Archive for the ‘Economic matters’ Category

The world-wide growth in house prices

April 27th, 2015 Comments off
  • Since 1900 house prices in advanced economies have increased threefole. The overwhelming hare of this increase occurred  in the second half of the 20th century.

    Since 1900 house prices in advanced economies have increased threefole. The overwhelming hare of this increase occurred in the second half of the 20th century.

    house prices australia

    No price like home: Global house prices 1870-2012 – How have house prices evolved over the long‐run? This paper presents annual house prices for 14 advanced economies since 1870. Based on extensive data collection, we show that real house prices stayed constant from the 19th to the mid‐20th century, but rose strongly during the second half of the 20th century. Land prices, not replacement costs, are the key to understanding the trajectory of house prices. Rising land prices explain about 80 percent of the global house price boom that has taken place since World War II. Higher land values have pushed up wealth‐to‐income ratios in recent decades.

  • Nobody Said That – Imagine yourself as a regular commentator on public affairs — maybe a paid pundit, maybe an supposed expert in some area, maybe just an opinionated billionaire. You weigh in on a major policy initiative that’s about to happen, making strong predictions of disaster. … But nothing you predicted actually comes to pass. What do you do? You might admit that you were wrong, and try to figure out why. But almost nobody does that; we live in an age of unacknowledged error. … Refusing to accept responsibility for past errors is a serious character flaw in one’s private life. It rises to the level of real wrongdoing when policies that affect millions of lives are at stake.
  • 8 Obama Jokes That Stood Out From The White House Correspondents Dinner


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  • Poetry is going extinct, government data show
  • Why So Many Americans Feel So Powerless
  • Can we predict happiness? – What makes us happy? Well-being researchers have identified many variables related to happiness, but we still don’t know exactly how the events of our daily lives combine to influence how we feel from moment to moment. People should get happier when good things happen, but clearly this is not the whole story. We designed a study to investigate the relationship between rewards and happiness. We brought people into the lab and asked them repeatedly about their happiness as they chose between safe and risky monetary options. Risky choices were gambles with equal probabilities (like a coin toss) of a better or worse outcome. If they chose to gamble on a given trial, they then found out whether they won or lost. Based on the data, we developed a mathematical equation to predict how self-reported happiness depends on past events. We found that happiness depends not on how well things are going, but whether things are going better or worse than expected.

    Happiness depends on safe choices (certain rewards, CR), expectations associated with risky choices (expected value, EV), and whether the outcomes of risky choices were better or worse than expected. This final variable is called a reward prediction error (RPE), the difference between the experienced outcome and the expectation. The neurotransmitter dopamine is thought to represent these signals which might explain how people learn about rewards (if you get more than you expected, next time you should expect more).

    Happiness depends on safe choices (certain rewards, CR), expectations associated with risky choices (expected value, EV), and whether the outcomes of risky choices were better or worse than expected. This final variable is called a reward prediction error (RPE), the difference between the experienced outcome and the expectation. The neurotransmitter dopamine is thought to represent these signals which might explain how people learn about rewards (if you get more than you expected, next time you should expect more).

An interest rate cut by Reserve Bank narrowly favoured

April 6th, 2015 Comments off

The Owl’s election indicator narrowly supports the view that the Reserve Bank board will decide to lower official interest rates by a quarter of a percentage point.

april 2015 interest rates

China’s slower growth rate – Australia to feel the pain

March 5th, 2015 Comments off


  • China Warms Up to ‘Low’ Growth Rate Other Countries Would Kill for – Today, China’s leaders are increasingly aware that what really matters is ensuring adequate employment and growing incomes. That’s particularly true of Li, premier since March 2013, who has a law degree and a Ph.D. in economics from Peking University and who is known as an advocate for more economic reform. The leadership can even afford to miss its GDP target, as arguably it did last year, when the goal was “about 7.5 percent,” as long as Chinese are employed and keep earning more. It’s been working. Last year, Li promised that China would add 10 million urban jobs and then handily beat the target, with 13 million. People’s livelihoods improved, too. … Expect the real pain to be reserved for resource-rich countries such as Australia and Russia. The value of crude oil, steel, and iron ore imports to China is already falling rapidly, a trend likely to continue as China’s property sector and new construction cools.  insect
  • Insectophilia – In Japan, beetles are pets, grasshoppers a delicacy and fireflies are adored. Is the creepy-crawly a Western invention?

the banker

  • Eurozone meltdown: how can it be avoided? – Resolving the eurozone crisis is one of the greatest challenges facing the global economy. Steady global growth cannot resume until a proper solution is found, as nearly all major economies – the US, China and Brazil – are impacted by failure in the common currency area. But, for the past five years, the euro area has lurched from one disaster to another, amid bitter argument over who is to blame and with reform and key initiatives moving at a snail’s pace. [ Free registration required]
While the tropical Pacific Ocean is currently neutral, the odds of an El Niño developing in 2015 has increased. Therefore, the ENSO Tracker status has been raised to El Niño WATCH.

While the tropical Pacific Ocean is currently neutral, the odds of an El Niño developing in 2015 has increased. Therefore, the ENSO Tracker status has been raised to El Niño WATCH.

  • Renewed warming in the tropical Pacific Ocean – The Bureau’s ENSO Tracker has been upgraded to El Niño WATCH. This is due to a combination of warmer-than-average temperatures in the tropical Pacific Ocean and models showing that further warming is likely in coming months. El Niño WATCH indicates about a 50% chance of El Niño forming in 2015.
  • Mugabe’s New Best Friends in Brussels – Why is Europe suddenly cozying up to Zimbabwe’s nonagenarian kleptocrat?

Pernicious inflation and an imploding Europe – a few things for Joe to think about

February 22nd, 2015 Comments off

22-02-2015 consumerprices

  • Feeling down – Deflation can be a good thing. But today’s version is pernicious – “Deflation poses several risks, some well-understood, one not. … The least-understood danger is also the most serious, because it is already here. Deflation makes it harder to loosen monetary policy. … Policymakers should be more worried than they appear to be, and their actions to avert deflation should be bolder. Governments need to boost demand by spending more on infrastructure; central banks should err on the side of looseness.”
  • An orderly Greek exit is the only option for Europe – “The euro will eventually break up. But, before it does, we’ll see a lot more democratic transgressions as big countries, aided by the Brussels machine, impose their will on smaller neighbours.’If we aim deliberately at impoverishment, vengeance, I dare predict … will not limp,’ Keynes wrote in 1919. ‘But who can say how much is endurable, or in what direction men will seek at last to escape from their misfortunes?’ I’m not predicting war in Western Europe. But I am saying the eurozone will generate ever-rising tensions and spiralling financial instability until it finally implodes or is deliberately dismantled.
  • The hideous dialectic of Isis savagery – “The methods of the jihadi blackshirts are chillingly savage. But Isis is chillingly smart too.”
  • Facing Up to the Democratic Recession  – Democracy has been in a global recession for most of the last decade, and there is a growing danger that the recession could deepen and tip over into something much worse. Many more democracies could fail, not only in poor countries of marginal strategic significance, but also in big swing states such as Indonesia and Ukraine (again). There is little external recognition yet of the grim state of democracy in Turkey, and there is no guarantee that democracy will return any time soon to Thailand or Bangladesh. Apathy and inertia in Europe and the United States could significantly lower the barriers to new democratic reversals and to authoritarian entrenchments in many more states.”
  • Why Do Many Reasonable People Doubt Science? “We live in an age when all manner of scientific knowledge—from climate change to vaccinations—faces furious opposition. “Some even have doubts about the moon landing.”
  • The Great Jewish Exodus – “Israel is indeed the home of every Jew, and that is important, a guarantee of sorts. It is equally important, however, that not every Jew choose this home. That is another kind of guarantee, of Europe’s liberal order, of the liberal idea itself.”

22-02-2015 shape

Part timing Australia – the declining full-time jobs

February 17th, 2015 Comments off

Australian Bureau of Statistics figures suggest that Australia is becoming a part-time economy. The trend Labour Force figures for January show that a record high of 30.73% of jobs were part time. Back in February 1978 when the ABS series began the proportion was only 15.17%


Categories: What the figures show Tags:

A real health cost crisis to think about – Médecins Sans Frontières on immunisation

January 21st, 2015 Comments off

The right shot

  • Rocketing vaccine cost warning – “The price of life-saving vaccines has skyrocketed leaving some countries struggling to fully immunise children, Medecins Sans Frontieres warns. A report by the charity says there has been a 68-fold increase in prices between 2001 and 2014. It accused the pharmaceutical industry of overcharging and highlighted cases where rich western countries were getting a better rate than poor ones. Industry said its pricing reflected the cost of manufacture.”

price to immunise


  • Hating Good Government – “… most self-proclaimed conservatives are actually reactionaries. That is, they’re defenders of traditional hierarchy — the kind of hierarchy that is threatened by any expansion of government, even (or perhaps especially) when that expansion makes the lives of ordinary citizens better and more secure.”

oecd employment rate

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China’s falling growth rate enough to drive iron ore producers to drink?

January 20th, 2015 Comments off

20-01-2015 chinagrowth

The significance of the wine barrels illustrating this Chinese government newsagency tweet on China’s falling growth rates escapes me but the story it points to might drive some iron ore producers to drink.

BEIJING, Jan. 20 (Xinhua) — China’s economy grew 7.4 percent in 2014, in line with market expectations and registering the weakest expansion in 24 years, the National Bureau of Statistics (NBS) said Tuesday.

The reading was slightly below the government target of around 7.5 percent for the year, as authorities are at pains to transform the economy onto a more sustainable track while tackling a housing slowdown, softening domestic demand and weak global recovery.

Last year, the country’s gross domestic product reached 63.65 trillion yuan (10.4 trillion U.S. dollars). Growth in the fourth quarter came in at 7.3 percent, flat with the rate seen in the third.

“The economy is maintaining steady operation under the new normal, with positive trends of stable growth, optimized structure, enhanced quality and improved social welfare,” noted Ma Jiantang, head of the NBS at a press conference.

In 2014, China’s industrial output grew 8.3 percent, down from the 9.7-percent growth seen in 2013, while growth of China’s fixed-asset investment slowed to 15.7 percent. Retail sales went up 12 percent to 26.24 trillion yuan, the NBS data showed.

Another sign of an Australian economy trudging sideways

January 19th, 2015 Comments off


Trend estimates: The December 2014 trend estimate (92 618) has decreased by 0.1% when compared with November 2014. The trend estimate has now decreased by 0.1% for five consecutive months.
Seasonally adjusted estimates: The December 2014 seasonally adjusted estimate (94 903) has increased by 3.0% when compared with November 2014.

  • Cover of darkness – The cypherpunks are winning the second crypto-war against government spies. What will happen when everyone is anonymous?
  • Oasis or Mirage? Jordan’s Unlikely Stability in a Changing Middle East – “Jordan’s stability and security are not figments of the imagination, especially considering the revolutions, civil wars and endemic terrorism that seem to have afflicted most of the country’s neighbors. Yet the calm may not be sustainable, as Jordan confronts its own continuing struggles over reform and change; faces seemingly countless threats in terms of its internal and external security; and attempts to deal with its own economic crises and challenging energy needs.” (Sign in required)
  • Death rate drops when top heart surgeons are away – “Among the most severe cases of cardiac arrest, 70 per cent of those admitted when no cardiology conference was taking place died within 30 days. But among those admitted when expert cardiologists were away at meetings, the corresponding death rate was 60 per cent (JAMA Internal Medicine). The results suggest that for the most seriously ill heart patients, the risks of emergency interventions such as artery widening may outweigh the benefits …”
  • The Hemingway Law of Motion: Gradually, then Suddenly – ‘Ernest Hemingway’s 1926 novel The Sun Also Rises, which is available various places around the web like here, includes the following snippet of dialogue:

    “How did you go bankrupt?” Bill asked.

    “Two ways,” Mike said. “Gradually and then suddenly.”

    Many economists will recognize this as a version of an apercu offered a number of times over the years by the prominent macroeconomist Rudiger Dornbusch, who liked to say (for example, in this interview about Mexico’s economic crisis in the 1990s):

    “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”

    What I am dubbing the Hemingway Law of Motion clearly has wide applicability.’

An economy sliding sideways

January 15th, 2015 Comments off

No evidence in today’s Australian Bureau of Statistics employment figures of a healthily growing economy. I’ll settle on the aggregate monthly hours worked figures to tell the story.

monthly hours worked


It has been a real sideways slide.

This May’s budget will be a difficult event for Joe Hockey to negotiate.

Some Conservative ideas for Joe Hockey’s MYEFO

December 4th, 2014 Comments off

If Joe Hockey really is keen on some deficit reducing action, perhaps Britain’s Conservative Government has provided some ideas.

UK autumn statement

That’s how the business section of London’s Daily Telegraph headlined the tax changes outlined by the Chancellor.

GEORGE Osborne has used his last Autumn Statement before the general election to launch an £8bn tax raid on big business, targeting banks and multinational technology companies.

The Chancellor intends to raise billions by enforcing a “Google tax” on multinationals which artificially divert their UK profits overseas, while also blocking a corporation tax rule that allows banks to use the losses they racked up during the financial crisis to offset their future profits. The moves, combined with a string of other measures to stop companies avoiding tax, will help to fund a major overhaul of stamp duty and an increase in the personal income allowance to £10,600.

A different kind of approach to raising the dosh than being taken in Australia by our Treasurer Joe Hockey.

Silence not salesmanship might be the best answer for Abbott

December 2nd, 2014 Comments off

Take a look at this interview from morning television and consider the question: Would a silent Abbott do better for the Coalition’s popularity than a talking Abbott?


Not much doubt in my opinion that the smartest leak out of the Prime Minister’s camp for a while is this one:


Tony Abbott just makes things worse.

And it will take some very creative spinning when the revised spending and revenue figures come out in a couple of weeks for people to understand just what the PM means when he says of the budget “we are making progress every day – we are committed to budget repair” with a determination to end “the crime of inter-generational theft.” The way things are going this Coalition government will end up presiding over the biggest increase in government debt in the country’s history!

No evidence that economic growth is anything but moderate

November 6th, 2014 Comments off

You can quibble abut the accuracy of the estimates of employment and unemployment by the Australian Bureau of Statistics if you want to but it is hard to fine any evidence that economic growth is anything but moderate.



And if you don’t like the ABS figures, then take a look at the lterntive measures provided by the Morgan Poll.


Fairfax’s Adele Ferguson exposes a government looking after its financier friends

October 27th, 2014 Comments off
  • Call on CommBank Royal Commission disappointing and shallow – “The decision by the federal government to reject a bipartisan call for a royal commission into the Commonwealth Bank was always on the cards, but its reasoning was both disappointing and shallow. Its response to a landmark Senate inquiry into the performance of the Australian Securities and Investments Commission, outlined in a press release on Friday, essentially says CBA’s revised compensation scheme, a so-called “open advice review”, is enough. This glib response fails to take into account the Senate’s original call for a royal commission; that it was “unable to get answers from the regulator or the bank”. “We tried and failed and decided it is important that this is cleared up,” it said. What it did was take a dissenting report by one of its own, Liberal senator David Bushy, and embrace it.”
  • National armies for global health? – From an editorial in The Lancet: “… the security of one nation’s citizens is inextricably linked to others through both global health and climate change. Therefore, the military seem set to play a greater part in global civilian health in the future. The question is what should this role look like in the 21st century?”
  • The rise of the female diplomat
  • Treasury’s War on the Islamic State – “The green-eyeshades crew is taking the lead in trying to choke off the illicit millions that fund the terrorist group. But the Islamic State’s own overreach may cost it more than sanctions.”
  • What have British troops achieved in Afghanistan? – As British troops end combat operations in Afghanistan, BBC Kabul correspondent David Loyn asks if the war was worth it.
  • The world’s biggest economic problem – “Deflation in the euro zone is all too close and extremely dangerous.”
  • The Zombie System: How Capitalism Has Gone Off the Rails – “Six years after the Lehman disaster, the industrialized world is suffering from Japan Syndrome. Growth is minimal, another crash may be brewing and the gulf between rich and poor continues to widen. Can the global economy reinvent itself?”
  • Why Europe is doomed, in 3 paragraphs  – “This, from Reuters, tells you everything you need to know about Europe’s continued descent into depression:

    According to German officials, Merkel felt betrayed by Draghi’s speech at a central banking conference in Jackson Hole, Wyoming in August in which he pressed Berlin for looser fiscal policy to stimulate the economy.
    Her entourage is also deeply skeptical about Draghi’s plan to buy up asset-backed securities (ABS) and covered bonds in the hope of encouraging commercial banks to lend.
    Most of all, politicians in Berlin worry that if this scheme doesn’t work, the ECB president will be tempted to launch full-blown government bond buying, or quantitative easing. This is a taboo in Germany and a step Merkel’s allies fear would play into the hands of the country’s new anti-euro party, the Alternative for Germany (AfD).

Are women better decision makers? Forget the glass ceiling – think about the glass cliff.

October 20th, 2014 Comments off
  • Are Women Better Decision Makers? – “Credit Suisse examined almost 2,400 global corporations from 2005 to 2011 — including the years directly preceding and following the financial crisis — and found that large-cap companies with at least one woman on their boards outperformed comparable companies with all-male boards by 26 percent. … From 2005 to 2007, Credit Suisse also found, the stock performance of companies with women on their boards essentially matched performance of companies with all-male boards. Nothing lost, but much gained. If we want our organizations to make the best decisions, we need to notice who is deciding and how tightly they’re gritting their teeth.Unfortunately, what often happens is that women are asked to lead only during periods of intense stress. It’s called the glass cliff …”
  • No Consensus at Vatican as Synod Ends – “A closely watched Vatican assembly on the family ended on Saturday without consensus among the bishops in attendance on what to say about gays, and whether to give communion to divorced and remarried Catholics. … Pope Francis addressed the bishops in the final session, issuing a double-barreled warning against “hostile rigidity” by “so-called traditionalists,” but also cautioning “progressives” who would “bandage a wound before treating it.” The bishops responded with a four-minute standing ovation in the closed-door meeting, Vatican spokesmen said afterward.”
  • The Ebola Conspiracy Theories – “The spread of Ebola from western Africa to suburban Texas has brought with it another strain of contagion: conspiracy theories.”
  • Why Germany is so much better at training its workers

2014-10-20_clive james

  • Clive James: ‘I’d be lost without poetry’ – “Writer and broadcaster Clive James, who suffers from leukaemia and emphysema, has just had a new volume of essays published, called Poetry Notebook. In an interview with the BBC’s Andrew Marr, he explains why the book means so much to him and how it is hard to have a serious literary reputation if you are on television regularly.”
  • This Age of Derp – “derp … is a determined belief in some economic doctrine that is completely unmovable by evidence.”
  • Inflation Derp Abides
  • “Inflation derps” are people from the concrete steppes
  • Regret and economic decision-making – “Regret can shape preferences and thus is an important part of the decision-making process. This column presents new findings on the theoretical and behavioural implications of regret. Anticipated regret can act like a surrogate for risk aversion and could deter investment. However, once people have invested, they become attached to their investment. This commitment is higher with better past performance.”
Figure 1 plots a simple transformation of the value of the unemployment rate, measured on the left axis, and the real value of the S&P, measured on the right axis, in log units. This graph shows a clear correlation between these series and a more careful investigation reveals that this correlation is causal in the sense in which Clive Granger defined that term: there is information in the stock market that helps to predict the future unemployment rate.

Figure 1 plots a simple transformation of the value of the unemployment rate, measured on the left axis, and the real value of the S&P, measured on the right axis, in log units. This graph shows a clear correlation between these series and a more careful investigation reveals that this correlation is causal in the sense in which Clive Granger defined that term: there is information in the stock market that helps to predict the future unemployment rate.

  • Don’t Panic — Yet! – “Volatility has returned to the stock market and most of the gains of 2014 were wiped out in the last week. Is it time to panic? Not yet! … For a market panic to have real effects on Main Street it must be sustained for at least three months. And there is no sign that that is happening: Yet.”

So you think we are doing it tough. Well the figures say Australians continue to be the world’s wealthiest people

October 16th, 2014 Comments off

The annual survey by Credit Suisse continues to show that Australia has the world’s highest median wealth per capita adult. The Global Wealth Report 2014  shows Australia at the top of the list for the fifth consecutive year with wealth of $US 225,000, far above Belgium in second place. On the measure of average wealth Australia comes in second behind Switzerland.



Credit Suisse says about Australia:

Household wealth in Australia grew at a fast pace between 2000 and 2014 in US dollar terms, except for a short interruption in 2008. The average annual growth rate has been 11%, with about a third of the rise due to exchange rate appreciation. Using constant exchange rates, wealth has grown on average by 4.4% per annum since 2007, compared with a 9.2% rate over 2000–2007. Despite this recent slowdown, Australia’s wealth per adult in 2014 is USD 430,800, the second highest in the world after Switzerland. Its median wealth of USD 225,400 is the highest in the world.


Interestingly, the composition of household wealth in Australia is heavily skewed towards real assets, which averaged USD 319,700 and form 60% of gross household assets. This
average level of real assets is the second highest in the world after Norway. In part, it reflects a large endowment of land and natural resources relative to population, but it is also a result of high urban real estate prices.

Only 6% of Australians have net worth below USD 10,000, which can be compared to 29% in the USA and 70% for the world as a whole. Average debt amounts to 20% of gross assets. The proportion of those with wealth above USD100,000 is the highest of any country – eight times the world average. With 1,783,000 people in the top 1% of global wealth holders, Australia accounts for 3.8% of this wealthy group, despite having just 0.4% of the world’s adult population.



France and Europe’s currency crisis and other news and views for Tuesday 14 October

October 14th, 2014 Comments off


Bank of England Governor advocates jail terms for guilty bankers

October 13th, 2014 Comments off


Brisbane’s G20 meeting of world leaders is shaping up to be remembered as the time when the belief that the world’s largest banks were Too Big To Fail finally ended. Bank of England Governor Mark Carney foreshadowed the impending change at the weekend. Mr Carney said the bosses of the big banks behind the 2008 crash should have paid more for their errors, such as handing back severance packages and spending time in jail. The failure to inflict real punishment in both Britain and America had left the global economy exposed to the same risks as it was six years ago, he said.

London’s Daily Telegraph reported:

“They got away with their compensation packages, they got away without sanction,” Mr Carney told the International Monetary Fund’s annual meeting in Washington.

“Maybe they were not at the best tables in society after that, but they’re still at the best golf courses. That has to change.”

The Bank has proposed that senior bankers face prison if their organisation fails in the same way that Lloyds and RBS did in the financial crisis.

Curtailing pay alone was not enough to prevent risky behaviour, he said. Top executives should be forced to take full responsibility for the recklessness of their staff.

In his formal address to the 29th Annual G30 International Banking Seminar, Mr Carney said the job of fixing the fault lines cannot be complete without ending Too Big to Fail. He continued:

Operating in a heads-I-win-tails-you lose bubble, the world’s largest banks threatened the stability of the global financial system. Their bail-out using public funds undermines market discipline and goes to the heart of fairness in our societies.

This cannot be allowed to continue.
It is essential that all systemically important financial institutions can be resolved when they fail:
– Without the need for taxpayer support.
– And without disruption to the wider financial system or real economy.
Tackling the rampant moral hazard at the heart of the financial system hasn’t been easy. And our success can never be absolute. Specifically, we can’t expect to insulate fully all institutions from all external shocks, however large.
But we can change the system so that systemically important institutions bear the cost of their own actions and the risks they take.
After much hard work, and extensive cross-border co-operation, the FSB is on track to agree proposals that, once implemented, will be decisive in achieving that.
The use of statutory resolution powers to resolve global systemic banks will finally be possible.
The proposals will be presented to the Brisbane G20 Leaders summit in November.
That Summit will be the watershed in ending Too Big to Fail.
The first is an internationally agreed standard on the total loss absorbing capacity (or TLAC) that globally systemic banks must hold.
It will be based on clear principles. But it will be much more than a list of aspirations. It will include a detailed indicative term sheet that will cover the amount; the type, and the location of that loss absorbing capacity.
It will establish a level playing field between global systemic banks, while taking into account differences in national resolution regimes.

It will ensure globally systemic banks finally have the quantum of total loss absorbing capacity that extensive analysis show balances the benefit of greater resilience against the higher funding costs for the banks that results from the removal of public subsidies.
It will set clear roles for home and host regulators in a resolution.
It will give host nations the confidence that they won’t again be side-swiped by the failure of a large foreign bank.
And, by removing the implicit subsidy that systemic banks have long enjoyed, it will re-establish market discipline.
Once implemented, it will make our financial systems more resilient and our economies stronger.

Categories: Economic matters, Ticket clippers Tags:

Not much joy however you look at the unemployment figures

October 9th, 2014 Comments off

However you look at the latest Australian Bureau of Statistics figures for employment and unemployment there is little to be cheerful about. Forget the concerns about seasonal adjustment. The original numbers are clear enough. This year is worse, month by month, than the previous three.



When it comes to the aggregate number of hours being worked there is no sign of much growth either.


With employment and unemployment go with the trend and it’s not good

September 11th, 2014 Comments off

Much ado about nothing today as the pundits try to make sense of the employment and unemployment figures from the Australian Bureau of Statistics. I’m happy to stick with the trend figures for what is always a volatile series. And the trend indicates that economic growth is just enough to stop things getting much worse and that’s about it.

11-09-2014 employmentunemployment

Perhaps the ABS figures for total hours of paid work give the best indication.

11-09-2014 hoursworked

Over the last year the increase in hours worked is a meagre 0.56% and that is less than the increase in the number of people available to enter the labour force. Clearly it is not a time to be reducing government spending.

Budget crisis – what budget crisis? The difference a day makes

August 20th, 2014 Comments off

Tuesday’s paper:


But where has that sovereign risk gone? Today’s front page:


Categories: Australian media, Economic matters Tags:

A 1968 Robert Kennedy speech on GDP I’d like an Australian politician to give today

July 26th, 2014 Comments off

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  • Robert Rubin Echoes Robert F. Kennedy: GDP Is Fatally Flawed Measure Of Economic Health – “Former Treasury Secretary Robert Rubin has a must read piece in the Washington Post, ‘How ignoring climate change could sink the U.S. economy.’ The centrist economic panjandrum main point: The notion that tackling climate change will harm the economy is the exact opposite of the truth. In this regard he makes a similar point to one Climate Progress made last week — one that Sen. Robert F. Kennedy made so powerfully on the presidential campaign trail nearly half a century ago … — the GDP is a deeply flawed measure of the economy’s health.”
  • When all the jobs belong to robots, do we still need jobs? – “… there’s a real scarcity of economists willing to think about the possibility that abundance makes markets obsolete altogether. Property rights may be a way of allocating resources when there aren’t enough of them to go around, but when automation replaces labor altogether and there’s lots of everything, do we still need it?”
  • Longest UK slump in a century ends – “Of the G7 major economies, only Italy has taken longer than the UK to regain its pre-crisis size and output per head in Britain is still 4 per cent below its pre-crisis level. A muted Mr Osborne admitted there was ‘still a long way to go’.The big question for him is whether the rebound has come too late to save the Conservatives at the next election, but he is convinced voters will not turn back to a Labour party that was in power when the crash hit in 2008.

26-07-2014 ukrecovery

  • Britain’s economy is finally bigger than it was in 2008. What took so long? “Britain’s economy is a riddle, wrapped in a mystery, inside an enigma. And finally, six years later, it’s an economy that’s bigger than it was before the Great Recession.”
  • Former CIA Officials Denied Chance To Preview ‘Torture’ Report – “About a dozen former CIA officials named in a classified Senate report on decade-old agency interrogation practices were notified in recent days that they would be able to review parts of the document in a secure room in suburban Washington after signing a secrecy agreement. Then, on Friday, many were told they would not be able to see it, after all. Some of them were furious, while Democratic Senate aides were angry that they were given the chance in the first place. It’s the latest chapter in the drama and recriminations that have been playing out behind the scenes in connection with what some call the Senate torture report, a summary of which is being declassified and is expected to be released in the coming weeks.

26-07-2014 robots

The IMF gives a recipe for “The Double Irish Dutch Sandwich”

July 17th, 2014 Comments off

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The International Monetary Fund called its Fiscal Monitor back in last October Taxing Times as it analysed ways that nations reducing budget deficits might raise revenue to help do so. In passing I note that on the Fund’s reckoning Australia is well down the list of those needing to take drastic action with its projections of debt to GDP by 2030.
17-07-2014 2030debtThere we are on the far right but I’m not sure of the assumptions used to put us there in pride of place. Perhaps the current Senate shenanigans might change things but there is hardly evidence there that Australia is facing some imminent disaster.

Be that as it may, what intrigued me when I belatedly discovered the paper was the description in a section on increasing company tax receipts of how some of those large multi nationals avoid paying much at all.

“So many companies exploit complex [taz] avoidance schemes, and so many countries offer devices that make them possible, that examples are invidious. Nonetheless, the “Double Irish Dutch Sandwich,” an avoidance scheme popularly associated with Google, gives a useful flavor of the practical complexities. Here’s how it works (Figure 5.1):

•• Multinational Firm X, headquartered in the United States, has an opportunity to make profit in (say) the United Kingdom from a product that it can for the most part deliver remotely. But the tax rate in the United Kingdom is fairly high. So . . .
•• It sells the product directly from Ireland through Firm B, with a United Kingdom firm Y providing services to customers and being reimbursed on a cost basis by B. This leaves little taxable profit in the United Kingdom. Now the multinational’s problem is to get taxable profit out of Ireland and into a still-lower-tax jurisdiction.
•• For this, the first step is to transfer the patent from which the value of the service is derived to Firm H in (say) Bermuda, where the tax rate is zero. This transfer of intellectual property is made at an early stage in development, when its value is very low (so that no taxable gain arises in the United States).
•• Two problems must be overcome in getting the money from B to H. First, the United States might use its CFC [controlled foreign corporation] rules to bring H immediately into tax. [Note: The “controlled foreign corporation” rules seek to reduce the ability of companies to move profits to another country via a pure paperwork transaction to what is really the same company.] To avoid this, another company, A, is created in Ireland, managed by H, and headquarters “checks the box” on A and B for U.S. tax purposes. This means that, if properly arranged, the United States will treat A and B as a single Irish company, not subject to CFC rules, while Ireland will treat A as resident in Bermuda, so that it will pay no corporation tax. The next problem is to get the money from B to H, while avoiding paying cross-border withholding taxes. This is fixed by setting up a conduit company S in the Netherlands: payments from B to S and from S to A benefit from the absence of withholding on nonportfolio payments between EU companies, and those from A to H benefit from the absence of withholding under domestic Dutch law.
This clever arrangement combines several of the tricks of the trade: direct sales, contract production, treaty shopping, hybrid mismatch, and transfer pricing rules.

Categories: Economic matters, Ticket clippers Tags:

Living longer with mum and dad

July 12th, 2014 Comments off

The only evidence I have is anecdotal but these US figures seem to ring true about Australia in my experience:

12-07-2014 livingathome

This is how a slump becomes self-perpetuating. Young people moved back home when the economy cratered, and stayed there when it didn’t bounce back. There just weren’t enough jobs, let alone well-paying ones, for them to afford to move out—especially if they had student loans to pay back. But all of these micro decisions to set up camp in their parents’ basements had a macro effect: there wasn’t as much demand for new housing. And that’s been a big part of why the recovery has been so underwhelming.


Categories: What the figures show Tags:

Trust the wisdom of the International Monetary Fund? Be it at your own risk

July 5th, 2014 Comments off

Another example of the true meaning when the board announces it has full confidence in the coach!

IMF Concludes Staff Visit to Bulgaria

Press Release No. 14/278
June 12, 2014

An International Monetary Fund (IMF) mission visited Sofia during June 6–11, 2014, to discuss the economic outlook and government policies with the Bulgarian authorities. At the conclusion of this regular staff visit, Ms. Michele Shannon, IMF Mission Chief for Bulgaria, made the following statement: …

Regarding the financial sector, the implementation of the new EU regulatory regime is on track, including through the adoption of maximum capital conservation and systemic risk buffers applicable to all banks. In addition, the elimination of specific provisions resulted in a commensurate increase in regulatory capital. While credit growth remains low, the system is stable and liquid, with banks’ non-performing loans buffered by provisions and significant capital, as well as a positive net foreign asset position. Efforts by banks to address the stock of distressed assets and claim associated collateral should continue in order to lower asset price uncertainty and thereby support renewed investment.

(Note: emphasis added by the Owl.)

Accusations fly in Bulgaria’s murky bank run

SOFIA Fri Jul 4, 2014 5:50am EDT

(Reuters) – One worker at Bulgaria’s Corporate Commercial Bank knew panic was setting in when she spotted colleagues among the anxious depositors lined up to withdraw cash from the troubled bank.

The alarm came in part because the week before, on June 13, with television news crews filming, Bulgarian state prosecutors had raided a building in Sofia that housed Corpbank offices.

Though both the prosecutors and the bank said the raid did not target Corpbank – the building housed other companies as well – customers soon began to withdraw their savings. Within days, the Central Bank had seized control of the bank, the fourth-biggest lender in Bulgaria, and suspended its operations for three months.

Though both the prosecutors and the bank said the raid did not target Corpbank – the building housed other companies as well – customers soon began to withdraw their savings. Within days, the Central Bank had seized control of the bank, the fourth-biggest lender in Bulgaria, and suspended its operations for three months.

The dramatic raid and bank run were reminders that despite progress from the worst days of the euro crisis, parts of Europe’s financial system are still far from secure. The run quickly spread to another bank and saw Sofia announce a protective $2.3 billion credit line.

Extending income management for those on welfare – but does it work?

July 1st, 2014 Comments off

In my little list of stories from around the world that took my interest on Monday was one by Christopher Blattman, an associate professor in the political science department and at the School of International and Public Affairs at Columbia in the USA, entitled Let them eat cash. This extract gives the flavour but the examples from the full piece as published in the New York Times are worth noting:

“The poor do not waste grants. Recently, two World Bank economists looked at 19 cash transfer studies in Latin America, Africa and Asia. Almost all showed alcohol and tobacco spending fell or stayed the same. Only two showed any significant increase, and even there the evidence was mixed. You might worry handouts encourage idleness. But in most experiments, people worked more after they received grants.”

What adds to the relevance of the argument is the movement within Australia towards placing restrictions on how welfare payments are spent. From Mondays’s Sydney Daily Telegraph:

1-07-2014 doleProfessor Blattman understands that those making welfare payments worry that people might spend handouts on drugs or alcohol. “This pessimism (and paternalism) is common and understandable,” he writes.  “But evidence from other countries suggests we should be more optimistic. …

Perhaps our first duty is to do no harm, but I say that’s our second duty. Our first is to be skeptical of stereotypes of those we purport to help.

These stereotypes have consequences: The Family Independence Initiative tried paying poor American families in return for setting and meeting goals. Its demonstration project showed promising results. But the No. 1 obstacle the organization said it faced? Mistrust by donors and other nonprofits who held hard to the view that poor people can’t make good decisions.

Here in New York, the Opportunity NYC Family Rewards program has experimented with cash transfers to poor families. It sent $8,700 over three years to thousands of families. A randomized evaluation showed that self-employment went up and hunger and extreme hardship went down, at least while the cash transfers lasted.


Categories: Economic matters Tags:

Which bank? The CBA’s credibility is so compromised that a royal commission into these matters is warranted.

June 26th, 2014 Comments off

Australia’s Commonwealth Bank has entered the ticket clippers big league

From the report of a Senate committee released today:

In this case study, the committee examined misconduct that occurred between 2006 and 2010 by financial advisers and other staff at Commonwealth Financial Planning Limited (CFPL), part of the Commonwealth Bank of Australia Group (CBA). Advisers deliberately neglected their duties and placed their personal interests far above the interests of their clients. The assets of clients with conservative risk positions, such as retirees, were allocated into high-risk products without their knowledge to the financial benefit of the adviser, who received significant bonuses and recognition within CFPL as a ‘high performer’. There was forgery and dishonest concealment of material facts. Clients lost substantial amounts of their savings when the global financial crisis hit; thecrisis was also used to explain away the poor performance of portfolios. Meanwhile, it is alleged that within CFPL there was a
management conspiracy that, perversely, resulted in one of the most serious offenders, Mr Don Nguyen, being promoted.
Initially the committee found:

 the conduct of a number of rogue advisers working in CFPL was unethical, dishonest, well below professional standards and a grievous breach of their duties—in particular the advisers targeted vulnerable, trusting people;
 both ASIC and the CBA seemed to place reports of fraud in the ‘too hard basket’, ensuring the malfeasance escaped scrutiny and hence no one was held to account;
 the CBA’s compliance regime failed, which not only allowed unscrupulous advisers to continue operating but also saw the promotion of one adviser, thus exposing unsuspecting clients to further losses;
 there was an inordinate delay in CFPL recognising that advisers were providing bad advice or acting improperly and in CFPL acting on that knowledge and informing clients and ASIC;
 ASIC was too slow in realising the seriousness of the problems in CFPL, instead allowing itself to be lulled into complacency and placing too much trust in an institution that sought to gloss over its problems;
 ASIC did not pay sufficient attention to the whistleblowers who raised serious concerns about the conduct of Mr Nguyen and the action

As the committee gathered more and more evidence, however, lingering doubts began to grow about the robustness and fairness of the ASIC-sanctioned compensation process for CFPL clients who had suffered losses because of adviser misconduct. The committee could see major flaws in the process being implemented by CFPL, in particular:
 the manner in which information about adviser misconduct was conveyed to clients, which rather than reassure clients tended in some cases to intimidate and confuse them;
 CFPL’s obfuscation when clients sought information on their investments or adviser;
 a strong reluctance on the part of CFPL to provide files to clients who requested them;
 no allowance made for the power asymmetry between unsophisticated, and in many cases older and vulnerable clients, and CFPL;
 no client representative or advocate present during the early stages of the investigation to safeguard the clients’ interests when files were being checked and in many cases reconstructed;
 numerous allegations of missing files and key records, of fabricated documents and forged signatures that do not seem to have been investigated;
 the CFPL’s initial offer of compensation was manifestly inadequate in many instances; and
 the offer of $5,000 to clients to pay the costs of an expert to assess the compensation offer was made available only after the CFPL had determined that compensation was payable and an offer had been made.

Recent developments, whereby both ASIC and the CBA have corrected their testimony about the compensation process, have only deepened the committee’s misgivings about the integrity and fairness of the process. The committee is now of the view that the CBA deliberately played down the seriousness and extent of problems in CFPL in an attempt to avoid ASIC’s scrutiny, contain adverse publicity and minimise compensation payments.

In effect, the CBA managed, for some considerable time, to keep the committee, ASIC and its clients in the dark. The time is well overdue for full, frank and open disclosure on the CFPL matter. The committee is concerned that there are potentially many more affected clients that have not been fairly compensated. The clients that gave evidence at a public hearing were exceptional in that they were willing to voice their concerns publicly and were able to fight for compensation because of their circumstances. They were fortunate because they had a family member determined to assist them, were able to obtain independent expert advice, or were able to obtain a copy of their original file from one of the whistleblowers.

At this stage, the committee’s confidence in ASIC’s ability to monitor the CBA’s implementation of its new undertaking regarding the compensation process is severely undermined. Furthermore, the CBA’s credibility in the CFPL matter is so compromised that responsibility for the compensation process should be taken away from the bank. The committee considered five options to finally resolve the CFPL matter. But, given the seriousness of the misconduct and the need for all client files to be reviewed, the committee believes that an inquiry with sufficient investigative and discovery powers should be established by the government to undertake this work. To resolve this matter conclusively and satisfactorily, the inquiry would need the powers to compel relevant people to give evidence and to produce information or documents.

The committee is of the view that a royal commission into these matters is warranted.

Categories: Economic matters, Ticket clippers Tags:

Australian official job vacancy figures show some reason for optimism

June 26th, 2014 Comments off

A slight upturn in the Australian Bureau of Statistics quarterly figures for job vacancies. Total job vacancies in May 2014 were 146,100, an increase of 2.1% from February 2014. The number of job vacancies in the private sector was 135,000 in May 2014, an increase of 2.0% from February 2014. The number of job vacancies in the public sector was 11,200 in May 2014, an increase of 4.3% from February 2014.

job vacancieschart

(click to enlarge)


An analysis by Westpac also released today of new jobs created suggests Australia’s impressive jobs growth this year is somewhat undermined by details showing the gains have been concentrated to just a few sectors. New jobs are concentrated in the services, construction and real estate sectors.

26-06-2014 westpacjobcreation1There has been a stagnation in jobs created for many years outside the mining, utilities, education, health, public and business services.

26-06-2014 industry divergence

26-06-2014 constructionandmining




Renaming budget day as government wish-list day

June 25th, 2014 Comments off

In another three or four weeks it might be possible to make an intelligent assessment of the Australian federal budget for 2014-15. Until then I will continue to refrain from adding to the pointless analysis that has been occurring since Treasurer Joe Hockey released all those pages of documents outlining his wish-list.

Categories: Economic matters Tags:

OECD reports how market income inequality rose considerably and other news and views for Thursday 19 June

June 19th, 2014 Comments off

19-06-2014  incomeinequality

  • Rising inequality: youth and poor fall further behind – Insights from the OECD Income Distribution Database, June 2014 – “… market income inequality rose by 1 percentage point or more in 20 OECD countries between 2007 and 2011/12 (orange bars in Figure 1). The largest increases occurred in those countries hit hardest by the crisis: Spain, Ireland, Greece, Estonia
    and Iceland but also in France and Slovenia… By contrast, Australia, Canada, Ireland, Israel and Sweden recently reversed the trend and experienced a fall in market income inequality during 2011.”
  • Argentina says next bond payment ‘impossible’, default looms
  • Post-Crash Economics – Robert Skidelsky, Professor Emeritus of Political Economy at Warwick University and author of a three-volume biography of John Maynard Keynes, writes how we may be witnessing the beginning of the end of the neoliberal capitalist consensus that has prevailed throughout the West since the 1980s. “… mainstream economics is a pitifully thin distillation of historical wisdom on the topics that it addresses. It should be applied to whatever practical problems it can solve; but its tools and assumptions should always be in creative tension with other beliefs concerning human wellbeing and flourishing. What students are taught today certainly does not deserve its imperial status in social thought.”
  • Bill Shorten seeks to censure PM over budget ‘honesty’ – The Guardian’s Katharine Murphy summarises the political day in Canberra.
  • Australia won’t describe east Jerusalem as ‘occupied’ – and is wrong to do so – “Australia’s new view is starkly at odds with the true status of east Jerusalem under international law – and to dismiss ‘historical events’ as unhelpful is astonishingly foolish.”

The politics of McMansions and urban enclaves and other news and views for Saturday 14 June

June 14th, 2014 Comments off



  • Political Polarization and Personal Life – Liberals and conservatives are divided over more than just politics. Those on the opposite ends of the ideological spectrum disagree about everything from the type of community in which they prefer to live to the type of people they would welcome into their families. It is an enduring stereotype – conservatives prefer suburban McMansions while liberals like urban enclaves – but one that is grounded in reality. Given the choice, three-quarters (75%) of consistent conservatives say they would opt to live in a community where “the houses are larger and farther apart, but schools, stores and restaurants are several miles away,” and just 22% say they’d choose to live where “the houses are smaller and closer to each other, but schools, stores and restaurants are within walking distance.” The preferences of consistent liberals are almost the exact inverse, with 77% preferring the smaller house closer to amenities, and just 21% opting for more square footage farther away.
  • Tract Issued By Theologians Takes On Money In Politics
  • The World (fizzy drink) Cup 2014 – From The Lancet – “To the dismay of public health experts, it has become common to see fast-food and sugary drinks companies sponsoring major sporting events. The 2014 FIFA World Cup, which started this week in Brazil, is no exception … Supporting physical activity and healthy eating efforts should be a natural link for a sporting federation. Kicking the unhealthy sponsorship habit, FIFA, would be an excellent start.”
  • Can A Female Politician Be Insulted Without It Being Sexist? –  The talk on the streets of Brazil is the host country’s resounding victory over Croatia on the World Cup pitch. But online, debate is raging over whether or not chants directed against Brazil’s President Dilma Rousseff at the stadium where she was attending yesterday’s match were sexist. After the opening ceremony, fans briefly started jeering “Hey, Dilma, go f*** yourself in the a**! Hey, FIFA, go f*** yourself in the a**!”

14-06-2014 bukharajuice

Employment in Australia standing still

June 12th, 2014 Comments off

At least things are not getting worse on the employment front. Today’s Australian Bureau of Statistics Labour Force report for May shows the trend rate for employment edging ever so slowly up and that for unemployment on a slight downward slope.


The relatively stagnant nature of a labour market where full time and part time employment fluctuate considerably from month to month is perhaps best illustrated by the trend of aggregate monthly hours worked. It has ben virtually flat since late 2011.


With minimum wages catching up with inflation is not enough and other news and views for Saturday 7 June

June 7th, 2014 Comments off
  • Seattle Leads the Way – “The new $15-an-hour minimum wage approved this week in Seattle does more than guarantee a raise to tens of thousands of workers in the city. As the highest minimum in the nation, it changes the terms of the minimum-wage debate and expands the realm of the possible in setting new minimums. In recent decades, proposals to lift the minimum — whether on the federal, state or local level — have been presented as a way to restore purchasing power lost to inflation during long stretches with no raises. Seattle lawmakers have said, clearly and correctly, that catching up with inflation is not enough. To be adequate, a minimum wage also has to reflect real economic gains as measured by average wages and productivity growth.
  • Privatisation and government debt – Simon Wren-Lewis economics professor at Oxford University: “Possibly the worst argument for privatising part of the public sector is a supposed ‘need’ to reduce public sector debt. … Privatisation is one of a number of devices that flatter the short term public finances with no impact (or worse) on the long term position. (Considerably worse if the asset is sold far too cheaply, as in the most recent UK case for example.) “


  • Linkages Between Arctic Warming and Mid-Latitude Weather Patterns: Summary of a Workshop (2014) – “The Arctic has been undergoing significant changes in recent years. Average temperatures are rising twice as fast as they are elsewhere in the world. The extent and thickness of sea ice is rapidly declining. Such changes may have an impact on atmospheric conditions outside the region. Several hypotheses for how Arctic warming may be influencing mid-latitude weather patterns have been proposed recently. For example, Arctic warming could lead to a weakened jet stream resulting in more persistent weather patterns in the mid-latitudes. Or Arctic sea ice loss could lead to an increase of snow on high-latitude land, which in turn impacts the jet stream resulting in cold Eurasian and North American winters. These and other potential connections between a warming Arctic and mid-latitude weather are the subject of active research.”
  • Former Boxer Steps Up As Kiev Mayor, Spars With Remaining Activists – “Former world heavyweight boxing champ Vitaly Klitchko is now set to become mayor of Kiev. In his first major move, Klitchko is asking activists in Independence Square to pack up their tents and allow the square to return to normal. Some activists are resisting, warning that one presidential election doesn’t guarantee the success of their revolution — or do justice to the martyrs who were killed there.”
  • Early Exposure To Bacteria Protects Children From Asthma And Allergies -“Babies who are exposed to both bacteria and allergens in the first year of life are less likely to develop asthma and allergies, a study finds. … But what’s interesting about this study is that it gets specific; not just any old germs or allergens will do.”
  • Upset at UN climate talks as ministers go missing – “Negotiators and campaigners have reacted angrily to the failure of many environment ministers to attend UN talks in Bonn. They say governments gave an undertaking last year to come here and update plans to cut emissions. But so far, around 50 ministers have turned up, with representatives from the UK, France and Brazil notably absent. Over 130 turned up in Warsaw for the last major talks session.
  • Climate change helps seas disturb Japanese war dead – “Rising sea levels have disturbed the skeletons of soldiers killed on the Marshall Islands during World War Two. Speaking at UN climate talks in Bonn, the Island’s foreign minister said that high tides had exposed one grave with 26 dead.”
  • The Climate Domino by Paul Krugman – “Maybe it’s me, but the predictable right-wing cries of outrage over the Environmental Protection Agency’s proposed rules on carbon seem oddly muted and unfocused. … the attacks on the new rules mainly involve the three C’s: conspiracy, cost and China. That is, right-wingers claim that there isn’t any global warming, that it’s all a hoax promulgated by thousands of scientists around the world; that taking action to limit greenhouse gas emissions would devastate the economy; and that, anyway, U.S. policy can’t accomplish anything because China will just go on spewing stuff into the atmosphere.”
  • EPA’s Proposed Greenhouse Gas Regulation: Why are Conservatives Attacking its Market-Based Options? – “Not so long ago, cap-and-trade mechanisms for environmental protection were popular in Congress. Now, such mechanisms are denigrated. What happened? Professor Richard Schmalensee (MIT) and I recently told the sordid tale of how conservatives in Congress who once supported cap and trade had come to lambast climate change legislation as “cap-and-tax.” Ironically, in doing this, conservatives have chosen to demonize their own market-based creation.”


The problem is the product not the salesmanship

June 3rd, 2014 Comments off

If Tony Abbott can resist the temptation to say much at all while overseas during the next fortnight then my guess is that he will come home to far less doom and gloom about his government than the pollsters are showing this week. When the message you have to sell is unpopular it is better not to try and do so and this Coalition budget is full of nasty little elements. But time heals – especially when most of the things the public is objecting to are never going to happen. When the Senate has done its destructive best the voters will be left wondering what they were ever getting so upset about.

Treasurer Joe Hockey seems to have realised that silence is the best policy. He has gone conspicuously silent and the Prime Minister would be wise to follow his example.

That things are  not really as serious as much of the media comment would have us believe is shown by the way the Owl’s market based election indicator still has the Coalition comfortably favourite to be returned at the next election.

3-06-2014 australianindicator

Sure there has been a movement towards Labor but it is still pointing in a very different direction to the opinion polls that have Labor seven or eight percentage points in front.

Taking Away Unemployment Benefits Doesn’t Make People Get Jobs and other news and views for Wednesday 21 May

May 21st, 2014 Comments off

Happy, McDonald's new mascot has not proved a big hit. Photograph: McDonalds

  • The terrifying new McDonald’s mascot – and other creepy corporate monsters – “The fast-food container with human teeth has not been well received – but he’s not the first beast to scare people off a brand.
  • Queensland corruption fighter Doug Drummond says CMC changes ‘very dangerous, very worrying’ – “Changes to Queensland’s Crime and Misconduct Commission (CMC) are designed to spare the Newman Government political embarrassment, a top Queensland corruption fighter says. Doug Drummond QC, the special prosecutor who helped convict former police chief Terry Lewis and dozens of others in the wake of the 1989 Fitzgerald Inquiry and later served as a CMC commissioner, told the ABC the reforms would leave the door open to the kind of corruption uncovered by the ICAC inquiry in New South Wales. He claimed the amendments to the Crime and Misconduct Act were designed to allow the ruling Liberal National Party (LNP) to raise campaign funds unimpeded by the attentions of an anti-corruption body.
  • Napoleon I seated backwards on a donkey on the road "to Elba" from Fontainebleau.  Text on saddle: Materials for the history of my life and exploits // A budget of mathematical books for my study at ELBA Text top left: A throne is only made of wood and cover'd in velvet. Text behind the donkey: The greatest events in human life is turn'd to a puff.

    Napoleon I seated backwards on a donkey on the road “to Elba” from Fontainebleau.
    Text on saddle: Materials for the history of my life and exploits // A budget of mathematical books for my study at ELBA
    Text top left: A throne is only made of wood and cover’d in velvet.
    Text behind the donkey: The greatest events in human life is turn’d to a puff. – “Napoleonic anniversaries are neither officially marked nor celebrated in France. Two hundred years after his exile to Elba, Bonaparte’s latter-day countrymen still can’t decide if he is a hero or a villain.”

    • Defeated and inglorious? – “Napoleonic anniversaries are neither officially marked nor celebrated in France. Two hundred years after his exile to Elba, Bonaparte’s latter-day countrymen still can’t decide if he is a hero or a villain.”


An apology to the Treasurer

In this news and views section yesterday I included this item:

Hockey’s Free Lunch, No Questions Asked – “Hockey is the keynote speaker at an Australian Council of Social Services luncheon in Sydney, at Parliament House. But his appearance is on the basis that he not only gets a free lunch, but a free kick as well — organisers have been told Hockey will only appear if no questions are permitted from attendees.”

The item linked to the New Matilda site from which it was taken. Well tonight I note from an AAP report of the lunch:

Guests at the ACOSS event, many of whom represent the underprivileged, took the opportunity to grill Mr Hockey for one hour and 10 minutes. He gave combative replies, interrupting or debating questioners if he thought the proposition of their question was wrong.

Hence an apology is in order. Presumably New Matilda will eventually make a correction itself.

No inflation problem on the Australian wages front

May 21st, 2014 Comments off

No signs in this morning’s Australian Bureau of Statistics wage price index figures that wage rises are going to create any inflationary problem. The trend index and the seasonally adjusted index for Australia rose 2.6% through the year to the March quarter 2014.



In the March quarter 2014, the Northern Territory recorded the largest quarterly rise of 0.9% and the Australian Capital Territory the smallest rise of 0.2%.


Quarterly rises in South Australia (0.6%), Western Australia (0.6%) and the Australian Capital Territory (0.2%) were smaller in the current quarter than in the March quarter 2013. All other states and territories recorded larger rises compared to the quarterly changes the year before.


Rises through the year ranged from 2.3% for Tasmania and the Australian Capital Territory to 3.2% for South Australia.


Rises in the original indexes through the year to the March quarter 2014 at the industry level ranged from 1.9% for Professional, scientific and technical services to 3.3% for both Electricity, gas, water and waste services and Arts and recreation services.


An index of anti-semitism and other news and views for Friday 16 May

May 16th, 2014 Comments off

14-05-2014 adlsterepotypes14-05-2014 adl114-05-2014 holocaust14-05-2014 oceania

  • Climate Change Debate: A Famous Scientist Becomes a Skeptic – “I have full respect for the scientific work behind the IPCC reports but I do not appreciate the need for consensus. It is important, and I will say essential, that society and the political community is also made aware of areas where consensus does not exist. To aim for a simplistic course of action in an area that is as complex and as incompletely understood as the climate system does not make sense at all in my opinion.”
  • Inflation Targets Reconsidered by Paul Krugman – Over the course of the 1990s many of the world’s central banks converged on an inflation target of 2 percent. Why 2 percent, rather than 1 or 3? The target wasn’t arrived at via a particularly scientific process, but for a time 2 percent seemed to make both economic and political sense. On one side, it seemed high enough to render concerns about hitting the zero lower bound mostly moot; on the other, it was low enough to satisfy most of those worried about the distortionary effects of inflation. It was also low enough that those who wanted true price stability — zero inflation — could be deflected with the argument that official price statistics understated quality change, and that true inflation was in fact close to zero. And as it was widely adopted, the 2 percent target also, of course, acquired the great advantage of conventionality: central bankers couldn’t easily be accused of acting irresponsibly when they had the same inflation target as everyone else. More recently, however, the 2 percent target has come under much more scrutiny. The main reason is the experience of the global financial crisis and its aftermath, which strongly suggests that advanced economies are far more likely to hit the zero lower bound than previously believed, and that the economic costs of that constraint on conventional monetary policy are much larger than the pre-crisis conventional wisdom. In response, a number of respected macroeconomists, notably Blanchard (2010) and, much more forcefully, Ball (2013), have argued for a sharply higher target, say 4 percent. But do even these critics go far enough? In this paper I will argue that they don’t — that the case for a higher inflation target is in fact even stronger than the critics have argued.”
  • Hockey’s ‘Honest John’ budget routine – “In the past week, Treasurer Joe Hockey has been fondly quoting Howard’s first budget as treasurer in 1978 as a precedent for governments abandoning election promises and increasing taxes in the national interest. … If he had a closer look, he might be a little more reluctant to quote it as a precedent.”
  • Absurdities of Copyright Protection – “As a starting point, the fundamental purpose of copyright is not to help authors gain a reward in the market. The fundamental purpose is to advance science and the arts, which means encouraging others to build on pre-existing work. For this purpose, copyright protection must strike a balance between protecting the ability of authors to earn a reward, on one side, but also assuring that what they have created enters into the public domain so that it can be used by others, on the other side.”

Australian housing prices close to the trend

May 13th, 2014 Comments off

Australian Bureau of Statistics figures out today show capital city housing prices continue rising back on trend. Things have certainly recovered since the dips of recent years.


So Australia has an economic crisis – then heaven help the rest of the world

May 6th, 2014 Comments off

The madness being spoken by Joe Hockey about the state of the Australian economy is well and truly exposed tonight by the OECD in its May Economic outlook, analysis and forecasts. Here’s the summary of what the Organisation expects to come:

Output is projected to increase by 2½ per cent in 2014 and by nearly 3% in 2015, with a general pick-up in demand offsetting declining investment in the resource sector. Some economic slack will remain and the unemployment rate will not begin to edge down until the second half of 2015. As a result, there will be little inflation pressure, although rapid growth in house prices and mortgage lending requires continued close attention.

Given near-term uncertainties in the rebalancing of the economy away from investment in the natural resource sector, heavy front loading of fiscal consolidation should be avoided. Against the backdrop of the projected recovery, monetary stimulus should start to be withdrawn in the first half of 2015.

So how does Australia compare with the rest of the developed world?

6-05-2014 comparisonsbyOECD

Categories: Economic matters Tags:

The United States and those evil budget deficits

May 5th, 2014 Comments off

Do you think the USA is sliding towards economic oblivion?

Just a little table to think about as you listen to all that talk about the destructive nature of Australian budget deficits.

5-05-2014 usbudgetdeficits

Categories: Economic matters Tags:

Paul Kelly’s strange logic on forecasts

May 3rd, 2014 Comments off

Just choose your forecast to fit your prejudice. That seems to be the view of Paul Kelly writing in The Australian this morning:

The value of the audit commission is proved by the firestorm it has generated. It is not written by politicians. Freed from such political constraints it can launch the national debate Australia needs to conduct.
Anybody who doubts this should consider the business-as usual projections showing the budget stays in deficit for a decade and beyond. This may be based on conservative forecasts but conservative forecasts are necessary after years of forecasting failure on the optimistic side.

Conservative forecasts are necessary? Really? Surely if we are going to be in the forecasting business at all we should be making our best guess? Otherwise it is just a nonsense.

The caution we show should be the realisation that our best guess most probably will turn out to be wrong – sometimes too pessimistic and sometimes to optimistic. Then when we are wrong we change.

That audit commission – much ado about nothing

May 1st, 2014 Comments off

I have scanned the major news website headlines and stories, listened to the radio current affairs programs and watched the television news. I am working my way through all those pages of the Audit Commission report. And I am still wondering what all the fuss about this budget deficit is all about.

My conclusion is that governments for the next few years should stop having new spending and tax reduction proposals. Then a few years of growth and a dash of inflation will solve any problem. And if the growth does not come there’s little that any Australian government can do about it. Most of what will happen is outside the control of a government of any political persuasion.

Thankfully we have a Senate where the numbers ensure that the austerian flavour of the Audit Commission will be ignored.

I’m an optimist and remain far from panic mode.

See also my comment written before the release of the Audit Commission report: Look at the Audit Commission through the prism of minority government

An opinion about China to frighten Australians

April 30th, 2014 Comments off

It is only an opinion so let’s hope it’s wrong:

30-04-2014 chinaopinion

But then, London’s Financial Times is no tabloid scare monger.

Just another little something to think about when studying all those budget forecasts and projections out into the distant never-never on Tuesday week.

Prasenjit Basu is founder of, an independent economic research firm. His rather frightening conclusion:

In a country that already accounts for half of all capital-intensive production globally, and nearly a fifth of all US imports, the growth of manufacturing will inevitably slow. A thriving service sector could pick up some of the slack. But building more houses and railways is not the way to encourage it.
China’s economy is in an unbalanced state. It can stay that way for some time – but the longer it does, the worse the eventual outcome will be. The industrial sector is already plagued by falling prices. To avert a wider deflationary spiral, the country needs to wean itself off the false cure of perpetual policy stimulus.

The Sydney Daily Tele just confuses me further

April 30th, 2014 Comments off

From page one of the Sydney Daily Telegraph yesterday:

30-04-2014 tuesday

From page one of the Sydney Daily Telegraph today:

30-04-2014 wednesday

Is that clear then?

As I wrote yesterday, don’t ask me. I can’t explain it. I should have stuck to my promise and just turned over the page when I saw a mention of the forthcoming budget and kept patiently waiting for Tuesday week.

Categories: Economic matters Tags:

Spinning out of control? Budget scene setting confusion

April 29th, 2014 Comments off

Reading the papers these last few days has left me utterly confused about what to expect in next week’s federal budget. The inspired leaks – at least I presume the stories have some foundation with someone pretending to know telling journalists something – seem to be so contradictory. I mean, what are we to make of a budget deficit that will take many years to be rid off with the thought bubble that there will be tax cuts before the surplus is reached? And what’s all this about higher taxes on the risk so that the pain is shared by all?

Don’t ask me. I can’t explain it. I’ll just turn over the page when I come to a pre-budget piece and wait until Tuesday week.

Categories: Economic matters Tags:

Murdoch columnist Terry McCrann calls Sydney Daily Telegraph “silly and venal”

April 29th, 2014 Comments off

This morning’s Terry McCrann column in the Daily Terror:


And today’s editorial from the same paper:

2014-04-29_teleeditorialWho said there was no room for diverse opinion at News Corp?


Back to the future – the return of the partisan press

April 25th, 2014 Comments off

An interesting interview on the Quartz website with University of Chicago economics professor Matthew Gentzkow who recently won the John Bates Clark Medal which the American Economic Association bestows on the American economist under the age of 40 who “who is judged to have made the most significant contribution to economic thought and knowledge.” Quartz described Gentzkow’s work as “an interesting mix of the history and micro-economics of the media world.”

For instance, he’s studied the drivers of political “slant” in American newspapers. (Short version: Political slant tends to play to the views of readers, not owners.) Along with his frequent collaborator and University of Chicago colleague Jesse Shapiro, he’s investigated tendencies among consumers to read only online news sites that square with their own ideological biases. (Short version: They found no evidence that segregation among consumers of online news was becoming more pronounced.) His research has also found that television—and the television news which supplanted politics-heavy newspapers—has helped drive down US voter turnout.

The part of the interview that intrigued me most concerned the return of the partisan press. You’ve looked a lot at the history of American newspapers, he was asked, going back to their roots as ideological party organs in the 19th century, as well as the advent of television, and more recently online news. Is there some sort of grand unified theory or thread running through all that work that you were surprised at?

In some ways, the US media today looks increasingly like the US media of the 19th century. Back in the day we had fiercely competitive, partisan newspapers going after each other, wearing their ideological views on their sleeve … not pulling any punches talking about scandals and using all kinds of inflammatory language. That is very much like what we see if you turn on cable TV or you look at political blogs.

And really the exception, historically, is the period that I grew up in and the period that many people grew up in. We had three broadcast networks and everybody got their news from the same places. People would argue about the political slant of the broadcast networks, [but] they certainly presented themselves as very objective and sort of partisanship-free. That was really the unusual period. When you go back and look at partisan newspapers in the past, things look awfully similar to what we see today.
Categories: American media, Economic matters, Media Tags:

An increase in Australian home renters

April 9th, 2014 Comments off

More Australians are renting the home they live in and the cost of doing so increased strongly from 2006 to 2011. Australian Bureau of Statistics figures this week show that the median weekly household rent rose to $285 from $191 in 2006, an increase of 49.2%. Overall, rental costs have increased twice as much as wages; the median weekly household income increased from $1,027 in 2006 to $1,234 in 2011, up 20.2%.

Nearly three in ten Australian households (29.6%) rented their dwelling at the time of the 2011 Census. There was a larger increase in rented homes between 2006 and 2011 compared with homes owned with a mortgage. The proportion of rented homes increased almost two percentage points (from 28.1% in 2006), whereas homes owned with a mortgage increased by less than one percentage point (from 34.1% in 2006 to 34.9% in 2011), and the proportion of households that owned their dwelling outright decreased (from 34.0% in 2006 to 32.1% in 2011).

2014-04-09_ownedbuyingrentedThe ABS figures show that rental costs increased by about ten percentage points more than mortgage repayments. The median monthly mortgage repayment in Australia rose from $1,300 in 2006 to $1,800 in 2011, an increase of 38.5 per cent, while the median weekly rent payment increased by 49.2 per cent.

In 2011, the Northern Territory recorded the highest home rental rate of all states and territories, with nearly half of all homes being rented (49.1%). Tasmania and Victoria had the lowest home rental rates of 26.4% and 26.5% respectively. Home rental rates increased in all states and territories between 2006 and 2011. Queensland had the largest increase from 31.1% in 2006 to 33.2% in 2011, followed by Western Australia from 27.2% in 2006 to 29.2% in 2011. New South Wales had the smallest increase from 29.5% in 2006 to 30.1% in 2011.




Solving the corporate tax system – replace corporate income tax entirely and replace it with a direct tax on shareholders

April 8th, 2014 Comments off

Preventing multinationals from shifting reported income to low-tax countries is receiving attention in Australia, along with other countries, as companies like Apple and Google record high sales but low profits by placing patent ownership in a low tax country like Ireland. The OECD has been given the task by the G20 to try and fine a solution that distributes company tax more equitably than at present but it is no easy task. Getting nations to agree on a fair formula for tax would make achievement of agreement on combatting global warming seem easy.

A new paper by Eric Toder of the US Tax Policy Center and Alan Viard of the American Enterprise Institute published this week attempts to provide a way forward with what they call “major surgery” on the corporate tax system. They propose two alternatives: Either build a tax based on a broad international agreement on how to allocate corporate income among countries, or kill the corporate income tax entirely and replace it with a direct tax on shareholders. In such a system, capital gains would be taxed as they accrue rather than when they are realised upon the sale of shares.

The broad international approach, a difficult thing to achieve as noted above, would require an agreement with other countries on a uniform rule for allocating corporate income among jurisdictions. For instance, countries could apportion income by formula, or agree to tax income from intangibles (such as patents) based on the location of sales.  How to allocate profits of multinationals is easier said than done.

The second structural reform option would eliminate the corporate income tax and instead tax shareholders of publicly traded corporations at ordinary income rates on their dividends and capital gains. To make this shareholder taxation fully effective, it would be necessary to tax capital gains as they accrue, whether or not they had been realised through the sale of shares. Under this approach, tax would depend only on the residence of the shareholder, not the residence of the corporation or the source of its income. Owners of closely-held businesses would pay individual income tax on their firm’s profits,  just as partnerships and S corporations (corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes) are taxed  today in the US.

Categories: Economic matters Tags:

Paul Krugman on the economics book of the year and other news and views for Wednesday 26 March

March 26th, 2014 Comments off

26-03-2014 capitalpikketty

  • Wealth Over Work – “It seems safe to say that “Capital in the Twenty-First Century”, the magnum opus of the French economist Thomas Piketty, will be the most important economics book of the year — and maybe of the decade. Mr. Piketty, arguably the world’s leading expert on income and wealth inequality, does more than document the growing concentration of income in the hands of a small economic elite. He also makes a powerful case that we’re on the way back to “patrimonial capitalism,” in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent.”2014-03-26_googlecompare
  • Apples Vs. Oranges: Google Tool Offers Ultimate Nutrition Smackdown
  • Putin and the Laws of Gravity – “The morning after, he was the hero of Russia. Some moronic commentators here even expressed the wish that we had such a “decisive” leader. Well, let’s see what Putin looks like the morning after the morning after, say, in six months. I make no predictions, but I will point out this. Putin is challenging three of the most powerful forces on the planet all at once: human nature, Mother Nature and Moore’s Law. Good luck with that.”
  • Australia’s luck runs out as China slows – By Henny Sender in London’ Financial Times: “Reasons to be bearish on currency and country grow daily; There is only one good reason not to short the Aussie dollar: it is expensive. But the grounds for taking a bearish view on both the currency and the country become more compelling by the day.”
  • Profiles in Courage at the IRS (Really) – ” Randolph W. Thrower was IRS commissioner from 1969 to 1971. The Nixon White House insisted that the IRS audit the president’s enemies. Thrower, a lifelong Republican, refused to do it. According to the Washington Post, he also refused to hire Nixon dirty tricksters John Caulfield and G. Gordon Liddy. In 1971, Thrower asked to meet with Nixon, believing that the president would be appalled at the attempt to use the nonpartisan agency as a political tool. Instead of a meeting, Nixon aide and future Watergate convict John Erlichman called to tell him he was fired. After Mr. Thrower was thrown out, Nixon told top aides the kind of IRS commissioner he wanted.

    I want to be sure he is a ruthless son of a bitch that he will do what he is told, that every income tax return I want to see I see, that he will go after our enemies and not go after our friends. … Now it’s as simple as that. If he isn’t, he doesn’t get the job. We’ve got to have somebody like that for a change in this place.

    Thrower died last Thursday at the age of 100.

Australia on top of developed world growth list but be warned – it is just a forecast

March 26th, 2014 Comments off

The group of economists polled regularly by The Economist on future trends have Australia growing faster than other developed countries during 2015.


Categories: Economic matters Tags:

Australia and the USA: different directions on penalty rates

March 13th, 2014 Comments off

While I am waiting for bankers, stock brokers and other financial wizards to embrace the seven day week, I note that in the United States they are moving in a different direction to us when it comes to penalty rates. President Barack Obama is pushing to extend penalty rates to more workers while here Eric Abetz wants to narrow their scope.

An editorial in this morning’s New York Times explains the new Obama approach:

For the first 40 years of its existence, a worker’s right to time-and-a-half for overtime, established by federal law in 1938, operated as intended. It guarded against exploitation and inequality by ensuring that extra hours meant extra pay.

Since the mid-1970s, however, that right has been severely eroded. The law gives the Labor Department the authority to update the salary threshold and job descriptions that define who is eligible for overtime pay. The last meaningful update was in 1975, when the Ford administration raised the salary threshold significantly to account for inflation.

In 2004, rule changes by the Bush administration, which remain in force today, basically locked in the law’s by-then outdated and inadequate salary threshold, while giving employers more leeway to define workers in ways that make them ineligible for overtime pay.

President Obama’s directive to the Labor Department to revamp the nation’s overtime rules is an opportunity to undo the damage. By reasserting a meaningful right to overtime, it could lift pay for an estimated five million workers a week and, in the process, help to mitigate the wage stagnation and income inequality that increasingly plague the American economy.

The most important change the department can make is to raise the salary threshold — the pay level below which all hourly and salaried workers are guaranteed overtime pay. Today’s threshold, $455 a week, is unacceptably low, barely above the poverty level for a family of four. The Labor Department should set the new threshold at around $1,000 a week, which is where it would be if it simply had been adjusted for inflation since 1975.

Categories: Economic matters Tags:

Joe Hockey and putting the gloomiest figures forward

March 7th, 2014 Comments off

I guess that when you still want to be able to blame your predecessor for anything that’s remotely bad you need to be careful about sounding too enthusiastic about any inherited figures showing that things are in fact going ahead quite nicely. So it was that Treasurer Joe Hockey treated this week’s GDP figures from the Australian Bureau of Statistics for the December quarter in a very downbeat fashion rather than put them in the context of the latest international summary by the OECD.


Far from pointing out how well Australia is doing compared to other developed countries he stressed a negative. “Today’s numbers,” said the Treasurer, “highlight the growth challenge that the economy will face in the next couple of years as construction on a number of large mining projects comes to an end.”

The pattern of growth in today’s numbers shows an increasing reliance on the export sector. Exports of goods and services rose 2.4 per cent in the December quarter and Australia’s trade balance shifted into surplus.  Net exports accounted for around two‑thirds of growth in the December quarter, while gross national expenditure (a measure of domestic spending) accounted for only a third.  Much of this export growth is coming from the resources sector, which needs fewer workers per dollar of production than the rest of the economy.

And then this:

Nominal GDP, the dollar value of goods and services produced in the economy, increased by 1.6 per cent in the December quarter.  This was in part because the price of iron ore held up relatively well in the December quarter, with the terms of trade rising by 0.6 per cent after falling by 3.1 per cent in the previous quarter.  World prices for both iron ore and coal have fallen since December, suggesting that the terms of trade may weigh on nominal GDP growth in the March quarter.

Not that there was any sign of that warning about iron ore and coal prices weighing on that nominal GDP growth coming true in the January trade figures released the day after the Hockey statement.

In seasonally adjusted terms, exports of non-rural goods rose $536m (3%) to $19,886m.
The main components contributing to the rise in seasonally adjusted estimates were:

. metal ores and minerals, up $290m (3%)

. other mineral fuels, up $162m (6%)

. coal, coke and briquettes, up $55m (2%)

. machinery, up $42m (6%).

The detailed export figures from that ABS release show this picture of how the mining boom is taking over from the mining investment boom:


Categories: Economic matters Tags:

Those “terrible” budget deficits – a 60 year look at the United States experience

March 5th, 2014 Comments off

Just occasionally, very occasionally, the US government has turned in a budget surplus.

2014-03-05_usbudgetdeficitsAnd has all that profligacy ruined the country?

Just something to think about as you listen to Joe Hockey.


The government speaks hypocritical nonsense on airlines and an abolition of the carbon tax

March 4th, 2014 Comments off

Read the Coalition’s election policy on the carbon tax and the hypocritical nonsense being spoken by the now Coalition government on ways to help Qantas becomes absolutely apparent.

The policy taken to the election promised to impose heavy fines “to prevent price exploitation attributable in any way to the carbon tax.” But now, as pointed out by the Owl yesterday in “The very strange nature of Australia’s carbon tax”, airlines are being urged to pocket for themselves the tax saved.


The very strange nature of Australia’s carbon tax

March 3rd, 2014 Comments off

In question time today government ministers – Tony Abbott, Warren Truss and Christopher Pyne – went on and on claiming that the abolition of the carbon tax would be the best way of solving the financial problems of Qantas and saving the jobs of the airline’s staff. The assumption of the answers was that the tax money saved would go to the airlines.

But when referring to the impact of the removal of the carbon tax on energy producers the government argument is that consumers would be the beneficiaries. Indeed the government would be insisting that the tax savings were passed on down the line.

A strange tax indeed.

Constructing new mines going down but actual mining production on the rise

February 27th, 2014 Comments off

The signs that the inevitable decline in investment in new mining projects is well and truly underway was shown today when the Australian Bureau of Statistics released its survey of Private New Capital Expenditure and Expected Expenditure for December. The ABS found that the trend estimate for Mining fell 0.6% in the December quarter 2013. Equipment, plant and machinery fell 12.4% while buildings and structures rose 0.8%. The seasonally adjusted estimate for Mining fell 5.5% in the December quarter 2013. Buildings and structures fell 4.2% and equipment, plant and machinery fell 16.0% in seasonally adjusted terms.


The decline in mining investment was a major component in the trend volume estimate for total new capital expenditure in industries overall falling 0.7% in the December quarter 2013 while the seasonally adjusted estimate fell 5.2%.

2014-02-27_totalcapitalexpenditureIt was not the reported actual falls that seem to have spooked many economists but the ABS estimates of future capital expenditure. Estimate 1 for 2014-15 at $124,880m is 17.4% lower than Estimate 1 for 2013-14. The main contributor to the decrease was Mining (-25.2%).

Before getting too despondent it is worth remembering that the figure for next financial year is but an estimate. In 2009-10, 2010-11 and 2011-12 the first estimate – made five to six months before the financial year begins – understated what finally happened.

Whatever happens on the total and mining investment front, the mining “boom” in actual volume of production is still a long way from its peak as the graph below taken from the Minerals Council of Australia’s brief for members of the new parliament illustrates:


What that rise in production volume will mean in a dollar contribution to GDP is difficult to judge given the volatility of the Australian dollar exchange rate but there must be a good chance of increased export income softening the blow caused by declining capital investment. On the downside, however, is the effect on employment with actual mining requiring far less labour than the initial construction work.



Categories: Economic matters Tags:

No official interest rate change likely in March

February 24th, 2014 Comments off

The Owl’s interest rate indicator suggests that the Reserve Bank board will make no change to official rates at its meeting on the first Tuesday in March.


The forecasting power of Eric Abetz – completely wrong about wages

February 19th, 2014 Comments off

It was less than a month ago – on 29 January – that Employment Minister Eric Abetz took to the rostrum to warn that Australia risks a wages explosion that could push thousands of Australians out of work. This morning the Australian Bureau of Statistics reported that “the growth in wages over the last year of 2.6 per cent, seasonally adjusted, was the smallest through the year rise since the series commenced in 1997.”


Categories: Economic matters Tags:

The perils of economic predictions proved again

February 13th, 2014 Comments off

You have to wonder why Australian banks continue to employ economic spokespeople to make fools directly of themselves and indirectly of their employer. Just what is the benefit to anyone of the succession of misleading prognostications? And why does the media think it necessary to report the nonsense?

Take this example this morning just an hour or two before the Australian Bureau of Statistics released its official figures.

Unemployment expected to hold steady on rising business confidence

By finance reporter Elysse Morgan

Today’s official employment data is widely expected to show unemployment remained at 5.8 per cent last month.

Economists believe 15,000 jobs will have been added, which would only make up for some of the 22,500 thousand jobs that the ABS currently estimates were lost from the economy in December.

December’s figures were the biggest loss in full-time jobs in two-and-a-half years.

The Reserve Bank believes the jobless rate will continue to rise over the coming months to reach 6 per cent, but some economists believe a pick-up in business confidence and conditions will flow through to hiring.

HSBC Australia chief economist Paul Bloxham is one of those who believes the report will show a pickup in employment.

“Part of this reflects that we saw such a weak result in December that we’re expecting bit of a bounce back in January, but also we are broadly optimistic that the labour market is going to start to show some signs of improvement soon because growth in the economy looks like it was rebalancing in the fourth quarter of last year,” he said.

Mr Bloxham says he believes the unemployment rate is unlikely to rise much higher.

“Look we think growth is already rebalancing, we’ve seen a pickup already in the housing sector, a pickup in residential construction, we think that’s flowing through to business confidence and business conditions, and very soon we think firms will start to hire to meet that rising demand,” he added.

Westpac chief economist Bill Evans says a positive reading is needed to turn around rising concerns about job security, which are affecting consumer confidence and spending.

“We have to go back a long way before we can see people feeling as concerned about the outlook for unemployment, so we need to settle that down, they need to feel more confident about job security,” he explained.

And so to those official ABS figures.

  • Employment decreased 3,700 to 11,459,500. Full-time employment decreased 7,100 to 7,953,000 and part-time employment increased 3,400 to 3,506,500.
  • Unemployment increased 16,600 (2.3%) to 728,600. The number of unemployed persons looking for full-time work increased 20,700 to 547,200 and the number of unemployed persons looking for part-time work decreased 4,100 to 181,400.
  • The unemployment rate increased 0.1 pts to 6.0%, based on unrounded estimates.
  • Participation rate unchanged at 64.5%.
  • Aggregate monthly hours worked increased 20.5 million hours to 1,635.8 million hours.



A sign that the unemployment position is worse than shown by these seasonally adjusted figures is shown in this plot of the employment to population ration of 15 to 64 year olds that takes out the influence of the ageing population on the declining participation rte.




Categories: Economic matters, Media Tags:

Putting a probability on economic forecasts – the Bank of England shows how

February 12th, 2014 Comments off

The Bank of England has a sensible way of illustrating the uncertainty that is naturally involved when making predictions about the economy. In its February inflation report issued overnight it illustrates the probability of what it predicts actually occurring.

12-02-2014 gdpprojection12-02-2014 bofeunemployment12-02-2014 bofeinflation


Categories: Economic matters Tags:

Sound familiar? Chrysler asks governments for $700 million

February 12th, 2014 Comments off

Canada is having troubles keeping its car industry too. Chrysler has asked the federal and Ontario governments to come up with $700 million to keep its plants operating.

The Globe and Mail reports:

12-02-2014 canafamotors

Composite leading indicators continue to point to an improving economic outlook in most advanced economies

February 11th, 2014 Comments off

A hopeful pointer this morning from the OECD’s Composite leading indicators (CLIs). The indicators, designed to anticipate turning points in economic activity relative to trend, continue to show signs of an improving economic outlook in most advanced economies.


The CLIs continue to point to economic growth firming in the United States and the United Kingdom and to growth above trend in Japan.

In the Euro Area as a whole, and in France and Italy, the CLIs continue to indicate a positive change in momentum. In Germany, the CLI shows signs of firming growth.

In the emerging economies, the CLIs point to growth around trend in China, Brazil and Russia, and to growth below trend in India.


The above graphs show country specific composite leading indicators (CLIs). Turning points of CLIs tend to precede turning points in economic activity relative to trend by approximately six months. The horizontal line at 100 represents the trend of economic activity. Shaded triangles mark confirmed turning-points of the CLI. Blank triangles mark provisional turning-points that may be reversed.

Categories: Economic matters Tags:

Where the banks get their money

February 5th, 2014 Comments off

An interesting graph tweeted by Greg Jericho ‏@GrogsGamut 

5-02-2014 bankfunding

Categories: Economic matters Tags:

No Australian interest rate change more likely

January 22nd, 2014 Comments off

After today’s consumer price index figures the market rates no change in official interest rates as even more likely when the Reserve Bank board meets next month.

22-01-2014 februaryrates

Ethics and managerial responsibility – South Korea’s different standard

January 21st, 2014 Comments off

Senior managers taking responsibility for failings of their underlings by themselves resigning is a novel occurrence in even the most scandal ridden western companies but things are different in South Korea. Up there managerial responsibility actually appears to mean something.

The Korea Times reports this morning that the chief executives of four financial services companies offered to resign on Monday over massive consumer data leaks that have hit the local financial sector.

21-01-2014 korea

They are KB Kookmin Bank CEO Lee Kun-ho, KB Kookmin Card CEO Shim Jae-oh, NH NongHyup Card CEO Sohn Kyung-ik and Lotte Card CEO Park Sang-hoon. Along with Lee and Shim, all executives of KB Financial Group’s credit card and banking subsidiaries decided to step down. Eight other executives at Lotte also offered to resign to take responsibility for the country’s worst ever customer data leak.

“They have tendered their resignations en-masse to the group Chairman Lim Young-rok,” said a spokesman for KB Financial Group. “It’s not yet clear whether Lim will accept all of them.”

In addition, all executives of the Korea Credit Bureau, a private financial data provider, have decided to step down, accepting liability for the incident that may have been perpetrated by an employee.

KB Kookmin Card is one of three card firms that experienced the data theft, which may affect more than 20 million card users. The other two firms are Lotte Card and NH NongHyup Card.

“Sohn offered to resign to take responsibility for the theft case, and the company accepted his resignation,” an NH NongHyup official said.

The case couldn’t come at a worse time for KB Financial, which is still reeling from a series of high-profile corruption scandals involving its banking staff.

“Unfortunate things recently occurred at KB one after another, causing concern to many people. We hope the resignations will help produce a turnaround,” the KB official said.

Their resignations came hours after Prime Minister Chung Hong-won called for strict punishment for those responsible for the consumer data leaks.

Categories: Economic matters Tags:

No Australian interest rate change the prediction

January 18th, 2014 Comments off

A fall in official interest rates by the Australian Reserve Bank is rated as being more probable than an increase but no change is the firm favourite according to the Owl’s interest rate indicator.

2014-01-18_interestrateindicatorAll the current Owl’s Indicators are listed here.


5 reasons why your pay isn’t rising as fast as it should – CBS News

January 14th, 2014 Comments off

In theory, wages should grow at the rate of inflation plus the rate of growth of productivity. But in the last several years wage growth has been below this benchmark. Why? Here are five factors that are conspiring to restrain wage growth…

Large supply of unemployed workers


Hollowing out of the middle class

Decline in unionization


via 5 reasons why your pay isn’t rising as fast as it should – CBS News.

Categories: Economic matters Tags:

Job creation memories – a note on economic forecasting

January 6th, 2014 Comments off

This item from the Sydney Morning Herald this morning brought back some memories of election campaigns long past.

6-01-2014 jobmemories

In 1983 an earnest young economist who had spent months working seriously on Labor policy matters presented me with his final conclusions as to what should be promised about employment growth under a new government. I forget the recommended figure – 350,000 new jobs over three years or something – but it didn’t have the right ring to my well honed economic ears. So a much more grandiose 500,000 new jobs appeared in the shadow Treasurer Paul Keating’s election manifesto. The real surprise to me came a few years later when I heard the then proper Treasurer Keating boasting about how he had done even better than he had promised. So much for forecasting.


Categories: Economic matters, Federal elections Tags:

Not such a silly Joe – Blocking ADM

December 21st, 2013 Comments off

Archer Daniels Midland’s (ADM), whose takeover of Australia’s Graincorp recently was blocked by Treasurer Joe Hockey, this week agreed to pay $54.3m to resolve civil and criminal charges that a subsidiary bribed government officials in Ukraine in return for tax refunds. The Financial Times reports that the deal with US authorities ends an embarrassing chapter for the company, which has sought to polish its image after pleading guilty in a high-profile price-fixing scandal in the 1990s. US authorities accused Alfred C Toepfer International, a Hamburg-based subsidiary, of paying $22m to Ukrainian officials to recover more than $100m in unpaid tax refunds.

In one scheme, Toepfer made payments to a shipping company in the port of Odessa for artificially inflated invoices, a piece of which was passed as bribes to Ukrainian officials, the US Securities and Exchange Commission alleged. One set of disbursements was disguised “as prepayments for feed barley”, its complaint said.

In another, the company drafted fake contracts with an insurance company that included false premiums that were paid to Ukraine officials.

Toepfer’s Ukraine office pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA and agreed to pay $17.8m in criminal fines, the Department of Justice said Friday.

ADM also agreed to pay $36.5m to settle the SEC’s civil charges of failing to prevent the illicit payments. Toepfer also paid an unspecified penalty to German authorities.


Categories: Economic matters Tags:

Shanahan doctors a devil’s debt number

December 18th, 2013 Comments off

Don’t let a billion get in the way of a good headline.

Two different versions of the gross debt figure in 10 years time


Categories: Economic matters, Media Tags:

Baling out university superannuation schemes

December 16th, 2013 Comments off

Snuck away in today’s Financial Review story on plans for a federal takeover from state governments of the administration of universities is an apparent costly rescue plan for the superannuation scheme for academics. The Fin report says:

The Abbott government is also poised to relieve NSW of the burden of $2 billion of unfunded obligations for superannuation schemes operated by NSW universities. The federal government will take responsibility for 80 per cent of the unfunded obligations of the defined-benefit schemes.

Academics, especially younger ones, should be grateful for the Commonwealth’s largesse for without it their retirement incomes are in big trouble.

16-12-2013 unisuper

The rather sad story of UniSuper is not one that has received much coverage in the mainstream news pages. Superannuation is a complex subject for journalists to cover and the couple of attempts I made to draw attention to the university problem aroused little interest and thus can be included in the “failure” category.

More successful are the efforts of financial consultant Daryl Dixon in his regular columns hidden away on the finance pages of The Canberra Times and The Australian. They are worth a read.

Defined benefit a time bomb

Daryl Dixon September 28, 2013 The Australian (subscription required)

Unisuper has acknowledged that its defined benefit superannuation fund is no longer prepared to pay all the benefits promised to members when they were forced to join this fund. Its latest chief executive, Kevin O’Sullivan, has indicated that a name change, including “target benefit” rather than “defined benefit”, will be considered. For younger members with many years of employment ahead, and nearly 7000 non commutable lifetime pensioners, a more suitable description could well be “uncertain benefits” scheme.

Public servants on steadier ground than academics

Daryl Dixon September 03, 2013 The Canberra Times

Defined-benefit funds CSS and PSS pensioners are highly unlikely to face the uncertainties plaguing UniSuper. A protection for public servants is that a breach of the Commonwealth’s statutory commitments would trash Australia’s credit reputation. Apparently tempted by the extra cash on offer, Australian National University employees have been keen to volunteer for one of the 230 early-retirement packages now on offer.

Uncertainty looms over uni’s staff pensions

Daryl Dixon August 06, 2013 The Canberra Times

Last month, the Australian National University joined other university and public sector employers in announcing it would shed a large number of jobs. The ANU will seek 230 volunteers to accept an early retirement package, offering cash inducements of between six and eight months’ salary depending on the staff’s length of service. These incentives will be paid, subject to Taxation Office approval, not as a tax-free voluntary redundancy pay-out but as an eligible termination payment instead, subject to less generous concessional tax arrangements.

More woes in Unisuper saga

Daryl Dixon June 24, 2013 The Australian (subscription required)

My most recent article highlighting the inadequate regulatory protection for university employees forced to join the UniSuper Defined Benefit Fund provoked a justified response from a reader.

It’s time to bail from UniSuper

Daryl Dixon June 08, 2013 The Australian

Where are the superannuation regulators when investors really need them, as the UniSuper defined benefit fund difficulties continue?

Pension time bomb ticking

Daryl Dixon March 11, 2013 The Australian

The federal government’s unfunded super liability for politicians, judges, public servants and military personnel now totals some $200 billion and continues to increase. This is more than 2.5 times the assets in the Future Fund set up by the Howard government to help fund these liabilities.

Regulators must act to end the UniSuper farce

Daryl Dixon March 05, 2013 The Canberra Times

University pensions authorities must now step in to protect the superannuation savings of university staff.

Our unis are stealing their staff’s futures

Daryl Dixon February 05, 2013 The Canberra Times

UniSuper University staff may lose the retirement benefits that their super fund promised them. The fund is relying on the contributions of new younger members to help fund the larger benefits promised to older members.

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Launch of world’s largest vessel big step towards development of Australian LNG industry

December 6th, 2013 Comments off

Australia’s move towards becoming a major producer of liquefied natural gas has moved a step closer with the launching in Korea of the world’s largest floating vessel.

The vessel, called the Prelude, is so large that if stood up, it would be 1,601 feet tall, reaching higher into the sky than the Empire State Building. It won’t be able to travel under its own power but used as a floating island about 300 miles off the coast of western Australia.


NPR of the US reports that the 600,000-ton Prelude will serve as a liquefied natural gas, or LNG, facility, which lets the company tap into the natural gas deep at sea. The gas will then be chilled into a liquid, which makes the gas easier to store and ship.

Smaller ships will come and pick up the natural gas and transport it to customers. Shell’s Prelude is so huge it can store enough liquefied natural gas (LNG) to fill 175 Olympic swimming pools. It will stay in place during stormy weather and is built to withstand a category five cyclone, according to the company.

The Prelude will allow Shell to tap into natural gas reserves that have previously been too expensive to extract, according to Kayla Macke, a U.S. spokeswoman for the company.

She declined to comment on the cost of the drilling project, but noted that Samsung, the South Korea company that built the Prelude, put the cost of the vessel at $3 billion back in 2011.

Previously, the world’s largest vessel was the Jahre Viking, an oil tanker that’s 1,504 feet long, according to Guinness World Records.

Macke says the Prelude will be similar to the offshore rigs in the Gulf of Mexico, adding there will likely to be around 100 workers who will perform two-week shifts at sea before heading back to shore.

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Here we go again – the craziness of economic austerity

December 2nd, 2013 Comments off

Simon Wren-Lewis, an economics professor at Oxford University, and a fellow of Merton College writes on his blog mainly macro: Here we go again.

1) Government embarks on austerity, to try and maintain the confidence of the bond markets. We must preserve the AAA rating for our government’s debt, says the finance minister.

2) Austerity reduces demand, helping create flat or negative growth. As a result, deficit targets keep being missed. Additional austerity is imposed, and growth declines again.

3) Country loses its AAA rating, and the credit rating agency gives concerns about poor growth as an important factor for the downgrade.

4) This confirms our fears, says the finance minister. We must redouble our efforts to reduce our debt.


This will sound familiar to UK ears, but it is also what has just happened in the Netherlands.
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Australia – the OECD’s economic forecast of moderate growth for 2014

November 19th, 2013 Comments off

The OECD in an economic forecast released tonight predicts that growth in Australia should remain moderate at 2½ per cent in 2014, before gradually accelerating toward its potential rate of 3% in 2015. The slower pace of mining investment,the organisation argues, should be offset by the gradual strengthening of non-mining sectors, which will benefit from recent improvements in confidence, the currently lower exchange rate and expansionary monetary policy.

In the absence of inflationary pressures, a continued policy of monetary accommodation will be needed to sustain demand once the mining investment cycle comes to an end. It will also be important to avoid any additional tightening of fiscal policy in the short term above that already factored in. The authorities’ medium-term objective of restoring some room for manoeuvre on fiscal policy is welcome. This should be accompanied by a tax reform that will make real estate taxation more efficient and reduce the corporate tax burden to encourage the restructuring now underway in the economy.


The OECD’s economic forecast for the global economy is for continued expansion at a moderate pace over the coming two years, “but policymakers must ensure that instability in financial markets and underlying fragility in some major economies are not allowed to derail growth.”

“The recovery is real, but at a slow speed, and there may be turbulence on the horizon,” OECD Secretary-General Angel Gurría said during the Outlook launch in Paris. “There is a risk of another bout of brinkmanship in the US, and there is also a risk that tapering of asset purchases by the US Federal Reserve could bring a renewed bout of instability. The exit from non-conventional monetary policy will be challenging, but so will action to prevent another flare-up in the euro area and to ensure that Japan’s growth prospects and fiscal targets are achieved,” Mr Gurría said.

GDP growth across the 34-member OECD is projected to accelerate from this year’s 1.2% rate to a 2.3% rate in 2014 and a 2.7% rate in 2015, according to the Outlook. The world economy, by contrast, will grow at a 2.7% rate this year, before accelerating to a 3.6% rate in 2014 and 3.9% in 2015. The pace of the global recovery is weaker than forecast last May, largely as a result of the worsened outlook for some emerging economies.

Growth in the United States is projected at a 2.9% rate in 2014 and a 3.4% rate in 2015. In Japan, GDP is expected to drop to a 1.5% growth rate in 2014 and a 1% rate in 2015. The euro area is expected to witness a gradual recovery, with growth of 1% in 2014 and 1.6% in 2015.

Growth has begun picking up in China but will remain weaker than previously projected in most other major emerging market economies. A group of emerging OECD member countries – Chile, Turkey, Mexico, Korea and Israel – will continue out-pacing growth in other advanced economies.

The Outlook draws attention to a range of downside risks in this recovery, which is still weak by past standards. It points to a worrisome slowdown in world trade growth, in foreign direct investment flows and in fixed investment, as well as continuation of stubbornly high unemployment, particularly in Europe, where it is only expected to fall below 12% by the end of 2015.

The OECD says US monetary policy should remain accommodative, while proposing a gradual winding down of asset purchases by the Federal Reserve, to limit impacts on vulnerable emerging-market economies. It calls for an end to fiscal deadlock in the United States, through the abolition of the nominal debt ceiling and implementation of a co-ordinated medium-term fiscal plan.


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Europe’s Remarkable Achievement – Paul Krugman

November 17th, 2013 Comments off

Europe’s Remarkable Achievement –

Compare industrial production with data from the 1930s, which can be found here. When I compare the Eurozone now with Europe then, I get this chart:

My joke slogan for Obama has been, “It’s not as bad as the Great Depression!” But Europe can’t even claim that. At this point it’s just as bad as the Great Depression — and where European economies were recovering strongly by this point in the 30s, they’re stalling now.


Doing worse than the 30s; that’s a remarkable achievement.

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China expected to cut growth target to 7% –

November 12th, 2013 Comments off

China will cut its growth target to 7 per cent next year in a sign of the government’s determination to push through structural reforms and steer the economy on to a more sustainable path, one of the country’s top investment banks has predicted.

via China expected to cut growth target to 7% –