An interesting comment on a previous thread about the Labor government’s “decisive state action” campaign suggested that Rudd had laid more than one trap for the Liberals with his essay in The Monthly. As well as forcing Malcolm Turnbull and co. to heighten their adoption of the mantle of free marketeers obsessed with tax cuts and railing against deficits (and it’s always good politics to get your opposition doing something futile they’re inclined to do anyway), it was suggested that the obsession among commentators and Oppositionistas with chattering about ideology would have them talking up a storm of complete irrelevance to the electorate at a time when the government is doing stuff that’s bound to be well received.
It’s also interesting to observe Peter Costello’s lines about the economy being immediately echoed in the pages of The Australian. Shorter commentariat: Free markets rule. Dollar Sweetie’s risible performance on Lateline tonight will reinforce Labor’s desired message that the Howard mob were lazy and incompetent during the boom, and his total inability to articulate any alternative course of action was telling. It might also spark off Leadership Speculation Round #8929. At a time when people are rightly concerned about their jobs and their futures, an inward looking focus and an obsession with the past are very big own goals from the Libs.
Has there been any episode in Australia’s political history where our political ‘leaders’ have so transparently sought to position themselves as in the centre of economic events over which they have no control?
A bloodbath of biblical proportions is taking place on the world stage. And here we have the likes of Rudd and Costello in the carpark outside arguing about where to park Australia’s ambulance.
Worse, they are trying to cast their desperate and irrelevant sideshow as part of a titanic battle of ideas when in fact they are both provincial political and economic nobodies with nothing of importance to say.
Both are lightweights and the story is elsewhere.
And ironically, Rudd’s Stimulus pacjage has been roundly applauded by the nation’s only state Liberal Government – WA
http://www.news.com.au/perthnow/story/0,21598,25005336-5017005,00.html
Maybe Costello thinks we’re just going to luck ourselves out of it. I heard a little bit of him last night, wnough to realise he was still no PJK.Then I pressed the mute button and went back to reading.
btw, can’t get the transcript at Lateline to open, so far.
Costello quotes Rudd talking about the failure of capitalism for the past 30 years so includes not only Hawke/Keating and Fraser but Whitlam as well. Now I might only have been in Australia since 1993 but even I am pretty sure that Whitlam was not on centre stage in 1979.
Costello never did anything right, why would we expect him to be able to count?, after all he was only Howards Treasurer.
I could only stomach a few minutes of the video, but enough to hear Tip claim the government’s handouts are intended to ‘massage’ the retail figures for the March quarter. Quite how that will work when the money doesn’t get paid until April he didn’t explain.
The man is as big a self-regarding clown as ever. I do hope he hangs around and does more media appearances. It will remind people of why they gave his mob the arse in 2007.
And in the SMH Tip is comparing Rudd to Whitlam. I guess that’s one way he could get in. Stage a quick coup against Turnbull and ask the GG to dismiss Rudd.
I also notice our old friend J Ho is very very quiet. I would have thought he would have been crowing about how Rudd mangaed to’roon’ Australia and plunge the world into recession.
Ratty is probably still in the States trying to undermine Obama.
Hilarious: Smirker finally makes a comment on Rudd’s previous stimulus package, claiming it had no effect – 10 minutes before figures arrive showing 3.8% increase in consumer spending in December.
First dose of his smug, badgering economic certitudes in 6 months, and it was WRONG.
Why are they even interviewing him? He’s a timeserving backbencher.
Mark says:
Its against my own mass immigration and bubble financier-skeptic position but I have to concede that the Howard Model of political economy is working out better than expected. We are highly indebted and highly dependent on Asia-boosted mineral prices. Yet it looks like AUS is likely to survive the GFC better than comparable countries.
Instead of fulminating against Costello and Turnbull Mark would do well to analyse the reasons why Howard (and his faithful mini-me Rudd) have done better so far.
The secret of the Howard model is AUstralia’s higher quality suppliers of housing finance after the Wallis Committee investigation into the finance bust of the early nineties. And higher quality new servicers of housing finance, let in during the mineral boom of the early naughties. Also, Dollar Sweetie deserves some credit for paying down federal debt which allows the LNP-run Commonwealth to bail out the hopelessly improvident ALP states.
Australia’s economic salvation lies in the very high quantity and quality of more or less captive skilled immigrants which is underpinning the relatively sound position of Australian bank balance sheets. Combined with higher standards of lending as regards deposit provision and serviceability, at least compared to the reckless standards prevailing under Clinton and Bush.
The crafty Howard model is a triumph of machiavellian political economy. From 2002 onwards Howard moved to double the skilled immigration rate, after securing his Right-wing with the Tampa. The mass inflow of immigrants ramped up the demand for Residential Investment Property, which was already receiving negative gearing and capital gains tax-concessions.
The difference bw Howard’s immigration flows and the rest of the Anglosphere is that our new immigrants tend to be higher quality high IQ Asian students. They are intent on becoming established citizens, and Howard was intent on establishing them, as evidenced by high skill requirements and citizenship tests.
Compare this to the USA and USE where the typical immigrant from the Americas and Africa is not likely to turn into a good accommodation servicer. They have porous borders which leads to poorer quality control.
Howard’s massive increase in immigration was only partially related to do supplying skilled labour to the mining industry (which tends to be run by itinerant farmers.) Rather it is to feed the needs of the Business Council and property developers for sweatshopped labour and slumlord renters. That is why rents rose and wages stagnated during the second half of the noughties.
Alan Wood neatly summarises the difference bw the Howard model and the Bush-Blair model of property driven financial growth.
The key to preventing a massive financial meltdown in Australia is a massive increase in unemployment. This is unlikely because of the massive fiscal stimulus injected by Rudd. THe Commonwealth is in a good position to borrow money and go into debt because it is largely free of debt after Dollar Sweeties long train of surpluses and amortisation of debt.
SO the viability of Australia’s economy largely depends on masses of immigrants flooding in and propping up the rental income from our over-leveraged under-supplied accommodation stock. It looks like the Howard-model will scrape through relatively unscathed.
Of course this massive immigration flow comes with tremendous sociological and ecological costs: carbon gluts, water shortages, stagnating wages, ubiquitous queues, parking shortages, housing unaffordability, white flight, sea-changers, gang-related crime, lengthening school and hospital waiting lists. But at least the banks stay un-rupt and property developers stay afloat.
Strocchi prediction for the AUS economy over the next 12-24 months:
Unemployment will be < 10%.
Metro Housing prices falls will be < 20% off their 2007 highs.
I also predict that the PRC will engineer a relatively soft-landing for its largely-export driven economy. Unemployment in export related industries will rise but the largely state-run economy will turn to internal development, largely in the peasant hinterlands. This will have the added benefit of politically pacifying unrest in the hinterland.
Is Peter Costello really as silly, vain and self regarding as he seemed on Lateline? Yes, Keating did some self justifying, but he did directly answer questions put to him by Tony Jones with the gravitas this crisis demands and also came up with some insightful and sound suggestions for future initiatives to tackle it. Costello smirked, sneered and jeered throughout the interview and seemed only interested in defending his own reputation while attacking Rudd personally. He failed to suggest any constructive policies for the country or for the Coalition. If the Liberal Party thinks this man can lead them out of the political wilderness they are as foolish as he showed himself to be last night.
… and many of them were foolish so to think when they were in Govt, and he was Treasurer.
Yes, it just goes to show Costello was the greatest (reader of notes prepared by treasury for the) treasurer we ever had!
Not much idea without the dept behind him, it seems.
Patricia WA – I think the answer to that question is “yes”.
Jack, you make some good points about the Howard economic legacy, but haven’t you ovelooked the fact that net foreign debt doubled under his watch? And our c/a deficit expanded to nearly 7 pct of GDP at a time when our terms of trade had never been more favourable.
Howard pissed away billions in surpluses in pro-cyclical fiscal initiatives that fed an unproductive property boom and starved much needed infrastructure projects of capital.
Yet the vastly over-rated Costello – a Keating wannabe – has the nerve to criticise Rudd for some counter cyclical spending because it might end up in Frank Lowy’s pocket.
Costello is a lightweight
Can I suggest we need a term akin to Godwin’s Law wrt Hitler for whenever the conservatives mention Gough Whitlam?
Over to you all.
Patricia WA
Fact is, the Parliamentary Liberal Party had opportunities to dump Mr Howard, and they never seized such an opportunity. Never. It seems there was never a majority for Peter Costello. They had seen Peter at close quarters. I think that speaks volumes.
To mix metaphors I see Costello now as less Achilles sulking in his tent than Goerring now – without his Luftwaffe.
Remember when he used to ENJOY life?
Those were the days.
Mark says:
Mark and other LP posters and commenters have not noticed “the dog that hasnt barked” in contemporary Australian political economy: why hasnt our economy crashed yet despite being in a higher risk category than comparable economies. Mark also fails to see the irony that Rudd’s financial and fiscal policies are the same as, or at least enabled by, Howard-Costellos policies.
Superficially you would think that AUS would be more likely to suffer a big hit owning to our great indebtedness and foreign dependency. We check positive on two major risk factors for the crash:
– balooning debt servicings, owing to dependency on credit-squeezed foreign capital supplies;
– slumping export earnings, owing to dependency on falling foreign mineral demand.
Michael Stuchbury, in the article linked to by Mark, noted that
AUS federal financial and fiscal economy appears better designed to avoid and to ameliorate the GFC. This is largely, though not soley, come about through the administration of the Howard-Costello model of political economy.
The possibility that we might dodge the GFC bullet is apparent from the relative strength of our financial and fiscal syste. The Australian reports on the extraordinary success of AUstralian banks relative to the disasters in the rest of the Anglosphere – a fact commented on by Keating, and bragged about by Gillard and gloated on by Costello:
Its true that our equity indices and currency rates have come off their bubbly mineral boom peaks. They are now trading at post-Cold War trend levels. That is hardly the sign of a massive crash or the toxic treatment from foreign markets. But we should be in a much worse position than we are now, going just by the headline indices.
Even Quiggin concedes that bank nationalisation is not likely to be on the Australian policy agenda, despite our history of this policy and fairly robust theoretical support for it in research circles.
So the question remains: why is Australia not being hammered as hard as other countries in the Anglosphere? Despite having had a long period of governance by politicians at least notionally accepting neo-liberal economic nostrums. And despite having two major risk factors (dependency on purchases of now-costlier capital from foreigners and dependency on sales of now-cheaper minerals to foreigners).
To summarise the HOward-Costello financial-fiscal economy:
1. HIgher quality loan providers, mainly through stricter APRA regulation, Wallis committee reccommendations and better institutional governance;
2. Higher quality and higher quantity of loan servicers, up-trading boomer investors and masses of skilled immigrant renters.
3. Better financial position of the Commonwealth capital outgoings through debt amortisation
4. Better financial position of Commonwealth current incomings through tax base broadening (GST)
Our demanders of finance (household borrowers) appear to be more pecunious. Since 2002 Howard-Costello ramped up immmigration to keep the upward pressure on housing prices. Renters and first home buyers have few places outside the metro areas where good jobs, services and amenities are in easy commuting distance. Crikey notes that this means property owners and their bankers will benefit from the massive waves of skilled immigrants:
The AUS financial system compares very favourably to the US and UK. When you look at Wall Street, not to mention the lower reaches of housing finance in the so-called Sand States in the USA, its not hard to see why. In the USA it was a case of the Biggest Shark meets the Greater Fools. Stuchbury elaborates:
The US liberal approach in contrast to AUS’s more corporal regulatory regime is quite striking. Left-liberals forget that it was Clinton – following the advice of Larry Summers the worlds most prominent neo-liberal – who repealed the Glass-Steagall Act which had until then constrained merchant and investment banking conflicts of interest.
And both Clinton and Bush embarked on the disastrous project of loaning money hand over fist to redlined minorities. What I call the “debtquity and diversity” depression is the predictable result. Our suppliers of finance (bank lenders) appear to be more provident and prudent than the sort of fellows running riot on Wall Street, Salomon, Lehman, Bears Stearn, Madoff, et al. Stuchbury highlights the contrast:
Costellos long string of surpluses have put the Commonwealth in a good financial position – low debt with a large war-chest of financial assets – to put in place a massive stimulus. This compares favourably with the ALP-run states who have let infrastructure run down despite being flush with cash from the stamp duty.
And now Rudd can now use the Costello war-chest, flush with cash from the GST, to finance his string of stimuli.
I freely admit that throughout most of the late naughties I predicted that Australia would suffer a massive bubble burst on account of the inherent riskiness of our financial situation. I thought that the excessively long duration of the bubble (14 years = twice the typical length of a cycle) would make our bust excessively deep.
It looks like I was wrong on Australia (although quite right about the effects of the bubble on the RoW). My prediction about Australia look to have been too bearish because it failed to take account of the higher quality of our financial and fiscal system, largely a legacy of Howard-Costello.
Instead of post-facto pontifications lets have some pre-facto predictions. I challenge Mark, Robert Merkel and others to weigh in with some predictions about the likely depth and duration of Australia’s recession.
I predict that Australia will ride out this recession relatively less-scathed than comparable economies. I predict a sharpish but shortish recession. About 12-24 months of flat growth.
Also I am predicting a lengthy period of property prices sliding slowly downwards rather than a cataclysimic crash. The continued high quantity of high quality immigrants and new home buyers will underpin property values and bank balance sheets.
Shorter Strocchi: Over the next 24 months:
Metro property price slump < 20% (off their 2007 highs.)
Unemployment will be < 10%.
Now its early days yet. But if the AUS financial system continues to remain on an even keel Howard-Costello can congratulate themselves on being capable stewards. If my reasoning is correct then Costello-Howard should get plenty of kudos for hitting on the magic formula for avoiding a financial crash. Its only fair to give them credit for this, so far.
Quite possibly. The transcript and video of his interview is still not available on the Lateline website, despite Keating’s becoming available the next day.
I know they needed to interview Costello because they’d extended the same courtesy to another former Treasurer in Keating. But in Costello’s own words he is leaving parliament, thereby washing his hands of any ownership of decisions made today which will impact the future. Surely in this context his views about what the government is doing are irrelevant?
Isn’t it taking “balance” to the extreme to say Costello had to be interviewed because Keating was a former Treasurer? Or can we look forward to hearing what Ralph Willis, John Dawkins, John Kerin, Bill Hayden and indeed John Howard think?
Besides Costello, Howard is the only living Liberal Treasurer.
Forgot to add my source
http://en.wikipedia.org/wiki/Treasurer_of_Australia
Probably, but I’m sure it would be a brave ABC current affairs program that interviewed Keating and didn’t extend the same invitation to the other side of politics. Yes Keating is streets ahead of Costello, or Howard for that matter, when it comes to the big picture of our nation’s economy. But remember, this is what the culture wars have done to Aunty.
Rachel – Indeed!
Frank, I think the ghost of Sir Billy Snedden might have given an amusing interview!
“Frank, I think the ghost of Sir Billy Snedden might have given an amusing interview!”
Well it certainly wouldn’t do for Snedders, from liberal all-star heaven lodge, to accuse the government of “excess”, just for a start.
Mr Snedden (upon deciding he wanted to be referred to as Bill): “Billy is a diminuitive name and I am not a diminuitive person!” circa 1974.
Ah, Norman Gunstone: you weren’t the only accomplished Australian comedian in those years.
I downloaded $weetie’s Lateline appearance this morning, to watch this evening. Four minutes in, I’ve realised that, if I bother to watch the whole thing, it’ll be 16 minutes and 35 seconds of my life I’ll never get back.
What a tool.