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January 31, 2013
the new low-revenue economic environment
The PM's National Press Club speech explicitly addresses the consequence of the high Australian dollar in the context of a global economy and declining government revenue. The media coverage from the Canberra Press Gallery was almost entirely focused on an election date.
John Spooner
The economic situation is laid out quite clearly. Gillard says:
Economic orthodoxy prescribes that falling terms of trade and falling interest rates will result in a fall in the value of a currency. But even though our terms of trade peaked around fifteen months ago and interest rates have been falling, our dollar is now actually higher. Consequently, we have to have a plan which can withstand the possibility of a persistently strong dollar into the future – not simply rely on the economic assumption that our dollar will fall. This is critical because over the coming year or two we expect to move beyond the peak of the investment phase of the mining boom.
She adds that, given the dollar's strength has persisted despite declining terms of trade and interest rates, then, we need to be prepared if it persists despite a lessening of demand for capital. The economic diversity and competitiveness pressures our nation faces now, because of our strong dollar and the huge boom we’ve had in mining investment, may well persist even though economic orthodoxy would predict their lessening.
Gillard adds:
We cannot control a number of factors that have kept our dollar strong: like the weakness in the global economy, the close-to-zero interest rates of many nations and the increasing view that Australia is something of a safe haven.Where we can make a difference is to other factors that matter for competitiveness and economic diversity. So we can and must focus on increasing skills, building a national culture of innovation, rolling out the national broadband network, investing in infrastructure, improving regulation and leveraging our proximity to and knowledge of a rising Asia into a competitive advantage.
The problem the government faces is that spending is tightly constrained by the amount of tax collected from all sources – particularly from company tax. This is significantly lower than independent forecasters or the Treasury have anticipated---- on average, lower by more than thirty billion dollars every year.
Consequently:
with pressure on revenue, it is the wrong time to be spending without outlining long-term savings strategies which show what will be foregone in order to fund the new expenditure. Put another way, we are in an era when new structural calls on the Budget need to be associated with new structural savings.....This year we will make the tough, necessary decisions to ensure our medium-term fiscal strategy is delivered, and our centrepiece plans for Australian children and Australians with disability are funded, in this new low-revenue environment.
This kind of structural economic straitjacket on the national government's budget applies to the Coalition as well, if they regain power. The straitjacket leads to increasing productivity as the way out.
Where the two political parties differ in addressing this changed economic environment is that the Coalition's policy will favour the mining and agricultural industries and reducing working conditions, whilst Labor will focus on improving skills and education in an information economy. These are two different conceptions of improving productivity.
We can see this from Abbott's claim that the NBN was not needed for Australia’s future and that a market-based approach to telecommunications would be a better policy for the Government to take. Or from Hockey's regularly cited his belief that the future of Australian telecommunications would be better served by a focus on wireless and mobile broadband rather than on fixed-line communications.
Posted by Gary Sauer-Thompson at 6:52 AM | Comments (8) | TrackBack
January 30, 2013
the light at the end of the tunnel
In his Upside to economy's downside column in the Sydney Morning Herald Ross Gitten asks: why has the gloom of so many business people and consumers greatly exceeded the reality? Why have people's perceptions of the state of the economy been so much worse than what the hard facts tell us.?
Gittens reckons that a big part of the explanation is political. By this he means that:
Many business people seem to be sitting on their hands until the political atmospherics improve. They say the period of minority government has damaged confidence, but this is code for their impatience to see the back of Julia Gillard.....If you delve into [the Westpac and the Melbourne Institute] index you discover that people intending to vote Liberal are far more pessimistic about the economy than those intending to vote Labor. I suspect it will prove a better indicator of who'll win this year's election than of the prospects for consumer spending.
The end of the gloom for the corporate elite is a Liberal government. With the proper order restored all will be well in heaven and earth and we can all relax and be comfortable. The corporate elite don't seem to appreciate that a Coalition government would be one blundering through history; or that it would be led astray by its ideological opposition to an educated polity and a strong research establishment that threatens the corporate elite's vested interests.
Gittens adds that another explanation for the discrepancy between perception and reality is surely that the difficulties currently faced by the manufacturing and retail industries from structural change caused by the high dollar and digital technology have mistakenly been taken as symptomatic of the whole economy.
The policy option here is is to allow the supply side to adjust to the different structure of demand more normal and sustainable sources of demand – to ease the way for retail workers and autoworkers to retrain for faster-growing industries. The worst thing that governments can do is to stand in the way by propping up unviable firms or by sustaining demand in unviable industries through easy credit. These kind of supply-side adjustments take time.
Posted by Gary Sauer-Thompson at 6:17 AM | Comments (7) | TrackBack
January 28, 2013
Australia Day woes
Chris Kenny's Australia Day column in The Australian states the now standard conservative/neo-liberal criticism of South Australia. Once the Festival State, South Australia has become a mendicant state, reliant on federal largesse, and it risks becoming a state of stagnation. Fiscal discipline is lacking.
Pat Campbell
Kenny's core argument is that South Australia is living beyond its means:
From 2002, the early years of the Rann Labor government consolidated that work, but a decade on, those achievements have been undone. The credit rating has been downgraded, and with state debt topping out at $14bn, net debt will overshoot the government's planned limit of 50 per cent of revenue.In short, the state banked on the proceeds of a new mining boom before it happened. It increased expenditure on public sector jobs and a lavish infrastructure plan (major new hospital, sports stadium, freeways, railways) based on the expected proceeds of the $20bn expansion of the Olympic Dam copper, uranium and goldmine. With that project now scrapped, the state is stuck with the spending and a billion-dollar budget deficit.
Another example is that it SA has continued to increase the size of the public sector despite most other states heading in the other direction and that it was the highest taxing state for business.
It is one long list of negatives. Even though the government boasts of having more wind-generated power than any other state Kenny says that a study last year by the Energy Users Association found the state has the nation's highest electricity costs. Kenny implies that this is due to renewable energy, even though the wholesale price of electricity has decreased and the utilities refuse to lower the retail price.
His conclusion is that SA's drift is likely to continue. His solution repeats the Business SA line ---embrace a low-cost/low-wage competitive option. This would involve removing the life tenure and reducing the number of bureaucrats because the public sector and the political influence of public sector unions as a handbrake on economic reform. However, the Weatherall Labor government doesn't have the courage to do what is necessary. Instead it lives on the hope for another resources boom.
Posted by Gary Sauer-Thompson at 6:55 AM | Comments (4) | TrackBack
January 24, 2013
closing the gap?
My judgement is that the ALP's factional system would have blocked any aboriginal candidate from being pre-selected for a winnable Senate seat. It is to the ALP's shame that it has never had an indigenous representative in national parliament.
It also tarnishes the ALP's credibility as a progressive party with a record of improving the lives of indigenous Australians in the form of anti-discrimination and land-rights legislation to the closing-the-gap policies and the Redfern speech and the Apology.
It is good that Nova Peris has been selected by Gillard going over the top of the factional power blocs in the Northern Territory by exercising a "captain's pick". The factional system has little interest in reform, a merit based system, or openness and accountability. We can expect a large and bitter backlash from them to this important and right step for the ALP.
Will the ALP now reform itself and look to recruit more indigenous people into federal seats? It needs to do something, given the Aboriginal candidates were elected for the Country Liberal Party in the 2012 Northern Territory elections (eg., the marginal wins to Bess Price and Larissa Lee). Both Warren Snowden (the MHR for Linigari) and Trish Crossin (who filled Bob Collins’ casual Senate vacancy in 1998) have refused to step aside.
The ALP has a view that it should be selecting among its own membership. But the factional system prevents this, especially the "Darwin end" of the NT Labor party. It did so in 1998 with Tracker" Tilmouth (who withdrew) and again in 2001 with the Aboriginal candidate, Pat Anderson.
Peris, a celebrity candidate, will inevitably clash with the Labor Party machine and the straitjacket that it imposes on members. She may well be left hanging in the wind.
Posted by Gary Sauer-Thompson at 7:23 AM | Comments (4) | TrackBack
January 23, 2013
the political circus is back in town
Some say that political activity is pretty much on hold until the tennis is finished, or the cricket is out of the way, or the usual conservative nationalist rhetoric about Australia Day has been washed away.
You know, all that rhetoric about Australia being a part of the Anglosphere that share a common history, culture, language, a Westminster form of government, legal concepts like common law, habeas corpus and innocent until proven guilty. Australia is a Christian nation with a Judeo-Christian heritage---not a multicultural nation founded on violence.
Politics hasn't really gone away. What has been put on hold for the Xmas break is the usual “circus” of ministers and MP's attending events in their constituencies: unveiling plaques, kissing babies, making stump speeches, and constituent schmoozing. The extensive electoral work is a form of pastoral care, and it is a perpetual electioneering, especially for those MP's in marginal seats. This is politics making a difference.
The electioneering on the campaign trail has begun along with the claim that said politician are in regular contact with the “real Australia” of the constituency/electorate, and that only they can deliver a better deal to the working families of Australia.
The conservative commentary has also picked up from where it left off last year. Thus Janet Albrechtsen continues with her anti-Julia Gillard commentary in The Australian. In PM's fake feminism is man made Albrechtsen states that:
By using baseless allegations and seeking the solace of victimhood for ulterior motives, our Prime Minister has let Australian women down. In a headlong collision between politics and ethics, the politically ruthless PM chose to debase the one issue that seemed dear to her heart -- championing the cause of women. If a female PM recklessly and ruthlessly uses gender as a weapon, isn't that PM saying to other women: "Go girl, go ahead, make serious allegations, never mind the lack of evidence, so long as it furthers your agenda."
According to Albrechtsen, Gillard and Tanya Plibersek and Nicola Roxon have a fraudulent feminist chip on their shoulder. They have used confected outrage to launch a dishonourable gender war.
Isn't Albretechsten using gender as a weapon to defend Tony Abbott's conservatism and sexism? Albrechtsen is silent about the verbal savagery of the personal attacks on her by some leading members of the opposition, including Tony Abbott. Attacks, we can recall from the AWU slush-fund scandal, premised more on innuendo than facts showing misconduct by Gillard.
Posted by Gary Sauer-Thompson at 6:59 AM | Comments (5)
January 21, 2013
ideas for Abbott Liberals?
Well, they could come clean about what is happening to the demand for electricity, and the reasons for its rising cost for a start. Then they could add to that by acknowledging that the National Electricity Market is in chronic failure mode.
But why bother with this line of reasoning. Partisanship to deeply divide Australia, not good policy, is what drives the Liberal Party today. Climate denialism is what holds the Abbott Liberal Party together. This means that we need to dump the idea of “independent” regulatory agencies or a “scientific” bureaucracy.
Why so?
We know that the energy policy of a forthcoming Coalition government would be ruled by the intense lobbying of the fossil fuel and alumium industries protecting their own interests that are threatened by the emergence and growth of renewable energy. The Coalition would dump the climate change department, get rid of Climate Change Authority because they would not want independent advice on climate change, emissions reduction and renewable energy, repeal carbon pricing , and use taxpayer revenue to pay polluters to reduce their emissions.
Even the Big Miners are starting to embrace solar energy in response to soaring fossil fuel costs, particularly diesel. It's more cost effective in Chile to do so. Some renewable energy technologies are already cost-competitive with fossil fuels and many others would currently be so if existing subsidies for fossil fuels were eliminated, and external costs of energy production and use (including climate change, other environmental and health impacts) were included in the price.
It is well known renewables face opposition from entrenched and vested interests, which take advantage of their significant market power and political influence to safeguard their positions. Consequently, public energy policy is distorted as a result of excessive influence by set of fossil fuel interests at the expense of others. It's called regulatory capture and its well known in the economic literature.
Posted by Gary Sauer-Thompson at 8:23 AM | Comments (2) | TrackBack
January 17, 2013
US: Obama finally acts on gun control
Barak Obama has challenged America's deeply ingrained gun culture by announcing a modest set of proposals to ban automatic weapons, limit magazines to 10 bullets, introduce universal background checks for all firearms buyers and increase scrutiny of mental health patients. It is pretty much a tougher version of the 1994 law introduced by Bill Clinton that banned automatic- and semi-automatic weapons.
Matt Golding
Obama also signed 23 executive orders that will take immediate effect and do not require Congressional approval. These include bypassing a congressional ban on research into any possible links between violence and video games.
No doubt those Republicans who do outrage for a living will oppose the legislation---they will “nullify” federal gun legislation. Their rhetoric will be that if you’re going to impose a brutal authoritarian regime on your populace, then the first step is to disarm them first so they can’t fight back. The NRA 's position is that it exists to protect America's gun rights. The NRA's slogan is that "the only thing that stops a bad guy with a gun is a good guy with a gun."
The Republicans, who are almost unanimously opposed to gun restrictions, control the House of Representatives. But the red state Senate Democrats are also opposed to gun restrictions. So the Obama administration aims to start a mass mobilisation campaign to put pressure on members of Congress. The assumption here is that the Newtown shootings has changed the political environment.
Maybe something will pass Congress. Maybe. Legislation to seriously tighten up background checks perhaps? An assault-weapon ban is probably a political bridge too far for the US.
Posted by Gary Sauer-Thompson at 4:30 PM | Comments (1) | TrackBack
January 15, 2013
Wall Street's rotten core
Greg Smith highlights what business as usual at Goldman Sachs means.
Steve Bell
Smith's core argument is that:
Goldman Sachs and Wall Street had lost sight of their mission: servicing clients. That the culture was rotting, which presented a dire threat to the firm and the industry. When the client no longer trusts the bank, calamity ensues. And that the buck ultimately had to stop with the board of directors and [others] who had turned a blind eye to all that was happening right under their noses, on their watch. They had put the sole pursuit of short-term profits ahead of a reputation that had taken decades to build up, but could be destroyed in an instant. They didn’t fully realise that you can’t just say that you are different and that you put clients first: you actually have to act this way. And if you don’t, the smell of hypocrisy soon starts suffocating your employees and your clients.
The bosses knew there were problems but they wouldn't do anything about it because they were simply making too much money. Wall Street---ie., finance capital--- calls the shots in global capitalism.
Wall Street are the ones saying that the passage from the post-second world war welfare state to new global economy involves painful renunciations, less security, less guaranteed social care for the working poor. They are the apostle's for austerity politics.
Their austerity in response to the Great Recession has proven to be an economic weapon of mass destruction.The losses that austerity causes include reversing growth, causing a recession and increasing unemployment, poverty, inequality, and misery (by cutting spending programs for those in need at the time they most need them). Government stimulus spending to counter a recession, for them, is not about creating demand: it is akin to “sugar,” whose effect is fleeting.
Freedom for finance capital means freedom guaranteeing the freedom of corporations to conduct their affairs as they wished and that that government interference and economic planning leads to tyranny.The state and big corporations are seen as guardians of the neoliberal order. This form of neoliberalism is a theory of how to reengineer the state in order to guarantee the success of the market and its most important participants, modern corporations.
Posted by Gary Sauer-Thompson at 9:27 PM | TrackBack
January 13, 2013
forewarning
The National Climate Assessment in the US has just released its draft report and it warns that climate change is on course to turn the country into a hotter, drier, and more disaster-prone place. The same could be, and has been said, for Australia, according to the CSIRO and Bureau of Meteorology. The insurance industry has recognised the reality of climate change and its costs.
David Pope
The report, which is not due for adoption until 2014, was produced to guide federal, state and city governments in America in making long-term plans.These kind of forewarnings imply that society will need to adapt to a certain level of climate change, rises in sea levels, and more floods and bush fires. The trend over the longer term is undeniable. The world is warming, and Australia is 0.9 of a degree Celsius warmer than it was a century ago.
The http://climatecommission.gov.au/">Climate Commission's recent Report says:
The length, extent and severity of this heatwave are unprecedented in the measurement record. Although Australia has always had heatwaves, hot days and bushfires, climate change has increased the risk of more intense heatwaves and extreme hot days, as well as exacerbated bushfire conditions. Scientists have concluded that climate change is making extreme hot days, heatwaves and bushfire weather worse.
Its time for a boycott of investment in fossil fuel companies
Posted by Gary Sauer-Thompson at 4:34 PM | Comments (10) | TrackBack
January 11, 2013
Big Mining's political agenda
In Phantom deferrals stoke unfounded fears on the Drum Tony Maher spells out the phantom deferral tactic that Big Mining uses to further its political agenda.
Maher outlines that agenda:
The big mining companies, spearheaded by the Minerals Council of Australia, have spelt out their political agenda: lower taxes, weaker workplace laws, less red and green tape, easier access to foreign workers. All of this adds up to free rein for companies to make easy money and less benefit from mining to the broader community. In pursuit of this agenda, it suits the mining industry to pretend things are going to hell in a hand basket. But they aren't.
Then he spells out the tactic they use:
Enter the phantom mining project deferral. The major public announcement of a mining project being 'shelved', with all the alarm that attracts, has become a favoured tactic of an industry willing to whip up fear about jobs and the state of the economy to advance its own interests....Announcing a delay on projects that haven't started yet is an easy way to panic governments and the public, without actually doing anything.
He adds that in an election year, we can expect an escalation in phantom deferrals and other tricks of the trade from the powerful mining lobby. It t pays to look at what the mining companies do, not what they say.
Delaying projects until the numbers align, adjusting a project's shape and specifications in line with changing demand, commodity prices and circumstances - that's what mining companies do. It's their business as usual.
What Maher doesn't say is how Big Mining is able to use its power to capture state governments which then pursue the political agenda of the big miners. Hence all the anti-federalism talk coming out of Perth, with Canberra seen as imposing red and green tape that comes from the power of green ideology over the commonwealth government. Or in NSW or Queensland with respect to supporting coal mines and coal-seam gas projects at the expense of community interests.
Posted by Gary Sauer-Thompson at 11:50 AM | Comments (4) | TrackBack
January 8, 2013
contradictions
The current heatwave is the sort of weather system typically associated with the middle of summer, especially across southern Australia. But the heat wave has been exacerbated by the monsoonal trough that usually brings cloud and rain in the north of the continent remaining far offshore in the Timor Sea.
A stationary high-pressure system over Australia has allowed heat to circulate over the inland, and with no respite from monsoonal cloud or rain, temperatures are building upon themselves.
It is likely that more extreme weather events similar to the current widespread heat wave (an intense hot dry heat) in southern Australia will become more frequent.
David Pope
As Barry Brooke says global warming is clearly expected to both increase the frequency of heatwaves (i.e., greater number of events per unit time) and cause those heatwaves that do occur to be hotter and to last longer (on average).
Yet the various levels of government in Australia continue to subsidize coal fired power changes and to place obstacles to the development of renewable energy that would facilitate the emergence of a low carbon economy. They oppose political action to curb greenhouse gas emissions and do so in order to protect the vested fossil fuel interests.
Australia is the world's largest exporter of coal and that is what matters. After all, economic progress can only be achieved by a high rate of natural resource extraction. We we can exploit the earth as much as we want without any significant side effects. That has become Big Mining's narrative and it is what sits behind the contradictions in energy policy.
Posted by Gary Sauer-Thompson at 7:45 AM | TrackBack
January 6, 2013
tightening the belts of the poor
The politics of austerity in the UK being implemented by the Conservative Cameron Government, highlights how neo-liberalism's mode of governance-- through corporate power, mistrust of democracy, and the maintenance of market freedoms----reshapes welfare.
The welfare system is increasingly being shaped both to integrate it with work (eg., welfare to work) and to make significantly, to make work pay. The middle class is being squeezed as low pay (the working poor) moves up the income scale. So there is increasing in-work support for low and middle income households through tax credits for childcare costs which have soared, so much so that many parents, particularly women, can not afford to work. The joys of home ownership, private property, individualism, and the liberation of entrepreneurial opportunities look increasingly distant.
However the politics of austerity cut into these tax credits of the working poor. So neo-liberalism can be interpreted as as a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites. David Harvey points out that this re-establishment was done at an ideological level by:
capturing ideals of individual freedom and turning them against the interventionist and regulatory practices of the state, capitalist class interests could hope to protect and even restore their position. emphasized the liberty of consumer choice, not only with respect to particular products but also with respect to lifestyles, modes of expression, and a wide range of cultural practices. Neoliberalization required both politically and economically the construction of a neoliberal market-based populist culture of differentiated consumerism and individual libertarianism.
What is now happening with the politics of austerity is tightening the belts of the poor whilst loosening those on the rich.
The neo-liberal state withdraws from welfare provision and diminishes its role in arenas such as health care, public education, and social services, which were once so fundamental to social democratic liberalism, it leaves larger and larger segments of the population exposed to impoverishment. The social safety net is reduced to a bare minimum in favour of a system that emphasizes personal responsibility. My health-care and education is my personal choice and responsibility.
This results in an ever widening circle of working poor, for the only way that I can satisfy my health needs in the market is through paying exorbitant premiums to highly profitable insurance companies. Or high child care costs or educational fees.
Posted by Gary Sauer-Thompson at 8:35 PM | Comments (4) | TrackBack
January 3, 2013
is blogging dying?
Paywalls are becoming increasingly popular as a mechanism to help the mainstream newspapers stay afloat financially. They don't see much alternative to the economics of paywalls and digital subscription revenue.
In Australia The Australian is behind a paywall, as is Crikey. So is the AFR and, from all accounts, the rest of Fairfax will follow this year. That leaves the ABC as a free access site. However, paywalls, even in their New York Times form, are only a contribution to cash flow, not an answer. Cutting resources too rigorously – as Fairfax is doing means that you may not have the staff to man one news outlet properly, let alone two. Push up cover prices too zealously and the print product may go into precipitate decline before any online alternative can begin to cover it losses.
Kevin Drum points out at Mother Jones this is a trend that's a real problem for blogging:
I currently subscribe to three newspapers: the LA Times, the New York Times, and the Wall Street Journal. This costs me over a thousand dollars a year, but I need to have access to all these sites to do my job decently. But as more and more media sites start erecting paywalls, I simply won't be able to afford to keep up all the subscriptions. ... as more and more sites go down this path, my choices are going to get harder and harder.
He points out that blogging has always been critically dependent on having free access to a wide variety of media, since you need to trawl through huge amounts of material to find the occasional pieces you want to write about. But as free access gets rarer, blogging is going to get harder.
We will have to increasingly rely on backdoor entrances or porous paywalls. Hence the need for an Australian Independent Media Network
Posted by Gary Sauer-Thompson at 1:38 PM | Comments (3) | TrackBack
January 2, 2013
upside down politics
Washington appears to think that the road to recovery for the US economy is austerity through cutting public spending ---deficit cuts, as it were, are the necessary road to recovery. It is a world of upside down politics because economy recovery and long -run growth comes from stimulus not austerity. The austerity crowd are exploiting the fiscal cliff to push their social benefit-cutting agenda that has nothing to do with the current crisis of low economic growth.
As Paul Krugman argues:
long-term economic growth hasn’t been a steady process; it has been driven by several discrete “industrial revolutions,” each based on a particular set of technologies. The first industrial revolution, based largely on the steam engine, drove growth in the late-18th and early-19th centuries. The second, made possible, in large part, by the application of science to technologies such as electrification, internal combustion and chemical engineering, began circa 1870 and drove growth into the 1960s. The third, centered around information technology, defines our current era.
We could add information technology and renewable energy.
The budget deficit ballooned in 2009 because of the recession caused by the global financial crisis. It knocked so many people out of work that tax revenues dropped to the lowest share of the economy in over sixty years. (The Bush tax cuts on the rich also reduced revenues.) As the nation slowly emerges from recession, more people are employed — generating more tax revenues, and requiring less spending on safety nets and stimulus. So the key is to get the economy growing.
One problem for the US is even though the economy is growing is that many Americans are not getting ahead no matter how hard they work, and there is an increasing concentration of income and wealth at the top.
Posted by Gary Sauer-Thompson at 10:27 AM | Comments (6) | TrackBack