billy blog ... some alternative economic thinking

Take a look at this graphic which is borrowed from a Sydney Morning Herald article on November 29, 2006.

While the article by Steve Meacham is about the allegation that Churchill who was a secret fan of science fiction, "borrowed some of his biggest ideas and most telling phrases from his favourite author, H. G. Wells.", it is clear th  More ...

As the High Court effectively terminated the Federal system yesterday and gave the Federal Government power to control almost anything it wants under the Corporations part of the Constitution, back at the ranch, conditions for workers were deteriorating further. The ABS released its Wage Price Index (WPI) today which confirms that real wages for the average worker are now falling. The following table shows why. The WPI provides data on Total hourly rates of pay excluding bonuses (and the data in the table is seasonally Adjusted). The bottom row in the table shows the Consumer Price Index (  More ...

Two items caught my (economic) eyes today. First, it seems that the Australian higher education sector is being increasingly funded by prostitution and related activities. Second, Australia's largest economy continues to flag despite the Labour Force figures yesterday showing that official unemployment is at 4.8 per cent.

University funding: a report from a University of Melbourne academic has found that some students are relying on income received as sex workers to fund their way through university study. In part this is a visa restriction problem for international students who   More ...

Today's 0.25 per cent rise in interest rates by the Reserve Bank of Australia (RBA) is a sign of the madness that goes for macroeconomic policy these days. This is the third rate rise since May 2006 and short-term rates are now 6.25 per cent. The yield curve has been inverting for a while now - which means that short-term rates are higher than the longer term investment rates. When this happens the economy is slowing and typically sliding into recession.

The RBA defends its decision onthe basis of recent inflation figures which show that the acceleration in the price level rem  More ...

The credit-fuelled household spending spree that has helped the Australian economy continue to achieve economic growth in the face of the massive fiscal drag (negative contribution) from the Federal Budget surpluses is starting to slow. The latest ABS data for September released today shows that retail trade increased by just 0.1 per cent. The August figure has been revised downward to 0.2 per cent. The markets apparently were not expecting this (having factored in 0.5).

What does it mean? Well with households straining under record levels of indebtedness and their major asset now  More ...

The Australian Bureau of Agricultural and Resource Economics (ABARE) has forecast that as a result of the annualised impact of the drought on the nation's winter grain crops on GDP will be 0.7 per cent. With GDP growth currently stalling at 2 per cent per annum, this negative impact is substantial. The smart money is that the impact will actually be over 1 per cent per annum of lost production.

The impact will not stop with the lost crop production however. Urban households are already feeling the impact of higher fruit and vegetable prices combined with the stress they are fe  More ...

Readers should realise that under the WorkChoices legislation and regulations any public commentator such as myself who makes comments such that the public might have reduced confidence in the decisions of the Fair Pay Commission (FPC) is liable for 12 months imprisonment. Such is the state of our democracy in 2006.

Well lets get the ball rolling. Today the FPC brought down its first decision. The much-awaited decision is that workers on the lowest pay - the old safety net - gained an increase of $27.36 per week payable from December 1, 2006. The last pay rise they received was on  More ...

Today the Federal Government issued directions to Centrelink to take a tougher line with the unemployed by way of more onerous activity tests including more advanced dole diaries and audits. The targets are the long-term unemployed. At a recent conference in Sydney attended by many Job Network providers a common complaint was they are sending breaching orders to Centrelink who do not act upon them. What a place Australia has descended into. The JN providers are meant to be training the LTU and instead seek to punish them. The JN failure is exemplified by the so-called skills shortage in Au  More ...

A recent report released by the Canberra University based research group NATSEM has revealed that increasing numbers of Australian workers are losing more than 50 per cent of any extra earnings they make due to the structure of our (high) taxation regime.

The Sydney Morning Herald reports (September 24, 2006) that the report "found that when seven per cent ... [some 900,000 of working-age] ... Australians earn extra income, they hand back more than half of it to the government ... around two-thirds of these people are couples with dependent children, while the rest are single   More ...

I am presently working in the Netherlands at the University of Maastricht. A couple of things to report. First, the Dutch Government brought down its budget statement last Tuesday (third Tuesday in September as is the norm over here). In summary, a surplus of 0.2 per cent of GDP announced. Reactions were that it should have been higher. The Dutch Government is claiming it is about ... wait for it ... the demands that will be placed on it by the ageing population. Seems that this nonsense is influencing budget outcomes everywhere.

This is the graph that depicts what I wrote about recently on household debt.

The problem is that all the journalists that are now jumping on the bandwagon have not associated the problem correctly with the Federal Government's obsession with running budget surpluses. It is a fundamental of National Accounting that a government surplus = non-government   More ...

Increasingly we read in the local news that mortgagee in possession auctions areon the increase in our major cities, particularly Sydney. Mortgagee in possession auctions simply refer to the bank or finance company taking possession of a person's house after the person has defaulted on their debt repayments. The bank then tries to get what it can for the property and sometimes (often) leaves the person with residual debt and no property when the forced fire sale doesn't yield a price sufficient to wipe out the residual debt.

These sales are the manifestation of financial f  More ...

Today's ABS Labour Force data for the month of August has been hailed by the Government as a vindication of their decision to introduce WorkChoices, the largest deregulation of the wages system to date which virtually has undid the gains made by workers since the famous 1907 Harvester decision. That decision enshrined the notion of a fair wage which underpinned nearly a century of wage outcomes designed to protect the weakest of the workforce.

The LFS seasonally-adjusted employment rose by around 23,000. As more workers entered the labour force looking for work, a strong econo  More ...

Today the ABS released the June quarter National Accounts data for Australia and confirmed that the Government's attempt to hard sell the proposition tha they are sound economic managers is falling apart. The data reveals a sharp contraction in economic activity with an annual June-June growth rate of 1.9 per cent (0.3 per cent in June quarter 2006), almost half the rate expected by the markets which have been spoon fed too much mis-placed optimism by the Federal Government.

In the June quarter businesses have been running down inventory rather than producing such is the state  More ...

The Federal Treasury Secretary, Ken Henry seems to have the idea that full economic potential means wasting the productive capacities of some 1.8 million Australians. He told an AiG function in Canberra today that the economy was growing at its potential without any notable problems (see Sydney Morning Herald, August 14 - "Economy growing at potential: Treasury"). He said that the "inflation also appeared to be relatively under control ... [and] ... Notwithstanding very high oil prices, and consequently high prices for products derived from oil, the Australian economic environme  More ...

When interest rates were 17 per cent under Labor in the late 1980s, the average mortgage holder was better off than now.

The average new mortgage in Australia is now $222,200 and the yesterdays' rate hike will mean a monthly repayment of $1,685. This means that mortgage repayments will now be 28.2 per cent of the averaage household's disposable income.

Go back to June 1989 when the mortgage rate was 17 per cent and the average home loan was $66,700. Average monthly repayments were $959 then and consumed 25.8 per cent of income.

The situation is much worse also b  More ...

The ABS today released the latest CPI figures which shows that Australia's annual inflation rate is running at 4 per cent. Not surprisingly natural calamity (bananas) and world-wide petroleum cost rises are to blame. Price rises are also coming from housing purchases, rent, health costs, tobacoo and furniture.

The relevance of these trends is that the annual rate is now 1 per cent above the RBA's target upper bound. The problem is that the bank will now in Pavlovian fashion put interest rates up again ... and so the lunacy begins.

Australia has not fully recovered from th  More ...

Two related news stories today in the wake of the ridiculous decision by the Federal Government to continue in surplus in the coming fiscal year. If you want my opinion on the budget by the way go to http://e1.newcastle.edu.au/coffee. Story 1: Australian credit growth slows; Story 2: unemployment rate rising.

The National Australia Bank has indicated that it expects credit growth to moderate in Australia over the coming year. This will be in line with "with slower domestic demand." The Sydney Morning Herald reported that NAB CEO "said he agreed with the view from ... [  More ...

Treasurer Costello announced yesterday that in net terms the Federal Government is now debt free. He went on to make some statements that do not hold up under scrutiny.

First, he claimed that budget surpluses took pressure off interest rates. Sorry, budget deficits put downward pressure on overnight rates as commercial banks scramble to rid themselves of excess reserves and in doing so find that they are unable as a group to clear away a 'system-wide excess'. That is why debt is issued in the first place under a fiat-currency system - to allow the central bank to maintain   More ...

The Australian labour market continues to stagnate with today's ABS data showing a rise in the national unemployment rate.

The January 2006 Labour Force Survey shows that employment is dropping and the unemployment rate is rising.

While total employment increased by 1,800 to 10,034,500, part-time jobs, which have driven the employment growth in recent years fell. Full-time employment increased by 30,500 while part-time employment decreased by 28,700 in the month of January. This rise in the unemployment rate has also been at odds with what the so-called 'markets&#  More ...

According to recent data the household debt binge is starting to unwind. A report in the Sydney Morning Herald on November 26, under the title Mortgage dreams drift off the plan reveals that:

THE number of properties seized and sold by lenders after mortgage defaults is on the rise after more than $60 billion has been slashed from the value of the Sydney property market since the city's house prices peaked two years ago.
As house prices continue   More ...

The Australian Bureau of Statistics (ABS) released the October Labour Force data today and it confirms the trend towards a declining labour market. The official unemployment rate is now 5.2 per cent which means the 'rule of thumb' broader labour underutilisation rate (including hidden unemployment and underemployment) will be once again into double figures (roughly double the official rate). The total number of unemployed increased by 9,000 and now stands just shy of 550,000

This is the second successive month that employment has fallen. All the pundits have been predictin  More ...

Today I listened to a most extraordinary interview on the ABC AM program with the Federal Workplace Relations Minister, Kevin Andrews. Transcript here. The topic was the Government's pending industrial relations changes and the minister was responding to the accusations from the Salvation Army that the legislation would be unethical. The Minister said in part when he was challenged about this:

... the most fundamental ethic is to ensure everyone who wants a job can get one. Unemployment is an evil. I  More ...

Reuters reports this morning on the latest World Economic Forum's economic competitiveness index - see Report. Local reporting (via the ABC is on Australia's entry into the top 10 countries but the interesting part of the story is the composition of the top 10. The Country Rankings 2005-2006 are:

1. Finland
2. USA
3. Sweden
4. Denmark
5. Taiwan
6. Singapore
7. Iceland
8. Switzerland
9. Norway
10.Aus  More ...

We have been so busy that it has been hard to keep the Blog happening. However, I cannot avoid making a comment on the latest news. There are two very disturbing trends on the economic horizon in Australia at present. First, is the news from the Treasury (reported by the ABC news today) that the "The Federal Government has recorded a higher than expected budget surplus. Final budget outcome figures released by Federal Treasurer Peter Costello reveal an underlying cash surplus of $13.6 billion in the last financial year.The surplus is $4.4 billion higher than expected at the time of the  More ...

In Saturday's Sydney Morning Herald article Decade of debt eats family cash by Matt Wade, finally we see some mainstream interest in the household debt problem currently facing Australia. However, the analysis by the journalist fails to correctly locate the problem fairly and squarely in the Federal Government's misguided budget surplus obssession.

The article is in fact a summary of the latest Deutsche Bank's financial obligations ratio, which prov  More ...

With the introduction of the radical new Industrial Relations (IR) legislation looming and the first public opinion poll suggesting that finally the Federal Government is impacting negatively on mainstream Australia, it is worth reflecting on what happened in New Zealand under their so-called Employment Contracts Act (ECA). I note that up until now the neo-liberal regime of the Howard Government has attacked the weak, the jobless, the marginalised, the homeless, the stateless - those generally living in the shadow of our communities. That bully-like approach has been bolstered with the int  More ...

Recently a delegation from the New Zealand Mayors Task Force for Jobs visited Newcastle to discuss further research partnerships with us at CofFEE and also to participate in a workshop we put together with the Lord Mayor of Newcastle, John Tate. The aim was of the workshop was to discuss ways in which Australia could learn from the NZ experience. You can find a full report on the weekend at Jobs Letter Number 234. We will keep you posted of local developments. At present John Tate has indicated he will be calling meetings of local m  More ...

The ANZ Bank published its latest survey data on job advertisements from both metropolitan newspapers and the Internet today. The news is bad - they feel by 2.4 per cent in June. In May, the decline was 7.3 per cent and the trend is downwards. The message is clear: the economy is slowing and employment growth will taper then fall in the coming months. The ANZ economist providing the briefing told AAP that "It is also likely that we have seen the low in the unemployment rate in this cycle". Which means that with employment growth slowing from 3.4 per cent to something like 2 per cen  More ...

This article was written for the magazine Australian Prospect.

In recent times, the public has been made aware by our politicians of an impending skills shortage. Whether this claim is based in fact is yet to be seen. But what is based in fact is that there are approximately 1.8 million Australians without sufficient work. Some have no work at all while others are forced into working fewer hours than they desire at going wages.

Assuming for argument sake there is a skills shortage, what are we to make of this seeming para  More ...

Australian society is one of monumental self delusion. In public discourse, we congratulate ourselves for our 'fair-go' dealings with each other. Our alleged egalitarianism and 'mateship' is perpetuated by the mass media as a representation of the glue that binds our society.

The myth - like all national legends has clearly been rough around the edges with notable contradictions evident. We venerate our soldiers as exemplars of this 'help your mate' attitude when times are tough yet conveniently overlook the fact that in conflict they have raped and murdere  More ...

I wrote this analysis of the NSW State Budget for tomorrow's Newcastle Herald newspaper so yesterday anticipates it being published a day after the Budget came out.

Back down and Sydney-centric - these words come to mind when you read yesterday's State Budget.

The political back down is exemplified by land tax relief provided to nearly half a million (mostly Sydney) residents. This is bad economics but good politics. It encourages further speculation in an already inflated real estate market and diverts resources away from more productive (employment creation) act  More ...

On the ABC news site late today was a story about the Prime Minister John Howard and Deputy Prime Minister John Anderson expressing concern about the mental health of Australians. This is a topic that is of great interest to me and it is the first time I have actually heard the PM and DPM raising the topic on the same platform. And after all this is a Government that imprisons the mentally ill without adequate health care, even locking Australians in detention camps. So this seemed like really something. I read on.

This morning on the ABC AM program talk turned to the problems that the on-going drought are posing for the Australian rural communities. The Deputy Prime Minister John Anderson was interviewed and as you would expect, given he heads the National Party, was extremely sympathetic to the farmers who are demanding more income support. Here is the Transcript. Anyway, as I listened it became obvious that once again the politicians see misfortune in different ways depending on which group is experiencing the misfortune.

Wh  More ...

We know there is an indisputable relationship between crime rates and unemployment. The achievement and maintenance of full employment is the single most important anti-crime measure a government can take. While the costs of crime are large for individuals and communities they also impact on the government spending outcomes.

In a Productivity Commission report in 1999 (Report on Government Service Provision, vol. 1, Steering Committee for the Review of Commonwealth Service Provision, Melbourne), it was estimated that during 1997-98, the cost of i  More ...

In last night's dismal Budget Speech we witnessed the Treasurer continually using two separate concepts as if they were interchangeable. In doing so he clearly was trying to blur the fact that there was not a job in sight in his Budget. It was his 10th Budget and he hopes it will be his last. I hope so too but for different reasons. The other problem is that the Opposition response has been so dismal that the state of macroeconomics in the public policy arena is very bleak. But back to my story. Early on in his speech the Treasurer said:
More ...

I wrote this for the Newcastle Herald - hence the local references.

The Budget's ideological message is clear - further privatise spending through tax cuts rather than expand much needed public services.

The surprisingly high tax cuts are inequitably skewed towards high incomes and business. Average wage earners get $6 weekly whereas someone on $120,000 gets about $90. Business also prospers from huge tax cuts.

Political scientists will note this beneficence directly panders to the Treasurer's key constituency in his aspirations for the top-job - the rich  More ...

On the ABC PM program (Tuesday, April 26) there was a segment on the claim by the Australian Council of Social Services (ACOSS) that the upcoming Federal budget should provide more for the poor by explicitly targetting the rich. Here is the Transcript of the segment. The so-called 'expert' that the ABC interviewed as the 'opponent' of the proposal, one Mike Nahan, who is the Executive Director of the free market think tank, the Institute for Public Affairs (IPA) presented a breathtaking command of economics. I  More ...

Today the Australian Bureau of Statistics released the Consumer Price Index (CPI) data for the March quarter - 0.7 per cent giving a annual rate of 2.4 per cent. That is, a continuing low inflation environment. Yesterday, the ABS released the Producer Price Index results for the March 2005 quarter. These figures which provide information about movements in domestic production costs  More ...

In the Melbourne Age late yesterday an AAP report carried the interesting title Long-term dependence on welfare: study. What study I thought? The report was from the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne and titled Movement between benefit types.

So I read the report in full and probably should not have wasted my time. The AAP repo  More ...

In the Melbourne Age today Misha Schubert's article Six-month wage subsidy aimed at chronic jobless says that "Employers would be paid wage subsidies for up to six months to hire the long-term jobless under a new plan to cut unemployment queues. The second part of the strategy, to be discussed by cabinet today, proposes harsher treatment of long-term dole recipients who are "job avoiders", imposing extra obligations to get them looking for work." More ...

The blogs slowed over the last few weeks due to workload deadlines. But here is Part 5 of the series that are progressively examining (paragraph by paragraph) the letter from Federal Minister for Employment and Workplace Relations to the Australian Local Government Association (ALGA) outlining why the Federal Government will not introduce a Job Guarantee in Australia which would provide a guaranteed public sector job to anyone who wants to work at federal minimum award wages   More ...

This is Part 4 of a series of blogs I am writing which are progressively examining (paragraph by paragraph) the letter from Federal Minister for Employment and Workplace Relations to the ALGA outlining why the Federal Government is afraid to give the most disadavantaged workers in Australia a job at federal minimum award wages (FMW). As brief background, recall that CofFEE's Job Guarantee plan has been endorsed by the Australian Local Government Association in a resolutio  More ...

This is Part 3 of a series of blogs I am writing which are progressively examining (paragraph by paragraph) the letter from Federal Minister for Employment and Workplace Relations to the ALGA outlining why the Federal Government is afraid to give the most disadavantaged workers in Australia a job at federal minimum award wages (FMW). As brief background, recall that CofFEE's Job Guarantee plan has been endorsed by the Australian Local Government Association in a resolution carried last year. The ALGA wrote to the Federal Minister and received a repl  More ...