Tuesday, January 20, 2009

Anger with Access Economics

Last night I brought up the first part of my response to the Access Economics report on the Australian economy - Has Access Economics done Australia a grave disservice? - 1.

I am really quite angry with Access.

For the benefit of international readers, Access Economics is one of Australia's most respected economic consultancies.

Sometimes known as the Treasury in exile, the firm was founded by former staff from the Australian Treasury. Their economic reports go into the board rooms of all the big firms in the country. Their reports also attract media attention, a great deal of media attention if, as appears to be the case here, they carefully craft their words to attract that attention.

The single message that came through the media reporting was that the Australian economy was buggered. Access says so.

I had the distinct feeling watching Access's Chris Richardson on TV that the size of the media firestorm was creating a degree of discomfort. He did make the point in a kind of sub-text that the Australian recession was going to be far milder than that experienced in some other countries, but this was swept away in the response to the headline statements.

A line by Australian poet John O'Brien (P J Hartigan) has entered the popular language: "We’ll all be rooned," said Hanrahan,"Before the year is out." Those interested can find the full poem here. It's a very Australian poem.

The problem with the actions of Chris Hanrahan Richardson and his colleagues lies in the concept of a self-fulfilling prophesy. If all of Access's clients accept the reported Access headlines without looking at the detail, then their responses may indeed bugger the Australian economy.

Last night on TV, the Australian Treasurer was asked if he had been receiving Treasury advice on the economic outlook and, if so, was it consistent with the Access advice? He did not answer the question directly, instead making the point that Australia was in a remarkably good position to respond.

I have no doubt that he has been receiving daily briefings. I also have no doubt that some of that advice has been sombre. Blind Freddy could see that the international downturn has been more severe than expected.

To my mind, the key requirement at a time like this is to keep a cool head. Confidence has been broken and will only return slowly. Further, there are signs that at least some countries have begun to adopt the kind of beggar your neighbour policies that helped create the Great Depression.

In all this, it remains true that Australia is in a remarkably good position to ride through the storm. Further, there were clear if still qualitative signs that a degree of confidence was returning.

I am not basing this on hard data, simply the conversations of people around me.

Unlike the position last October, the economy has not been a topic of daily conversation. It is actually weeks since I heard anyone say anything beyond flippant comments such as doing their bit for Kevin upon return from shopping. Real estate investment - always a Sydney fascination - is back as a topic, with two colleagues planning to buy.

People are concerned about jobs, but that's understandable.

Listening to the reports, I had the odd feeling that the Treasurer was quite pleased at one level with the Access report.

It completely sidelined opposition leader Turnbull, reducing him to comments about the need to protect the budget. It gave the Government greater freedom to do things. Since then, PM Rudd has followed up with his own remarks with a special focus on the importance of China.

Mind you, I am not sure that this freedom is necessarily a good thing, given what I see as the Government's sometimes tendency to shoot from the hip. Again, cool heads are required.

Some time ago I made two key points.

The first point was that conventional consumption stimulus measures were unlikely to have the desired short term effects given the crash in confidence and because they did not address structural issues that had helped trigger the crash. At best, as has happened in Australia, they can have a cushioning effect.

The second point was that it would take time for structural imbalances to correct and for longer term investment measures to start feeding into the system. The challenge was to manage through to the recovery point.

I still don't know what Access hoped to achieve with their report beyond headline grabbing. They have certainly achieved that.


Anonymous said...

Now they are telling us; after the horse has bolted. Where were they when the crisis developed? Did they warn the banks, Centro, or ABC Learning not to invest in the US? Did they warn superannuation funds to quietly retreat from hedge funds?
They claim to be Australia's No.1 forecaster, but with that should come responsibility. Why are the media giving this private company, who has lost all credibility, so much room?

Jim Belshaw said...

Hi Anon

I have to admit to a bias. I worked in Treasury for twelve years, knew a number of the Access people, and so have a bias in favour.

Your point about responsibility drives to the heart of my concern. I think that Access put the promotion of the company name in front of their professional responsibilities.

This may come off as a marketing tool if the economy goes to hell in a hand basket or even if it just limps along. Somewhere between the two is most likely. But to my mind they have not helped either their clients or Australia.