Saturday Sanity Break, 10 December 2016 - Treasury rediscovers economic sense.
Glory be, Treasury has finally accepted that the Rudd-Gillard-Rudd governments did a lot of wasteful spending during and following the Global Financial Crisis. See the Australian's front page report Friday by Simon Benson. ' A damning Treasury-commissioned independent review of the former Labor government’s unprecedented spending response to the global financial crisis has found it was a “misconceived” waste of money, fundamentally weakened Australia’s economy, almost destroyed parts of the manufacturing sector and inflicted more long-term harm than good'.
Congratulations Treasury Secretary John Fraser and your sensible economic analyst.
In August 2013 - over 3 years ago - this humble scribe foreshadowed the same point. 'The Rudd-Swan Government faced the harsh reality of a global recession and, advised by a deeply Keynesian Treasury, responded with handouts, vainglorious spending, including the National Broadband scheme. The struggle against global warming added further spending and confusion. WorkChoices was junked, and regulationist zeal was high among the priorities of the Rudd-Swan government. When Gillard replaced Rudd in an ugly coup, the spending continued. All worthy causes - education, health, helping the disabled, ... , you name it, we've got it, but only affordable on the proposed scale if the China boom was going to continue at double-digit speed forever.'
One notes that Treasury did not invite your scribe to Canberra for a chat. No, the Malonglo lads needed no help. Nor did they apparently consult the files. Why was the 1980-81 recession predicted, but the even worse recession of 1990-92 failed to be predicted? Even the RBA was asleep at the switch.
Earlier this week we learned of the possibility of a production recession with the ugly 0.5% fall in GDP for the latest quarter. Australia has been in an income recession for at least two years and the voters are in an unforgiving mood. Recession was predicted in that 2013 article: 'Now the nation's leaders are walking unknowingly into a new economic crisis, ironically just as other developed nations are showing signs of recovery. Warnings have been sounded, and not just by this writer, and the only excuse for the steady tramp into recession is the insularity and self-congratulatory hubris of successive ministers and officials, especially those in Treasury.'
Those who gave the dud advice are mostly safely retired from public policy. The Treasury Secretary who set Australia's budget on the road to ruin is chairman of the board of one of Australia's largest banks. One can only hope he has learned the lessons of his national policy advising.
Your scribe's advice in 2013 is available here.
2017 is the year of rising interest rates.
Markets have already signalled this, as the latest bond rate data shows. The US Fed is now odds on to raise cash rates as a Christmas gift to pensioners everywhere, and a warning to over-geared businesses and households. Perhaps also a warning to rapidly overgearing nations, including (ahem!) the USA and its loyal ally Australia.
In Australia's case, loss of our prized AAA credit rating will add to the debt burden and make a production recession and a worsening jobs market virtually certain.
European politics, 2017. Julian McCrann - Observer at Large - comments.
Thanks for the Christmas Raff Report and its remarks on European politics in the year to come. The Leader of the Dutch Freedom Party Geert Wilders has coined a term for 2017 in Europe (borrowing a term used a few years ago in the Arab World) – and called 2017 the year of the “European Spring”.
I guess we’ll see how prescient he is. I think also he is the best chance of any of the insurgents in Europe to get up and to be Prime Minister, rather than Marine Le Pen becoming President – Le Pen’s best chance is if somehow the left unites around a candidate in opposition to Fillon. (30% Left 30% Fillon 30% Le Pen – could be very close if they can actually find a candidate – Valls? Hmmm).
A leftist candidate v Le Pen means Fillon’s supporters might drift to Le Pen. Le Pen v Fillon is an almost certain Fillon victory one would feel – probably the best result really because the man speaks sense about – for instance working with Russia to eradicate terrorism/ISIS – same as Donald Trump.
It would likely leave Mutti Merkel on her lonesome, but that looks inevitable anyway. As an aside – Germany is hosting the G20 meeting next July – there looks to be a whole bunch of new leaders set to be there – May, Trump, Fillon, Italy?, South Korea, Brazil, Argentina, Merkel will not be amongst just friends in perhaps her last big international outing.
The wildcard in all this – the European elections in Netherlands, France, perhaps Italy and particularly Germany is Turkey. Turkey still holds 2-3 million refugees – mainly Syrian, and there has to be a strong chance Erdogan has been waiting for next year to push them all into Europe and get rid of some of his “enemies”. Hollande is already gone, so his only target is Merkel probably. Expect a big refugee push to Europe to begin again in May/June/July – perhaps even in the run-up to the G20 meeting to embarrass Merkel!
All the best and a Merry Christmas to our readers!
2017 is certainly going to be an interesting year – in my estimation even more interesting than this year!