News&Views, No 9, Mch 19 – 25

Greg Sheridan, ‘Nuclear nightmare is a real possibility’.

‘The prospect of nuclear war is now back within the realm of possibility’. (Antonio Guterras, UN Secretary-General.)

‘Don’t think it cannot happen.’ Greg Sheridan’.

‘There are growing signs of a deal whose terms both sides could live with.’ (Cameron Stewart.)

Paul Kelly. ‘Bob Hawke would never have been prime Minister today.’

But: ‘Despite his personal flaws, the 23rd PM made Australia a better nation’.

I was lucky to be a member of a group of economists (we called ourselves Sherpas) to agree on an economic solution. Despite our work, Hawkie, as we called him, came in to give us instruction. ‘Aaaargh! I want you to agree that wages need to be constrained and that’ll do it'.

All participants but one agreed, including the union chief. The then head of the Melbourne Institute pulled out with a declaration that he would return to Melbourne to create a far better model. This was never presented unless I missed it.

My biggest achievement was helping the PM float the dollar. All senior economists were of one mind except for Treasury Secretary John Stone. He said that we should introduce such a reform slowly, certainly not now. My principal argument (with the Treasurer) was that immediate floating was overdue and would greatly help the economy.

My other big involvement in the 1980s was strong advice on the need to beat inflation – Goods and services inflation as in those distant days, Asset inflation was largely ignored. Australia’s inflation fighting came in the 1980s in fits and starts, with gradual reductions.

My last experience as Head of Research was strong advice to raise interest rates to finally fix inflation. The board seemed to agree with this, but the Governor then said it would be better to cut interest rates. The board apparently agreed with the Governor but with two contrasting suggestions it was unclear what was agreed. With the senior advice accepted, the rate continued to fall, and Treasurer Keating told people I was the cause of that mistake. After leaving the RBA Mr Keating phoned me and I chided him for his mistake. The great man apologised and promised to put the story straight. I am still waiting and this is my first telling this tale.

Apologies, gentle readers, getting this point off my chest will help me to sleep. Of course, as we now know the mistaken cuts to interest rates required the major rise in interest rates that new Governor Bernie Fraser and Deputy governor Ian Macfarlane applied at considerable cost to labour markets. (An apology was made but the damage in the form of a major recession was done.)

AFR, No 9, P 38, ‘Strong economy but fiscally weak’.

‘Josh Frydenberg has mapped out the fiscal framework for the March 29 from a place scarcely believable after the carnage just two years ago. Jobs are booming, with the 4 per cent jobless rate at its equal lowest since 1974. Commodity prices are high. Both will deliver spades of tax revenue as welfare payments fall. It is an almost painless escape from the pandemic, without any austerity. Gross public debt will not now hit the baleful trillion mark. And the economic rebound means that debt will peak lower and sooner as a percentage of the growing economy than feared.’

‘China’s elites gag on Vlad the Toxic’ says Geoff Raby P39.

‘China’s top people see a successful country standing tall in the world. Now their leader is tarring it all by association with the wrecker and war criminal in Moscow’.

Perfectly good comment. When and how will decide the shape of the economic and political frameworks. The final paragraphs are important: ‘China’s economy was already weakening under the pressures of adjusting balance sheets in the property sector and anaemic consumer demand. Xi is heading toward his moment with destiny, with Covid-19 becoming rampant, major cities locked down, and the economy faltering. ‘Putin’s invasion has made Xi’s big year a most dangerous one.’

Tuesday March 22, The Oz, P1, Patrick Commins, ‘Labor’s Chalmers takes fiscal fight to Frydenberg’.

‘Opposition Treasury spokesman Jim Chalmers will deliver a budget this year if Labor is elected, one that will “look at the full extent of nearly a decade of rorts and waste and start dealing with it”.’ …

‘While not offering a sharp alternative towards the nation’s finances out of the pandemic to the Coalition, the would-be Treasurer will warn of the dangers of rising interest rates in the context of the nation’s record deck.’

Greg Sheridan. P 11. ‘We do not have missiles in strategic numbers, which we could get right now, and we still do not have one armed drone. Bejing, Moscow and Washington show by their actions that they take strategic capability seriously. Dismayingly, we still show we don’t.’

How can this be, gentle readers? Lots of words, far less activity. By the look of it, Labor will have an opportunity, but sadly they will be just as all talk and little action. AFR, Phillip Coorey, ‘Labor ready to outspend Coalition’.

‘Ruling out austerity and reckless spending, Mr Chalmers says as long as Labor’s spending is on productivity-inducing measures it will help grow the budget back help and not contribute to rising inflation.’

As we all know, or should, just how hard finding productivity-inducing measures. If Mr Chalmers is fair dinkum, he should read the list of such matters at the end of News&Views No 7. The Oz, Wednesday, March 23, P 13’ Paul Kelly, ‘Government can’t buy its way out of trouble’.

‘Josh Frydenberg will bring down a budget next week revealing a stellar, world leading Australian economic recovery yet compelled to offer cost-of-living support for a public now expecting government support for price rises largely outside government control.’ … ‘The Australian public doesn’t want to know’ that ‘the budget will need $40bn in saving annually’.

‘Both sides of politics must negotiate with an electorate nursing pandemic grievance’.

AFR, P 46, Editorial opinion, ‘Four weeks on it is Ukraine that’s remaking history.’ ‘Western democracy has been invigorated by Ukraine’s heroism. … ‘It is Ukraine’s resistance for the past four weeks in the name of a democratic choice of its own destiny that has remade history.’

This is a dramatic difference to Mr Putin’s expectation and one wonders if and when Russia withdraws. If Russia hangs in the West may finally provide physical help to the Ukraine, But it is very hard to decide what the Russians decide.

The Oz, Thursday, March 24, Stephen Anthony, ‘These reforms could help retire budget debt’.

‘The key to assessing the long-term sustainability of the federal budget is to compare the projected path of interest rates and gross domestic demand’.

The author says most experts simply “set and forget’ assuming nominal interest rates remain below GDP growth rates.

‘But in the real world this is a very risky approach. It also runs contrary to a global interest rate environment that seems to have reached a 1970s-like inflection point with surging inflation, especially in the United States’.

And in conclusion: ‘Vision and leadership have been lacking as politicians have been too happy to kick the structural down the road,’

‘We hope the federal Treasurer will confound expectations by announcing on Tuesday real reforms that assist in minimizing the structural pressures on the budget’. Well done, Steven Anthony. A very useful article that we hope Josh Frydenberg takes notice of. Perhaps it helps explains why Dr Lowe is so keen to keep cash interest almost zero.

AFR, P 47, Jim O’Neill, ‘Russia sanctions could shake up international monetary order’.

‘The US and its allies and partners have already implemented unprecedentedly severe economic and financial sanctions against Putin’s regime, and the decision to block Russia’s central bank from international financial markets (effectively freezing the country’s foreign exchange reserves) is arguably a masterstroke.’ …

‘It doesn’t take a deep thinker to appreciate that China must be alarmed and displeased by the audacity of both Russia’s war and the Western reaction to it. If China were to pursue military action against Taiwan, it too could expect to lose much of its access to the global financial system.’ ,,,

‘China seems unlikely to pursue any reforms that would require radical changes to its own economic and regulatory model. If China did bite the bullet and open its financial system, structural changes in the global monetary order would almost certainly follow. But even in that case, the changes would not happen in time to spare Russia the consequences of its President’s appalling behaviour,’

he Oz, March 25, P1, Scott Morrison., ‘Don’t let Putin attend G20’. Amanda Hodge, Ben Packham, ‘The Prime Minister on Thursday backed a formal US assessment of Russian war crimes in Ukraine, and declared he had “very strong concerns” about Mr Putin’s presence at the summit and discussions between the US and allies over whether Moscow should be expelled from the powerful economic block, following its invasion of Ukraine.’

A separate article beside this article is headed: ‘Sanctions ramped up, Putin accused of ‘Barbarism’. (Prime minister Johnson of the UK.)

I believe that free, democratic nations should be doing far more to free Ukraine from the barbaric Russians. Don’t know exactly what or how, but surely major thinkers can devise something.

‘Russians fume over failures at the front’, says Charlie Parker and two colleagues on P 8 of the Oz. Please read of Russian setbacks – not enough tents for Russian troops, half the troops have frostbite in their feet, inadequate clothes, Russian planes bomb their own troops, a Russian officer on day 4 told his troops the war would be over very soon and many

Russian troopers are very disgruntled.

AFR, March 25, Editorial, P 38, ‘Decade of China luck a surprise boon for Australia.’ Yes, but China’s luck has changed. Construction is in real trouble, growth has slowed, China’s attempted efforts to eliminate Covid-19 are failing, the Weigers are very unhappy, as are many people in Hong Kong and elsewhere, and Australia is being difficult. President Xi is seeking a lifetime appointment and worrying about when to repossess Taiwan.

Kulture

Fiona Prior check's out Ivan Sen's 'Loveland'. More here.

Sporting life.

The great Aussie tennis star, Ash Barty, is retiring, with three Grand Slam wins and a great number of top of the list of female players. Will she play golf, or cricket, or in the AFLW’s Carlton team. Even a return to tennis. We wish her well in whatever she decides to do for the rest of her life.

Usman Khawaja, born in Pakistan, was dropped from the Australian men’s cricket team several years ago. Finally he got another, in my view belated, opportunity and he has made hay in the three games in Pakistan. How was he so overlooked as he peeled of great scores in State games?

And in Aussie rules, my team, Carlton! has opened the season by beating their old enemy Richmond and last night the Doggies. It is the start of a long season, but it has been ten years since the blue boys beat two good teams at the start of a season, and twenty years since they did any good for a season. Go blues, I shall be watching with great expectation of a stellar season.