27 thoughts on “Monday message board”

  1. Is Mr Rudd’s problem with Mr Burke (‘who touches pitch must be defiled’, according to Mr Costello) going to be a nine day wonder, or will it have permanent effects, e.g. making Mr Rudd unelectable?

  2. I think the people are getting a gut full of the Rodent and his ability to hit a new low standard when it was thought not possible. The feeling I get from radio and letters is that he has well and truly gone too far this time and all the previous deceit and lies that were being put up with are now wearing thin. This will blow over as some in the Rodents camp won’t want cupboard doors opened, even to save the little rats ego.

  3. We see clearly how poll-driven the rodent is. Rudd gets a couple of good poll results, and its all hands to the merde-pump.

  4. I have just been able to track down a copy of an interesting report by the large investment banking firm ‘Lehmen Brothers’ on climate change. It looks like a nice complement to the Stern Review, partly because governments and businesses are probably more likely to listen to investment bankers than experts. It seems to be suggesting that firms which embrace climate change adaptation and mitigation will have competitive advantages.

    I found it at http://www.cs.bc.edu/~muller/teaching/cs021/lib/ClimateChange.pdf

  5. I’m betting that Rudd and Burke will have minimal damage. And I think the rodent’s response has worked against him. Because…
    Rudd is polling well because people are desperate for someone who really can credibly replace Howard. They have been waiting for years. So they will forgive him. His indiscretion makes him less perfect and therefore more human, therefore more credible, and even (sorry Kevin) more like “one of us”. And if Australian’s generally thought, as is claimed, that the AWB scandal was a bit ho-hum, then talking to Burke is not nearly in that league.
    On the other hand, Howard’s ranting campaign is more of the same. People may be recognising echoes of another Tampa, another Children Overboard. But, and most importantly, I think especially people are realising that this is the true Howard who has hid himself away for a while and if they don’t vote for Rudd they’re in for another arrogant, compassionless, condescending, heartless, sneering (even “un-Australian”) term of Howard, Costello, Downer, Ruddock and Abbott and I think a lot of people will realise they simply couldn’t stand it.
    On top of which, the treatment of Major Mori in the 24 hours or so has confirmed for a lot of people the utter bastardry of this US administration (with which Howard identifies himself so closely) and the now obvious impossibility of Hicks getting a fair trial.
    In any case, the harder and nastier Howard fights the worse it gets for him.
    Or so I predict. And hope.

  6. I saw a very amusing political ad this morning from the NSW Public Sector Union, along the lines of a crazy bargin sale. However, what is more interesting is the level of advertisment that Unions and other groups are undertaking in the NSW election. Can the same be expected later this year in the Federal arena?

  7. […] seems Graham got it right in his comment over at John Quiggin’s blog yesterday that the voters have had enough of Howard and the way he does business and […]

  8. It does look a bit desperate by Howard and co. I think that’s how its coming off in the electorate. Most people outside of WA seem only vaguely aware of who Burke is.

    I wish Ruddock had faced this with a bit more of a smile and less of an apology. It would be a pretty effective come back to be pointing out the number one priority of the entire government for the week has been a dinner and coffee more than a year ago. Expressing a bit of sympathy for the minister getting sacked for being on the wrong side of Howard’s latest mud slinging campaign might have worked well too.

    All Rudd needs to say is that Howard is losing on every issue, is panicked by the polls and is responding with dirty politics. Do they want a leader who plays politics or talks about the issues?

  10. JQ – Current account below $900 million for January – trend continues to move towards surplus. Can’t wait for it to start raining!

    What is happening? I thought the sky was meant to be falling in?

    Next thing you know our overseas debt might start falling! What will you have to complain about then??

    Wait – don’t tell me – – income/wealth inequality and productivity!! Yep. That should keep you happy/sad!

  11. Razor, alas, that figure is for the trade balance, not the current account.

    The latest figure for the current account was for the September quarter, and it was a deficit of $12084 million. The difference is the interest on the overseas debt and the income on Australian assets owned by foreigners. This is where the action is. The trade deficit is an order of magnitude smaller.

    That’s a current account deficit of over $12 billion in just three months. If you prefer annual figures, the current account deficit in the year to September was a shade under $53 billion.

    Overseas debt isn’t going to start falling any time soon.

  13. Bugger – yep, in my haste I banged in the wrong label despite having read the correct one on the news. Anyway – it’s improving and trend is towards surplus. Once that is in surplus then current account ceteris paribus will start moving towards surplus, no??

  14. Unfortunately, no. The trade account was in surplus in 2001 and the current account remained in deficit, about $3.5 billion per quarter.

    It’s quite possible that the trade balance will move to a small surplus, and this will have a small positive effect on the current account. But this will be swamped by the interest on the foreign debt and the income on foreign owned assets, which will then cumulate into a bigger foreign debt etc, even bigger interest on foreign debt etc.

    Not that this means that disaster is inevitable. While the current account deficit gets inexorably bigger, so does the economy, and so the current account deficit as a proportion of the ecomomy’s size may not get bigger, though even this has been getting bigger in recent years. The current account deficit is double what it was when Peter Costello was driving around his debt truck, and while the economy is larger than it was then, it isn’t twice as large.

    For the current account deficit to become a surplus would require massive trade surpluses, and it’s impossible to see where these are going to come from. Even if somewhow we managed another $50b or exports, all that extra income would lead us to import another $50 billion worth of plasma TVs or whatever. Short of the government, China style, forcing us to work for export while also forcing us to hold down our standard of living, it’s not going to happen. And just as well.

  15. I nearly missed a pretty intelligent comment by Sen. Christine Milne (Green,Tas) in my haste to recycle old newspapers yesterday. In response to the latest poll-driven and media-oriented “climate initiative” from the Fed. Govt. – the Small Business and Household Climate Change Action initiative (4 Mar 2007) – Sen. Milne suggested acidly that “The first thing the Govt. should do is require that 250 of the largest energy companies in Australia implement the findings of their energy efficiency audits. That one regulatory change would achive far more” (Canberra Times 5/3/07, p.5).

    Why didn’t I think of that? Of course, the Senator is referring to the Energy Efficiency Opportunities Program, set up under the Energy Efficiency Opportunities Act 2006. The website says: “Participation in Energy Efficiency Opportunities is mandatory for the estimated 250 corporations in Australia that use more than 0.5 petajoules (PJ) of energy per year”.

    Unfortunately, although “Participants in the program are required to assess their energy use and report publicly on the results of the assessment and the business response”, (which is good), “Decisions on energy efficiency opportunities remain at the discretion of the business” (which is not so good).

    So we see the importance of Sen. Milne’s point about “that one regulatory change” to require implementation. So near and yet so far. Good one, Senator.

  16. Uncle Milton,

    You remind me a my 2nd year economics Lecturer back in 1988 bemoaning the rate of unemployment and interest rates and getting all Hanrahan on us.

    Your comment that “The current account deficit is double what it was when Peter Costello was driving around his debt truck, and while the economy is larger than it was then, it isn’t twice as large.” unveils your bias. The key part of that debt back then was the level of Public debt – which has virtually all been paid off.

    This link has some very informative graphs –

    Click to access balance_of_payments.pdf

    Levels of personal debt have increased as financial deregulation has spread. At the same time corporate levels of debt have not gone through the roof. Whether or not this is a good thing is both an economic and social policy thing. I have heaps of debt because I can afford it and want it. Others are not so fortunate and there needs to be protections for the weak. However this is a side issue.

    What I would point out in the charts in the link are two things – First, the Current Account is improving almost in lock step with the Balance on Goods and Services. Yes, it is still negative, and your point about the trade balance going into surplus not being enough to fix it ignores the second thing. The graph of Net Capital Inflow is very interesting – it does show increasing debt, however the Equity flows are out bound and trending more that way. This is very interesting and quite logical. More people want to borrow more money for a whole range of reasons. While I can’t personally borrow in Japan and hedge the currency risk for my home loans and credit cards, a credit aggregator can. This is good for competition in retail lending markets and good for the economy. The more interesting thing is the equity outflows. As Australia becomes wealthier it is looking for more places to invest. One of the sources of wealth is superannuation with an estimated AUD$1 Trillion now needing a home. I estimate that at lest $200 billion is invested overseas. They estimate that about $30 billion will flow into super before Jun 30 this year – so about $6 billion is also going to go offshore. What I am high lighting is that there is a growing flow of equity offshore. I contend that at some time in the future this will start having a significant impact on the Net Capital flow. It will be intersting to see if in the future Australian interest rates fall to such levels relative to the rest of the world that we become net lenders.

    Your statement that ” But this will be swamped by the interest on the foreign debt and the income on foreign owned assets, which will then cumulate into a bigger foreign debt etc, even bigger interest on foreign debt etc.” assumes that we aren’t paying our interest bill. Is there evidence of this??

  17. Razor old chum the current account deficit is not improving in the only decent way to examine it as a % of GDP.

    Good to see you writing , it could be me but I have missed your writings

  18. Razor, you do realise with your praise of superannuation’s effect on our balance of payments you are in effect lauding Paul Keating who was probably most responsible for it happening in the first place ?

  19. Razor

    “unveils your bias. The key part of that debt back then was the level of Public debt – which has virtually all been paid off.”

    At the time, Costello didn’t say that the current account deficit was bad because it was largely driven by public sector deficits. He just said it was bad, without qualification.

    Your points about borrowing from Japan and investment overseas are well made. I think it’s a good thing that Australians can invest overseas and foreigners can invest in Australia.

    But these are gross capital flows. The current account deficit is the net capital flow.

    You “contend that at some time in the future investments by Australians overseas will start having a significant impact on the Net Capital flow”. The only way this could happen would be if the rate of return on investments by Australians overseas is sustainably higher than the rate of return on investments by foreigners in Australia. I contend that this won’t happen, because capital is mobile internationally. It will flow out of places where the return is low and into places where the return is high (adjusted for risk), and the rate of return in all countries will tend to be equalised.

    The only way that that capital inflows to Australia will be reduced (that is, the current account deficit will be reduced) is either because investment opportunities dry up in Australia (very unlikely) or if we start saving like the Chinese, who have little choice in the matter. But we do have a choice, and as a nation we choose to borrow and spend, not save.

    “assumes that we aren’t paying our interest bill. Is there evidence of this??Is there evidence of this??”

    Yes. The (net) interest bill is $10 billion per quarter. To pay this requires a balance of trade surplus of $10 billion per quarter. At present, the balance of trade isn’t in surplus at all, let alone by $10 billion per quarter. We are borrowing to pay the interest bill and the (relatively small) balance of trade deficit. Provided the rest of the world is prepared to keep lending to us, or keep buying our assets, we can keep on doing this.

    The rest of the world have lent to us every year bar two since 1788 (1972 and 1973), so there’s no reason to think they are going to stop any time in the foreseeable future.

    But you can never be sure.

  20. BBCL – Unless my eyes are deceiving me the Green Line indicating the current account on the first chart inthe set I linked to is going up over the last couple of years indicating an iprovement of the current accoutn from -6% to -4% of GDP.

  21. SWIO – yes, Australia’s suprannuation system is probably the best in the world and PJK can take a lot of the credit for it. That said, he couldn’t have got it through the Senate without support from the Coalition and the same goes for floating the AUD and financial deregulation – many things that the Liberals would never have got through if they were the Government of the day – much like Nixon going to China.

    That said, PJK is a screaming prick who should never have been allowed to beat Hewson (who I am not actually much of a fan of).

  22. Uncle Milton,

    Your contention that capital is mobile is only partially correct. Yes, capital is mobile, but not fully. While the international capital flows are valued in trillions of dollars – much more is quite imobile – it is in real estate and other illiquid assets.

    You may recall back in the start of this decades there were a number of years of very low returns to internationally invested money including negative returns. During this period financial advisors were not telling their clients to stop investing overseas and to pull their money out – it stayed in the low return environments. Advisor used terms like “time in the market not timing the market” and the “ASX value is equivalernt to GE” so don’t keep all your money in Australia.

    There are imperfections in all markets including the one for capital.

  23. Costello didn’t pay off public debt by prudent financial management, all he’s ever done is flog assets. That’s a once only opportunity, and the difference between interest payments and dividends foregone means it’s almost a zero sum game anyway.

  24. wilful –
    Here is a challenge. Calculate the amount of debt paid off and then look at the receipts from asset sales. I will believe you if the receipts are higher than the debt paid off.

  25. The SMH (7 March 2007) carried a report about the Murray Darling system and water extraction, flows etc. The more I looked at this initial report the more I was struck by the similarities to what the Russians did to the Aral Sea and surrounding region. A monumental enviromental disaster driven by irrigating unsuitable crops in an unsuitable area and no hint of an end in sight to this piece of folly. Meanwhile absolutely no change to river flows or storage levels in the key SE Australian belt from QLD down, this is going to be a very interesting year indeed.

    PS It would also appear the cyclone season has passed us by yet again, is this five or six years now in a row?

  26. in statistical terms you look at the trend and that is not improving particularly given the last quarters figures.

    the $A is safe whilst commodity prices are so strong but watch it fall when commodity prices fall. How we have a deficit on trade with these commodity prices is beyond me.

    Even Whitlam got a surplus under similar conditions in 1974

  27. Gah, my previous comment must have gotten spaminated. Andrew, we’ve officially paid $60 bn in debt, not including T3. Against that, we’ve sold T1 and T2 for $31 bn and the airports for nearly $9 bn. A bunch of other assets post 1996 add up to about $10 bn, leaving sod all ‘fiscal rectitude’.

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