The Economy

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The Economy

Post by Lee on Fri Mar 22, 2013 9:17 am

From the UK Guardian

Last June, Australia celebrated its 21st. No, not a birthday or coming of age, but the completion of its 21st consecutive year of economic growth. Yup, you heard right, 21 years. Of growth. 21.

While the rest of the world lurches from crisis to economic crisis, the land of Oz is powering ahead, enjoying an Aussie dollar at a record high, unemployment at near-record lows (5.4%) and basking in more sunshine than the rest of us can dream up. So what does its Labor government do? Attempt suicide.

Yesterday's "coup" against Australia's Labor prime minister Julia Gillard by Kevin Rudd, the man she herself beat for the prime ministership in 2010, was the third failed attempt of her mandate. In the past 10 years, the Australian Labor party has installed and dispatched five national leaders while its nemesis, the Liberal party, has tried four different leaders in just six years.

Viewed from Europe, where national governments are planning to bail out their banks by raiding the savings accounts not just of Russian oligarchs but pensioners too, news of yet another political attack against Australia's leader smacks of a particular strain of antipodean madness. For decades, it is the British who have worn the "whingeing Poms" label. Now, it's time for Australians to accept the malcontents' mantle, because it is they who appear incapable of seeing just how lucky they are.

Complaint has become the national default position, seen in a political class – and a mainstream media – who spend more time slinging mud or knifing each other than debating and analysing national policy. No other advanced economy can come close to Australia's 21 years of growth. That period, a full generation, saw governments of both political flavours at the helm in Canberra, and is even more impressive when you remember that it spanned the dotcom boom (and bust), the crisis of 1997-1998 (remember that one?) and the global catastrophe that was the Lehman Brothers crash in 2008. Every single time, opposition parties (again of both persuasions) channelled Chicken Little, warning the sky would fall down in Australia. It didn't. It still hasn't.

Things are so damned good that the Reserve Bank is worried the strength of the national currency is harming national export markets. Aussie voters happily travel with more money in their pockets than ever before, and still they grouch about wavering national confidence, or rail against the couple of hundred sad souls who land illegally on their shores seeking asylum.

The world over, economists talk about "the Australian model". I've sat through enough press conferences in Europe to know that there are many learned bean counters who see this continent as a great example of just how to exploit and thrive in a tumultuous global environment where economic might is turning its eyes toward Asia.

There's a chorus of voices that argue that Australia's success is a role model not only for resource-rich emerging markets like Chile and Brazil but also for many other already developed nations navigating low growth and burgeoning unemployment.

Nobody would quibble with the reality that Australia has also been lucky, riding the back of a massive boom in global commodity markets – thank you China and your seemingly insatiable appetite for iron ore. Without doubt, Australia's bubble could burst if the Chinese market and global commodity prices were to crash.

But the fact is, Australia has shown resilience in the past – and this is largely due to good economic policy. Aussie banks have been managed conservatively; none have failed, no taxpayer bail-outs have been needed. There has been no Euro-style printing of money, no pushing of interest rates down to the historic lows we have seen in the UK. The Australian government, despite public brouhaha, has held its nerve, continuing to invest and stimulating the economy to keep it aloft. At 5.40%, the unemployment rate – one of the lowest in the industrialised world – is half that of Europe, never mind the horrendous 20% seen in Greece, Spain or Italy. And all the while, Australia's government debt has been chipped at: surpluses have been delivered and real money squirrelled away to tide the nation through bad times.

A government budgetary surplus of up to 2% of GDP? Surely, that in itself should deliver government on its own. But not in Oz. Instead, Labor allowed itself to be spooked by another bad opinion poll for Gillard, the epidemic of political dread fanned by a plethora of male radio shock jocks, and a largely hostile parliamentary commentariat. And once again, it turned to sharpening the knives.

There is, of course, one thing that's going badly in Oz. But at least the Australian cricket team is standing by their captain
.
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Re: The Economy

Post by Lee on Fri Mar 22, 2013 9:55 am

Stephen Koukoulas, highly creditable economist, 2 hours ago:

Prime Minister Julia Gillard woke up this morning with the knowledge that Australia’s annual GDP growth is 3.1 per cent, inflation is 2.2 per cent, the unemployment rate is 5.4 per cent, mortgage interest rates are at 6.4 per cent and over 190,000 jobs have been created over the past year.

Gillard can check with the three major credit rating agencies and see that they all have Australia triple-A based on some of the best fiscal settings in the world. Government debt remains at trivial levels and the recent cuts to government spending is seeing a sharp improvement in the budget balance, as it should when the economy is growing.

The prime minister also knows that real wages have
risen in each and every year of the past decade and that the stock market is up 25 per cent from the lows of 2012, both factors boosting wealth and making a mockery of most claims of cost of living pressures. Australians have never been richer.

These macroeconomic statistics are just about impossible to beat. It is not clear whether there is a country in the world that can boast these fundamentals. [i]If anyone knows one, please add a comment.
?bigclock?????????

Whatever shortcomings there are in the Gillard government, economic management is not one of them.

Gillard and her team are now framing the 2013-14 budget which will be delivered by Deputy Prime Minister and Treasurer Wayne Swan on May 14. That budget will reveal an economic package that outlines the financial details behind the national disability insurance scheme and the additional investment in education, both hugely popular reforms. Both should be potential winners.

To pay for those reforms and pitch for a surplus in 2013-14, there will inevitably be a range of spending cuts, tightening in tax concessions and more means testing. Gillard and her team are searching in every nook and cranny for savings but undoubtedly, a number of big ticket items will need to be tightened. Gillard will be looking at these savings in the days and weeks ahead as Treasury provides updates on a regular basis on how the bottom line is looking.

The good news for Gillard is that the economic outlook is increasingly rosy. Consumer sentiment has jumped in recent months to be more than 10 per cent its long run average, pointing to a further lift in consumer spending. House prices and dwelling investment are also trending higher, buoyed no doubt by low interest rates and improved housing affordability. At the same time, global economic conditions are improving slowly but surely, with this pick up in global growth likely to pull the Australian economy with it.

The economic news between now and election day on September 14 is more likely than not to show strong economic growth which in normal times helps the incumbent.

For the sake of future long run policy deliberations, locking in good economic outcomes and making good decisions, it is to be hoped that the internal ructions in the Labor Party have been ended by the humiliation of Kevin Rudd and his dreadfully misguided assessment of his popularity and talent. Rudd’s ignominy has rarely been matched in Australia’s political history and any expectations of him contemplating yet another tilt at the leadership should be treated with contempt.

Assuming Rudd finally gets the message, which is that he has nothing to offer and is widely unpopular, and he announces his decision to leave politics at the September election, there will finally be some clear air for Gillard to focus on economic policy and delivering reforms.

Importantly, this should also bring into focus the economic policy differences between the government and Abbott’s Opposition. After all, the polls overwhelmingly suggest that Abbott and his team are likely to be in government within six months. This means that we should all be looking closely at the Coalition’s economic policy manifesto to see what they have in store if they win the election.
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Re: The Economy

Post by Lee on Fri Mar 22, 2013 10:35 am

Incorrect.

Please keep to the topic, bc.

Thank You
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Re: The Economy

Post by dedja on Fri Mar 22, 2013 10:39 am

I thought this opinion piece got it just about right ...

http://www.adelaidenow.com.au/news/opinion/steady-on-change-is-the-only-certainty/story-e6freabc-1226600990764

That voters aren't falling over themselves to reward the Gillard government for its world-beating economic credentials is something Labor strategists just can't fathom.

Voters, it seems, just don't listen when the Treasurer, Wayne Swan, runs through his regular checklist of Australia's strengths: low joblessness, low inflation, low debt and a stable banking system.

Surely a cursory glance at Europe is all anyone would need to feel good about our economy?

The Greek economy has shrunk by a fifth over the past five years. Youth unemployment in Greece and Spain is nearly 50 per cent.

In the latest European crisis, Cyprus will impose a tax on bank depositors in return for a 10 billion Euro bailout package. This has sparked fears of widespread runs on banks in Cyprus and other debt-ridden nations as depositors there sense a precedent and rush to withdraw funds.

Public trust in the European banking system - the lifeblood of economies, matching savers with investors - is shaken once again.

Australia, by comparison, appears, once again, an ocean of calm.

As Reserve Bank deputy governor, Phillip Lowe, observed yesterday: "growth close to trend, a stable and relatively low unemployment rate and inflation at target. By the standards of most other countries, this represents a very good outcome and a high degree of internal balance."

But it is also true, as Lowe points out, that the Australian economy is undergoing an intense and sudden period of structural change in response to the biggest external shock in our history.

A pure trick of timing it may be, but Labor has presided over the biggest period of structural change the Australian economy has undergone since the early days of European settlement.

In part thanks to the reforms of previous Labor governments, Australia today is one of the most open, flexible and adaptable economies in the world. This very flexibility has helped us to achieve internal balance (ie. avoid runaway inflation) despite the biggest boost to the nation's export prices since the Gold Rush days.

But the economy's automatic responses to this mining boom have also wiped out some business models completely.

The floating Australian dollar has responded just as it was intended, rising to offset the inflationary impact of the mining boom and dealing a death blow to many a manufacturer and tourism operator.

Meanwhile the global financial crisis and the end of debt boom has put the reins on household spending. Turnover in the property market remains depressed, meaning lower housing construction and less work for real estate agents

Retailers, the nation's biggest employer, complain bitterly of lower sales. Technological change and the rise of online shopping is also destroying business models. Just ask DVD rental stores or photo developers.

And yet, it could be worse. We are not seeing skyrocketing joblessness. Job losses have been offset by less visible job gains. Yes, it's true much of this gain has been in mining and mining related services.

But our jobs market is also fundamentally changing.

Australia's 10 million strong workforce is expected to add another 3.5 million workers by the year 2025, according to the government's Australian Workforce and Productivity Agency.

By 2025, 70 per cent of working Australians will have a post-school qualification, compared to 60 per cent today.

Three out of every five new jobs created will be in the "technical, professional or managerial" sector. More than half of the new jobs will come in healthcare and social assistance, professional, scientific and technical services, and education and training.

It's not just rhetoric that we will need a highly skilled workforce to compete with fast growing Asian nations. Already it is our economic reality.

Low skilled, traditional blue collar jobs are disappearing, no matter what jobs strategy the government unveils.

We can't bring them back. We wouldn't want to. As Phillip Lowe said yesterday, businesses is already adjusting to the "new realities": "This adjustment is often difficult, but it does hold out the prospect of higher productivity and higher living standards."

But this is not a painless process. It is, in fact quite painful. Industries are in crisis. Not everyone will make the transition to the new economy.

With one foot in the furnace and another in the ice bucket, the Australian economy is Cyprus, Greece, China and India all rolled in one.

That's why Wayne Swan and other pollies get it so wrong when they imply we've never had it so good.

Talking about headline numbers ignores the huge churn and change happening below the economy's surface.

The government's economic narrative rings hollow because it is constructed around a Mr Average that doesn't exist.

It's like being told your child's class is performing well, on average, but your kid can't spell.

This is the economic reality which confronts whichever side takes power in September.

In truth, the test of good economic management is how well a government can prepare the economy and the workforce for the changes to come and set us up for long term prosperity.

We can only hope we are equipping our kids with the skills they will need to survive in the new economy.

For now, the change is unsettling.

With economics - as too, it would seem, with politics - change is the only certainty.
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Re: The Economy

Post by Lee on Fri Mar 22, 2013 11:19 am

Sorry, bc, I only posted a link, so blame Mr Koukoulas and the UK Guardian's writer instead of attacking me again, please.

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Re: The Economy

Post by howthewestwaswon on Fri Mar 22, 2013 11:46 am

bigclock wrote:Incorrect

I've read through the first article and fail to understand what you mean by your simple post.

Can you enlighten me further as to what exactly is incorrect about the article?

Otherwise, it's just another journalist expressing his/her opinion. scratch scratch scratch
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Re: The Economy

Post by howthewestwaswon on Fri Mar 22, 2013 11:55 am

I've also read through Dedja's post too and see that as just another opinion piece.

The reality is that we are indeed the lucky country here in Australia, regardless of what is seemingly occuring in our economy.

Before we complain of our own backyard, it's not hard to understand what is happening in other economies around the globe.

Imagine, for example, gaining a uni degree in Europe, costing you thousands of dollars (euro) and not being able to secure work in your chosen profession until you're at least 40 years old. This is an example of what is happening to my distant relatives in Italy and Spain.

Our Government hasn't had to bail out banks or huge companies like the USA has.

What do we have to complain about really?
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Re: The Economy

Post by Lee on Fri Mar 22, 2013 12:19 pm

Consumer Confidence in Australia increased to 110.54 in March of 2013 from 108.33 in February of 2013.

Consumer Confidence in Australia is reported by the Westpac Banking Corporation, Melbourne Institute. Historically, from 1974 until 2013, Australia Consumer Confidence averaged 101.90 reaching an all time high of 127.67 in January of 2005 and a record low of 64.61 in November of 1990.

The Consumer Sentiment Index is based on a survey of over 1,200 Australian households. The Index is an average of five component indexes which reflect consumers' evaluations of their household financial situation over the past year and the coming year, anticipated economic conditions over the coming year and the next five years, and buying conditions for major household items. The index scores above 100 indicate that optimists outweigh pessimists. This page includes a chart with historical data for Australia Consumer Confidence.

http://www.tradingeconomics.com/australia/consumer-confidence
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Re: The Economy

Post by howthewestwaswon on Fri Mar 22, 2013 12:24 pm

bigclock wrote:
howthewestwaswon wrote:I've also read through Dedja's post too and see that as just another opinion piece.

The reality is that we are indeed the lucky country here in Australia, regardless of what is seemingly occuring in our economy.

Before we complain of our own backyard, it's not hard to understand what is happening in other economies around the globe.

Imagine, for example, gaining a uni degree in Europe, costing you thousands of dollars (euro) and not being able to secure work in your chosen profession until you're at least 40 years old. This is an example of what is happening to my distant relatives in Italy and Spain.

Our Government hasn't had to bail out banks or huge companies like the USA has.

What do we have to complain about really?

Who exactly is complaining about the economy?

Think Dedja's link is quite good, as a whole the economy is going well compared to other countries around the world. However, there are segments of the economy that are struggling, construction, retail, manufacturing are all in states of limbo at the moment. Consumer confidence is not great and that more than anything else is related to property prices IMO. These are a few things the the government haven't been able to address, and continue to hide behind the whole picture which is being artificially boosted by the mining sector.

Another simple question is would the economy be any worse under a coalition government given the history of the 2 parties.

Agree that those industries are struggling, but unless the dollar dips dramatically and we introduce wages akin to China, I don't think there's a whole lot that can be done, particularly in a profit-driven market. Maybe decrease our taxes, but then how are we to pay off the debt?

I also agree with your last comment. I too have often wondered what would have happened with Liberals if they retained power, especially with WorkChoices in tow. scratch
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Re: The Economy

Post by Lee on Fri Mar 22, 2013 2:35 pm

bc, I don't know which link you're talking about.

None of them are 'wrong'. Some parts are opinion, some are fact.

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Re: The Economy

Post by Lee on Fri Mar 22, 2013 3:13 pm

Don't be silly, bigclock.

I said there was some fact and some opinion. The above is not correct, is sloppy opinion and your argument is selective quotation, which actually strengthens my argument, not yours, unless 4 in 6 years is less than 5 in 10. The previous debate was about 'challenges', not 'failed attempts', which number 2, not 3 as the article says.

I've already asked you to stick to the topic, which is the economy, so I'll ask again.

Thank you.
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Re: The Economy

Post by Chambo Off To Work We Go on Fri Mar 22, 2013 3:15 pm

Is it not 1 spill (ie when Rudd was ousted) and perhaps 3 attempts (including Rudd's ousting)?

However, in terms of the economic situation, does it matter?
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Re: The Economy

Post by Chambo Off To Work We Go on Fri Mar 22, 2013 3:32 pm

bigclock wrote:Instablity in Government doesn't effect the economy?

Yes it probably does, but depends what is 'instability'.

Australian politics is much much more stable now than in the early to middle part of the 20th century.
That was a highly volatile period where Prime Ministers resigned, formed new parties, amongst other interesting manoeuvres.

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Re: The Economy

Post by Lee on Fri Mar 22, 2013 3:44 pm

bigclock wrote:Instablity in Government doesn't effect the economy?

Talking down the economy hurts it more.
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Re: The Economy

Post by Lee on Fri Mar 22, 2013 3:50 pm

bigclock wrote:http://www.news.com.au/breaking-news/solomon-lew-takes-aim-at-unstable-australian-politics/story-e6frfkp9-1226602907525

RAG trade tycoon Solomon Lew has attacked political in-fighting in Canberra for harming consumer confidence and says Asia is a more attractive investment destination for his cashed-up retailer.

Yes, very likely, most tycoons only care about the bottom line and are happy to outsource jobs from Australia to Asia.

They rely on people thinking that's OK.
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