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  • Writer's picturePete Jonson

Monday Sanity Break, 23 April 2018 - Lest we forget

Apologies dear readers, for late communication. I have been finishing a paper on 'Animal Spirits' for an economist's conference in Vancouver in late June. If there is any demand, I shall post it on the site in due course.

This is the week for our remembrance of the horrible wars our friends (in recent cases), parents and grandparents were involved in. My father was wounded seriously in the bombing of Darwin but fortunately was not required to fight abroad. My number did not come out in the conscription lottery, but several close friends died in Vietnam. My elder son is a Lieutenant in the Australian Army, Reserve Division, and like Sir John Monash and many others in times past would respond if called upon. In both world wars and later, smaller conflicts our soldiers fought magnificently and earned respect of warfighters from nations involved in both sides. Australia's nurses and other support staff also performed brilliantly and mostly the people at home, some unionists and pacifists excepted, buckled down to support the war effort.

All wars are horrible, but most of us have nothing but respect for those people who go to war when their nation calls. Remembrance is mostly about the need to avoid the horrors of war but sadly there are people who we are forced to face in global hotspots, or in the case of home turf, individual terrorists or small groups, who wish to do us harm. Force must be met, firstly by strategies of defence, and if necessary counter force.

I do wish that bone-headed politicians would avoid gratuitiously insulting China, our greatest trading partner. In my view China should be a reliable friend provided we do not poke sticks at her system or people.

Henry's image of the week is a painting illustrating the RBA's admitted major mis-forecasting of wages growth. I commend Governor Dr Lowe for his admissions but wonder why there were at least 7 years of systematic forecasting errors. Simple mis-forecasting is one thing, and perhaps it goes without needing to be said that new procedures have been adopted, and new people have been applied to the task. 'Lest we forget' because major forecasting errors have important consequences and should not be repeated 6 times.


Fiona Prior reviews a movie about a party that she thinks would be better as a play. At the Nimrod in Surry Hills, for preference, when Henry was about 25 years old.

Sporting Life

Caaaarlton! fought hard against West Coast on Saturday afternoon and were far from disgraced by their 10 point defeat with four of their best players out through injury. Losing so narrowly, however, was due largely to the Eagles resting several key players in the final term. Still , it was a glimpse of light in what has been a poor start since the glorious 5 goal opening in the first 15 minutes of the opening game against reining Premiers, Richmond.

I watched less sport at the weekend because of that dratted paper, but have the impression there were no great upsets in AFLM.

The struggle between Israel Falou and the Rugby management, and some of Rugby's sponsors, is unfortunate. Freedom of speech must be supported if not always welcomed. Falou's freedom of speech about his God's alleged hatred of gay people was only matching the Qantas CEO's freedom of speech about gay people's right to marry. I'd prefer that neither man spoke out on these subjects while recognising their right to do so.

Image of the week - Lest we forget


It has been revealed that RBA forecasts for wages growth for the past 7 years have been (ahem!) consistently far higher than the outcome. In this image I have represented the line of the actual wages growth by the downward fall of the fishing line. Forecasts for each year are shown by the upward attachment for each year, marked by the date, from 2011 to 2017. In the original painting this is clearer, of course, but readers will I hope get the general idea.

Over-predicting wages means over-predicting income tax collections and over-predicting income taxes means over-optimism about the budget deficit - ceterus paribus, of course, the economist's great general caveat. This may not be the whole story. Perhaps other revenues were also over-predicted, and just possibly the 'independent' RBA was leaned on by colleagues in Treasury or even (gasp!) an over-optimistic Treasurer.

One can excuse two or three years of forecasting error. In my day when responsible for such forecasts, such consistent errors would have forced me to find a hole in the ground and shoot myself. Kissinger once said that three errors in a row required some change of approach. This painting is called 'Lest we forget'. This is in the hope that the mighty RBA will never again produce such a consistently biased set of forecasts.

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