Talking down the economy

Ruth Williams writes:

Economists believe Australia is in a good economic position, yet we’re still running scared.

HOW did we get here? Was it only five days ago that the prospects of an interest rate rise were strong, and inflation loomed as the big bogyman of the Australian economy?

Yesterday, as Australian shares plunged as much as 4.6 per cent, Treasurer Wayne Swan urged Australians to ”never forget” the nation’s credentials are among the ”strongest in the developed world”. He hearkened back to the global financial crisis, which Australia managed to survive without sliding into a recession. ”Australia has a proven track record of dealing with global economic uncertainty,” he said. ”There is just a world of difference between the situation in Australia and the situation in Europe and the United States.”

Yet, Australia’s retail sector is reeling from the high dollar and battered consumer confidence. On Wednesday came news that in the 12 months to June 30 retail spending grew just 2.6 per cent, the weakest rate of growth in 50 years. On Thursday, another clothing brand called in administrators.

Meanwhile, opposition treasury spokesman Joe Hockey has enraged the government when he referred to debt-stricken Greece after being challenged on a claim that Australia’s debt level was ”significant”. Although he clarified that Australia could pay its debt, Mr Hockey said the country’s reliance on foreign funds was a key vulnerability.

”Australia is a massive importer of money, and just as the financial crisis hit our banks last time, there is the capacity for similar events to hit us again,” Mr Hockey said.

Mr Swan accused Mr Hockey of recklessly trying to talk down the economy. “To compare Australia’s finances to those of Greece not only defies logic, but is grossly irresponsible for someone who lays claim to high office,” Mr Swan said.

Australian government debt is 7.2 per cent of GDP – one-tenth the comparable level of other OECD nations.

107 comments on “Talking down the economy

  1. El gordo, I just saw similar. During the last GFC the government was able to find immediate and practical stimulation measures..and was kicked in the guts for their effort. I should imagine that this will make the government very wary about doing similar this time around.

  2. The conservatives in America held a gun to their countries prosperity to get their way. The conservatives here are acting no differently. Luckily for us though, the Greens and Independents took their guns away. All they have left is stones to throw. And they are lobbing them indiscriminately, without any regard for the damage it does to the house they share with the rest of us.

    And our media, instead of alerting us to the barrage, are running around collecting the damn rocks for them.

  3. How disappointing that Gillard and Swan can’t trust the Australian people and call the conservatives’ bluff. My be they are right. Maybe Alan Jones controls the minds of the masses.

  4. I posted this in PB
    ‘If the the Coalition of the lies just STF*U the country should sail through this possible “GFC2″, however it does not follow their agenda of forward to the Lodge occupancy and not give a rats for who you trample to death in the rush. Ross Gittens is on the nose I just wish he and the rest of his mob fired their arrows into the right “budgie smugglers” direction.”
    I shoud have added Sloppy to the list of targets and any other of the so called “Gov in waiting” front bench and their shock jock followers. Did I leave anyone out???

  5. Jones punches above his weight. Gillard and Swan get some media exposure but negligible compared with Bony Tony.

  6. Not that I’ve ever listened to Alan Jones, but I can’t help but feel that his listeners are…umm..somewhat gullible.

  7. Thing is Min the opposition have painted themselves in a corner of a floor covered in super glue, and this was started by Howard in his campaign of the ’96 election and continued throughout his reign.

    The Coalition have put all their eggs into the debt = bad basked and more than that have run a continuous campaign of that basket being deadly toxic. They have nowhere to go on debt and no room to move within it, their position is that absolute.

    If in government it means they can only run deficits early in their terms and do so by blaming the previous Labor government of forcing them to, just as O’Farrell has in NSW whilst also cooking the figures. Then moving onto severely slashing services and spending, mostly to those areas that effect lower income demographics whilst also slashing wages and working conditions to aid big business, which has been a hallmark of Conservative governments in this country.

    The only other thing Conservative government’s rely on is luck. Luck that they will rule through good economic times, and history has shown that indeed Conservative governments do rule through better times more often than not whilst Labor governments are elected when it appears times will be in decline and hardship looms.

  8. Alan Jones only panders to a very limited demographic, mostly in one senior age group. Crikey or someone has his viewer demographics somewhere.

    I have never understood why the older demographics mostly favour the Conservatives, and many stridently so, when the empirical evidence shows they have done better under progressive governments in this country. The comparison between 11½ years of Howard and just one term of Rudd is a good example.

  9. From the last paragraph of Peter Hartcher’s opinion piece. If only the article began with:
    “And the Abbott opposition needs to stop scaring the pants off the public.

    The scaremongering over the carbon tax has become so reckless that even the Reserve Bank governor alluded to it obliquely last week, referring to the “bitter” political debate as a factor damaging confidence in the economy. Politics is sometimes just silly. But days like yesterday remind us that it is also deeply serious.”

    Read more: http://www.smh.com.au/opinion/politics/hit-by-the-debt-boomerang-20110805-1ifh5.html#ixzz1UCfTqX8q

  10. Mobius, I would agree with that – certainly historically in difficult times the people have turned to Labor to help protect working conditions. Which is why Abbott could run into deep poo if there is a GFC Mark II.

  11. Min I did read that S&P did not like the fact that raising taxes had been cut from the deal. While at the same time in the UK the Tories want to cut the tax rate for the rich.

  12. Sue, this is the latest that I can find.

    http://www.reuters.com/article/2011/08/06/us-usa-debt-downgrade-idUSTRE7746VF20110806

    (Reuters) – The United States lost its top-notch AAA credit rating from Standard & Poor’s on Friday, in a dramatic reversal of fortune for the world’s largest economy.

    S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.

    U.S. Treasuries, once undisputedly seen as the safest investment in the world, are now rated lower than bonds issued by countries such as the UK, Germany, France or Canada.

  13. Sue
    its the old Reagan trickle down effect if the UK follow the USA its unemployment will rocket up. Just look back at the Reagan stats, some people never learn from history.

  14. ‘Alan Jones only panders to a very limited demographic’

    That’s true and they regularly listen to the radio as they do the housework at that time of day.

  15. It seems that the USA is going to have a HUGE task ahead of it..how to convince the rest of the world how they are going to be able to repay their mammoth debt.

    The fall of a modern day empire?

  16. Sue..anyone. I thought that I heard Sky News say that this is the first time that American has EVER lost it’s AAA rating.

  17. The fall of the empire was predicted by those with wise heads the moment Bush started borrowing a billion dollars a day from China and Japan to fund his war in Iraq. Now that the AAA rating has been stripped away I’d be feeling somewhat jittery if I were a crediter. There are going to be some confronting issues if China in particular (as the biggest crediter) feels the panic and wants its money back all of a sudden.

    What might be helping the US is the plight of the Euro at the moment. A sustained weak $US could encourage Saudi Arabia to drop the dollar as the preferred currency for oil payments and replace it with the Euro. That no longer appears an option with the Euro having its own crisis. The day that the Saudis drop the US$ will be the day the US disappears off the map.

    Of course, Obama is being blamed for all this. The first big mistake was Bush stuffing up the country, the second big mistake is blaming someone else for it.

  18. It will be interesting to see how the american politicians react. the republican was proud of the fact he had got his way, the democrat that the negotiations went well.
    When the japanese bombed pearl harbour the quote is that “a sleeping giant has awoken”, well now by the downgrade maybe the yanks will wake up to the fact they are no longer the world “giant”.

  19. Roswell, Germany and France will prop up the EU..the USA is an empire in decline. Empires have always been sustained via expansionism and basically there is nowhere left for America to go.

  20. ….and basically there is nowhere left for America to go.”

    Yet they are going to build a substantial military base here and another smaller one North whilst they expand into S.E. Asia. One of Obama’s first undertakings and mutterings was about America’s neglect in our region and that he would seek to increase the US’s influence and presence in this region.

  21. Mobius Ecko, I would have thought that this is more to do with surveillience and security issues than expansionism. The growing SE Asian powers are not ripe for the picking as they were during colonial times.

  22. On Twitter

    HunterDK Hunter

    Let’s hear it for Bush tax cuts, one of few specific policies specifically named by S&P as reason for downgrade.
    9 minutes ago

  23. It amazes me that every time Mr. Abbott is mention by the media, it is always with the comment, that Mr. Abbott is wonderful the way he gets his message across attacking, destroying the government.

    Don’t these same fools realise that you cannot trash a government and all it does, without trashing the Australia and it’s economy.

    It is impossible to do one without the other. Mr. Abbott’s aim is bring about loss of confidence in the government. This can only be done by leading people to have no trust in the future and the economy.

    What is worse, they have no intention of acknowledging or stopping what they are doing. They are following the Tea party example of sticking to their guns, no matter the harm caused. There must be some wiser heads in the Coalition that are saying, enough is enough.

    This is the first time in my memory that Oppositions have not been pulled up by the media when attempting similar behaviour.

    Many besides us are saying that Mr. Abbott’s talking down of the economy is causing harm. How can it be any other way.

  24. Sue, the similarities are quite striking.
    Keep wages low, [WorkChoices], keep Big Business happy with low taxes.

    http://www.miamiherald.com/2011/08/05/2347498/sp-downgrades-us-debt-for-first.html

    House Speaker John Boehner, R-Ohio, blamed the Democrats for the problems leading to the downgrade in a statement that did not address the debt-ceiling debate that figured so prominently in S&P criticism of U.S. creditworthiness.

    “This decision by S&P is the latest consequence of the out-of-control spending that has taken place in Washington for decades,” he said in a statement. “Republicans have listened to the voices of the American people and worked to bring the spending binge to a halt. We are no longer debating how much to spend, but rather how much to cut. Unfortunately, decades of reckless spending cannot be reversed immediately, especially when the Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground.”

    Such as dropping the social services to the [un] deserving poor !

  25. Another suggestion from Twitter, for Pres., Obama

    @Billablog
    Bill
    Y’know, I hope Obama doesn’t run next year. If Republicans want to wreck everything, just hand it over to them and let them own the wreckage

  26. We have to move away from the stupid belief that budgets can be balanced by cutting expenses alone.

    This simply does not work in government or business. A business that does not invest in itself will soon go broke.

    Now the family budget is not the same as government and business, but if one only cuts expenses, they will not get far. It will make things worse. The family will become ill and weak. The house will eventually let the rain in or worse.

    There is a limit to cutting expenses that does not lead to disaster.

    I can cut the luxuries, that is OK. I cannot cut the essentials such as food and maintenance of my family and home without incurring more expense in the long run.

    I can improve my family budget by cutting luxuries, yes but this is not enough to get me out of trouble.

    What I also have to do is raise my income.

    This can be done in many way. Getting a second job, wife going out to work, kids working after school, changing jobs or studying to improve my income.

    What I cannot do is stand still, as I will go backwards.

    Business is in the same situation. They have to find a way to invest in their companies, to allow expansion. This the can do by borrowing or inviting others into the fold. They must always be open to new products and ways of running the business or they also will go broke.

    When we come to governments, yes there is always so call fat that can be cut, but this is only the low fruit on the tree. Governments also have commitments they cannot and should not touch.

    Governments are also responsible for providing infrastructure that enables business to thrive.

    Government also at times of need be willing to raise there incomes. They can do this by borrowing and by raising taxes. As long as this is done in a balance way and the country has the ability to pay back the debt, it is OK. It is also essential at times.

    It not that the USA cannot meet it’s debts. It is that those who can afford to pay will not meet their liabilities. They expect the poorest in their country to pay for them, by going without the essentials they need to live. They expect these people to work for nothing, so they can thrive. Something is wrong with this picture. What the selfish fools do not realise, this is a recipe for disaster for the country.

    I say to Australians, do not be taken in by Mr. Abbott’s campaign about taxes. We are not a highly taxed country, and to cut taxes more will not improve out economy or our lives. People who believe this are living in a fools paradise.

  27. Cu, the ‘Bush tax cuts’ expires next year, but will the GOP pass a Bill to change them in an upward direction, probably not.

    Just as the Abbott Opposition opposed the MRRT and the carbon tax/ETS.

  28. To put it more simply, I am sick of people complaining about what governments cost them.

    Why don’t we hear about how governments provide for them.

  29. Catching up

    Why don’t we hear about how governments provide for them.

    Could be it’s not in ltd news’ DNA to speak of such things !!

  30. Catching Up these are wise words. A business can cut expenses only so far before it impacts on efficiency, ditch the part-timer and then your stock doesn’t reach the shelves in a timely manner and neither do your customers get served in a timely manner. Then you make less profit and then you try to prune your expenses even further and before you know it you no longer have a viable business.

  31. “The key fiscal problem facing the US is a shortfall in revenue, not out-of-control spending. Tax receipts are lower in relation to income than they have been in 60 years. Getting jobs growing again is the number one priority for eliminating the cyclical decline in federal revenue. A tax system that discourages tax avoidance by the wealthy and in which everyone – individuals and corporations – pays their fair share will speed the reduction of the national debt as a share of GDP.”

    http://www.truth-out.org/debt-ceiling-deal-wrong-diagnosis-leads-wrong-treatment-what-ails-economy/1312562828

  32. CU, that certainly hit home to me – your very excellent description about ‘luxuries’. Surely the fact that the wealthiest in the US pay no income tax whatsoever is an indication of where the ‘luxuries’ lie.

  33. CU and Pip, re To put it more simply, I am sick of people complaining about what governments cost them.

    Why don’t we hear about how governments provide for them.

    And the BER immediately came to mind – that whenever things are provided, out come the whingers in full force. I remember before the ’07 election how the Howard years were called the Greedy Years where everyone was an ‘aspirational’ looking to become even more wealthy which ended up to be short term dellusion. Everyone including the wealthiest in society was looking for a handout – how different from earlier society and the words of John F. Kennedy come to mind: ask not what your country can do for you; ask what you can do for your country.

  34. “Alternating waves of optimism and pessimism – ”animal spirits” – do much more to explain the swings in the business cycle than it suits most economists to admit. And because we’re such herd animals, we tend to contract these moods from one another – even from our cousins on the other side of the globe.

    Will our increasingly negative perceptions overwhelm our strong reality? If they do, they’ll have a fight on their hands: thanks to the mining construction boom, business investment spending is expected to grow by 15 per cent this year and another 15 per cent next year. For your own sake, pray reality wins.”

    http://www.smh.com.au/business/so-are-we-talking-ourselves-into-a-recession-20110805-1ifif.html#ixzz1UCb4Bdbm

    Read more: http://www.smh.com.au/business/so-are-we-talking-ourselves-into-a-recession-20110805-1ifif.html#ixzz1UDm3URsC

  35. CU, thank heavens for sensible Ross Gittins..from your link:

    Despite their weak economies, the Europeans and Americans have been worried about the rising cost of rural and mineral raw materials. But what’s a problem for them is income for us.

  36. Min @10.13am, Anal tells these twats what they want to hear; that they are victims of an incompetent government and he backs this crap up with lies, gossip and innuendo. Ditto Dolt and the other RW sh!t dribblers!

    Boo hoo, your pension has been increased, your allowances also, but teh evil gubment is victimising you by putting more money in your pocket! I have had this shite put to me by a pensioner, admittedly a Smuggles Lover, when she whined that the government had increased the utilities allowance, but was paying it fortnightly. FFS, this is the mentality we’re dealing with in the RWDB universe.

    Unfortunately, I was in a situation where I couldn’t tell her to canvas the government to remove the allowance entirely.

    I think that now would also be a good time for the government to sink the slipper into the opposition doom merchants, not by accusing them of talking the economy down, but in a different way, by accusing them of wanting the economy to fail, throwing hundreds of thousands out of work.

    I also think it would pay them to compare current unemployment figures to those under the Rodent. They could play up the fact that they have kept unemployment figures to this level in difficult economic circumstances, whereas the LIEberals, in a booming economy, couldn’t manage better figures.

    Anal & the other RW shit dribblers won’t be able to spin those figures; they’re common knowledge that even their intellectually challenged mouth breathers know; it was rammed down everyone’s throat enough!

    While at the same time in the UK the Tories want to cut the tax rate for the rich.

    Sue, why does this not surprise me?

    Bilko @10.45am, they don’t want to learn. The trickle down effect has been shown as a total failure time and again, but still Conservative governments everywhere cling to this outmoded and ludicrous idea.

    Of course, Obama is being blamed for all this. The first big mistake was Bush stuffing up the country, the second big mistake is blaming someone else for it.

    Roswell, once again typical Conservative blame shifting and scapegoating. As noted in comments above, the Conservatives stuff the place up and then Labour has to fix up their mess.

    It not that the USA cannot meet it’s debts. It is that those who can afford to pay will not meet their liabilities. They expect the poorest in their country to pay for them, by going without the essentials they need to live. They expect these people to work for nothing, so they can thrive. Something is wrong with this picture. What the selfish fools do not realise, this is a recipe for disaster for the country.

    CU, truer words have never been spoken. I thought that the poor carrying the rich was a thing of the past; obviously I was deluded. Perhaps the Tea Partiers and Conservatives everywhere should be reminded about the Soviet Union.

    Re the Ross Gittins article, I’m going to email it to my email address list and will take particular delight in sending it to all the Smuggles lovers!

  37. There is a board a fallacy that the rich pay for the benefits of the workers and poor. The lecturer, using fact and figures proved this fallacy untrue.

    The money for the benefits for the workers and lower income earners come from them, not the rich.

    It is too long ago for me too give any links to this belief, but I am sure that many out there studying today, can enlighten me as to what the position is today.

    I do believe us on lower incomes more than pay our own way. Income taxes cuts of the last few years benefit the rich, as do company tax reductions.

    Therefore today, I believe the rich are paying less, we are paying more.

  38. Jane, in my opinion it’s solely because it makes headlines – good news does not make headlines. It confirms to me that Australians are indeed a nation of whingers. Yes I’ve had this from pensioners..they loved their Howard-handouts, but now they don’t get these..because..the government made certain that they were not reliant on handouts but on a permanent increase in the pension. No wonder the pokies are so successful in Australia, everyone always wants something for nothing.

  39. Catching Up you do not have to think further than negative gearing where the wealthy with investment properties get tax breaks at the expense of the poorest in society. Cut out those tax breaks and you increase the wealth of society as a whole.

  40. CU @4.12pm, not only do the poor pay for their own benefits, they also subsidise the undeserved benefits for the wealthy. Unfortunately, it’s even hard to convince some of the poor of this; they’ve been brainwashed with this “aspirational” crap by the Rodent regime. I believe income tax cuts should be means tested, or applied as a flat rate-$20/ week for all for example.

    However, I really like the increase in the tax threshold to $18,000; this will be of enormous benefit to people earning very little and for unemployed trying to get back into the workforce.

    Min @4.12pm, yes the Rodent Regime created a culture of whinging and expecting something for nothing, like the baby bonus.

    AntonyG, negative gearing; as you say, another undeserved windfall for the wealthy at the expense of the poor.

  41. Jane, why else all this tugging of forelocks. Luckily Tony is out of the country and so we don’t have to put up with his pontifications.

    And minus Tony we have some factual information making it into the headlines:

    Australia had its best terms of trade figures in 140 years, she said, attributing the economy’s healthy state to China’s demand for resources.

    http://www.smh.com.au/business/australian-economy-safe-and-strong–labor-20110806-1igbb.html#ixzz1UEDXQXeL

  42. Sue, a very very interesting article. Prison labor has already started to undercut the business of corporations that don’t use it.

    “This has been ongoing for decades, with prison privatization contributing to the escalation of incarceration rates in the US,” Friedmann says. Just as mass incarceration has burdened American taxpayers in major prison states, so is the use of inmate labor contributing to lost jobs, unemployment and decreased wages among workers—while corporate profits soar. The incarceration rates in the USA are a national disgrace.

  43. Breaking News: China is demanding the USA address it’s debt problems. As in ‘demanding’…. more to follow I’m certain.

  44. A positive story
    “ONE more time for the dummies: we are not part of the US economy. Every day, the US matters less and Asia matters more. The American-centric mindset that a recession in the US means a recession in Australia is hopelessly out of date. It hasn’t for the past two and shouldn’t for the next.”

    Read more: http://www.theage.com.au/business/forget-us-woes-china-keeps-our-economy-strong-20110806-1igpw.html#ixzz1UIjAeUUx

    A good to read considering Turnbull is blaming the government for the lack in consumer confidence.

  45. “A good to read considering Turnbull is blaming the government for the lack in consumer confidence.”

    He’s following his party’s line of blame the government for everything whilst he doesn’t believe any of it.

    Pascoe had their measure when he said, and quoted the figures, that Howard’s push for consumerism and spending beyond means was unsustainable and only a short time away from an economic disaster. The government encouraging savings, which is what Hawke/Keating also did, is the right policy.

  46. Very true Mobius – the ye olde days consisted of How much you could save but during the Howard years it became How much debt could you sustain.

  47. The looming disaster of Howard’s push to unbridled consumerism was recognised by Costello by the way, where he openly stated in direct contradiction to Howard that personal debt because of over spending was unsustainable and was leading to a major problem. If you remember Howard countered that the unbridled spending leading to the largest personal debt on the planet was a sign of affluence and how good his economy was.

  48. Min
    re How much debt could you sustain.
    No better conveyed than by that horrible advertising campaign, where a person held up car keys to gloat to the neighbours about their latest purchase.

    Yes debt was open to everyone, even advertising that poor records were no problem, and the most mindless catch phrase of all “Equity Mate”.
    Then to add to all this consumerism, tax handouts by the Howard government, with the other mindless catch phrase, “the voter knows best how to spend their taxes.”

  49. Sue, how very very true. That smug self-satisfaction about possessions…

    And yet now the car is old, the latest gizmos passé and they’re left with nothing but shallow lives and one heck of a lot of DEBT!

  50. Does Adrian ever bother to reflect on his posts?

    He’s turned into a hilarious caricature of himself.

    Now he’s down on consumerism, apparently this is a legacy of the Howard Government!

    But he neglects to reflect on his staunch support (as a typical barracker) for the billions and billions spent on $900 cash handouts, all funded by debt. All intended to fuel a burst of consumer spending.

    Adrian likes debt-fuelled consumerism when it is ALP policy, but not otherwise!

    Adrian sure has turned out to be a very funny barracker.

  51. I know this is a post on talking down the economy. I am watching Mr. Scott Morrison, the shadow immigration talking down the success of the Malaysian policy.

    What he has not been answered, is what happens to those he would put on Nauru, would stay there forever. If not, when will he bring them to Australia.

    By the way he is still talking down the economy.

    Asked about age care is answered by that they should be abandoning their their mad plan for a carbon tax.

    Maybe some of us are interested in what the Liberal party would do.

    “ridiculous carbon tax” was used in every answer he gave.

    He was NOT asked about the carbon tax.

  52. Here is TomM again asking if I reflect on my posts, which I do, often, whilst he should reflect on his. The hypocrisy he engages in screams hilarity at every turn.

    As is typical of TomM the greatest Howardista and Abbott lover around whilst accusing me of being an absolute barracker, of course overlooking my past criticisms of Labor and this government, but woe behold him to ever be fair and even handed in anything to do with his very narrow ideological outlook.

    This parody of a political commentating clown only provides belly aching laughs in his rush in coming running to defend Howard or Abbott whenever the truths of their considerable failings are revealed, and he does so by straw men, making mountains where none exist and decrying “quick look over there at Labor, please, please look over there.”

    Of course in his haste to defend his beloved Howard in a “quick look over here at Labor’s debt” he overlooks that I posted it was Pascoe, Costello and many others who were the ones to damn Howard for his encouraging of unsustainable personal debt and the train wreck that was heading for.

    Our laugh a post TomM also neatly overlooks the fact the buffoon Hockey also proposed massive debt during the GFC, only his was in giving massive tax cuts that mostly benefited the wealthy, and there’s a whole world of examples out there to show how spectacularly that policy failed, none more so than in the US, where even now they refuse to cut back on the tax cuts to the wealthy, instead preferring to cut back services and monies that will devastate the poor and lower income earners. Welcome to Abbott’s and TomM’s preferred world for Australia.

  53. ToM, as you very well know there were 2 very different situations. During the Rodent Regime, when we apparently never had it so good, was the time for both government and the population to save for a rainy day.

    Incomes were high, we were told time and again, the economy was going great guns, so there was absolutely no need for extravagant tax cuts, baby bonuses, private health care rebates and all the other middle class welfare that was splashed around.

    Instead of encouraging people to save some of this enormous good fortune, the Rodent government encouraged the country to go on a huge spending spree and rack up debt to the eyeballs and we did it with a vengeance.

    Want a house, borrow 110%; want a boat, holiday house overseas trip, stick it on the mortgage or increase your credit card limit. Living well beyond your means is the new black. Don’t worry, the good times will never end.

    Well, the good times ended with a crash, horns had to be pulled in and there was a very real and immediate danger of a recession and the loss of hundreds of thousands of jobs and all the misery and economic horror that goes with it.

    The government decided to do everything it could to prevent that happening. No thanks to the Rodent, Costello had squirreled some cash away for a rainy day; it wasn’t just raining, it was a deluge, but thanks to quick action, unemployment is still low @ 5%, and government debt is a measly 7.2% of GDP. Ask Europe or the US which position they’d rather be in.

    I rest my case.

  54. ME has it pretty right about the massive build up in private sector debt during the Howard years (inmho)

    The Howard surpluses would not have been possible without the the finance “industry’s” willingness to throw money at goggle eyed window shoppers.

    If the banks hadn’t lent so freely to fill in the gap left by the withholding of government spending (in the ideological pursuit of the surpluses) the economy would’ve gone backwards.

    In retrospect, perhaps it’s a pity that hadn’t happened because we-the-people might’ve twigged back then that surpluses are just an ideological fixation of the neo-liberal paradigm.

    Another quick point on topic: my progressive friends here who criticise (and rightly so) the Coalition for talking down the economy should realise that their comments about the US debt situation are equally unhelpful, and on even shakier foundations (none in fact).

    The US, as monopoly issuer of the US dollar, can pay dividends on US Treasuries until hell freezes over and redeem them with a computer entry at the holding bank’s reserve account.

    It’s the PRC who might not sleep well, having swapped container loads of valuable stuff for bits of paper with pictures of long dead US patriarchs.

  55. Jane, I’ll second that.

    I double dare anyone to tell me how much WORSE their lives are under Labor. I think to the contrary, that ordinary workers are no longer under the threat of WorkChoices. There has also been a discernable Change of Attitude – no longer do we have to have the latest gizmo aka status symbol. Nobody cares anymore which is probably why retail sales have gone down the gurgler.

  56. And jane too. Nicely put.

    I might quibble however about whether Costello did actually put something away for a rainy day. As I understand it, the “surplus” was actually “spent”: not on infrastructure, education, health, etc but on financial products in “wealth” funds managed by finance industry spivs.

    Contrary to most folks’ understanding there is no pile of money sitting in a locked vault somewhere in Canberra (for the rainy day)

  57. Mr. Bolt maybe correct, we are not buying the doom and gloom of climate change.

    Mr. Bolt is showing no concern for the gloom and doom he and the Opposition is spreading.

    Today on his show, he done the best he could to destroy the economy in this country.

    It is scary that many are buying the terror he is portraying.

  58. “Nobody cares anymore which is probably why retail sales have gone down the gurgler.”

    But they haven’t gone done the gurgler as has been pointed out by some economists and commentators, the honest ones anyway. Retail has shifted and has gone down for many of the old department store models and non-niche areas but in other areas it is booming. A good indication of this is to see who is actually complaining about going down the gurgler and who is not.

  59. Agreed Mangrove, the US will indeed pay it’s bills. However, it is IMO an empire in decline. The American Empire in spite of it’s principles of democracy has always been built on ever-expanding territory. And one could use the analogy of the Roman Empire where it expanded ’til breaking point (think Iraq). The Iraq ‘venture’ has cost America so many incalculable billions of dollars and for what…

    When the stock exchange opens tomorrow, it’s going to be blood on the street. Irrespective of the Republican influences of S&P the times they are a changin’…

    Tim for a song..

  60. Mobius, point taken. I admit that on the issue of retailers I have only been reading the headlines. :blush:

  61. The Bolt show got worse as it went on. The man should be tried for treason or espionage.

    He made one mistake. He had Ms. Belinda Neal, the much malign and under estimated ex Labor MP on the show.

    Ms. Neal might not be everyone’s favourite person, but thankfully she is not the fool that Mr. Bolt believed her to believe.

    Ms. Neal did not put the boot into Labor, much to Mr. Bolt’s discomfort.

    He actually cut her off, because she was supporting the PM. We cannot have that, can we.

  62. ” it is IMO an empire in decline. The American Empire in spite of it’s principles of democracy”

    Is that necessary a bad thing. I feel that we are coming to the end of what began in the 1980’s when the USSR collapsed and we seen the fall of the Berlin wall and the restructure of the Eastern countries.

    We felt we were looking at a new world order. I believe what we where seeing then was the beginning of the new world order. The process is still going on.

    The USA is not the lone world leader left. There are other bodies and countries that are gaining equal power with the USA.

    This can only be good for the world.

    No one country or power should reign. Power corrupts and absolute power corrupts completely or something along that line.

  63. ME, I agree. I still shop but hardly go near a shop. The parcel post is regular visitor to my home. My fruit and vegetable comes by home delivery.

    My meat and groceries will also when I find a suitable on line supplier.

    I am afraid that the major retailers are not reacting to change.

    They would rather blame the workers and the government.

    The truth is that change will not stop.

    They are not CAnute, they cannot hold he waters of change back.

  64. “When the stock exchange opens tomorrow, it’s going to be blood on the street”

    Min, we can hope that wiser heads, that realise’s the mess the world is in, pulls us back from the chasm.

    You are right I think, what happens tomorrow will set the climate for whats happens for the future.

  65. Min,

    I like your taste in music.

    Here’s something for you:

    http://bilbo.economicoutlook.net/blog/?p=15564#more-15564

    There’s a bit of economics before you get to the music.The music is the bait.

    In case you don’t know, Bill Mitchell is also professional musician as well as a prolific blogger.

    http://bilbo.economicoutlook.net/blog/?page_id=14993

    Re US “democracy”…it’s a hollow joke isn’t it. The word demos has a hypnotising quality that belies its Greek roots. The common man never cast a vote in ancient Greece, let alone any woman.

  66. Poor old Adrian, once considered so original in his input and opinion, now just another barracker, more noise just lost in the cheer club.

    Adrian still criticises consumer spending fuelled by debt under the Howard Government, and ignores that this was the central element of the ALP policy for the past couple of years.

    Funny.

  67. Run out of retorts has poor old tired sad faced clown TomM.

    So unoriginal in his efforts to defend his beloved Howard he’s still doing a look over here at Labor whilst overlooking the post and those who I stated were critical of Howard’s spend policies, one was his Treasurer.

    Tell me TomM how come in this government supposedly encouraging spending, which you state is their central element, household savings have increases considerably and spending, especially in the department and other retail sectors has declined, the exact opposite of what happened under Howard?

    Personal debt had declined and not increased as it did under Howard, so dramatically that it sky rockets on the back of his middle and upper class welfare handouts.

    The government’s policy has been to encourage saving over the last couple of years and that has been stated and has been happening. It shows how out of touch you are, or probably closer to the truth, how blinded you are in your love of the Liberals and dislike of Labor.

    And now we have another Howard policy failure for the history books, his NTER. But then again just about everyone but the Howard lovers knew that policy, penned overnight on a paper napkin to flag waning polls, was always doomed to be a very expensive failure. Just add it to the long list of Howard failures with many more to be revealed. A failure that for some reason the Labor government continued. But such is the negative climate from the doom clowns like TomM that any dismantling of the NTER would have been met by a barrage of derision and scathing attacks. This government has to realise that as those like TomM so aptly illustrate, it is on hiding to nothing no matter what it does, and the more successful it is in anything the greater the negative doom and gloom attacks against it will be. Negativity, projection and blame shifting are the DNA of the conservatives and that is immutable.

    The sooner this government just gets on with it come what may and totally ignores the opposition, their media mouthpieces and the other doom and gloom negativity clowns the better.

  68. Maybe it is time for some bipartisanship, with the world appearing to be on the edge on economic disaster.

    History shows that in times of instability, it does not matter who is to blame.

    What matters is finding answers.

    Australian governments have prove they can do this in the past, why not now.

  69. Is the anarchy we see on the streets of the UK the sort of thing Anal Jones and Tony Abbott are advocating when they call for the overthrow of our elected government?
    Bipartisanship only happens when both major parties act in a responsible way.
    Abbott the wrecker only wants power (at any cost).

  70. lunalava it would seem to be exactly what Abbott and his cheer squad are after. Abbott has never been able to accept that he lost the election and opines that it will take a people’s revolution to set things right. Stuff the economy and stuff democracy, power at any cost.

  71. There is a lot of hysteria coming out of the US with most of it blasting Barack Obama in relation to the defecit, the economy and the sharemarket.

    Here are the facts.

    For 72 years to 2010 the USA had 60 Defecits and 12 Surpluses. The Democrats had 29 Defecits and 7 Surpluses for a toal of 36 years. the Republicans had 31 Defecist and 5 surpluses for a total of 36 years.

    So during the last 72 years to 2010 both parties occupied the White House 50% of the time and the better finance managers were the Democrats. These are the facts. Naturally the hysterical Tea Party cannot see past their noses, or maybe they just cannot read.

  72. And also…

    Trillions wiped off globally

    Global stocks took another pounding overnight as worries over the downgrade of America’s credit rating sparked a massive rout in the US and Europe.

    A total of $US2.5 trillion was wiped off global markets yesterday, matching the total lost in last week’s four-day slide. For the first time since at least 1996, all 500 of the companies on Wall Street’s S&P500 share index fell.

    http://www.theage.com.au/business/markets/shares-in-free-fall-amid-global-panic-20110809-1ijzf.html

  73. Min

    I actually exoected the current crash would happen last November but I was 9 months out. This time IMO it is more serious than last time. America has no manufacturing to fall back on for jobs and neither do we. We have exported our jobs and ability to grow our employment market, to China, for sake of being able to buy things a bit cheaper and much larger profits for the corporations.

    London is burning and if people think it cannot happen here or in America they only need look no further than South America and the revolutions (sadly) that have happened because of the tilt so far towards the rich that the poor revolt. Leading to the lection of extremists of either side of politics.

    I do not condone violence of any sort, yet sometimes it is the only option for those who are ignored and treated with disdain over and over again. The same can be said for many strikes, workers try to negotiate for 12 months on a pay deal and the top brass refuse to negotiate during the whole period. The workers decide to strike and are called thugs and radicals after 12 frustrating months of ignorance and indifference form their employer. The employer is paraded in the media as a victim of surprise strike action taken by good for nothing employees.

  74. ME, I think we should rename ToM, The Strawman. He has nothing original to say, just trots out the same old tired strawman bullshit. D’you think he’s got them saved and just copies and pastes?

    AntonyG @9.24am, I don’t think Smuggles has the intellect to appreciate that in the current global economic situation, there needs to be a bipartisan approach to the economy and how it’s run.

    But all he can do is drum his heels on the floor and bawl about how he wuz robbed! He’s too arrogant and stupid to recognise that the role of PM was as available to him as it was to Julia Gillard; all he had to do was negotiate honestly and with integrity………oh wait.

    shaneinqld, I’m beginning to think it would have been better for Obama if he’d lost the election and the Republicans were left holding the bag of their financial mismanagement.

    Min, this could be a second tranche of the GFC. Thank God we’ve got the Gillard government at the helm. I dread to think what a calamity a Smuggles government would be for the country.

  75. hi jane

    I believe that Obama and Rudd should have lost at the time to be ready for the following elections in 2012 and 2010 respectively. But we can be wise in hindsight.

    Problem with human beings is that they blame who is in, not who has caused it.

    The claim by the richest that higher taxes will force them to abandon businesses is just garbage because if they leave an industry someone will step in to fill the need.

  76. Shane, I heard an opinion which stated – last time it was a banking crisis but this time it’s a confidence crisis. And so I would agree that it’s far more serious this time around as for starters America has not even started to recover from the last GFC.

    Yes I’ve seen that over many years – that the media calls it as you say thugs and radicals when often it’s a low level pay dispute plus conditions such as reasonable overtime and reasonable rosters.

  77. Min

    I think it is a crisis of confidence as well. I don’t think it has anything to do with the Carbon Tax, I think that is just the smoke screen for the mega corporations.

    I have maintained that America could not recover if it continued along the same vein of tax cuts for the rich, decimating its revenue stream in the anme of greed for the top.

    The Tea Party and Republicans have demanded the tax cuts for the rich stay and the public benefits be slashed. The problem there, is that the tax cuts for the rich slashed revenue for the government by 26%. The increase in public programmes including Medicare only added an additional 2%. Slashing 2% by decimating the assitance for the poor while failing to reign in the 26% benefit to the rich will no doubt see riots happen in the US as well.

  78. shane and Min, I think that it could also happen here. For some reason, the government is bringing some very draconian measures against the unemployed.

    I have felt for some time that Julia Gillard, in particular, has a big problem with the unemployed, which I don’t understand.

    The measures include:
    Coming down harder on the long-term unemployed with even more onerous “mutual” obligations”.
    Forcing those under 35 on the disability pension into training, courses, rehab etc.
    Making it harder for people to get the disability pension in future by making the impairment tables even more stringent.
    Cracking down on teenage parents.

    As the parent of 2 boys with disabilities and your crew, Min, I have to say I feel very worried about this. I really hope the Greens amend this legislation.

    The unemployed and disabled, along with Aboriginal people, are among the most disadvantaged in this country and I don’t think making them even more disadvantaged is the way to go.

    And the ones who will suffer most will be their children.

  79. “I think it is a crisis of confidence as well”

    It is mainly a crisis of lack of confidence. There are no figures or data that suggest other wise.

    If Mr. Howard was re-elected, we would be in the same position as the rest of the world. There is no doubt against that.

  80. shaneinqld

    “So during the last 72 years to 2010 both parties occupied the White House 50% of the time and the better finance managers were the Democrats.”

    I wish you wouldn’t say things like that Shane. You are helping perpetuate neo-liberal bullshit.

    The “natural” state for a government that is sovereign in its own currency is a budget deficit.

    It’s why I bang my head against the wall every time I hear Wayne Swan promise to get the budget back into surplus. With the retail sector in recession we need a surplus like a hole in the head.

  81. Mangrove, it’s all going to be changing from the end of August. If you think about all the variables to be now factored it, it’s going to be very interesting…August to August..

  82. Min,

    I can’t see much changing with the new arrangements Senate-wise if that’s what you’re thinking.

    Swan has been goaded into this silly boast by the taunts of Hockey and Robb.

    But they couldn’t have gotten away with it if the masses hadn’t already been chloroformed.

    The Cafe purports to be a progressive blog, so it troubles me when I see kool-aid on the wine list.

  83. Mangrove, surely there will be discernable change – Fielding and Xenophon having the casting votes in the Senate compared with the Greens being in charge of the Senate.

    The Café has never actually be purported to be anything at all.

    I would have to defer to the boss on that one but the idea at the time when Migs set up this blog was a place where everyone could be free to express their opinion.

    I have absolutely no idea what you mean by koolaid.

  84. Min, kool-aid is a pretty common expression around the blogs:

    http://en.wikipedia.org/wiki/Drinking_the_Kool-Aid

    Re my comment addressed to Shane, I was specifically referring to the pejorative casting of budget deficits.

    Sadly, I don’t think the changes to the Senate will have any effect on Swan’s intentions in that regard. He’s been sipping Coalition kool-aid (to add some context 🙂 )

    I expect the Coalition apologists, who come over here from Bolt’s other world, to bang on about deficits because they don’t know any better but I would’ve thought there might be some here who might put up some resistance instead of rolling over and helping perpetuate the myth..

    In economic parlance, these are called “deficit doves” and they are more dangerous than “deficit terrorists” (who we know are ratbags) because they lend veracity to the myth.

    Whilst Shane was implicitly endorsing the virtue of budget surpluses, he was probably unaware that every budget surplus was followed by a recession or a downturn in the economy.

    And there are sound reasons why this is not a surprising outcome for, as I’ve said before, a budget surplus is paid for by a private sector deficit. That truth is embedded in an accounting identity

    Why else did private sector debt go through the roof in the wake of Howard’s surpluses ? The GFC probably smothered the inevitable Howard Recession that was already in the pipeline.

    I see Neil taunting us with the big bad deficit boogey man on the “Panic and Mungo’s take” thread. I was going to post a comment but there doesn’t seem to be any point, certainly not in addressing any comment to Neil.

    At the end of the day Min, as someone once famously said, “it’s the economy, stupid” and I think it might be a good idea if we-of-the-left got our heads around the arguments and fought back.

    The reason this stuff is so important, and to put as simply as I can, deficits can fund public purpose (infrastructure, health, education etc) whereas budget surpluses make sure those things don’t happen.

    Ask yourself which policy setting best suits the self-interest of the rentier class ?
    Then ask how come the working class willingly goes along with it.

  85. It’s why I bang my head against the wall every time I hear Wayne Swan promise to get the budget back into surplus. With the retail sector in recession we need a surplus like a hole in the head.

    Mangrove, unfortunately Swan succumbed to the rope-a-dope by those two economic halfwits and now he has to go through with it-it will be absolutely pointless to state the bleeding obvious, because the electorate has been brainwashed into thinking a deficit is Satan’s work.

    Even if the country is tipped into recession with 10% unemployment, everything will be fine because LOOK! there’s a surplus.

    And despite all the lies and broken promises littering the Howard government’s path, can you imagine the shit storm if the government announced that they’d be maintaining a deficit a bit longer to get the country through this looming new economic crisis?

    That GREAT, BIG, ENORMOUS, GIGANTIC, HUMUNGOUS, EARTH SHATTERING, LIE coupled with Gillard’s GREAT, BIG LIE that she didn’t tell, would have the likes of Anal and Dolt calling for torches, pitchforks and rioting in the streets!

    Because I’m afraid that the Smuggles Set and their cheer squad in Ltd News, don’t care about the welfare of the country. It’s all about grabbing power and to hell with the country.

  86. Mangrove, in defence of shane (who doesn’t need defending, but isn’t here atm). I think his comment was directed at Neil, who thinks that the only proof of good economic management is a surplus no matter what.

  87. “And despite all the lies and broken promises littering the Howard government’s path, can you imagine the shit storm if the government announced that they’d be maintaining a deficit a bit longer to get the country through this looming new economic crisis?”

    So we just give up ?

    What Rudd, Swan, Gillard, Tanner did in the face of the GFC (with guidance from Ken Henry) was heroic.

    Since then it’s been one humiliating capitulation after another. The sacrificing of Garrett for the amusement of the Moloch press brought tears of frustration to my eyes, the moreso when Possum did the numbers and showed us it was all bullshit. I yelled “fight back, you bastards”.

    Ditto for the BER.

    I thought The Left was made of sterner stuff.

    But thanks for your response jane. I appreciate it.

  88. who thinks that the only proof of good economic management is a surplus no matter what.

    A proviso on that, “who thinks the only proof of good economic management is a Liberal government.”

    Neil thinks Hawke getting rid of the Howard as Treasurer debt was nothing and not good economic management just as he believes that Howard racking up that debt was good economic management.

  89. Mangrove, I share your frustration and think they should just go for it and sod the consequences-in fact I still do.

    And I guess they’re starting to do that with carbon pricing and some of the other things they’re doing. I hope they’ll make it impossible for the wrecking ball of the Smuggles Set to destroy.

    I agree 100% about Garrett; in fact I emailed him to give my support and appreciation. He copped a lot of shit from the left as well, but I like him. I find him intelligent and very knowledgeable and articulate.

    I have noticed some changes even in the most rabid LIEberal supporters. Some friends of ours who are red hot LIEberal supporters are not too keen on Smuggles for PM.

    They hate Kevin Rudd and Julia Gillard with an unnerving intensity, but reckon Stephen Smith would be a good choice for PM. I was taken aback, I can tell you.

    I really don’t understand why they hate Gillard with such visceral intensity; after all they didn’t like Kevin Rudd either.

    I can only think that her ability to negotiate with the Independents and form government where the arrogant duplicity of Abbott saw the crown slip from LIEberal hands.

    You’d think it would have made them take the bat against Abbott, not Gillard, but I suppose they don’t like to accept that for all his posturing he’s a dud and a first class thug imo.

    ME spot on. From Neil’s pov, the only good surplus is a LIEberal one.

  90. And here is the proof that Tony has talked down the economy.
    Liberal voters, who by the way, are probably more likely to have the money to spend, have a crisis in confidence.
    CONSUMER confidence has slumped to recessionary levels and confidence among Coalition voters is near the lowest on record.

    Labor voters remain on balance optimistic, but much less so

    Read more: http://www.theage.com.au/national/crisis-in-confidence-coalition-voters-lead-the-way-20110810-1imxr.html#ixzz1UfOtCYvg

    Here is the proof so use it Swanny

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