RBA pause continues; GDP rises strongly in June quarter
Date: Wednesday, September 07, 2011
Author: Henry Thornton
As widely expected, the RBA left interest rates unchanged yesterday.
Extreme global uncertainty is making prediction difficult.
The key point was right upfront: 'Conditions in global financial markets have been very unsettled over recent weeks, as participants have confronted uncertainty about both the resolution of sovereign debt problems and the prospects for economic growth in Europe and the United States. As a result, the outlook for the global economy is less clear than it was earlier in the year'.
Inflation is expected to decline by year end, and monetary policy is excersising a degree of restraint - with credit growth low and house prices falleing - not in Canberra it must be noted, although Glenn Stevens was not so undiplomatic to point this out.
And in conclusion: 'At today's meeting, the Board judged that it was prudent to maintain the current stance of monetary policy. In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation'.
As someone said, they don't know either. The governor's press release is linked here.
Students of the monetary framework, putting recent decisions of the RBA board into context, will enjoy a nicely crafted speech by governor Stevens, linked here.
More later today when June Quarter GDP data are released and Henry has seen Darwin's major art works. Our car is on the Ghan for Adelaide and we follow it by air shortly.
June Quarter GDP Figures released
Well, the figures for June Quarter GDP have been released here and show the Australian economy rebounding strongly from the flood-induced shrinkage during the March Quarter with Australian GDP growing at 1.2% on a seasonally adjusted basis during the June Quarter - an annual figure close to 5%.
The strong rebound suggests the RBA has been right to hold interest rates during the past few months and not cut despite the calls from many sectors of the economy. Interest rates are at historically low levels, and with an economy growing at nearly 5% per annum, it would be an unprecdented move to cut interest rates into the 'teeth' of this type of growth.
As further information becomes available about the state of the sovereign debt crisis in Europe, the RBA will clearly be able to take action accordingly in coming months.
Consumer confidence plunges
Date: Wednesday, May 07, 2014
Author: Roy morgan Research
The ANZ-Roy Morgan Consumer Confidence fell a further 4.2% to 106.3 in the week ending 4 May. Confidence is now down a sharp 8% over the past fortnight; a large move for the index.
This is most likely to have been driven by policy leaks in the lead up to the May 13 Federal budget, with the Commission of Audit’s report and the mooted ‘deficit reduction levy’ covered extensively in the media in the past week.
Consistent with this, the weakness in the week was driven by another sharp fall in consumers’ perceptions of ‘economic conditions next year’ (-10.8%) and this sub-index is now down over 20% over the past fortnight. Perceptions of ‘economic conditions in the next five years’ fell 3.8% after declining 4.6%.
However, there was a silver lining in the report. The sub-index of confidence - perceptions of ‘financial situation compared to a year ago’ - which is most correlated with households’ spending decisions, rose modestly last week (+1.9%) after falling a more modest 3.7% in the previous week compared to other sub-indices.
As such, and together with signs that the labour market is beginning to strengthen, ANZ’s bottom line for the household consumption outlook remains that consumer spending will improve this year and next, although next week’s budget has the ability to drag on the speed of that recovery.
ANZ Chief Economist (Australia) Ivan Colhoun said: 'The ANZ-Roy Morgan weekly consumer confidence is providing the first read of the impact of the Budget on consumers. Confidence has fallen sharply over the past fortnight, to be down over 8% over that period, which coincides with a number of policy leaks in the lead up to the May 13 Federal Budget.
'The policies of most concern to the consumer spending outlook at this stage are the mooted temporary deficit reduction levy and the proposed changes to the eligibilities for welfare and pension payments. These policies, if introduced, would impact consumption both directly and indirectly. This index will be important to watch for the likely magnitude of the policy’s indirect hit to consumer spending – and how sustained the impact from any other Budget-related news will be on consumer confidence more generally'.
The graph shows the effects of facts, fictions and the occasional barefaced leak.
Henry draws your attention to an important article - linked here - on the benefits and costs of trade liberisation, written by Craig Milne of the Australian Productivity Council.
President Reagan's budgets
Date: Tuesday, May 06, 2014
Author: Henry Thornton
1979 was a dismal year. After two decades of strong post-war boom, OPEC’s two rounds of oil hikes had reduced the leading nations to virtual despair. But new administrations were in place, or in the wings, and radical change to economic policies were coming soon.
In Australia the Fraser government was struggling with ‘monetary projections that could not be achieved, except by chance, with a fixed exchange rate and heavily restricted domestic financial markets.
In the USA, President Carter was overwhelmed by the problems he was facing on all fronts.
Early in 1979 there began the second oil price crisis. Tremors from Iran spread around the world. Rumours of a new ceiling on Saudi oil production compounded oil companies’ warnings of shortages and cuts. The dollar plunged while gold shot up to $254 per ounce almost immediately (with further increases to $400 plus) and other metals soared.
A newspaper said: ‘This week, capitalists have been fleeing from securities. Almost all the major stock markets went into reverse’.
Investors were switching, sometimes indiscriminately, into anything that offered some shelter against the stagflationary fall-out from Iran.
President Carter appointed Paul Volcker as Chairman of the US Fed in August 1979, in perhaps his finest contribution to global economics. Mr Volcker blamed inflation on excessive monetary growth and said at Senate confirmation hearings “there is no substitute for monetary discipline”. By October, the American economy was experiencing an inflation rate near 12 % and a trade deficit almost $2 billion a month and a weak dollar, itself adding to inflation.
‘Strong-arm tactics were planned, including ‘sand in the wheels of finance’, with changes in operating procedures for monetary policy. These changes were widely seen as a major gamble. As someone said at the time: ‘Instead of the Fed setting cash rates and hoping for the best, it will cap ‘base money’ and let banks sort out interest rates’. When the new approach was implemented, interest rates oscillated wildly.
Ronald Reagan won in late 1980 and was inaugurated in early 1981. His brash young budget director, David Stockman, was described as David confronting the budgetary Goliath. ‘The hope was that, with the Fed’s monetary action, the combination of budget cutting and tax cutting might alter expectations of continuing inflationary spiral.
But, in America, the President proposes while Congress disposes. The subsequent struggles was described by one venerable journal as ‘a game of chicken’. Reagan and Stockman kept advocating three things: cutting taxes, increasing defence spending and radically cutting other sorts of spending, especially spending on welfare. Broadly speaking, congress accepted lower taxes and higher defence spending but not the other spending cuts that would have reduced the budget to anywhere like zero.
By early 1983, interest rates were rising while inflation had fallen to around 4 %. In fact, three month money cost 9 %, meaning ‘real’ (inflation adjusted) rates of interest were probably higher than they were in 1979. With President Reagan facing re-election in 1984, the Federal government’s budget deficit had risen from 2 % of GDP to 6 %. Mr Reagan renewed his call for constitutional amendment to ban budget deficits and to allow him to veto spending plans from Congress.
This call was ignored by Congress, and by 1985 the outlook was for ‘budget deficits as far as the eye could see’. Interest rates were rising. Paul Volcker called for the budget deficit to be cut ‘quickly’.
Make what you will of it, gentle readers. Almost any economist one could find would have predicted cast rates of 20 %, fluctuating wildly, and persistent, apparently unfixable, budget deficits would have wrecked the American economy. Yet the years following saw a massive global share boom, a short-lived bust (readers may recall October 1987) and further rises in what was one of the greatest share booms of history.
Henry's review of Prime Minister Thatcher's budgetary policy is available here.
Saturday Sanity Break, 3 May 2014
Date: Saturday, May 03, 2014
Author: Henry Thornton
More budget news today, especially 'No dole before 25: youth will have to earn or learn'. Smaller front page article on cutting down on politician's gold passes, with two reported cases of former pollies spending big to take their families to holiday houses in the sort of places others would like to bask in the sun if it were free to get there - Broome and Lord Howe Island. Nice one Tony'n'Joe, but what about taking a notch in the belt of current pollies? For example: 'Every Australian must share the pain, which includes a modest levy on marginal rates of tax above $xxx K. It will include a 20 % temporary cut in politicians' salaries (or, if this is not feasable, a voluntary cut in government salaries or equivalent payments to a recognised charity. The government also urges all Australians who feel they can afford to do so to increase their contributions to recognised charities.)'.
This is part of Henry's proposed draft outline of a coherent narrative from government that we believe our most senior journalists are in effect calling for. The draft outline is available here.
The budget is understandedly very important, if not yet a 'national emergency'. Regular readers will recognise that a bigger, more urgent, problem is double-digit cost disequilibrium. This is a problem that the proposed temporary 20 % salary cut for pollies is so important, once the problem is put on the table, which so far it has not.
Naturally, readers will make up their own minds about all this. Here is a link to a wonderful contributation by former crusading state premier Jeff Kennett. I really like his attack on penalty rates, which directly deals with the cost overhang.
Also valuable is his proposal to broaden the GST and (if needed to fix the budget) raise its rate, as the relatively brave New Zealanders have done.
And for a second independent opinion, see Paul Kelly, including another video. If you hang about you will see Alan Kohler interviewing the Chair of the Audit Commission.
Last night Henry and a co-religionist in the camp of Caaarlton! watched the AFL satanists Collingwood destroy the season of our (previous) one true footy team. It is very rare for Caaaarlton!'s season to be over after seven games, but with a 5(loss)/2(wins) record, only a miracle will see Caaaarlton! feature in September. The good news is there will be a lot of previous footy viewing time to use in more productive areas, like reading and writing, painting and hanging about with the family. Coach Mick the Merciless said afterwards that there were 'passengers' in the team, and one suspects there will soon be a 'youth policy' at Caaarlton!
Not much other sport to watch. NZ's Rugby League team gave the rampaging Aussies a fright, and our world champion heavy-weight boxer got belted. The good news is that a nation's sporting prowess is inverse to its sporting performance, so our sporting decline foretends a better economic performance.
Image of the week
The economy - proposed narrative
Date: Wednesday, April 30, 2014
Author: Henry Thornton
Treasury has told us that economic growth will be the weakest for 50 years. A key question is why they did not tell Rudd'n'Gillard'n'Rudd that the commodity boom they enjoyed so much would end soon (as all previous commodity booms had) and they should therefore not spend like drunken sailors? If such a message was delivered, it would be good to know, Dr Parkinson, preferably now but at least as soon as you are free to write your biography. Today's blog aims to provide a draft narrative to position the tough decisions needed now to minimise future misery for many Australians.
Of course, it seems highly likely Treasury did not sound the relevant warnings. If they had, Treasurer Swan would presumably not have constantly predicted a strong economy whose budget would whirr back into surplus not too long into the future. Did Treasury and/or successive governments really think Australia was a 'miracle economy' owed a living high on the hog for the feasible future?
Now it is time to sort it out, and Messrs Abbott and Hockey are hard at work telling us it is a whole lot worse than Treasury and Treasurer Swan believed only 6 or so short months ago. Gor blimey, comrades, it now looks pretty gruesome.
We have been told, correctly, that budget repair is going to take a unified effort from all Australians. Rich folk will cop a tax levy. While pensioners will have their pensions left alone, future pensioners can expect to work for longer. Families earning over $100 K will have to manage without handouts, which seems fair enough to the Thornton family.
Big spending schemes will need to be downsized/implemented more slowly, as even the PM's paid parental leave plan has been trimmed. Since Tassie has turned its back on the NBN, the largest and least useful white elephant of the Rudd'n'Gillard'n'Rudd administrations, why not just cancel the whole idea and let people make their own arrangements for fast internet? Radical, perhaps, but the simplest way to save a lot of money Henry can imagine.
Henry has been privileged to be the recipient by email of a lovely punch-up between Terry McCrann on one side and John Stone and Des Moore on the other. McCrann has supported the mooted 'tax levy' even if it will raise a relatively small amount, perhaps $2 to $3 billion. Messrs Stone and Moore say this is tiny relative to the overall budgetary problem and suggests it indicates lack of appropriate resolve to cut spending. Whilst one can agree with them on the size of the proposed levy, the political imperative of 'sharing the pain' is presumably the reason it is in the mix.
And on another point of political economy, every responsible commentator agrees that Labor's drunken sailor spending is most of the reason for the budgetary mess, along with the end of the best part of the commodity boom. Current attempts by Labor (and Labor's coalition partners, the Greens) to frustrate the government's attempt to fix the budgetary mess is full of contradictions and illustrates either blind stupidity or gross hypocricy.
The government is taking a beating in the polls and one hopes by budget time it has sorted out the 'narrative' into a few simple propositions.
Here is a first draft:
1 The budget is in big trouble, and Australia has become very uncompetitive. (Provide examples.)
2. Australia's strategic mistake was to assume record terms of trade would last forever, which produced overspending by governments and unsustainable increases in incomes, including welfare payments generally.
3. The Labor Green alliance boosted government outlays with a number of overly-ambitious spending programs. (Specify)
4. The current government is responsible for fixing the budget, which involves cancelling programs we cannot afford, slowing and/or making less ambitious programs Australia currently cannot afford in their current form.
5. Every Australian must share the pain, which includes a modest levy on marginal rates of tax above $xxx K. It will include a 20 % temporary cut in politicians' salaries (or, if this is not feasable, a voluntary cut in government salaries or equivalent payments to a recognised charity. The government also urges all Australians who feel they can afford to do so to increase their contributions to recognised charities.)
6. Companies whose costs are making them uncompetitive are urged to talk with their workforces to seek changes to remuneration practices, either temporary or permanant, to restore competitiveness. Top managements should take the lead in accepting cuts to their remuneration of a similar proportionate magnitude they wish their staff to adopt. To the extent that productivity can be improved, remuneration cuts can and should be smaller.
7. Specific promises made before we knew the magnitude of problems facing the nation may need to be postponed in whole or in part. We apologise for this but note that officials did not warn of the size of the problems we are now dealing with, nor did the major business representative groups, or indeed most economists or journalists.
Give us your thoughts.
Readers are invited to contact Henry here if you wish to contribute to the debate we have to have.
Saturday Sanity Break, 26 April 2014
Date: Saturday, April 26, 2014
Author: Henry Thornton
Treasurer Joe Hockey has said that all Australians have to share in the task of producing a sustainable budgetary position. David Uren of the Oz has discussed the productivity slide that is part of Australia's double-digit competitiveness handicap.As he says: '...many of the household income gains of the past decade may have to be surrended if commodity prices drop back to the long-term trend, as they have after every previous mineral boom in the past 150 years. In the same report, linked here, Uren says: 'Insiders say [Tony Abbott] was dismayed by his first reading of the Commission of Audit Report. He knew the budget was in poor shape but had no idea the turnaround would demand such a profound rethink of so many things government does'.
David Uren also tackles the challenge of productivity reform, with the help of Australia's productivity supremo.
'Productivity Commission chairman Peter Harris says he has never worked for a government that did not want to undertake productivity reforms. “The great difficulty they have is not what to do but how to do it.”
'Reform, he says, must be sequentially structured, with the people most affected having the reasons carefully and clearly explained in ways they appreciate. He says you can’t succeed by telling people they should “eat their greens” because it will be good for them'.
“You can’t jam it down people’s throats.”
Henry's favourite hound from hell, Grace Collier, provides another example of why business leaders do not have to bargain with truculent union officials. Put your case direct to the workforce, business leaders, and if you win the union will very likely go away. More than two decades ago, Henry conducted such a dialogue with his staff of almost 1000 souls. From over 60 % of the workforce when Henry took over, the percentage in unions had dropped to 16 when Henry moved on.
Read on here - 'If bargaining is killing your business, just stop doing it'.
Essendon blitzed Collingwood for the first quarter, then Collingwood blitzed Essendon to catch up by half-time. From then it was an arm wrestle eventually won going away by the Magpies. A stirring victory for the black'n'whites, one that sets them up for a potentially tough fight with Caaaarlton! if the Blues can play like they did against Julia Gillard's Doggies and beat West Coast this afternoon.
At long last, Australia has a boxer with a realistic chance of becoming world heavy-weight champ. Go Alex Leapai, we will be watching and cheering you on.
The visit of the Royals has moved the nation, especially the appearance of baby royal, boy George, coinciding as it does with the deep thoughts caused by the occurrance of ANZAC Day.
Lest we forget
Date: Friday, April 25, 2014
Author: Henry Thornton
Courtesy The Australian
Monetary policy - mixed up confusion
Date: Wednesday, April 23, 2014
Author: PD Jonson
Earlier this week we were told that Treasurer Joe Hockey was 'unhappy with' the RBA. Knowledgable RBA watcher, Terry McCrann, scotched this suggestion in a thoughtful article that also explained the Treasury Secretary's twice delayed marching orders. In both cases, McCrann concludes, 'just as Hockey has bonded well with Parkinson, he’s done the same with Stevens. Hockey’s personality is one of winning friends and influencing people; not barking pointlessly at key allies'.
But something odd is going on. Today the AFR's Economics Editor, Alan Mitchell says 'The IMF's tacit seal of approval for central bank intervention in asset booms can be seen as a concession to the RBA's approach'.
The RBA's approach, Mitchell claims, is one of 'leaning into' asset booms by raising interest rates. He claims this is what the RBA did succesfully at the start of the current decade - even though the politics of leaning against asset price bubbles is 'appalling' and its success - avoiding an asset crash by heading off an asset bubble - is impossible to prove.
Alert readers will recall John Howard as Prime minister say something like: 'Nobody comes up to me in the street to complain about increases in the price of their house'. Nor do many voters tell the PM or Treasurer, 'please get that nice Mr Stevens to raise interest rates to stop me getting rich'.
However, a policy of 'leaning into' asset boom by raising interest rates is not the answer to the logical contradictions now bedevilling Australian and global monetary policy.
In the countries which have have severe recession, interest rates have been set at record low levels, virtually zero, while share prices go through the roof. Should the US Fed have 'leaned into' the share boom with, say, cash interest rates at 2 %, while the real economy was struggling to avoid severe recession becoming depression? No way, Jose, is the sensible answer.
In Australia, while the Aussie dollar was widely perceived as too high, while the economy was struggling, cuts to cash interest rates were widely seen as a useful way to stimulate the economy while also reducing the currency, helped along by RBA's jawboning the forex market. This policy failed, as demonstrated by the subsequent revival of the Aussie dollar as the economy improved somewhat. Now another set of asset prices, house prices, are widely perceived to be booming again. Should the RBA 'lean into' house prices, even if this damages the real economy and pushes the Aussie dollar even higher? Jose says 'don't be silly, comrade'.
The answer, of course, is that seperate targets require seperate policies. I have proposed a variable tax on capital inflows to tame the dollar, and (automatic) variable asset ratios for banks and other financiers to take the sting out of housing booms and to encourage new spending in busts. This approach would leave cash interest rates to focus totally on the state of the economy, and not provide the ugly dilemmas that have been the focus of much useless discussion.
Of course, Mr Stevens, if perfectly unzipped, might say there are other ways to influence asset prices. House prices might be lower if governments simplified planning laws and made land more quickly available to build houses. The Aussie dollar would be lower if the budget deficit were lower, and reduced spending or higher taxes in a tough budget might also have a useful impact on house prices. Both points are fair enough, but we are where we are. Glenn Stevens must indeed be hanging out for a tough budget, in the reasonable expectation that it would take pressure off both the currency and the housing market.
But unless and until policies other than cash interest rates are brought to bear, there will be a natural (but painful) end to asset booms. My fear is that the US Fed will not be able to prevent a big fall in global share prices as it seeks, ever so slowly, to normalise US monetary policy. I also fear that when the Aussie dollar finally corrects its current overvalued levels, it will undershoot , producing another destructive lurch in the structure of the Australian economy. Ditto for the eventual but inevitable correction of house prices.
Milton Friedman, a far greater economist than anyone mentioned in this blog, famously said 'monetary policy cannot serve two masters'. I must confess I did not fully understand what he meant at the time. My greatest fear is that no-one now in power in Australia yet understands this point.
Today's news, consumer inflation slightly less than feared, still within the RBA's target zone, does not dispose of the issues canvassed above. It does provide time for the RBA to rethink its 'one instrument, multiple targets' approach. This writer had the searing experience of abandoning support for the 'monetary projection' approach to setting cash interest rates, and it would be no disgrace if the RBA adopted a multiple aims, multiple policies approach to monetary policy and macroprudential policy.
Professor Warwick McKibbin, 2/5
I agree that interest rates should NOT be used to bring down the dollar. The RBA has already probably injected an asset bubble into the economy so that foreigners will want to hold appreciating Australian assets which hurts the original goal of lowering rates to bring down the exchange rate. In my view the nominal interest rate (lets use the corporate bond rate) should be equal to the nominal growth rate for policy to be neutral. Corporate borrowing rates are around 3.75% which when compared to the nominal GDP growth rate of 5.5% shows that monetary policy is very loose in Australia.
I disagree with a capital flow tax because as I have written before this raise the cost of access to external finance and reduces the equilibrium capital stock in Australia because you need to get a higher MPK to cover the additional cost of borrowing. We need foreign capital to help fund our growth. Far better to concentrate on cutting input costs (i.e. raising productivity) through a range of policies like tax reform, removing inefficient government regulation, raising the infrastructure capital stock etc) so that the currencies strength does not lead to unemployed resources. Also a good idea to reduce government borrowing so we need less foreign capital.
The fact that the US and other countries that have had a financial crisis have low policy interest rate does not mean Australia should follow suit because we do not have the balance sheet problem they have – although we might soon generate our own if we keep the current stance of monetary policy!.
PD Jonson replies.
I understand your reason for rejecting a tax on capital inflow, and I agree that reducing input costs by raising productivity would be a better way of coping.
However, as you know, increasing productivity might at best produce 1 to 2 % improvement per annum, and if the overall cost level is 20 to 30 % above any sensible equilibrium, fixing it that way is just not feasible.
I also disagree that capital inflow would dry up. Indeed, with Australia showing the strength not to allow its industrial structure to be determined by foreign investors, capital inflow might even increase for a time. Something like this happened in Germany half a century ago.
Tough budget on the way, Caaaarlton! finally wins a game
Date: Monday, April 21, 2014
Author: Henry Thornton
The budget leaks and imspired guesses continue. It will be tough, pension age increased to, say, 70 years, but not until 2030, no means test for pensioners, cutting and scraping at Commonwealth public service, and so on and so forth. But no broader GST, or broader and with a higher rate GST, the one reform virtually all econmomists see as the least bad way to balance the books with least damage, indeed some benefit for, incentives to work, to take risks and to save.
Henry suggests a Commonwealth version of Queensland's slick ads would be worth showing on prime time telly. 'Do you prefer spending cuts, tax increases or sale of assets?'. One gathers that neither 'None of the above' nor 'All of the above' are on the list, but at least this set of options is a nice way to tell people there is no such thing as a free lunch, a fact that oppositions keep suggesting is possible. Click here to vote at the 'Advice to the Queensland premier' website and it seems you can vote multiple times, even if you live in Victoria, Burma or even Sweden.
When perfected, with a logically complete set of options, this approach may revolutionise politics, back to the old Athenian town meetings, conducted electronically.
Des Moore's view
Speculation continues on the federal budget without substantive economic analysis to support the large spending reductions needed to prevent, as Shanahan suggests below, a damp squib.
Let me be clear here: while there is no doubt that Labor left irresponsibly large spending commitments stretching into the future, commitments for next year (2014-15) are “only” 2 percentage points of GDP above what they were in the final year of the Howard government in 2007-08. It should be politically practicable – and not damaging to the economy unless Keynesianism is allowed – to return to 2007-08 GDP rates or close to them in 2014-15. Such action would also come close to eliminating the deficit.
But Shanahan has felt it necessary, so close to the budget date, to raise the possibility of a damp squib and to leave the impression that the Coalition has not settled on the main aggregate outcomes. Given the lengthy period since it assumed office, that is a disheartening perspective.
At least Caaarlton! has won a game. And it was without Judd, two-and-a-half men down in the last part of the game and using Brett Rattan's hard tackling, helter skelter, straight up the guts style ditched by Supercoach Mick Malthouse. One hopes this was the result of the players telling Mick thhat they preferred their old style and were thus empowered for the first time since Mick came along to destroy Caaartlon!'s free flowing, attacking style. Could this be a collingwood plot? Stranger things have happened in the James Bond movies, and we all think truth can be stranger than fiction.
Date: Friday, April 18, 2014
Author: Henry Thornton
16" x 36" Oil on old kitchen cupboard door Signed bottom left Jonson 68
Painted on an old kitchen cupboard during a time of adolescent religious fervour, the piece was rejected by the organisers of the local Church Art Show. ("Far too modernist" might have been the comment but apparently the committee objected to the nail holes. "You have problems with the nail holes" was my response, but the stout Presbyterians failed to see my point.) With Crowdy Bay, still my favourite painting.
Sunday Sanity Break, 13 April 2014, updated 16 April
Date: Wednesday, April 16, 2014
Author: Henry Thornton
Greetings from Wuhan, a small, well, smallish, town of 20 million souls, situated on the Yangtze River, two hours flight from Hong Kong. We are here to meet some brilliant scientists, and even more brilliant PHD students, all dedicated to remediating the environment. As we are reading Stephen Baxter's Transcendence, whose subplot is the final destruction of the Earth's environment, the subject assumes additional drama.
Henry has been struggling with the Chinese censor and the (alleged) shortcomings of his steam-powered notebook. He has three ways to communicate with home, with Mrs Thornton presiding - Skype, gmail and bigpond.com. Skype was not available in Hong Kong, and is also not available in Wuhan. Google was not available in Hong Kong, and so far at least is not available in Wuhan - 'It is intermittantly available', as one native said. Bigpond.com is available, and informed Henry of the disgraceful Caaarlton! loss to Melbourne - what were they smoking Mick? Whose tenure, and/or that of others, must now be under scrutiny.
Bigpond.com is available, as I said, but when I tried to open Webmail I got the same messages given by Skype and Google - 'No security certificate available' - which is not what one gets in Melbourne, London, Tokyo or New York, or for all I know Burma. What is the reason for blocking these sites, if that is what is going on? Facts plus factoids (Google); communication with the outside world (Skype) or bigpond webmail (ditto).
I must confess that the hotel staff in Wuhan have attended in large groups and are implying it is Henry's steam driven notebook that is the problem. More tomorrow, provided Henry's site is allowed to continue broadcasting. It was unavailable in Hong Kong, and suddenly was available in Wuhan. Who knows what will happen in Shaoguan?
So far we have travelled by aeroplane - 14 hours to Hong Kong, on CX 104, then after a brief sleep in the Regal Airport Hotel, within walking distrance of the airport, 2 hours by Dragonair to Wuhan. Tomorrow it is the bullet train to Shaoguan, another meeting and dinner, another sleep followed by the bullet train to Hong Kong.
Attended a great conference today mainly very bright young Chinese students reporting on their research. Then headed for the bullet train for Shaoguan a city about halfway between Wuhan and Hong Kong. The line goes on to within 45 minutes by road to Hong Kong. 'China would complete the link to Hong Kong in a year or so, but Hong Kong has a democratic government that is weak', explained our Chinese travelling companion.
Security was less than at an airport, but all luggage was scanned and bodies were frisked electronically. Our tickets took us to the rear carriage where first class seats had been booked. The carriage was marked First/business, and we were in a small compartment with five seats almost as luxurious as those in a Gold Class cinema. Our fare was 600 RMB, and when two of us sat in the two larger 'first class' front facing seats we were told firmly that they were double the price of the mere 'normal' first class seats. So in this socialist paradise, there are four classes of bullet train seats - Economy, Business, First and Superfirst.
The train rode near-silently on its cushion of air and quickly and effortlessly glided to its travel speed of 300 kph. (It was 350 kpm until a vast crash at this speed had killed many passengers.) We chatted as the green and hilly countryside glided past - neat fields and two story houses and in the hillier parts forests. Sadly saw no pandas chewing leaves. Our travelling companions told me the general Chinese view of what had happened to Malayian Flight 780. The captain, a known friend of Mr Anwar, so the story goes, had hijacked the plane to barter the life of his passsengers for Mr Anwar's freedom. If the trade was not agreed, the captain said he would fly the plane into a prominant city building. The government said 'no way Jose' and asked the USA to shoot down the plane, which it promptly did.
Other stories abound, all with the theme that the USA, China and Japan knew at all times exactly where the plane was located. One varient had lithium batteries in the hold, one or more of which caught fire and created a small breach in the hull. Gradual aphixiation overcome the crew and passengers and the plane flew on until it ran out of fuel. Mr Abbott's recent very confident assertion that the black box recorder would soon be found played into the conspiracy theories. 'On the facts we know, he should not be so confident', said one of Henry's companions.
Soon the train will rocket into Hunan, birthplace of 'Uncle Mao' as one wag described his statue as we were driven to the train station in Wuhan. Like most other things in China, the railway is built on a vast scale, with wide platforms and many sets of rails. There was notable signs of forward thinking, or poor planning, in vast apparently completed but unused freeways.
We arrived safely at the end of the rail to be picked up and driven to Hong Kong where business will dominate proceedings. We have been warned that exiting 'China' and entering 'Hong Kong' may be a bit tiresome. But then we shall be in the city that has been described as China's main exemplar of a free society, showing the path ot a more dynamic economy and a freer society. Will Henry be able to access his favourite web sites? That will be a (minor) sign of progress, or its lack.
Henry arrived home at about 8 AM today (16 April) after the three-movie flight from Hong Kong. All was well, except for the massive build up of unanswered emails due to lack of internet connectivity in China/Hong Kong. One was able to read the Oz and the Fin in the airport lounge, which suddenly reminds one of the almost total lack of English newsprint or TV coverage in Wuhan and Shaoguan. In Hong Kong there is The South China Post and other options, including on TV.
The great dragon is roaring, gentle readers, but growth seems to be slowing and there are continuing concerns about property markets, the so-called 'shadow' banking system and the need for State Owned Enterprises to focus on making money instead of creating jobs.
Tony Abbot's visit and Australia's work in coordinating the search for the lost plane seems to have reinforced our status as a friend of China, also helped more indirectly by the freer trade agreements with South Korea and Japan announced on the same trip. Some of the business propositions we were presented with, involving remediation of a number of specific environmental problems in what is a seriously polluted environment, would reinforce that positioning.