Weekly GFC Roll for May 29th 2009

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Thanks again to blog mem­ber Evan Har­ris for com­pil­ing this weekly list, and for blog mem­bers pass­ing on their sug­ges­tions. If you see any arti­cle or blog entry that you think deserves record­ing for pos­ter­ity, send the link to gfcwrap at gmail.com.

And a reminder for any blog mem­bers in Syd­ney that I’ll be speak­ing at Pol­i­tics in the Pub tonight at the Gaelic Club in Devon­shire St Surry Hills, start­ing at 6pm.

The Pool Room – Week End­ing Fri­day 29th May

Aus­tralian-Related Links:

Hous­ing & Hous­ing Finance: The View From Aus­tralia & Beyond, Luci Ellis [RBA Research], Dec 2006

Blog mem­ber Tom con­tributes some RBA howlers. From the “Ris­ing Indebt­ed­ness” sec­tion: “The most impor­tant les­son to draw from recent inter­na­tional expe­ri­ence is that a run-up in hous­ing prices and debt need not be dan­ger­ous for the macro­econ­omy, was prob­a­bly inevitable, and might even be desir­able.” “These rel­a­tively benign out­comes point to the under­ly­ing robust­ness of the finan­cial sys­tems in these economies.” Price­less.

The Aus­tralian Expe­ri­ence with Infla­tion Tar­get­ing, Guy DeBelle (speech), 15 May

Oh God. A neo­clas­si­cal dis­ci­ple of inter­est-rate set­ting defends the reli­gion against upstart infi­dels. The first line of the con­clu­sion sums up the dogma: “Infla­tion tar­get­ing in Aus­tralia has coin­cided with a period of low and sta­ble infla­tion, and a pro­longed eco­nomic cycle with a high aver­age rate of growth, which has only recently come to an end.” So if we exclude the great­est finan­cial melt­down since the Great Depres­sion (many say worse) then the exper­i­ment since 1993 has been a great suc­cess!

Size of First Home Own­ers’ Loans Inflat­ing, news.com.au, Nick Taba­coff & Joe Kelly, 25 May

The FMOG keeps the real estate Ponzi scheme alive at the expense of young peo­ple who are tak­ing on a larger debt bur­den in a period of job uncer­tainty. Sourced from Bubblepedia.net.au.

 Bendigo Banks $ 615m Expo­sure To Great South­ern, SMH, 26 May

Bendigo mar­kets itself as a “Com­mu­nity Bank”. So how does it ben­e­fit the com­mu­nity to offer its cus­tomers lever­aged loans to invest in ded­i­cated tax-avoid­ance schemes? And how does it ben­e­fit the com­mu­nity to acquire Macquarie’s mar­gin lend­ing busi­ness? More like the Com­mu­nity Bub­ble Bank.

 The Great Mort­gage Gam­ble, Robert Got­tlieb­sen, Busi­ness Spec­ta­tor, 26 May

Excel­lent arti­cle exam­in­ing the dif­fer­ent lend­ing strate­gies within our robust and con­ser­v­a­tive bank­ing car­tel. Sourced from Bubblepedia.net.au.

Global Bust Hits Home: Prices Diced For Iron Ore Exports, SMH, 27 May

Defla­tion watch – cuts of up to 44%. These cuts are bad news for our Terms of Trade. Michael Strutch­bury writes a sen­si­ble arti­cle bemoan­ing our inabil­ity to save in the extra­or­di­nary com­modi­ties boom of the last few years.

Coun­cils To Pick Up Toxic Return, Clancy Yates, SMH, 29 May

Coun­cils across the state — from Can­ter­bury to Coffs Har­bour — put up to $625.6 mil­lion into toxic debt prod­ucts through Lehman and its pre­de­ces­sor, Grange Secu­ri­ties.” All invest­ments were rated AAA by those “tough cus­tomers” at S&P. Ear­lier in the week they had the temer­ity to ask the courts to see Lehman’s insur­ance poli­cies but the courts turned them down. They will only recoup between 2 and 13 cents in the dol­lar. Any con­nec­tion to coun­cils charg­ing like wounded bulls to make up lost rev­enue? “In a stand-off between big busi­nesses owed money by Lehman and dozens of coun­cils and char­i­ties, the big end of town won the day.” Lehman exec­u­tives bonuses were paid out by admin­is­tra­tors ahead of coun­cil claims. 

Busi­ness Invest­ment Plunges, Chris Zap­pone, SMH, 28 May

Invest­ment by com­pa­nies plunged a record 8.9 per cent in the first three months of 2009, the sharpest rever­sal in more than 12 years.” Time for those green shoots pun­dits to declare that everything’s turned around since the lows of Q1, so there’s noth­ing to worry about.

Hous­ing Recov­ery Soon: Hous­ing Indus­try Asso­ci­a­tion, Chris Zap­pone, SMH, 28 May

The HIA projects the total num­ber of com­pleted homes in Aus­tralia will rise from 129,500 in 2009 to 139,200 homes in 2010” That doesn’t sound like much of a recov­ery to me. The Big Pic­ture enjoys fight­ing its way through the non­sen­si­cal press releases from the [US] National Asso­ci­a­tion of Real­tors.

Suncorp’s Calamity Painfully Emerges, Ian Ver­ren­der, SMH, 28 May

The slump in com­mer­cial prop­erty mar­kets, par­tic­u­larly in Queens­land, has started to bite. Trou­bled loans rose to $1.241 bil­lion in the nine months to the end of March, up from $986 mil­lion to the end of Decem­ber. Bad debts have risen to $491 mil­lion.” And the dif­fer­ences in whole­sale fund­ing costs, backed by the Fed­eral gov­ern­ment, are result­ing in less com­pe­ti­tion for the car­tel – never waste a cri­sis.

Ris­ing Bond Yields A Sign of Good Times Return­ing, Char­lie Aitken, The Aus­tralian, 28 May

Char­lie “pas­tries” Aitken is back! The whole world bemoans the threat of explod­ing US trea­sury yields on the US prop­erty mar­ket and the broader econ­omy (lots on this below) but Char­lie says this is great news! Mike Shed­lock begs to dif­fer offer­ing a polar oppo­site inter­pre­ta­tion (also below).

Sales slide at an end, says Myer, Jamie Freed, SMH, 29 May

Remem­ber the quote: “I think this is the start of a very slow burn up in retail… and par­tic­u­larly depart­ment store retail.” Remem­ber the com­pany: Myer. Remem­ber the CEO’s name: Bernie Brookes. Remem­ber the date: 28 May. All locked in so we can make use of this quote over the next few years. 

Global Econ­omy:

Lost Vegas [25min video], Van­guard, 13 May

Absolutely sen­sa­tion­ally bril­liant must-watch video exam­in­ing the col­lapse of Las Vegas. Con­tains excel­lent analy­sis of the root causes of this cri­sis. Email it to your friends. 

[Cal­i­forn­ian] Gov­ern­ment Plans To Com­pletely Elim­i­nate Wel­fare, LA Times, 21 May

… for fam­i­lies, med­ical insur­ance for low income chil­dren and cash assis­tance for col­lege stu­dents.” Bet those Aus­trian econ­o­mists will love this one. Also read the com­ments below to gauge the mood of the US. It looks like some read­ers have been lis­ten­ing to Alan Jones: “How about drug test­ing all indi­vid­u­als on wel­fare?”

Infla­tionisms Seduc­tive Bat­tle Cry, Doug Noland, 22 May

Bril­liant piece by Doug Noland of Pru­dent Bear. I sug­gest you skip through to the last sec­tion.

San Fran­cisco Fed Con­cerned About Con­sumer Delever­ag­ing, Zero Hedge, 22 May

Con­tributed by blog mem­ber Chris. “Regard­less of how many trea­suries are issued, and how much addi­tional debt the U.S. incurs, the demand side for credit is just not there, stick­ing banks with base­ments full of shrink-wrapped pack­ages of hun­dred dol­lar bills, that will sit dusty and unused for years.”

CSL Expan­sion Plan Thwarted, Eli Gleen­blat, SMH, 26 May

The US Fed­eral Trade Com­mis­sion has indi­cated that it is likely to block a planned $US3.1 bil­lion takeover of Tale­cris Bio­ther­a­peu­tics.” When was the last time a US cor­po­ra­tion was unable to pur­chase an Aus­tralian com­pany based on a pro-com­pe­ti­tion argu­ment? It looks like CSL needs to invest more in lob­by­ists as this result just doesn’t make the grade.

Case-Shiller: [US House] Prices Fall Sharply In March, Cal­cu­lated Risk, 26 May

Prices are still falling [2% in March] and will prob­a­bly fall for some time.” But don’t worry as US Con­sumer Con­fi­dence leaps to an eight month high! The real­ity gap goes unre­ported in the oz media.

The Worst Is Over For the Econ­omy, Yahoo Finance, 27 May

The stim­u­lus is kick­ing in and the hous­ing, man­u­fac­tur­ing, employ­ment, and con­sumer-spend­ing trends are begin­ning to improve…” Thank GOD for that. 

Mort­gage Mar­ket Locks Up, Mike Shed­lock, 28 May

Explains the omi­nous links between a steeper US trea­suries yield curve, US mort­gage rates and the US hous­ing mar­ket. 

Mort­gage Delin­quen­cies, Fore­clo­sures, Rates Increase, Bloomberg, 28 May

US hous­ing mar­ket bot­tom­ing? It doesn’t look like it to me. “The U.S. delin­quency rate jumped to a sea­son­ally adjusted 9.12 per­cent from 7.88 per­cent, the biggest-ever increase, and the share of loans enter­ing fore­clo­sure rose to 1.37 per­cent.” “Prime fixed-rate home loans to the most cred­it­wor­thy bor­row­ers accounted for the biggest share of new fore­clo­sures at 29 per­cent.” “The fig­ures show that the mort­gage cri­sis has shifted from sub­prime to bor­row­ers hold­ing the safest type of mort­gages.” As Cal­cu­lated Risk notes: “We’re all sub­prime now!” On the same news day, The Aus­tralian reported via it’s Dow Jones feed that demand picks up in the US econ­omy.

Global Banking/Finance:

Credit Where Credit is Due, Mike Whit­ney (“they said you’d never make it”), Coun­ter­punch, 19 May

Bril­liant, must-read arti­cle dis­cussing the struc­tural prob­lems behind claims that the econ­omy will re-bound at the end of the year. “The prob­lem is the break­down in the secu­ritza­tion mar­kets which has cut off the flow of easy credit to con­sumers and busi­nesses.” It is cru­cial to under­stand that the credit secu­ri­ti­sa­tion mar­ket, head­quar­tered in Wall St and the pin­na­cle of a vast and cor­rupt pyra­mid sell­ing scheme, deter­mines the price of your house, the bal­ance in your super­an­nu­a­tion fund and impacts Aus­tralian GDP more than any other met­ric. Add in immense de-lever­ag­ing and you’re left with a very bear­ish fore­cast, irre­spec­tive of short-term bounces in the stock mar­ket and gov­ern­ment smi­ley faces.

The $1.4 TRILLION Com­mer­cial Real Estate Tidal Wave, Clus­ter­stock, 24 May

Noth­ing like a catchy head­line. Lots of “mays”, “mights” and “coulds” but if the lit­tle boy who cried wolf is warn­ing of an actual wolf this time around then it will be inter­est­ing. The com­ments below the story also had use­ful infor­ma­tion.

JP Mor­gan $29b WaMu Wind­fall, Bloomberg, 26 May

Alarm­ingly hon­est account of how dodgy account­ing stan­dards allows Wall St banks to fab­ri­cate prof­its. “One of the beau­ties of pur­chase account­ing is after you mark down your assets, you accrete them back in.” Remem­ber that it was bogus “sur­prise prof­its” claims in early March (coor­di­nated with a pos­i­tive media and gov­ern­ment blitz) that started this bear mar­ket rally. As always, it pays to look at the fine print. 

Deep Thoughts From Bob Jan­juah, Zero Hedge, 26 May

Seems like a sen­si­ble analy­sis of stock mar­ket expec­ta­tions to me. Makes strong pre­dic­tions for a con­tin­u­a­tion of the bear mar­ket rally through to July then a 30/40% crash. Long gold and oil. 

The Great­est Swin­dle Ever Sold, The Nation [US], 26 May

Excel­lent sum­mary of the cor­rup­tion behind the TARP. “Here, then, are six of the most bla­tant and alarm­ing ways tax­pay­ers have been scammed by the government’s $1.1-trillion, pub­licly funded bailout.” Here, here.

The $4 Tril­lion Hous­ing Headache, CNN Money.com, 27 May

From blog mem­ber Lyon­wiss, “after 32.2% of house price decline (Case-Shiller index) since July 2006, the US mort­gage debt to GDP at 73% has hardly budged from its peak of around 75%”. That’s debt defla­tion for you.

It Is Fail­ing: ALL OF IT, Karl Den­ninger, 27 May

Den­ninger has called the end of civil­i­sa­tion a few times now (most notably on March 5 this year) but in this post he notes that the 30-year fixed mort­gage rate increased by 30% in a sin­gle day. This will have huge impacts on the US econ­omy as the Fed has already set inter­est rates to zero so can not manip­u­late retail mort­gage rates down fur­ther to stim­u­late the econ­omy. Zero Hedge pro­vides an analy­sis of bond sup­ply and demand: Time for QE2.

Bond Car­nage, Mud­dled Infla­tion Think­ing & Fed Options, Naked Cap­i­tal­ism, 28 May

A more in-depth look at this week’s top story. Key quote: “if the Fed were to step up pur­chases sys­tem­at­i­cally, it could very well wind up own­ing the mar­ket. How many investors would decide to sell into its bid? So QE would indeed cre­ate infla­tion, but might not con­trol bond yields as much as the Fed hopes unless it is will­ing to buy what­ever it takes to hold a given inter­est rate.” Note that Vockler’s surg­ing inter­est rates in the early 80s was a major cat­a­lyst in bank­rupt­ing of the US sav­ings and loans indus­try. The banks had sold 30-year fixed mort­gages at, let’s say 10%, but their financ­ing pipeline came from short-term rates. So when the whole­sale mort­gage inter­est rates rose to 20% they became instantly insol­vent.

Reg­u­la­tors Should Require Bond Bank Buffers, Bloomberg, 28 May

You scratch my back, I’ll scratch yours. The Fed/Treasury didn’t cre­ate $12.8 tril­lion and give it to the banks for noth­ing. This is shadow QE: the Fed buys Trea­sury bills with the stroke of a key­board; the Trea­sury bails out the banks; banks use the bail out money to bail out the Trea­sury and Fed. Prob­lem solved. There’s been some chat­ter in the blo­gos­phere about the Fed using shock and awe to push the yields back down. Watch this space.


Loud Par­a­digm Shift Rum­blings, Jim Willie, Goldenjackass.com, 22 May

I’m a bit ner­vous link­ing to Jim Willie as he often comes across as an unhinged crank. But this is a great post, so long as you take a few claims with a pinch of salt. It presents a very com­pelling view of the state of the US rel­a­tive to other emerg­ing pow­ers. If you have a spare six months, you could also check out an anno­tated ver­sion of the same arti­cle on Mar­ket Skep­tics (com­plete with razor blades and pain killers). 

China Unveils First Sov­er­eign Credit Rat­ing Stan­dards, China View, 23 May (via Mar­ket Skep­tics)

One to watch. “The sov­er­eign credit rat­ing stan­dards would be able to eval­u­ate the will­ing­ness and abil­ity of a [for­eign] cen­tral gov­ern­ment to repay its com­mer­cial finan­cial debts as stip­u­lated in con­tracts.” How will they rate US gov­ern­ment debt (like “tough cus­tomer” Moodys)? Or Australia’s for that mat­ter, now that we’re run­ning $70b deficits. How would China rate Westpac’s lat­est bond offer­ing?

Russia’s First Per­sian Gulf Naval Pres­ence Coor­di­nated With Tehran, DEBKAfile, 26 May

More bad news for the USD: “… this is the first time a Russ­ian flotilla will have taken on pro­vi­sions and fuel at the same Gulf ports which hith­erto ser­viced only the US Navy.” Kind of impor­tant, don’t you think? But don’t worry; read­ers of the main­stream press were kept up-to-date on break­ing Russ­ian news when a small girl was found behav­ing like a dog.

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  • sPurf

    Philip & Tel,

    Just to clar­ify a few points about your “greedy doc­tors” argu­ment.

    Philip the link you posted refers to Gov­ern­ment actions to restrict med­ical grad­u­ate num­bers. When have you known Govt. to put in place poli­cies to increase the wages of their employ­ees? I am not sure which pro­fes­sion you work in but I doubt you think that their should be unlim­ited entrants into Uni­ver­sity for the degrees you have. I am com­fort­able know­ing that it isn’t easy to get into Med­ical School, Spe­cial­ist train­ing etc. Show me where good Doc­tors have been trained by using a Neo­clas­si­cal com­pet­i­tive model?

    The AMA is with­out a doubt one of the weak­est Unions in Oz. If you have ever been to an Enter­prise Bar­gain­ing nego­ti­a­tion for Salaried Hos­pi­tal Doc­tors you would realise this. For exam­ple, the NSW Award for Staff Spe­cial­ists has clauses such as an expec­ta­tion to per­form “rea­son­able over­time and on-call” with no pro­vi­sion to remu­ner­ate for this. This allows hos­pi­tal bureau­crats to force Doc­tors to work out­side their ros­tered hours with­out extra pay and using this as a jus­ti­fi­ca­tion for not hir­ing extra staff. Ask any hos­pi­tal doc­tor whether they would like more or less doc­tors work­ing there and you may be sur­prised with the response. Addi­tion­ally the AMA does not nego­ti­ate for nurses, that is the ANF and they are com­par­a­tively a supe­rior Union and con­sis­tently achieve good out­comes for their mem­bers.

    Extolling Med­ical Tourism as a method of dri­ving med­ical costs in Oz down is the same as advo­cat­ing Chi­nese slave labour to make our undies. You maybe sur­prised to learn that in India the ratio of Doc­tors wage to Aver­age Wage is much larger than the same ratio in Oz. If you want a fairer com­par­i­son you should get health care from coun­tries who pay their doc­tors like every other civil ser­vant (East­ern Europe) and then tell me which sys­tem you would pre­fer? Or maybe your “alter­na­tive ther­a­pies” will fix you right up after your car acci­dent or from your appen­dici­tis.

    Using Neo­clas­si­cal mar­ginal cost of labour the­o­ries makes guys like Jayant Patel seem like heroes. I think you will agree pay­ing greedy local doc­tors an incen­tive wage to work in regions that can’t attract them is a supe­rior and cheaper solu­tion given how expen­sive that deba­cle cost and is still cost­ing tax­pay­ers, not to men­tion the suf­fer­ing of the patients who received his eco­nom­i­cally com­pet­i­tive care.

  • MMitchell

    Hav­ing had a look at Kari’s site, I the fol­low­ing arti­cle seems a good sum­mary of some of Karl’s major ideas:



    Reuters also pick­ing up on the move to short dated US Trea­suries. And pos­si­bly not because of a pickup in infla­tion expec­ta­tions , as Setser points out.

    The Fed sounds wor­ried- and so should it be. Ris­ing long bond rates will quickly derail any chance of a US recov­ery.

    Fed­eral Reserve puz­zled by yield curve steep­en­ing

    But the Fed is not really sure what is dri­ving the sharp rise in long-dated bond yields, and espe­cially a widen­ing gap between short and long term yields.

    Do ris­ing U.S. Trea­sury yields and a steep­en­ing yield curve sug­gest an eco­nomic recov­ery is more cer­tain, mean­ing less need for safe haven gov­ern­ment bonds and a healthy demand for credit? If so, there might be less need for the Fed to expand the money sup­ply by buy­ing more U.S. Trea­suries.

    Or does the steep­en­ing yield curve mean investors are wor­ried about the dete­ri­o­ra­tion in the U.S. fis­cal out­look, or the poten­tial for a col­lapse in the U.S. dol­lar as the Fed floods the world with newly minted cur­rency as part of its quan­ti­ta­tive eas­ing pro­gram. This might be an argu­ment to aug­ment to step up asset pur­chases.

    Another pos­si­bil­ity is that China, the largest for­eign holder of U.S. Trea­sury debt, has decided to refo­cus its port­fo­lio by lean­ing more heav­ily on shorter-term matu­ri­ties.”

  • Philip


    Health and med­ical ser­vices are demand inelas­tic. An increased sup­ply of health and med­ical pro­fes­sion­als of course would cost the gov­ern­ment or pri­vate health insur­ers more as an aggre­gate mea­sure, but this doesn’t mean much because lower wages mean that insur­ers gain on a trans­ac­tion-by-trans­ac­tion basis. The point is that increased com­pe­ti­tion in highly-paid ser­vices would serve to drive down wages, even if it results in only small decreases, and pure effi­ciency gains would be real­ized as well.

    A good overview:

    Baker, Dean. 2003. “Pro­fes­sional Pro­tec­tion­ists: The Gains From Free Trade in Highly Paid Pro­fes­sional Ser­vices”, Cen­ter for Eco­nomic and Pol­icy Research, Wash­ing­ton D.C.



    Nowhere will you find that I said there should be unlim­ited uni­ver­sity enroll­ments for any pro­fes­sion. My pro­fes­sion is ICT, and it is rea­son­ably easy for peo­ple to receive an edu­ca­tion is this area. Med­ical enroll­ments are small because of the lim­ited sup­ply of med­ical edu­ca­tional place­ments at uni­ver­si­ties and the dif­fi­cult score needed to gain a place­ment.

    Given that this severely restricts sup­ply, it doesn’t make sense for gov­ern­ment to go one step fur­ther and restrict sup­ply even fur­ther.

    The rea­son why so much of our man­u­fac­tur­ing is done by Chi­nese slave labor­ers is because they can do it much more cheaply than Aus­tralians can. Recent trade agree­ments, such as the Uruguay round of the WTO, have gone a step fur­ther to facil­i­tate the flow of goods between coun­tries. They sharply limit the abil­ity of coun­tries to impose safety or envi­ron­men­tal stan­dards on imported prod­ucts – in effect requir­ing that such stan­dards can be sub­ject to scrutiny by a trade panel, which has the power to assess whether the rules put in place by gov­ern­ments are accept­able.

    Inter­na­tional trade nego­ti­a­tions have made no com­pa­ra­ble effort to stan­dard­ize rules in order to facil­i­tate trade in highly paid pro­fes­sional ser­vices.

    Con­jur­ing up an exam­ple of a rot­ten apple like Patel serves no use­ful pur­pose. One of the rea­sons why he has gained pub­lic­ity is because he is an excep­tion, not the rule. Com­pe­ti­tion is not going to start cre­at­ing med­ical mon­sters, what he did was due to a lack of ethics.

  • sPurf


    The restric­tion described in that post refers to the 20% of grad­u­ates who are rural bonded. These grad­u­ates must work in rural areas after grad­u­a­tion for a min­i­mum of 7 years. Despite this there are still sig­nif­i­cant doc­tor short­ages in these areas as it is hard to attract peo­ple to these areas when Gov­ern­ments refuse to pay beyond the rate payed for the same or rel­a­tively eas­ier work in Met­ro­pol­i­tan areas. The short­fall is made up my cheaper over­seas grad­u­ates (cheap as the costs of train­ing are free) who are given restricted visas pre­vent­ing them work­ing any­where else. Fur­ther sav­ings are made by clas­si­fy­ing many of them as trainees rather than spe­cial­ists even if there is no train­ing tak­ing place. Iron­i­cally, these areas of need are often more demand­ing and with less sup­port than well staffed areas and send­ing peo­ple with lit­tle domes­tic knowl­edge is a recipe for dis­as­ter. It may be easy to see Patel as jut a bad guy with a “lack of ethics” but the real­ity is more com­plex. Also say­ing that he is the excep­tion rather than the rule is also naive…I could tell you some hor­ror sto­ries. Sure, he is prob­a­bly some­one you wouldn’t have a beer with be he isn’t the Unabomber either. The major issue is that his employer didn’t want to know that he was under­qual­i­fied for the posi­tion and chose to ignore con­cerns that were raised later. If there wasn’t a moti­va­tion for Gov­ern­ments to be “eco­nom­i­cally com­pet­i­tive” they would have ensured that they secured a senior spe­cial­ist able to work in remote and chal­leng­ing cir­cum­stances. This would obvi­ously cost more than the Patel option.

    Ulti­mately I think it is very dif­fi­cult to apply a com­pet­i­tive model to some pro­fes­sions. Would you apply this to the Police or the Mil­i­tary? Maybe out­source law and order to a com­pet­i­tive mili­tia? In many ways they are sim­i­lar to the med­ical pro­fes­sion as nei­ther pro­duce eas­ily mea­sur­able prod­ucts and there­fore dif­fi­cult to see who is more effi­cient than another. For exam­ple one GP can see an aver­age of a patient every 5 min­utes and while another takes 30 min­utes. The first GP will charge Medicare less per patient but I would hardly call him or her more effi­cient.

    If you delve a lit­tle deeper you will see that most med­ical organ­i­sa­tions want more not less doc­tors trained.


  • Philip


    Clearly we share con­cerns about the pro­fes­sion­al­ism of doc­tors. I don’t think its naive to call doc­tors like Patel an excep­tion, because I believe that the major­ity of doc­tors, as in any other pro­fes­sion, are hon­est, eth­i­cal and will do the right thing.

    It may be dif­fi­cult to increase com­pe­ti­tion in some pro­fes­sions, but clearly there are steps the gov­ern­ment can imple­ment to increase the sup­ply of doc­tors. The most obvi­ous is to allow more over­seas-trained doc­tors into Aus­tralia, on the basis of hav­ing been cer­ti­fied to Aus­tralian stan­dards. Of course there will always be bad apples that get through but prop­erly imple­mented cer­ti­fi­ca­tion will ensure that this will be kept to a min­i­mum.

    I think that state-imposed trade restric­tions are based upon labor quo­tas, not cer­ti­fi­ca­tion, though I could be wrong.

    It would not sur­prise me in the least if uni­ver­si­ties, the fed­eral and state gov­ern­ments, and the AMA have con­structed agree­ments to restrict sup­ply over the decades while at the same time cry­ing about short­ages.

    Uni­ver­si­ties impose tough restric­tions in terms of a ter­tiary score to get into med­ical place­ments, usu­ally >=98. How­ever, there really is no great dif­fer­ence between a high school stu­dent that achieves 90 or one that achieves 98. It is to ensure that sup­ply is restricted and that hun­dreds of eager stu­dents are turned away. I’m sure the argu­ment can be made that if med­ical entry scores are low­ered it will result in less-intel­li­gent stu­dents get­ting in, but I don’t see how it could apply to stu­dents who score >=90.

    It is gen­er­ally point­less to take the word of any orga­ni­za­tion at face value because the lead­ers will always pro­claim they have the best inter­ests of soci­ety at heart. The ques­tion that must be asked is what are their poli­cies?

    Under-sup­ply results in doc­tors deal­ing with too many patients, which may com­pro­mise qual­ity of ser­vice. With more doc­tors in the coun­try, then the demand can be dis­trib­uted more evenly between doc­tors.

  • evan

    Another fan­tas­tic video (under 20mins) from deepcapture.com:


    In places like India they pay off politi­cians with paper bags full of cash (lit­er­ally). In the west they do it this way:


    (The arti­cle is from 1994 and will only make sense after watch­ing the video and under­stand­ing the role of REFCO.)

  • sPurf


    I could only spec­u­late whether col­lu­sion is going on between Govt and Unions with regard to doc­tor num­bers. I can hon­estly tell you that doc­tors on the ground do want more staff and don’t think much about this push­ing wages down. Junior staff are still doing shifts that for all intents and pur­poses are ille­gal and senior staff are hav­ing to forgo leave to main­tain ser­vice lev­els. Doc­tors still have the high­est sui­cide, drug abuse, divorce rates etc of any profession…obviously all that cash they are rolling in doesn’t hug you back.

    The first step is to cre­ate more posi­tions on the ground and then find staff to fill them as we they are all employed by the Gov­ern­ment at the end of the day and sub­ject to either State Awards or to the Medicare Sched­ule. It is the Gov­ern­ment that also decides Uni­ver­sity entrance num­bers. Unless this par­a­digm is changed it mat­ters lit­tle how many peo­ple are com­pet­ing for the job as the suc­cess­ful appli­cant will get payed the same no mat­ter how tal­ented they are. Whether they come locally or from over­seas is a mat­ter for debate…but I will warn you that a GP from India will always strug­gle in rural Aus­tralia just like an Aus­tralian GP will strug­gle in India. The dif­fer­ence being that few Aus­tralian doc­tors will put them­selves in a posi­tion over­seas that they are not com­fort­able with as they aren’t as finan­cially “moti­vated”. The amount of train­ing required to put such a doc­tor to a level which would be equiv­a­lent to a local grad­u­ate would be to long and expen­sive to be “eco­nom­i­cally” viable. Hence why you end up with the Patel situation(s)…that is a doc­tor doing a job not because they are best qual­i­fied but because the employ­ing author­ity needed a bum on a seat.

    Except for UNSW, most Med­ical Schools are now either post-grad­u­ate or use a range of assess­ments (psy­cho­me­t­ric etc.) for entrants and rely­ing on lower TERs / GPRs (as low as 80% I think). The pre­vi­ous par­a­digm was a larger intake with higher fail­ure rates dur­ing the degree but this was aban­doned as it was felt to be unfair and didn’t result in bet­ter grad­u­ates.

  • ak


    Unfor­tu­nately I can see a poten­tial prob­lem with your pro­posal. As an IT pro­fes­sional and a migrant I can say that it is rel­a­tively easy to get a visa. True, the queue is much longer than in 2003 but it is still much eas­ier to get to Aus­tralia than to other coun­tries. The points-based sys­tem is sim­ple and prob­a­bly much less cor­rupt than in the US (think about get­ting a Green Card). 

    So why should we fix some­thing what is not fun­da­men­tally bro­ken?

    I don’t want to com­ment on doc­tors but for a psy­chol­o­gist it is still rel­a­tively easy to get a reg­is­tra­tion in Aus­tralia pro­vided that that the diploma meets the EU stan­dards.

    Now let’s con­sider the fol­low­ing sce­nario:
    We allow for unre­stricted immi­gra­tion of all pro­fes­sion­als to Aus­tralia. Due to rel­a­tively high salaries, the nat­ural beauty of the coun­try and quite tol­er­ant and accom­mo­dat­ing soci­ety half a mil­lion doc­tors, engi­neers and other pro­fes­sion­als arrive every year. We don’t need local grad­u­ates. Salaries can go down and there is per­fect com­pe­ti­tion. How­ever the demand for trades­peo­ple like plumbers or builders can only be sat­is­fied by the locals. We don’t need 1 mil­lion Pol­ish plumbers and builders here, do we? So Aussie plumbers can earn more than the doc­tors. (Not a joke, I saw it in 1988 in Poland).

    OK so in 20 years time all the doc­tors speak Mandarin/Hindu/Russian/Polish and all the plumbers are locals. 

    Is this what we want?

    Dis­claimer: I worked as a farm hand 16 years ago in Nor­way so I highly respect phys­i­cal work.

  • Philip


    I never claimed that our immi­gra­tion pol­icy should sup­port com­pletely open bor­ders to any pro­fes­sion. What I did say is that com­pe­ti­tion should be increased for highly paid pro­fes­sions, not a purely free mar­ket.

    Dean Baker is the only econ­o­mist I know of who has per­formed an analy­sis of this type of pro­tec­tion­ism (per­haps there are oth­ers). His rough analy­sis pre­dicts that if the sup­ply of four pro­fes­sions (doc­tors, den­tists,
    lawyers, and accoun­tants) were to increase 15% in the US, the con­sumer gains would amount to $US160 — $US270 billion/year, with a pure effi­ciency gain of $US12 — $US20 billion/year.

    Allow­ing a 15% greater sup­ply doesn’t amount to a per­fect flow of labor across bor­ders, yet the gains are enor­mous. Slow­ing open­ing the bor­ders to the most highly paid pro­fes­sions in this coun­try is prob­a­bly the best pol­icy.

    Even by neo­clas­si­cal stan­dards, cor­po­rate exec­u­tives don’t deserve what they earn (usu­ally hun­dreds of thou­sands or mil­lions) until there is a purely free mar­ket in the sup­ply of cor­po­rate exec­u­tives. Since they are the most well paid, pol­icy can start with this pro­fes­sion. Then it can move onto man­agers, lawyers, etc.

    In clas­si­cal times, it was assumed that cap­i­tal was fairly fixed and labor was free to move about. These days it is almost the oppo­site. What passes for “trade” is quite non­sen­si­cal and only half the story.

  • sPurf


    You seem to assume that doc­tors can come into the coun­try and once they have been cre­den­tialed they can then put up a shin­gle and start prac­tic­ing. The real­ity is that there is lit­tle free­dom to start prac­tic­ing out­side the con­text of a cre­ated posi­tion by the Gov­ern­ing author­ity. Dean Bak­ers analy­sis may float in the US “user pays sys­tem” but it doesn’t work when a 3rd party (Gov­ern­ment / Insur­ance com­pa­nies) con­trols both the num­ber of doc­tors and how much they are paid. As I have explained, bring­ing more doc­tors into the coun­try with­out fund­ing more posi­tions will just result in unem­ployed doc­tors with no improve­ment in wage effi­ciency.

  • Philip


    In that case, reform on the demand side will have to be changed as well.

  • Tel

    Addi­tion­ally the AMA does not nego­ti­ate for nurses, that is the ANF and they are com­par­a­tively a supe­rior Union and con­sis­tently achieve good out­comes for their mem­bers.

    Oh yeah, that explains why nurses get paid so much bet­ter than doc­tors do, and why the quota lim­i­ta­tions on nurses get­ting into uni­ver­sity are so tight.

  • sPurf


    I am not sure if you are being sar­cas­tic with that state­ment but I can’t see how you can con­clude nurses are paid more than doc­tors. A casual perusal of any state award makes this obvi­ous, NSW Health allows you to view the Awards if you are inter­ested http://www.health.nsw.gov.au

    What would be the logic behind the AMA…an organ­i­sa­tion funded by doc­tors, to have nurses paid more than their mem­bers?