- P D Jonson
Sunday Sanity Break, 15 September 2019 – Productivity Australia's hope
Updated: May 1, 2020
Everywhere central banks are reducing interest rates. In some Eurozone nations bond rates are negative, which means (one assumes) that holders of bonds pay dividends to governments for the privilege of owning bonds. Cash interest rates are near zero, an unprecedented state of affairs due to failure to raise rates during the long economic recovery since the Global Crisis of 2007-08. Now central banks are striving to keep this anaemic recovery going with zero cash rates, growing government debt and a serious trade war between China and the USA.
If anaemic recovery fails, then there will be little central banks can do to boost stronger recovery. Buying bonds, swapping cash for bonds, is proposed, and actually being done by the European Central Bank (ECB). Throughout the anaemic recovery period ‘Quantitative easing’ (ie swapping cash for bonds) hardly improved economies, although I suspect the asset swappers believe they turned depression into anaemic recovery.
The global economy is in uncharted territory, and this should make investors and others nervous. Fiscal policy has included deficit finance that is continuing. How will the global economy cope with near zero cash interest rates, growing government debt and the trade war between China and the USA? It was good to see Treasurers/finance managers from four mid-level nations, including Australia’s own Josh Frydenberg, warning the world of the dangers of trade war.
In Australia, add a severe drought to easy money, balanced budget (for the moment), leading nation’s trade war and lack of policies to promote growth of productivity. Measured per capita, Australia is now very close to recession, with little room to stimulate the economy.
Here is a discussion of productivity past and potential. Promoting productivity is the single thing that could be done to pull the Australian economy out of recession. But there would be consequences for the government introducing those policies unless the government stops saying ‘all is well, people' and explain why and how it plans to improve the Australian economy in a sustainable way.
Fiona Prior visits Sydney Contemporary 2019. Over 450 national and international artists from around the world and over 95 galleries … as well as a young indigenous women in a corner singing a ditty about pretentious white people stealing her land. More here.
Great weekend finals in all major sports and sadly unlikely to beat the Poms 3:1 as well as retaining the Ashes.
Also two pulsating footy finals and the Storm losing a Rugby League final. Soon the Wallabies will head off to the Rugby World Cup without its best player.
For me, Israel Falou’s legal case will be more exciting than the Rugby World Cup, almost certainly being won by the All Blacks.