Monday Message Board

I’m travelling, so posting will be light to non-existent for a while yet. In the meantime, another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

82 thoughts on “Monday Message Board

  1. @Gaz

    Q. “Why has it (CPI) been rigged, and how has this alleged rigging affected the measurement of inflation?”

    A. The government of the day has a political incentive to under-measure inflation. First, the claim of a low inflation rate earns points in the politics. Second, indexed payment rises made by government can be minimised by under-measuring inflation. Pensions, benefits and government super can thus rise slower than real inflation. Third, the capitalists (who donate to both major parties) can be given a free kick. Wages are suppressed, usually even harder, than the rigged under-measuring of inflation warrants. Fourth, asset inflation can be denied and ignored altogether. Again, banks, financiers, speculators and capitalists do well from asset inflation via leveraging and other strategies.

    Q. Who has ordered the rigging, and to what purpose?

    The government of the day orders the rigging for the purposes mentioned above. Of course, the term “rigging” is never uttered. The government has the final say on the basket of goods chosen and the statistical methods applied. Inflation measuring is complex and there are many valid areas of debate. The government of the day carefully controls and manipulates the debate (within the Public Service and the ABS) and has final choices on baskets of goods and services and metrics methodologies from a suite of arguably valid choices. You can be sure they mix, match and model to ensure they get the number closest to what they want. Obviously, they can’t be too blatant or the stink about rigging the CPI would become obvious and get out of hand.

    Q. Why have no ABS emplyees, ever, blown the whistle on this alleged rigging?

    A. The debate is subtle and couched in obfuscating neoliberalese, managerialese and officialese. Top heads of the Federal PS are now political appointees (have been since the Howard era at least). The culture of bullying and intimidation of ordinary workers is now intense in all our politicised public services. No ordinary punter dares raise his or her head. In any case, only a top statistician would have the capability to mount a credible whistleblowing case. The government could assemble 10 other top statisticians who are bought and suborned (essentially) to shoot the poor Don Quixote down.

    Q. Where does the Bureau’s justificaiton for the changes and its current methodology fall down, in your eyes?

    A. It is the brief that is wrong and not necessarily the methodologies used to meet the brief. Though I also suspect some statistical methods used to assess substitution effects and qualitative (usually technological) progress are significantly biased in a fashion that biases the inflation measure downwards. In summary, the government of the day gives biased directions and a biased brief, including cherry-picking of the methods required to get the answers desired. Anyone who does not comply with the dominant paradigm does not get promoted.

    Q. How do you think housing and finance costs should be measured?

    A. It is clear that they should be measured. They are common household (and business) costs. The selective shuffling of housing and finance costs into and out of the basket of goods and services at different times is the clearest possible evidence of the rigging of the inflation figure. There can be no valid reason for ever excluding these costs. IIRC, I remember Keating taking mortgage costs out of CPI when they were going up and putting them back in when they started to deline. That was a clear and blatant rig.

    Q. Unless you can answer those questions, at last some of them, satisfactorily, your comment will look like nothing more than an unsupported smear against what, in my observation over the years, is a group of dedicated, skilled, honest and modestly paid public servants.

    A. Well, I have answered them quite satisfactorily for the standards of a blog. There is no smear on public servants. They are ordered to do their jobs in a certain manner by the govt of the day. If they do not comply they are sacked. None of what they are ordered to do is illegal or inhumane. These would be the only defences under law for not complying with government and management direction.

  2. @Ikonoclast

    The government of the day has a political incentive to under-measure inflation.

    do you remember the underlying inflation rate, which removed more and more volitile items.

    a fightback by law of large numbers eventually made the underlying inflation higher than the headline inflation rate.

  3. @Jim Rose

    No, I don’t actually remember that. Not sure what you mean by the statement “a fightback by law of large numbers eventually made the underlying inflation higher than the headline inflation rate.”

    My thinking is this.

    1. The government collects GST.
    2. All GST returns should contain the data items of GST amount and a goods and services type code.
    3. From this data, data from every legal sale in Australia could be processed.
    4. A very accurate CPI could be calculated from this data.
    5. Given modern technology, the processing volume from this data collection is eminently collectable and processable.

    After all, every GST amount is processed and passed on to the ATO. Add the goods and services code and compute the data. Not hard. Volatility would be swamped in volume giving a very good CPI measure IMO.

    The RBA site states;

    “Following the cyclone (Larry), prices of bananas increased by around 400 per cent, before falling by almost 80 per cent by early 2007, with these movements first adding and then subtracting about ¾ percentage point to the rate of inflation.”

    I find it inconceiveable that people buy enough bananas for a 400% increase in banana prices to affect the entire CPI basket by ¾ of a percentage point. Clearly, the basket is far too inadequate and limited if that effect occurs. The entire purchase of goods and services caught in the GST net, including fresh food at 0%) should be used to calculate inflation. Fixed assets should also be caught up in the calculation net.

    Modern processing power could easily accomplish this entire task. Of course, no government does it because they don’t want real answers. They want to compute distorted answers to suit the agenda of deception which lies at the heart of the system.

  4. @Ikonoclast the basket of volatile items taken out of the CPI became so large that the movements up and down within that basket cancelled each other out to yield a number similar to the underlying rate of inflation

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