Saturday Sanity Break, 22 July 2017 - Economic confusion
Several great men opined on the economy in the past few days:
* 'Economy on the rise: Morrison', The Oz, Thursday * 'PM warns on rates, home prices', The Oz Friday * 'RBA's 3.5pc 'neutral' rate not a hard target', AFR Friday * ALP's 'false' pitch on inequality'.
Mr Morrison has been talking to businessmen. The PM is a self-confessed optimist but seems more focused on households. The AFR has been focusing on the RBA board's lunch time discussion, albeit on a subject set six months ago. Bill Shorten has proved lies - refer Mediscare - can turn into votes, so why not try another one?
Latest jobs data would seem to support the Treasurer, but those data are consistently misleading. Indeed, with the ABS's muddle headed measure of employed persons, the labor market statistics are systematically biased to optimism. If you are a home buyer with a large mortgage working in a large bank, or other profit optimising large corporation, the 'optimistic' PM's warning should send a chill through your backbone. Global interest rates are rising and in Australia a cash rate is 200 basis points below 'neutral'.
200 basis point increases in cash rates probably turns into 3 or 400 increases in mortgage lending rates. How will the many households now hanging on to their over-geared homes by their fingertips cope when mortgage rates double? Or if one or both wage earners lose their jobs? Selling on a falling market will provide a long-term blow that may mean they will never own their 'own' home again.
'Deliberately pessimistic' I hear you cry. This is what Treasurer Keating said in 1986 when he received the bad news about the state of the economy. To his credit he did what he could to fix things when the data showed his advisor had been realistic, not pessimistic. His budgetary clean up after that was commendable, but then the RBA board let interest rates fall in a misplaced attempt to prevent the exchange rate from rising. The net result was the 'recession we had to have'.
It is almost 30 years since that fiasco. The Australian economy has been in an income recession for several years. Again the currency is too high (and rising!) and the budget deficit is piling government debt on a mountain range of private (household) debt. 'Winter is coming' gentle readers, as they say frequently in Game of Thrones just now.
This week the first cultural issue is the supposed 'blokey' culture of the AFL board and executive. Do not miss Chip Le Grand's discussion in the Oz.
As for the wider discussion, Libertarians say why should the AFL care what people do in their private life. Many people in our social circle ask why the names of the people involved in what has been deemed corporate misbehaviour have been splashed over the press. (One of these people asked if those 'outed' in this way could sue for damages.) Other sensible people say the relationships involved should have been disclosed to the CEO and who could then be alert to real or perceived conflicts of interest. Depending on his philosophical biases the CEO might have offered advice that the people involved might consider focussing on their work and leave personal matters for totally private times and places.
Clearly the AFL has gone some way to recognise that women deserve a fair go - think AFLW - but there are few or none working in the senior levels. Mr Le Grand starts his article with an amusing account of the gender of the real workers at the big AFL functions. And please see today's image of the week, that accompanies his article.
Fiona Prior will (I hope) cheer us up on more positive cultural matters.
Fiona Prior offers some darkly poetic inspiration when she visits The Dark Matters. More here.
Most exciting sporting matter has already been discussed. Adelaide beat Geelong to move to the top of the ladder. More exciting games to come this weekend with the draw ending late Sunday by Caaaarlton! playing Brisbane in Queensland.
The Aussie cricket sheilas sadly went down to the obviously powerful Indian gals in a world cup semi-final. Now, sadly, the Aussies gals are unemployed like the Aussie blokes and press reports suggest the parties are still well apart.
Roger Federer won Wimbledon to go with his Aussie open triumph. What a wonderful player, an inspiration to all of us older folk. Roger neglected to rule out playing at Wimbledon when he is forty, and we hope to be around to see that.
Image of the week - courtesy The Oz