politicking.

The gap between the ALP and Libs on immigration and population has lessened considerably since Julia Gillard became Prime Minister.

She abandoned Kevin Rudd’s ‘big Australia’ policy and moved Labor towards the centre ground position of ‘sustainable population’. The Liberals also support a sustainable population that is the view held by most Australians.

Lastly, the parties have converged on illegal immigration. Kevin Rudd was seen to be too weak on asylum seekers and this was a key contributor to his downfall. Labor and the Liberals are now talking tough on illegal immigration, with Tony Abbott promising to turn boats away if they enter Australian waters.

Expect this centrist trend to continue over the coming month.

Game on indeed!

Newspoll and the Morgan poll both predict a decisive win for Labor, while the Galaxy poll says the outcome is too close to call.

Both leaders are new to their jobs and have legacy issues of substance - Rudd Labor's blunders and howard's WorkChoices in particular.

Paul Kelly outlines the stakes for both leaders, and both parties.

'FOR Labor, election defeat next month is too horrible to imagine.

'It would shatter the purpose of the leadership coup, constitute the dual repudiation of Julia Gillard and Kevin Rudd, and brand Labor a one-term, humiliating failure.

'The entire reputation of modern Labor is now on the block. Rejection of Gillard as Australia's first female prime minister would condemn Labor's performance in office and its culture as a political party. Gillard's task is daunting - to use this poll to regain Labor's momentum and rekindle public confidence around a new leader.

'Her dilemma is that Rudd's record is Gillard's record. Rudd's blunders are Gillard's blunders. Yet Gillard needs to tap the better nature of Australians to give Labor another chance.

'For Tony Abbott, snatching victory would constitute a miracle result after the Liberal Party's slide into a prolonged shambles following the 2007 defeat of John Howard. The Coalition does not look ready to govern. For two years it felt success at this election was inconceivable. Yet Abbott's muscular populism and genius at destabilising Labor give him a real chance of victory in a climate of volatility.

'Since Abbott became leader, Labor has misread and under-estimated him. But the negative campaign it now plans against Abbott is more risky than it looks, given his warrior mindset and instinctual convictions.

'This is the ultimate moment for Gillard and Abbott. It is the contest nobody dared predict 12 months ago. Facing their first contest as party leaders, they are divided by personalities that disguise remarkably shared agendas. The election remains open. It will be won or lost in the campaign. Pivotal to its outcome will be public judgments about the trust and reliability of each leader'.

http://www.theaustralian.com.au/news/labor-stakes-its-reputation/story-e6frg6n6-1225893681467

Tony Abbott has his promise of 47 billion of spending cuts to match Labor's 3 billion budget surplus in three years.

Rising inflation may again force the Reserve Bank to raise interest rates during the election campaign, and those people who have their doubts about the 'independence' of australia's central bank will be watching closely to detect any perceived political bias.

The 'smaller Australia' debate may not be joined, but the voice of Australia's economists should be heard on this, if only to note that net immigration at recent rates of 300,000 per annum is needed to help prevent skill shortages and wage inflation.  Both sides of politics 'hear' the people on congestion in Australia's big cities and the stresses of the cultural melting pot but concerns at these structural isses will not end the economic imperative.

WorkChoices may be 'dead, cremated and buried' but loose talk of using regulations to make labor markets more flexible will play into Labor's hands.

Spending more on Australia's defence is an item that should be on both sides agendas but will hardly be mentioned.  Instead, 'first class health and education' will be agreed by both Mr Abbott and Ms Gillard.

The (now smaller) big new mining tax will be abolished by Abbott if elected and will help fix the budget if Labor is returned.

Each of the main parties climate change policies will by scrutinised carefully.  A big new tax on carbon is off the coalition's agenda and dare not be mentioned by Labor.  Here too is an issue that ought be forced onto the agenda by Australia's economists but will not for the simple reason that every economist worth his salt is either employed by Labor or hohing to be employed by a newly appointed Coalition government.

It's on, gentle readers.

Julia Gillard has been to see the Governor-General and Sky News is confident that the date is 21 August.

Tony Abbott has cremated workChoices and is reported to have buried the ashes.

More later.

The History wars

Richard Allsop reviews Geoffrey Blainey's stellar career for the IPA Review.

'One does not have to have shared Blainey's position on Asian immigration to lament the vitriol that was poured on him. Not content with just debating the actual issue of Asian immigration, many of Blainey's fellow academic historians went back through his opus to find examples of poor practice they could use to undermine his authority.

'It presaged a new era in the national discourse, one in which someone with a view with which one disagreed was not just wrong on that issue, but was a bad person. The attacks on Blainey probably mark the beginning of the ‘history wars' in Australia, wars in which ideological correctness became more important than any other factor in assessing a historian's worth. Ironically, apart from Blainey, the other major victim of the history wars was Manning Clark who, while obviously disagreeing with many of Blainey's views, nonetheless decried the attempts to silence him.

'In many ways, the ground-breaking nature of Triumph of the Nomads has been obscured by the fact that promoting it has not suited anyone's political agenda. The left wanted to stereotype Blainey as a conservative while, for many on the right, aspects of the book, such as Blainey's use of the term ‘invasion' to describe colonisation and strong defence of the strengths of much of Aboriginal society, were not necessarily to their liking'.

Read Allsop's full discussion here.

The Gillard tapes.

By special arrangement, we bring readers a previously secret transcript of Julia Gilliard’s first interview .....
 
TV: “Congratulations Prime Minister. Before we start, as we stand here on Thursday afternoon, do you accept that tomorrow will be Friday?”

PM: “We have always supported the standard structure of the calendar and acknowledge that the public expect a regular system that provides the rhythm necessary for everyday planning and life structures. We feel very strongly about this.”

TV: “So you do agree that tomorrow is Friday?”

PM: “It isn’t important whether it is Friday or Monday. What is important is that unexpected changes don’t interfere with the normal expectations of the public - and this government has a solid record in supporting those expectations.”

TV: “But as today is Thursday, surely you can confirm that tomorrow is Friday?”

PM: “Everything is relative and whether the next day is Wednesday or Sunday is dependent on where you stand at the time. We have never challenged the current system and have the full support of the unions on this. Most intelligent people agree that changes are not required.”

TV: “Well then, what day is tomorrow?”

PM: “Tomorrow is the next day in our plan to further develop our marvelous country in many areas. We plan to continue providing better health care, reduced debt, reduced unemployment, controlled immigration and to be a world leader in controlling global warming.”

TV: “Returning to the question, can you not confirm that Friday is tomorrow?”

PM: “Friday is always around. It has been around many times before and will be around again many more times. Which is why we need - as a responsible government - to plan and organise for the future. Not just for tomorrow, but for our children and their children.

TV: “Prime Minister, the viewers are waiting for your answer on what day you think tomorrow is?”

PM: “We are dealing with bigger issues here. The Friday, Saturday, Sunday thing is not important or relevant to the scheme of things. They need to understand the critical issues and focus on the matters of concern, such as the condition of our nation and how we can continue to develop it so that all may reap the benefit.”

Cartoon of the week

The Chinese economy has 'cooled' - with GDP growth dropping from an annual rate of 11.9 % in the March quarter to 10.3 % in the June quarter.

Gadzooks, head for the hills.

And China's goods and services inflation has also cooled, supporting recent news that China's house prices have stopped rising.

All very neat, certainly neater than Australia's Treasurer's attempt to explain the budget numbers ahead of the election.

Rowan Callick says 'Fears of China's slowdown are overstated'.  'China economy still red-hot' is an alternative offered by Henry.

On the other hand, as we economists like to say, America's activity measures are failing to thaw.

Minutes of the US Fed's meeting of 22-23 June noted a 'relatively modest' worsening in the economic outlook.  The Fed's policy makers raised the possibility that further monetary stimulus may be needed if the economy shows more serious signs of slowing.  Milton Friedman's helicopter is being tuned up for the US dollar bill drops in depressed areas.

Investors said the minutes weren't surprising, but served as a glum reminder of the troubles the economy faces. Economic data also underscored those woes, with retail sales slumping for the second straight month while an increase in business inventories was weaker than expected.

'A number of participants expressed the view that, over the next several years, both employment and inflation would likely be below levels they consider to be consistent with their dual mandate, but they anticipated that, with appropriate monetary policy, both would rise over time to levels consistent with the Federal Reserve's objectives'.

Wall Street broke a six day winning streak and Asian markets can be expected to sag again today.

Check out the Fed minutes for yourself here.  A good read, as always.

Net-net (as they say) global activity has clearly strengthened, at least in our region - as Premier Joh would have put it.

Qantas has given a further sign of its confidence that the aviation market is improving by boosting fares by 3 per cent.

'The airline revealed the increases to the travel trade yesterday in the wake of Wednesday's announcement that it had advanced the delivery of its long-awaited Boeing 787 Dreamliners by two years and would now take the first aircraft in 2012.

'The decision to increase fares across its international, domestic and regional businesses builds on international increases in December and rises to domestic fares of $5 to $10 last September, after more than a year of falling ticket prices because of the global financial crisis.

'The airline said yesterday pricing was reviewed continually across all routes and took into account factors such as demand, capacity, competitor activity and business performance'.

Politics downunder - election soon

Greg Sheridan reports: 'All new prime ministers take a while to learn the ropes in foreign affairs. Most Asian officials, politicians and commentators I have spoken to are absolutely flabbergasted at Rudd's demise. So are the Americans. Nor have I met a single person in the region who knows Julia Gillard or Tony Abbott'.

If anybody noticed, the spat between Bob Hawke (represented by Blanche) and Paul Keating (representing himself) will do us no good, although it reportedly is amusing Julia Gillard, who today was fending off her own case of alleged deal disowned.

The text of Keating's letter is provided here, courtesy The Australian.

Gillard today at the National Press Club presented herself as a fiscal conservative.  This was Comrade Rudd's approach too, while throwing taxpayer's money at every problem known or discovered.

The larger-than-life Laurie Oaks asked THE question - did you reneg on a deal with Comrade Rudd? The lady's lips are sealed dear reader, but 'trust' will be an issue in the coming election, set for 21 or 28 August according to all the pundits.

Wayne Swan has fessed up to being too clever by half - a surprising occurrance since extreme cleverness is not Mr Swan's main characteristic.

We all wondered at how a major 'reform' of Labor's clumsy tax grab from the miners could satisfy the big miners while leaving the time of return to surplus unchanged and changing the net amount of tax to be collected by a miniscule amount.

After dancing around the subject for what seemed like weeks the Treasurer now says that it was Treasury's upward revision to commodity price assumptions that made up the missing billions, plus (of course) a smaller company tax cut and abolition of the totally incredible compensation for losses that was part of the original 'reform'.

How do the geniuses in Treasury get ministers into such deep trouble?  Ken Henry's undisciplined grizzle at being out of the loop in Peter Costello's time is finally explained - Howard and Costello were too canny to be suckered in by a bunch of unworldly, too clever by half, boffins.

Treasury has shown a rare ability to bring down by accident a Labor Prime minister whom it presumably quite liked.  Imagine the damage it could have caused to a coalition administration that presumably was not its favourite cup of twinings.

Here is another snippet that reveals Treasury's work.  Henry in his role as advocate for Research, Development and Commercialisation (R,D & C) was once granted an audience with Dr Ken Henry.

My case that more R,D & C would make Australia a more dynamic economy was rejected by Dr Henry.  In fact, Dr Henry said, he was not convinced that the Howard government's extra spending in this area so far (under Howard's Backing Australia's Ability program) was worthwhile.

Years later, we have the surprising fact that under the Rudd/Gillard government, spending on R,D & C is lower than that under the Howard government.

Kim Carr's Department of Innovation, Manufacturing, Research and Science has no ability to stand up to Treasury, and has shown no interest in establishing even a small group with the ability to take on Treasury.  Remember the floating of the exchange rate?  Advocated by the Reserve Bank and the Prime minister's department, fought by Treasury.

Instead, Kim Carr's penchant is for massive conferences of members of massive advisory bodies comprising the great and the good of Labor supporters, some of whom have done some real innovation, with the good minister dropping in to give pep talks.

Unstressful work for all involved, but a fine source of budget reallocation, away from idle conference chatter toward real R,D & C.  Who in the Gillard administration is capable of uncovering and reforming such a situation?

The global financial crisis marks a new era of capitalism - Capitalism 4.0.

That is the claim of Anatole Kaletsky in a new book with that name.

The Napoleonic wars produced the beginning of the classical era of laissez-faire (or Capitalism 1.0); the Great Depression spawned the government-heavy era of Capitalism 2.0; and the stagflationary 1970s led to the era of free-market Capitalism 3.0.

'Like the changes that have gone before', says The Economist's reviewer, 'capitalism’s latest transformation will alter the relationship between markets and governments and between politics and economics. It is the ability to adapt that secures capitalism’s survival. Version 4.0 will be as different from the recent free-market fundamentalism as Reaganomics was from the New Deal.'

Kaletsky says what was a run-of-the-mill financial crisis became a catastrophe because Hank Paulson allowed Lehaman Brothers to fail.  Perhaps 'nearly became a catastrophe' would be a better comment, as we do not yet know whether the Great Credit Freeze recession will become a Great Depression or the triumph of Keynesian policies.

It is also possible that the failure of Lehman Brothers will mark a decisive turning point in the battle against the moral hazard created by the bailout of financial institutions seen as too big to fail.

The Economist says experts will find plenty to quibble with in this book, but it is 'full of clever insights'.

'For sheer intellectual chutzpah and creativity it is well worth reading'.

Amazon, here comes another order.

In the local press, there is more musing about the philosophy of economics, from the estimable Janet Albrechtsen.

JULIA Gillard, we are told, can learn much from the principles of Hayek and Friedman.

No doubt, but such a person has to wish to seek out a different path.

'WHILE the Prime Minister has started her informal election campaign with a pitch to the future, a more honest and telling indicator of a Gillard Labor government is a focus on the recent past.

'Even a cursory look at the Green Loans scheme, just the latest Labor debacle, suggests a consistent message. Labor in the 21st century is committed to a deluded philosophy where a big spending government believes it can spend our money better than we can. It can't, of course.

'While Julia Gillard has taken deliberately bold moves to change direction over the mining tax, immigration, population and climate change, there is no sign that a Gillard government will free itself from the costly fantasy that took hold under Kevin Rudd about the omnipotence of big spending government brimming with expensive and grand designs'.

Janet Albrechtsen reminds us of the great gem from Friedman's preface to Hayek's great book The road to Serfdom.

'Freidman, who wrote the introduction to Hayek's book, best described the four ways we spend money: "You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost. Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch! Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government."

Albrechtsen also draws our attention to a much watched YouTube video, www.youtube.com/watch?v=d0nERTFo-Sk

The big question, of course, is whether Capitalism 4.0 has more Keynes or more Hayek.