News & Views, No 4, Feb 12 – 18, ‘World in crisis’
‘On the brink of war in Europe and Beijing never more aggressive in the Indo-Pacific’, says Greg Sheridan in the Oz.
‘At this historic moment, the Quadrilateral Security Dialogue has come of age in Melbourne, where its foreign ministers met on Friday’.
The global picture is going to remain in crisis until (1) Russia decides risk of war on the Ukraine is too large, and (2) China finally decides to become a powerful but peaceful member of serious countries that will help solve the many problems of the world.
The AFR, Feb 12-18. ‘Lowe warns of ‘abrupt’ impact of US [interest] rate rises’.
‘For the first time in several decades inflation has become a major issue in the global economy, Dr Lowe .
‘It’s entirely possible that countries with higher inflation rates will need a bigger adjustment than currently anticipated’.
‘And if so, this could result in an abrupt change in financial conditions around the world, including here is Australia’.
Dear Dr Lowe, my memory of global inflation (the 1970s and 1980s) was that inflation was a global business, with Australia doing its best to keep up.
I shall expect at least lunch with your team, so I can help you all to pay more attention to history.
Chris Joye is a bloke who thinks with a good brain. The end of his latest offering (AFR P28) concludes:’ If this inflation shock is indeed present the only remedy will be a US recession, which is exactly what followed most Fed hiking cycles. But it will be bad news for risky assets. But it will equally bequeath attractive entry point in the future’.
The Oz, Feb 16, P 1. ‘Great brawl over China’.
‘As the Coalition and Labor clashed over the Labor leader’s ability to stand up to China, secure maritime borders and deport foreign-born criminals, senior national security figures warned Mr Morrison to avoid ‘political overreach’ and creating a ‘particular divide’.’
Dennis Shanahan says ‘Morrison’s ‘’khaki’ election gamble risks backfiring’.
I cannot help agreeing. With the help of Peter Dutton, the Prime minister has gone hard against Mr Albanese and other brave Labor men. Perhaps this will help, but unless it really hits the spot it will indeed backfire.
AFR, Feb 17, P 46. ‘Shift in global economic story’.
‘BHP boss Mike Henry believes that the inflation that central bankers last year thought might be just a fleeting result of the pandemic has now set in for the rest of the decade. …
‘Australia’s record with inflation is patchy: we trailed the world in taming the 1970s global inflation breakout, leading to deeper recessions in early 1980s and early 1990s. That’s partly because , as BHP’s Mr Henry points out , global commodity price inflation can boost a commodity-exporter economy such as ours. If anything, that means Australia needs to be more disciplined than most in repairing its macroeconomic foundations. That would provide a strong base for a genuine microeconomic policy agenda to sharpen the incentives to deliver sustainable economic growth and prosperity’.
This is good stuff, but I must emphasis that only serious productivity reform will ‘deliver sustainable economic growth and prosperity’. Please, Mr Morrison, deliver productivity reform.
On P 47, the AFR’s John Kehoe discussed the problem of ‘negative interest rates’. Ie, when inflation minus interest rates are negative. (ie 3.5 % minus 0.1 %)
Normality is far better if the equation is 3.5 % - 5 % = -1.5 %. What do they do in the RBA?
The Oz, Feb 18 Feb, P 12. ‘Employment resilient despite Omicrom variant’.
The Oz’s first editorial quotes the BCA’s Jennifer Westacott who said the government must ‘throw everything’ at addressing structural issues threatening to stall the recovery such as acute worker shortage and record low investment. Skilled migrants, the BCA argues, will boost demand and increase productivity. The need for a larger workforce is a healthy sign of a strong economy’.
The two years of pandemic has meant a loss of overseas immigrants, a contribution to our economy that is traditionally strong. There is a case for more than the usual inflow of overseas workers and also more work from Australia’s women, young people and those old people who are willing to return to the shop floor.
AFR, 18 Feb, P 38. ‘The cut that dare not speak its name’ says John Roskam’. As usual, Mr Roskam is keen on the Federal government cutting taxes, and also making taxes fairer and more logical. Keep at it John, such action might improve productivity, one of the ways to improve Australia’s growth and general productivity.
Going to a better place.
I cannot end this blog except by reporting that our family border collie, name of Jack Jonson, has gone to a better place. He was cheerful, kind and with a tendency to bark at people he did not know, assumed to be bad people. We are very sad and will look for a replacement after a decent period mourning Jack.