Tuesday, December 10, 2013

Mr Abbott's rubber band and the need for longer term perspectives in economics

The Melbourne Age used to be called the old thunderer. By contrast, the Sydney Morning Herald was known as Granny Herald. I fear Granny felt obliged today to give young Tony Abbott an editorial lecture: Abbott is failing to live up to his promises - or his purpose. Tsk. Meantime, the latest polls show Labor close to pulling ahead if not ahead.

I make no detailed comment, beyond noting that  that the government's problems are self-inflicted, something that I alluded to in Mr Abbott's rabbit trap. Now I'm thinking in terms of Mr Abbott's rubber bands, pulled so tight that they have lost all elasticity. All they can do is break. This won't be aided by the likely half senate election in WA.

Meantime, the economic commentary across the media has become, if not confused, at least confusing. Or so I find it. This one is really important. The Australian Government will muddle through, However, what happens to the economy sets the tone.

Back in May I said in a very short post on quantitative easing (The world is awash with money) I said:

The thing that is making me increasingly uneasy is the feeling that the pre-conditions are being set for an economic crash. What makes perfect sense for one country, becomes a mess when multiple countries do it. What I'm trying to work out in my mind is a scenario that would allow multiple quantitative easing to be unwound without tipping the wheelbarrow  over and us all onto the ground.

That remains my position. I still don't have an answer. However, in a long piece I wrote for a national business magazine at the start of November (it's not yet on-line), I took a more positive view, arguing that Australian economic conditions would be better in 2014 than they were in 2013. That, too, remains my view.

Am I conflicted? Perhaps. Certainly I am a little confused. If you are going to make judgements about the future, as opposed to writing about current events, you have to specify your assumptions. Then you must judge what happens in terms of those assumptions, modifying as required.    


Anonymous said...

Jim I honestly can't see why you dither so on all this?

Economics suggests that all you need is a level playing field, and all market participants with equal access to all relevant information, and everyone acting rationally in an environment which never changes. So, what's your problem?

GOD, on the other hand, is said to have created economists so that weather forecasters wouldn't get so depressed every night.


Jim Belshaw said...

kvd, I don't know whether you are being crueler to economists or weather forecasters!

Evan said...

Well said kvd.

There are studies of experts whose predictions tend to be more often right. They are those who have the approach of, there's lots of factors, this could happen, or maybe this, unless this occurs in which case the other thing will probably happen - but my guess is this.

Dithering can be wisdom.

Scott Hastings said...

understand the Rich Man's Code Language!

"productivity-enhancing reforms" is code for pay cuts, less safe working conditions, and union-busting.

along with of course the other half of the Rich Man's Burden, that is, savage cuts to public services

the Australian is saying how DARE Abbott not deliver more inequality more quickly

this is of course a cynical stance since they know full well the Senate constraints in place

Anonymous said...

Don't think I've ever quoted Michael Pascoe (with approval) before, but I would commend his article:


I just do wish that our pollies could concentrate a little more on the future rather than irrelevant apportioning of blame - it's not as if they had anything to do with it, anyway.


Jim Belshaw said...

Hi Scott, on per, yes to the first, no to the second, yes often to the third.

Interesting piece, kvd, although I disagree with parts of it.