Saturday Sanity Break, 8 December 2018 - Miracle economy facing reality
Government debt is still rising, though the Morrison government's promise of a surplus budget - at last - provides some comfort. State budgets will be in deficit until infrastructure development catches up with massive population growth. Banks are tightening credit which brings downward pressure on house prices and reduces Australian corporate borrowing from overseas. Household debt remains the biggest likely source of economic catastrophe, especially if global growth continues and international interest rates continue to rise.
The dangers facing Australian households is illuminated as month by month housing prices fall. People who have borrowed on an interest only loan to buy at the price peak if forced to sell will face great pain. Household saving is now around zero, and household debt continues to rise. The RBA remains optimistic about the Australian economy and has even said if needed there will be cuts to official cash interest rates. Gor Blainey, comrades, can central bankers stave off the inevitable reckoning no matter what the international or domestic circumstances?
Apart from these basic macroeconomic concerns, Australian politicians, especially Liberals, face great political challenges. Key problems include: * The government has no majority it can rely on in the House of Reps. * The opposition seems determined to oppose key matters including matters greatly risking further terror attacks, a renewal of illegal immigrants, drug crimes, increasing pedophile activity and other nasty things that policy might limit. * Polls suggest a majority of voters are disengaged from 'Liberal' strengths like reasonably good economic policies, especially limiting growth of debt, and seem happy with Labor's 'soak the rich/merely-well-to-do' policies.
There is loss of confidence in the Liberal Party partly because of its leadership games. Why did the Liberal Party allow Turnbull to overthrow Prime minister Abbott having seen, and benefitted from, Labor's, leadership games, and having fired Turnbull from a previous leadership position? Such stupidity makes one think the Libs deserve rough handling by voters. Scott Morrison in my view is a far better leader than Turnbull, so I guess that is an offsetting point.
Anyway both the polls and general opinion have it that the coalition has little chance of winning the next election. Labor's biggest risk is overreach due to over-confidence. Shorten's opposition to the detail of giving relevant access to encryption busting technologies and demand to bring all asylum seekers from Nauru and Manus Island may be the start of this process. The attempts to fiddle with proposed religious freedom is another. His hesitation about timing of 'negative gearing' and indeed his promise to grandfather this policy shows signs of uncertainty.
Time is probably too short to allow the next recession to make voters have a long think about Labor's poor management of the economy - Whitlam's economy wrecking, Keating's severe 'recession we had to have', the muddle and confusion of the Rudd-Gillard-Rudd economic era with its unnecessary over-stimulation and debt building. This was thanks largely to Secretary Treasury Dr Ken Henry, whose rude, careless and disrespectful appearance at the Royal Commission showed a Labor econcrat at his worst. Then Mr Shorten's 'recession we will be unable to avoid.'
There is one unambiguously good piece of news, the first report of Australia's envoy on indigenous matter, former Prime minister Tony Abbott. An edited version of his report is published in the Weekend Australian and I have been so bold to post it on this site today.
The arresting opening paragraph should encourage every decent Australian to read the full report.
'To live in Australia is to have won the lottery of life — unless you happen to be one of those whose ancestors have been here for tens of thousands of years. That’s the Australian paradox. Vast numbers of people from around the world would risk death to be here, yet the First Australians often live in the conditions that people come to Australia to escape. We are the very best of countries, except for the people who were here first.'
Fiona Prior visits Sydney’s Carriageworks for New Breed. More here.
The lads of the men's cricket team are fighting hard in the first test. Bowlers did brilliantly to get most Indian batters out cheaply, including Captain Kohli for 3, only rescued by Pujara's dogged century. Our batters did not crack when Messrs Finch and S. Marsh played stupid early shots and Travis Head and the tail enders worked well to end only 15 runs behind India's lean 250 runs.