Australia’s Economy is a House of Cards

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By Matt Bar­rie & Craig Tin­dale.

I recent­ly watched the fed­er­al trea­sur­er, Scott Mor­ri­son, proud­ly pro­claim that Aus­tralia was in “sur­pris­ing­ly good shape”. Indeed, Aus­tralia has just snatched the world record from the Nether­lands, achiev­ing its 104th quar­ter of growth with­out a reces­sion, mak­ing this achieve­ment the longest streak for any OECD coun­try since 1970.

Aus­tralian GDP growth has been trend­ing down for over forty years
Source: 
Trad­ing Eco­nom­ics, ABS

I was pret­ty shocked at the com­pla­cen­cy, because after twen­ty six years of eco­nom­ic expan­sion, the coun­try has very lit­tle to show for it.

Rudd’s essay is on the money

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Aus­tralian Prime Min­is­ter Kevin Rudd has fol­lowed up his cri­tique of neolib­er­al­ism with a new essay in the Syd­ney Morn­ing Her­ald on the caus­es of the cri­sis, and the poli­cies need­ed after recov­ery.

With one excep­tion, his key expla­na­tions for the cri­sis are the same as those iden­ti­fied by myself and the hand­ful of oth­er econ­o­mists who pre­dict­ed this cri­sis before it hap­pened:

Talk to the Fabian Forum: The Global Financial Crisis: How bad will it get?

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Broad­cast on March 11 2009 by ABC Radio Nation­al Big Ideas

A blog mem­ber has kind­ly pro­duced a tran­script of the off-the-cuff talk I gave at this forum. I’ve made minor cor­rec­tions to the punc­tu­a­tion below, but the text is oth­er­wise as deliv­ered on the night with­out speak­ing notes–so there are some gram­mat­i­cal slips. For those who want to lis­ten to this alone–without also lis­ten­ing to Bernie Fras­er beforehand–here is a link to the MP3 of my talk.

Steve Keen’s Debtwatch No. 33 April 2009: Lies, Damned Lies, and Housing Statistics

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Lies, damned lies, and sta­tis­tics” is part of a phrase attrib­uted to Ben­jamin Dis­raeli and pop­u­larised in the Unit­ed States by Mark Twain: “There are three kinds of lies: lies, damned lies, and sta­tis­tics.” The state­ment refers to the per­sua­sive pow­er of num­bers, the use of sta­tis­tics to bol­ster weak argu­ments, and the ten­den­cy of peo­ple to dis­par­age sta­tis­tics that do not sup­port their posi­tions. (Wikipedia)

Two recent speech­es by the RBA sup­port­ed the con­tention that Aus­tralian house prices are no longer over­val­ued, that mort­gage repay­ment costs have returned to his­toric aver­ages, that Aus­tralia is suf­fer­ing a hous­ing short­age, and there­fore that the Aus­tralian hous­ing mar­ket should not expe­ri­ence the cat­a­stroph­ic falls that are now com­mon­place across the OECD–and espe­cial­ly in the USA.

It’s just a flesh wound…”

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It seems we’ve moved from Stan­ley Kubrick to John Cleese. Rory Robert­son’s reply to my “Rory Robert­son Designs a Car” post reminds me of one of my many favourite scenes from Mon­ty Python, the fight between King Arthur and the Black Knight:

King Arthur: [after Arthur’s cut off both of the Black Knight’s arms] Look, you stu­pid Bas­tard. You’ve got no arms left. 

Black Knight: Yes I have. 

King Arthur: *Look*! 

Black Knight: It’s just a flesh wound…

I do not know anyone who predicted this course of events…

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Sev­er­al peo­ple have com­ment­ed on the speech by Glenn Stevens (for inter­na­tion­al read­ers, Stevens is the Gov­er­nor of Aus­trali­a’s cen­tral bank, the Reserve Bank of Aus­tralia) yes­ter­day in which he com­ment­ed, inter alia, that:

I do not know any­one who pre­dict­ed this course of events. This should give us cause to reflect on how hard a job it is to make gen­uine­ly use­ful fore­casts. What we have seen is tru­ly a ‘tail’ out­come – the kind of out­come that the rou­tine fore­cast­ing process nev­er pre­dicts. But it has occurred, it has impli­ca­tions, and so we must reflect on it.”

Always look on the bright side of … economic data?

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If things are real­ly grim, it helps to have an inde­fati­ga­ble nature, and there’s no doubt that RBA Deputy Gov­er­nor Ric Bat­telli­no has that in spades—at least in the speech­es he makes at pub­lic con­fer­ences. Were I being cru­ci­fied, I’d like to have Ric up there with me, singing “Cheer up Bri­an!…”, to take my mind off the nails.

But were I still in the Gar­den of Geth­se­mane, and actu­al­ly try­ing to avoid the Romans (and an extend­ed Pilates ses­sion the next day), I think I’d want some­one else on look­out duty.

Debtwatch 27 October 08: The Failure of Central Banks

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Just two years ago, Cen­tral Banks appeared tri­umphant. Infla­tion, the scourge of the 1970s and 80s, appeared dead, the finan­cial cri­sis of the Tech Wreck had been con­tained, economies world­wide were boom­ing, and stock mar­kets and house prices were spi­ralling ever upwards.

Then along came the Sub­prime Cri­sis, and we received a rude reminder of why Cen­tral Banks were cre­at­ed in the first place: to ensure that the world would nev­er again expe­ri­ence a Great Depres­sion.

DebtWatch No 26 September 2008: Losing control of the margin?

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Late last year on SBS News, when Stan Grant asked me which way the RBA would move rates in 2008, I replied “Up, and then down”, Stan quipped “Spo­ken like a true economist–an even hand­ed answer!”–to which I replied “More down than up”.

I expect­ed the intial rate ris­es because of the RBA’s focus on the rate of infla­tion, and a sub­se­quent fall, not because infla­tion would be head­ing down, but because the econ­o­my would be–and the RBA rate would be forced to fol­low it

Defer the RBA “Enhanced Independence” Act

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Steve Keen’s DebtWatch No 22 May 2008

The Reserve Bank Amend­ment (Enhanced Inde­pen­dence) Bill 2008, which was tabled in Par­lia­ment in March, aims to give the RBA Gov­er­nor and Deputy Gov­er­nor “the same lev­el of statu­to­ry inde­pen­dence as the Com­mis­sion­er of Tax­a­tion and the Aus­tralian Sta­tis­ti­cian” (Wayne Swann, Hansard, Thurs­day, 20 March 2008, p. 2381).

Under the cur­rent Reserve Bank Act, the Gov­er­nor and Deputy are appoint­ed by the Trea­sur­er, and the Trea­sur­er must remove them from their posi­tions if either of them: