News&Views, No 21
Updated: Jun 20
The Aussie, June 11-12, P 17, Paul Kelly, ‘Australian economy under pressure’.
‘The Albanese government confronts a global and domestic inflation trauma that will demand a new political narrative and transformed economic policies from the recent election with the public facing higher costs, rising interest rates and real wage cuts.
‘The character of this new Labor government is going to be formed much faster than usual. Its test is managing an inflation surge that will cause much pain across the community and drive policy changes in relations to prices, wages, taxes and energy regulation’.
Cameron Stewart, ‘New Defence Minister faces diabolic dilemmas’, P17.
’Richard Marles’s subs and frigates will have a generational impact on national security.’
Peter Dutton’s suggests that two US subs may be taken off the American production line so that we have new (nuclear) subs by 2030 (so we don’t need to have a third category of sub, eg ‘son of Collins’).
Richard Marles seems to have not wanted advice from his Defence Chief and the situation may produce a costly fuck-up. Time will tell, but the cheapest option will be mighty costly and the new man should take sincere notice of Mr Dutton.
Chris Kenny, ‘Anthony Albanese and Penny Wong are setting the right tone. Richard Marles? Not so good.’ P 23.
‘Anthony Albanese and Penny Wong have made a reassuring and proactive start that not only provides continuity where it matters but is using the change of government to leverage fresh impetus. Their instincts and actions have been wise and competent’.
AFR, Editorial&Opinion, P 42, ‘Public deserves the low-down on economic choices.’
‘It was the week the two big pillars of economic discipline reimposed themselves, in both monetary and fiscal policy. In a whatever-it-takes moment on Tuesday, the Reserve Bank raised rates by 0.5 of a percentage point, the largest increment in 22 years. It’s set to do the same again next week so as not to lose control of inflation that one former RBA governor says could reach 8 Per cent as energy and other prices soar.’ …
‘In a second landmark, Treasurer secretary Steven Kennedy said that the inflation shock and ‘significantly’ higher borrowing costs had shattered the comfortable assumption that since the pandemic that Australia could just grow its way out of its trillion-dollar gross debt because of resumed growth and super-low borrowing costs’.
In conclusion” ‘The sooner the public understands, the better for everyone’.
Ross Garnaut, ‘Will to reform is best fix for a dreadful set of numbers’, P 49.
‘How did we get into this situation – the Dog Days is I anticipated in my 2013 book. We got 'here' by allowing vested interests to dominate the public in the policymaking process and by downgrading the role of analysis and knowledge.
‘How do we Reset, and begin the restoration of Australia – the question in my book early last year? First of all, in recognising, as we did in earlier successful periods of Australian economic policy, that broadly shared knowledge is the foundation of good policy in a democracy. My old boss Bob Hawke understood that better than anyone. The April 1983 Economic Summit and the political culture that grew from it allowed Australians to agree to changes before they were done.’
The Aussie, 14 June, P 11, Greg Sheridan, ‘Team Albo builds on Morrison’s work’.
‘China has decided to resume a ministerial dialogue with Australia, with Defence Minister Richard Marles meeting his Chinese counterpart, Wei Fenghe. This is a welcome development but does not signal a strategic change on Beijing’s part. It indicates at best a new stage in Chinese tactics. …
‘Beijing has not made a strategic change’. It is tactically readjusting, perhaps aware that its gross overstepping of basic international acceptable behaviour is provoking international reactions, which it very much doesn’t like.
‘Nothing is matching Beijing’s own military build-up, but it is the fact that that its most determined strategic competitors in the Indo-Pacific are all increasing their defence spending too. India and even Britain are also increasing security cooperation’.
Filling subs problematic’, An editorial contribution.
‘Defence minister Richard Marles is correct when he says the 2040s are ‘too far away’ to wait for the Collins-class fleet. He has made acquiring a replacement a priority. Being crucial to national security, the issue is too important for point-scoring from either side of politics’.
P 20, Robert Gottliebsen, ‘Hurricane all but certain to hit housing market’.
‘Few Australians have any idea of the force behind the hurricane that now looks certain to hit the residential home building in 2023. Unless builders and highly borrowed owners understand what is coming, they will be badly mauled’.
The same day saw a substantial fall of share prices for most corporate and individual share owners. Now the overall market is almost in a serious meltdown, but seems likely to become worse.
‘Sport’. The AFL competition saw another win for Carlton! Now the team is no 4 on the ladder but if it wins the game against Richmond on Thursday as seems likely, Carlton will be equal top. Wow! (The next game was less successful).
AFR, June 15, P1. Team of 4, ‘ASX dives on US recession fear.’
‘Australian shares suffered the worst day in two years yesterday as rising risks of a US recession triggered a global share sell-off and prompted investors to prepare for a hit to profits from local blue-chip companies’.
‘The rapid decline followed selling across global sharemarkets after US data on Friday showed inflation running at the highest level in four decades, increasing expectations that that sudden, sharp Federal Reserve interest rate increases will tip the US into recession.’
Karen Maley, P 27, ‘Investors wince at US, China pain.’
‘It’s hardly surprising that global markets are tumbling as despondent investors see little prospect that the United States and China – the world’s two largest economies – will work any time soon.’
‘Federal Reserve chairman Jerome Powell: ‘Investors fear that the US central bank is behind the curve and must lift [cash interest] rates more aggressively.’
The commentary suggests either one starting blast of 75 basis points, or two times 50 basis points, and more to come!
The Australian RBA chief, Philip Lowe is having a similar ‘Too little, too late’ moment. I have read his apology but cannot find it today. Readers, can any of you help?
Meanwhile, there is a nice article on P 15 of the Australian. The author is Demitri Burshtein, ‘The RBA should have realised the party was over’.
Two further lovely contributions.
‘Contemporary central bankers have spiked the punch to try to keep the party going indefinitely’.
And former RBA economist and AMP chief executive Andrew Mohl observed: ‘The RBA’s credibility is in tatters. So much for cash rates not rising until at least 2024. So much for it to hold medium-term per cent bond rates at 0.1per cent. So much for its forecast the inflation would remain below 3 per cent’.
The Aussie, June 15, Page 11, Paul Kelly, ‘Dialogue begins but Labor holds firm on national interest’.
This is a key development in Australia’s interaction with China. Mr Kelly tells us about Richard Marles speaking at length with China’s opposite Defence minister, Wei Fenghe.
Mr Kelly says: ‘The problem is that Beijing’s removal of sanctions would be an admonition of its failure – a concession that the brutal campaign of trade to break Australia’s will had been thwarted by the strength of the Morrison government reinforced by domestic bipartisanship.’ So far, so good.
'On AUKUS, Marles sent three crucial messages. First, Australia wants to protect the region, and there is ‘no more important platform than a long-range submarine capability’.
Second, having ‘nuclear propulsion is fundamental to that’.
‘Third, the government will confront the capability gap before the nuclear-powered submarines arrive.’
All this seems good to me, although the ‘explosive claim’ by Mr Dutton was not supported by Mr Marles. Mr Kelly said ‘The opposition needs to be careful.
This is of course sensible advice.
The Aussie, June 16, P 1 and 5, Perry Williams Cameron, (England), ‘Power crisis: market shut down'
‘Households in NSW were asked to cut their power use for a third conservative night, as regulators were forced to seize control of the entire electricity market for the first time in more than two decades to deal with a continuing supply crisis.
‘The Australian Energy Market Operator said it would control all prices and supply of generation in a bid to stop power shortages and spiralling household energy bills’.
Coal mines have shut and gas is also no longer producing decent amounts. Labor blames the Coalition, and the Coalition blames the newly appointed Labor government.
Lack of viable gas and coal makes sensible overall energy impossible. Surely both major political parties can work together. It is pathetic to blame each other. If the blame game continues, it will thwart attempts to create sensible outcomes.
‘Minimum pay rise overdue amid inflation, rising rates’, June 16, P 46
On the big issues, such as continuing AUKUS nuclear-submarines project, while it has been agreed by Labor, there have already been differences of detail between Coalition and Labor leaders. Worst case, the US government may decide it is too hard to allow Australia to buy or lease two new subs. Unless different political groups reach accords all our major challenges will not be met.
Peta Credlin, ‘Nuclear subs challenge will define Albanese’ tells much on P 12 of today’s Aussie Daily.
Here is her ending paragraph: ‘Amid all the challenges jostling the new government, the subs decision will be the biggest clue to its character. Bob Hawke turned out to be our best ever Labor MP because, in taking on the Labor left over economic policy, his government was actually better at delivering economic reform than its Liberal-National predecessor.
‘Does Anthony Albanese have it in him to deliver nuclear capability at sea even if that risks an internal war with the left about civil nuclear power on land? He said he wanted to govern like Hawke. Here’s his test to grow into the leader our country needs.’
Peter Jennings, ‘Labor must cancel post lease as part of China strategy’.
‘Albanese’s force posture review is an opportunity for policy creativity, focussed on strengthening deterrence, increasing allied assess and boosting our northern military presence. It goes without saying that China will not welcome an Australian decision to resume the Port of Darwin. Then again, China will not welcome any Australian move to strengthen our security.’
AFR, June 15, P 42, Editorial&Opinion, ‘Labor now has to face a changed economic reality’.
‘Anthony Albanese and new Treasurer Jim Chalmer need to use the snowballing cluster of shocks to recast Australia’s economic agenda in ways that its Coalition predecessor should have seized during the COVID-pandemic – as a burning as a program for change. ‘
‘Since Labor’s election win on May 21, it has become clear that the global inflation shock has materially worsened because the pandemic’s disruption of global supply chains, Russian’s invasion of the Ukraine and the latest COVID-19 lockdowns in China.
‘Last week, this forced the Reserve Bank to switch suddenly from a business-as-usual normalisation of interest rates to a much more urgent and outsized cash rate increase as it has raced to get inflation under control – partly by ensuring that wages growth does not accelerate in line with prices. Further official interest rate rises are likely to correct Australia’s over-inflated housing prices’.
image: with thanks to David Rowe
Fiona Prior visits the perfect storm. More here.
And the German Film Festival gives us a peak at the Stasi through a 'Hogan's Heroes' filter. Please see 'A Stasi Comedy'.