The Greek crisis - a high stakes game marked by blindness, inexperience and rigidity

Last night, I had ABC (Australian Broadcasting Corporation) News 24 on when the press conference with European Commission President Jean-Claude Juncker came on. It wasn't appearing in my twitter feed, that was full of tweets relating to the ABC Q&A program, so I started live tweeting the conference. When the ABC suddenly dropped coverage, I managed to follow along on the BBC.

Mr Junker was obviously an annoyed man. This was a pitch to the Greek people.

The BBC coverage is quite good on this one. Before going on, this EC press release will take you to the proposals as they were at the time that the Greek Government walked out having called the referendum.  I think that these are the proposals that Mr Juncker was referring too. They are difficult to interpret properly without more knowledge than I have of the current Greek system. They seem a little clunky, a  little over-prescriptive, to me.

Based on the public presentations from the two sides, it appears that the Greek Prime Minister's position is this. The EU can't afford to let Greece exit the Euro. The costs are too high. I need a no vote (no to accepting the proposals) to strengthen my negotiating hand. On the other side, a no vote means Greece's effective exit from the Euro.

Listening to the continuing feeds last night, I was reminded of two things. The first was the nearest Australian historical equivalent, the fight between the Federal and NSW State Governments during the depression over the Lang Plan. The second was the onset of the GFC where I stayed stuck to the TV in our Shanghai hotel room watching the crisis unfold..

In parallel to the evolving Greek crisis, the Chinese Government has announced measures to try to kick-start the slowing Chinese economy, while on the other side of the world, Puerto Rico is on the point of default on its $US72 billion in public debt. Meantime, stock markets are diving.

Greece has become a very high stakes game. I am not close enough to the political dynamics to understand all the possible permutations. On the surface, the lock-in effects on each side are now such that Greece will continue in economic lock-down mode until the referendum. If the vote is yes, the Tsipras Government has indicated that it will resign. Unless an alternative Government can be formed, that means new elections and further delays. If the vote is no, then everybody is going to be looking at exit strategies.

In Australian commentary, commentators have argued that China is far more important to this country. That's true at one level. But these things are interconnected. A telling sign here is the concerns expressed by the Russian Federation about the crisis. President Putin needs a weakened EU, not an EU in economic and political crisis whose flow-on economic effects affect other economies including Russia.

From a purely domestic Australian perspective, I don't have a clear idea as to what all this might mean. Clearly, it's a matter of concern to Australia's large Greek, Greek descended community. They have a very personal stake in the problem. Money is going back to Greece to support families and prayer vigils have been held. Beyond that, I have been trying to think through the flow-on effects depending on outcomes.

I hadn't expected the Tsipras Government to adopt such a high stakes approach. Looking at the IMF/ECB/EC document from a purely professional perspective and accepting that it has come about after a series of discussions, I don't think that the Tsipras Government really had clear strategic objectives, nor defined negotiating tactics. It finally devolved down to tinkering with detail. We will all suffer as a consequence.

Maybe in the few days before the referendum, Prime Minister Tsipras may set out more than what, in the end, comes down to we were robbed. I wouldn't count on it, however.

Postscript

This graphic from the BBC sets out the current composition of Greek debt.

Monday Forum - as you will

Another as you will forum.

The death of actor Patrick Macnee marked another passing for many of us old enough to remember the Avengers (1961-1969) or the New Avengers (1976-1977). I saw it first in 1967 and became quite addicted. It's still running on pay TV from time to time.

The photo comes from a BBC piece,
Patrick Macnee: The last great bowler hat-wearer. I knew nothing about the history of the bowler hat, so found the BBC piece very interesting. By the time I visited London for the first time, it had largely disappeared from the city. I remember being mildly disappointed. I hadn't realised that the bowler hat had a practical origin.

The Greek end game has become quite chaotic. It appears that the first that anybody knew about the proposed referendum came via a tweet. I don't know what the Greek PM was trying to achieve. He seems to have had a brain snap, something that is a feature of decision making under pressure when one side or the other ends by saying "well, bring it on."   

Well, there are two potential topics. Otherwise, feel free to go in whatever direction you want, including picking up any of the earlier things that we have talked about.

Postscript

Interesting article from Nick Miller on the Greek crisis. 

Sunday Essay - musings on women's sport

Again sidetracked this morning by the women's world cup. Again frustrated by the difficulty in actually finding the SBS live feed. Whoever designed the SBS web site deserves a good kick!

I got quite emotionally involved in the game to the point of tears when the Australian girls lost. The Japanese were the better side on the day, but our girls did us proud. Go the Matildas!

That got me thinking about women's sport, men's sport and the broader audience.

This is Aunt Kay on winning the Armidale tennis club woman's championship, It's actually a rather nice shot. Later she would go on to try for Wimbledon in the qualifying rounds. Kay argued, correctly to my mind, that women's tennis was more interesting than men's because of the higher skill levels required as compared to the power and physicality of the men's game.

Tennis was, I think, the first sport where the women's game came to rival the men's in popularity.

We are all formed by our own experiences. In  my case, my interest in women's sport came from my daughters. Outside tennis or athletics, I had no knowledge of women's sport beyond references in schholbooks. Then, with daughters, came almost two decades of watching my girls play.

This is Clare in goal, University of New South Wales defending. Emma. is in the middle. For a number of years Emmas's dad and I met at the hockey. I learned a fair bit about hockey (and Emmas's dad)!  He knew more than I, but together we would walk the sidelines and cheer.

A little later when the hockey world championships were on, I watched the women's matches. I knew enough about the rules by then to have a better feel for the technique of the game and to thoroughly enjoy the spectacle. ..

With Helen came netball and water polo, among other sports. As happened with Clare and hockey, after so many years watching netball, I acquired a real understanding for the game, along with some understanding of water polo. The next time that someone says that boys are rougher than girls, refer them to water polo! What goes on under the water is quite remarkable.

Do more women play sport now that in past years? They certainly spend more time in the gym, perhaps more time than men. But the answer is probably yes overall, although I know of no statistics to measure this.

Both girls and boys now have access to many more sports and at a higher level. The increase in standards has been quite substantial across all sports. In  Rugby, the game I now watch most at school level, my old school firsts now play in the GPS (NSW Greater Public Schools) thirds competition.

There are practical reasons for this. The school is simply not big enough in numbers to be able to compete.at the top GPS grade. Just because the school competes in the thirds does not mean that the boys do not have access to highly professional coaching nor to the latest sport's science. I could just wish that I had their opportunities when I played. Watching the boys play over the last two years, my feeling is that they would have defeated any of the school firsts at the time I played.

In all my years playing school sport, I don't think that my parents came to a single game or meet. The world of school was isolated. That has changed.

My own involvement in my girls' sport gave me much joy. However, the interest in and rising standard of school sport has its downsides. It has given rise to scandals about professionalism and to some very nasty behaviour by parents and other supporters.The idea that you would need guards at matches or rigid codes of conduct for players and especially spectators would have seemed incomprehensible to my parents or indeed me when I was growing up. The idea of drug testing for young athletes equally so.

Returning to my opening theme, there has been a lot of discussion over the last two decades about the limited audience for women's sport and the differential pay rates for men and women athletes. In the end, pay comes back to audiences. If you choose to play hockey at top grade, man or woman,  you will earn less for an equivalent skill level than if you were playing soccer.

As has already happened in tennis, when the audiences are there, pay tends to equalise.
As has already happened in soccer, as women's skill levels increase and where there is a competitive element that people can identify with, audiences grow. As they do, there is more cash.

Netball  is presently the most fascinating case study, for this is almost exclusively a girls' sport. With the possible exception of soccer, netball has the biggest junior playing base in Australia. It has a Trans-Tasman competition attracting growing attendances, including men. They may have begun as fathers, boyfriends or partners, but they remain attracted to the game.

Whether netball can make the final jump to a mass viewing audience of men as well as women is still an open question. I think that the code has a pretty fair chance of doing that.      .  

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Saturday Morning Musings - political and economic ramblings

This morning began, as Saturday mornings so often do, with a media tour looking for anything special that I might write about. I must say I find the electronic media including the BBC unsatisfying. They are useful for quick scan purposes, for perhaps indicating patterns, but they do not give me enough information to properly understand.

President Obama has had rather a good week. There was the Supreme Court decision on Obamacare, the legislation on the Trans-Pacific Partnership (TPP) and now the Supreme Court ruling on gay marriage.

I looked briefly at Obamacare in the context of the 2013 US debt ceiling impasse. I found it quite complex with major roll-out problems at the time, but couldn't quite understand the venom of the debate. While Republicans are still opposed, my feeling is that with the Supreme Court Decision, sufficient time has passed that the core will survive, if with modifications to improve performance.

The TPP is more problematic. There is a lot of debate in Australia especially on the left of politics about the value of the PTT, a view apparently shared by the Australian Productivity Commission, if on different grounds. I do understand the economics of "free trade" agreements including trade diversion versus trade creation.  However, when I first wrote on this some time back in the context of the strategic objectives of Australian trade policy,  I concluded that they were overall a good thing.

I'm not so sure now. The thing that has made me pause is the sheer complexity of the recent agreements for industry and others. FTAs are meant to simplify, not make trade and investment more complex.

One of the difficulties is discussed in the Productivity Commission report, the importance of global value chains. Both trade statistics and trade analysis have been based on a simple model. I sell something to you, you buy something from me. But what happens when the things I sell to you or you buy from me have inputs from other places? More complex still, what happens when the the things that you buy from me actually have less Australian content than the things that you buy from others?

 We re still coming to grips with these issues in both statistical and policy terms. However, it is already clear that trade statistics based on value chain analysis give very different results as compared to conventional models.

The Committee for Economic Development of Australia has released a report on the Future of Australia's Work Force. One conclusion is that 40% of Australia's work force could be replaced by automation over the next ten to twenty years. While I did receive advance notice of the release of the report, I simply haven't had time to read it. However, it bears upon a conversation that has been going on over at Winton Bate's place: Will robots replace human labour and reduce real wage levels?

I don't have a clear view on this. I don't know that there is one. Robots are installed because the price of labour is higher than that of capital involved. The freed labour bids labour costs (wages) down. This increased demand for labour. The lower costs associated with the robots allows for price reductions, increasing demand. Higher demand means more production, requiring capital and labour. So where does it end?

I am out of time now. Talk to you later.

Postscript

Relevant to the discussion on this post, ABC business editor Ian Verrender on Australia's Free Trade Agreements. The central point, I think, is that the FTAs are complicating, not simplifying, trade and investment.

Postscript 2

The Australian Department of Foreign Affairs and Trade has released a defence of the PTT.  

         

Zaky Mallah, the ABC and patterns in Abbott (and Rudd Gillard) Government behaviour

The brouhaha over the appearance of  on the ABC's Q&A program continues. Neil Whitfield's From omnishambles to pizza…, while written from a particular viewpoint, provides factual background.

As you might expect from my use of the word brouhaha, this is another of those examples where I find myself on the opposite side of the fence to the Government.  I actually don't understand the angst involved, but the Government's response simply reinforces that sense of  fear that I referred to in my post
Saturday Morning Musings - Triggs, terrorism and the decline of freedom. There I said in part:

My problem is a simple one. I am frightened. I am not especially frightened by the risk of terrorism in this country. I accept that it's real, but in proportional terms it's far less than my chances of being bitten by a snake. I don't argue that we should wipe out every snake in the country to reduce that risk. It's my Government that frightens me. 

I have no faith that these growing powers won't be misused by this or future governments of any persuasion. I have no faith that there won't be victims, people who may have to fight sometimes vainly for justice against the law. How could I have faith? History including recent history is not encouraging.

There is little I can say that will persuade people either way, although on the Zaky Mallah case I would reproduce John Howard's words when asked a question by David Hicks. The graphic comes from A Rational Fear.

 The Australian electorate seems highly polarised. To a substantial degree, there are two threads polarised around the Abbott Government that basically talk to themselves. On particular issues there is enough middle ground to force compromises; on other issues and especially economic ones, the Government has over-reached itself sufficiently to create electoral kick-back, forcing not always sensible changes; but on many issues and especially those to which the nationalism or security tags can be attached, polarisation is quite acute.

Looking back over the many posts I have written on Mr Abbott or the Abbott Government, I can see patterns in both Abbott/Abbott Government statements and proposals and in my responses..I can also see the continuities with the previous Rudd/Gillard Governments. Neither should be surprising, of course. However, the patterns started to interest me.

It is actually quite difficult to draw out common threads since we generally respond on particular issues. We also inevitably get caught up in the group think that often goes with communicating primarily with those who agree with us in general or on particular issues. It's only when we stand back that other patterns become clear to the point that we can ask new questions, challenge those patterns or indeed our perceptions of those patterns.  

I'm not quite sure where I am going with this reflection. I suppose that having written so much over time, it gives me a base from which to reflect on at least my own reflections!  

Postscript

Spotter referred to this piece setting out the views of Ricky Muir, while Legal Eagle wrote:

"As far as I'm concerned, it was foolish of Q&A to give Zaky Mallah a platform. Yes, he's entitled to freedom of speech, just as anyone is. That's not my problem with his appearance.

My problem is rather that a NSWSC judge said in sentencing remarks in 2006 that he seemed to have some kind of psychological attention seeking disorder which led him to do crazy things to get media attention, and that media outlets should not give him attention. The judge's conclusion was (as I read it) that Mallah himself was a danger to no one but himself. (See here www.austlii.edu.au/cgi-bin/sinodisp/au/cases/nsw/NSWSC/2005/358.html). Paragraphs [31] - [34] are apposite:

31 The evidence which the Prisoner gave during the trial was, in many respects, self contradictory, illogical, bizarre and downright foolish. His credibility remains very much in issue, particularly in so far as he gave the impression, at times, of saying virtually anything that came to his mind, and demonstrated himself capable of deception and manipulation of others.

32 Paradoxically, however, I am of the view that herein lies the answer to the question whether his threats were genuine or simply the product of a fertile imagination which had been allowed, or perhaps more accurately encouraged, by the media attention which he received, to run wild.

33 It does seem to me to have been regrettable that some sections of the media took up the Prisoner as a person of interest, and gave him an entirely underserved and unnecessary exposure, particularly if it be the fact, as he has claimed, that he was paid for his cooperation.

34 Had real fears been entertained as to his potential dangerousness, then the preferable course surely would have been to pass any relevant information concerning him, to the appropriate policing and security agencies. Had he been dismissed as an attention seeker, of no moment, then there surely would have been no occasion to give him the extensive public exposure which he obviously enjoyed and indeed craved.

So, yeah, I've got no issue with an audience member on Q&A airing unpopular views (although if I were a Muslim, I'd be pretty annoyed by someone like him claiming to speak for me). But Mallah appears to have psychological issues which are exacerbated by media outlets courting him. ALL of them (including the newspapers, pundits and television stations baying against him) should have ignored him. Instead they did exactly what he wanted.

P.S. I share your fear about giving government too much power. I can all too easily see how it can be misused".


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Shared identity, land rights and proposed changes to the Australian constitution to recognise Aboriginal occupation

Tuesday's piece was entitled What might be the Australian equivalent of the Haka? Because there was some risk that what I wrote I might be misunderstood, I want to repeat here a clarification I made in a comment.

Hi kvd. I absolutely agree with you on attachment to country. I would also agree that there are elements in Aboriginal culture and lore that could/should be incorporated into broader Australian culture. You have identified some of them.

Just re-summarising my concern, there is a bifurcation in Australia that goes back a long time, has increased in recent years, that essentially places Aboriginal culture in a ghetto. Both sides bear responsibility. 

Take art an an example. I was early attracted to Aboriginal art, saw it as Aboriginal but also part of my own heritage as an Australian. It became part of my own visual imagery. And then came a movement that said that Aboriginal art was uniquely and specially attached to the Aborigines. That is obviously true at one level. But the way that it was phrased seemed, at least to me, to say that you, Jim, as a non-Aboriginal person do not have a right to claim that art as part of your own heritage. That is appropriation. You mustn't do it. That places Aboriginal art in a ghetto.

Welcome to country or smoking ceremonies are important, a link between Australia now and the Aboriginal past, but they have become ritualised. Of itself, there is nothing wrong with ritual. The Haka is a ritual. There are equivalent Māori welcomes. But the meaning always isn't clear, despite the efforts of Aboriginal elders to explain it. 

In my own way, I have tried to address the issue by making elements of Aboriginal history more accessible to Aboriginal an non-Aboriginal people alike, but I do despair at the constant emphasis on distinction between the Aboriginal and non-Aboriginal space.

Recently I had to write a short piece on the importance of the 1967 referendum to following generations for inclusion in a poster. I wrote that the campaign came after an extended period of Aboriginal agitation, that it was successful for it combined Aboriginal and non-Aboriginal Australians. It then helped lay the base for further Aboriginal activism, including the now iconic Aboriginal tent embassy.

As I write, the Barkandji people, have received limited native title recognition over a large part of Western NSW. At both state and national levels, the native total process is complicated and legalistic, something captured in the graphic from  @jwwr.

On Monday, the Australian Law Reform Commission is releasing its report into native title legislation.'Connection to Country: Review of the Native Title Act'. I suspect that will highlight some serious issues. For the moment I just note that whatever the imperfections, we have native title legislation because of Aboriginal campaigning that drew support from the broader community.

Again as I write, the Commonwealth special Parliamentary Committee inquiring into recognition of Indigenous Australians in the constitution is due to report. I support constitutional recognition, although the best form is far from clear to me.

On 18 May 2015, Recognise released survey results suggesting that if the RECOGNISE referendum were held today, 75 percent of all Australians and 87 percent of Aboriginal and Torres Strait Islander people say they would vote Yes. This was attacked by Indigenous X.who reported their own on-line survey suggesting that a majority of Aboriginal people would actually vote no. On 24 June, Recognise responded on their blog, suggesting that the on-line results were unrepresentative, that the methodology and promotion of the survey actually attracted those who were opposed. I suspect that's right.

This is an Aboriginal passport issued by the Aboriginal Provisional Government that some activists have been trying to use for travel purposes. And yes, as so often happens, there is a new England connection!  Callum Clayton-Dixon  has Anaiwan connections. I actually made a small donation to help fund his and  Boe Spearim's 2014 trip to Canada. It's not that I agree with him, simply that I wanted the voices heard. It also seemed rather fun.

Returning to my point, While I think that Recognise is right in their assessment of the on-line survey, the feeds that come constantly across my screen show that there is considerable diversity in Aboriginal and Torres Strait Islander views. That's hardly surprising.

In my writing, I have made the point many times about diversity in Aboriginal Australia. While the smaller Torres Strait Islander group gets annoyed about their sometimes non-recognition in discussion, they have an identified home that belongs to them all. That is not true of Aboriginal Australians beyond the total continent. You have many different groups with differing cultures and connections to country, groups that have been affected in many different ways by European invasion across space and time. Now we want to deal with them as a single unit based on varying current perceptions. They try to respond in kind. It's actually very hard.

 Trying, in conclusion, to bring this discussion together.

We need better integration of non-Aboriginal and Aboriginal Australians, not integration in the way that word has often been used, but integration in the sense that gives me permission as a non-Aboriginal Australian, permission to share, to identify, to adopt. On a very personal note, working as a non-Aboriginal person in an Aboriginal space, I have sometimes felt very excluded.

We have to recognise diversity and allow time for views to evolve.The current discussion on Aboriginal recognition in the constitution is actually a top-down discussion.  You can see that in the wording used. It's locked in to current perceptions.

On the constitution, that's Australia's supreme law. If we are going to get anything through, it has to be minimalist. This is where I agree with Noel Pearson. Use the constitution as a minimum base, then get further changes through in declarations and legislation based on that base. Then, if necessary, look to further changes to the constitution.

Update

You can find  the Parliamentary Committee report here. Meantime, the Yaegl people from the Lower Clarence have had their native title claim recognised.

Update 2

I mentioned that there were different views in the Aboriginal community. This is another example from First Nations Telegraph. .

Musings on the Killing Season 3 - Mr Abbott's collateral damage

I see that Neil has already posted on the final episode of The Killing Season. With my TV still on the blink, I watched on Iview this morning. We are in periods that I was writing on on almost a daily basis.

Looking at it, it is clear that there were a series of misjudgments. However, that wasn't my primary reaction. My primary reaction was how can governments make sensible judgments of any type in that environment. The program captured so well the pressure cooker atmosphere of Canberra, that strange bubble that generates its own reality.

In some of my writing, I said that to survive, Julia Gillard had to find that quite space in the midst of turmoil that would allow her to break away, to think. I'm sure that that was good advice, but how the bloody hell do you do it?!  With a crammed appointment book, with constant information on polls and focus groups flowing in, with the demand to react now, any form of rational thought becomes very, very difficult.

I have been involved in or on the periphery of politics for much of my life.I was trying to work out how I would have responded if I were a Gillard or Rudd adviser to some of those events. A classic case is the failure to mention Mr Rudd at that speech, coming on top of the previous decision to distance the new Gillard Government from the previous Rudd-Gillard administration.The implications weren't even seen.

It's easy to be wise in hindsight, but watching Mr Rudd's face I thought damn, how would I have felt? Still, I'm not sure that I would have done any better as an adviser in those circumstances. Maybe I would have, for common kindness should have dictated a different response What happened wasn't fair. It was also unnecessary.

Ah well. Those who sow the wind reap the whirlwind, as Mr Abbott is finding now. That was not a party political statement, simply a judgement, one that may well be wrong. The next federal election is likely to be dirtiest on record. There are just so many visuals, I'm now speaking professionally, that both sides will use the media to wreak havoc.

If I was a Labor strategist, and I'm sure that this is happening, I would be working through image after image to put them into possible combinations. It doesn't have to be mass advertising although that will occur, simply very targeted stuff that will discredit Mr Abbott with particular groups.

I can see the slogans now. "Do you still trust this man to run the country?."  You don't have to shift a lot of votes, simply votes in the right places.Of course Labor (and our political system) has suffered from this series. However, the damage to Labor is now. The roll-on effects will be far greater than that.

   

      

What might be the Australian equivalent of the Haka?

Haka is used throughout New Zealand by many, not only Māori, to demonstrate their collective thoughts. There is a haka for each of the Services, as well as the Defence Force. Units with the NZ Army have their own haka. This video shows the soldiers of 2/1 RNZIR Battalion performing their Unit haka, powerfully.

Now this is a video clip of Prince Harry visiting New Zealand. Further comments follow the clip.


Regular readers will know that I am part Kiwi. I take great pride in that part. My New Zealand family has been involved in Māori studies and Māori advancement for almost one hundred years. I take pride in that. It has influenced me for much of my life and does so now.

One of the difficulties we have in Australia is that we have no equivalent of the Haka. In New Zealand, if you are a Pākehā, you can and should take part in the Haka because you are a Kiwi. You are not excluded. It is a national thing. An affirmation of common identity dating back to New Zealand's Māori past. In Australia, we treat Aboriginal and non-Aboriginal as separate domains. If you are non-Aboriginal, you do not belong in the Aboriginal domain except, sometimes, as an invited guest or, more often, as an observer of something like a smoking ceremony.

Australia and New Zealand are, of course, very different. They are now and were prior to European settlement. In New Zealand, I think that we can say with a high degree of certainty that the Māori connection will be an integral element of New Zealand life in one hundred years time. We cannot say the same thing in Australia for the Aboriginal connection. We just don't share enough, we have no common ceremonies, there is no way of admitting non-Aboriginal Australians into elements of Aboriginal life that might create shared ceremonial bonds.

I accept that this is a sweeping statement yet, when I look at the Haka, I feel that it is true.

Monday Forum - end of fossil fuels?

I must say at the outset that I rather like coal mines. Without coal, there would have been no industrial revolution. Without coal, the area I come from would have been a lot poorer.

All that said, for this Monday Forum I pose four questions:

• are fossil fuels finished?
• if so, in what time horizon?
• if so, what will take their place?
• and which parts of Australia might win or lose?

I have made my own biases clear with my opening comment. I now hand it over to you.

Postscript

Interesting discussion on this post that I would like to come back too later. In the meantime, the Australian Energy Market Operator has release a discussion paper: 2015 Emerging Technologies Information Paper.
 

Sunday Essay - the RBA on the reasons why lower interest rates don't presently lead to more investment

I do like the Reserve Bank of Australia. The Bank has come to fill the role that the Commonwealth Treasury once filled, the provision of relevant economic analysis that one can read without worrying about the political overlay. I mention this now because the June Quarter RBA Bulletin carried a very useful research report by Kevin Lane and Tom Rosewall simply entitled Firms’ Investment Decisions and Interest Rates.

One of the issues that I and others have been concerned about is the apparent investment strike that has been underway for a number of years. We have businesses with cash, we have very low interest rates, and yet business investment is at relatively low levels. We also have businesses that have been paying out an increasing proportion of profits in dividend, again implying that the investment options aren't there. Kevin Lane and Tom Rosewell examine these conundrums by examining the way that firms make investment decisions.

 The summary reads:

Firms typically evaluate investment opportunities by calculating expected rates of return and the payback period (the time taken to recoup the capital outlay). Liaison and survey evidence indicate that Australian firms tend to require expected returns on capital expenditure to exceed high ‘hurdle rates’ of return that are often well above the cost of capital and do not change very often. In addition, many firms require the investment outlay to be recouped within a few years, requiring even greater implied rates of return. As a consequence, the capital expenditure decisions of many Australian firms are not directly sensitive to changes in interest rates. Furthermore, although both the hurdle rate of return and the payback period offer an objective decision rule on which to base expenditure decisions, the overall decision process is often highly subjective, so that ‘animal spirits’ can play a significant role. 

I will leave you to read the piece in full, it's not complicated, but just a short head's up.

Firms look at the expected rate of return to determine the expected value of an investment. This is an absolute number that has nothing to do with the weighted cost of capital as such. The hurdle rate is is the percentage return that must be achieved before a firm will invest. The expected yield is the difference between the projected return and the weighted average cost of capital.

You would expect a rise in yield to increase investment. In other words, if interest rates or indeed tax rates go down and yield rises, you would expect investment to increase. However, if the hurdle rate is fixed or adjusts very slowly, if that rate is calculated independently of funding costs or indeed taxation impacts, rises in yields may have no investment impacts.

The use of pay-back periods in combination with hurdle rates compounds the problem. The pay-back period, the time required to recover costs, is a risk measure. When times are uncertain, you want your cash back more quickly. So investments have to pass two tests: will I get the rate of return I want; will I get my cash back in the time I want? The practical effect is to increase the required rate of return beyond the hurdle rate.

I leave it to you to read the paper. My thanks to Kevin Lane and Tom Rosewell for their work.


 

A note on the Northern Australia White Paper

The Australian Government's White Paper on Northern Australia is quite complex. It has the usual weaknesses of modern Government policy papers such as the use of the word "will" when "should" would have been more appropriate, as well as that constant tendency to repackage existing initiatives that seem vaguely relevant. All that said, it has a fair bit of substance, enough to allow me to actually engage with it.

Geographical Diversity

Northern Australia is very diverse. It is not an entity, simply a territory created by a line drawn on the map. While the White Paper does recognise that diversity, I'm not sure that it properly understand that it is dealing with an artificial entity. To my mind, the Paper suffers to a degree from a failure to recognise geography.

Indigenous Issues

A significant proportion of the paper focuses on Aboriginal land rights issues. Bob Gosford provides a comment on this. While I have been working in the NSW Aboriginal policy space, I lack the on-ground knowledge to be able to comment properly

I note that the Paper appears to make no reference to the Torres Strait, to Torres Strait Islanders nor, indeed, to Papua New Guinea. There is an apparent myopia here.

PNG

So far as North Queensland is concerned,

PNG is the closest country. What happens in PNG will affect North Queensland in ways that we cannot see yet. Inevitably, there will be greater flows of trade, of people, and possibly of disease between the two areas.

Just to put a number on this, PNG's population is projected to exceed 13 million by 2050.That's small in the global sweep, but quite large relative to North Queensland. Cairns is only an hour an a half flight from Port Moresby.

Irrigation and Agribusiness

The level of hype often associated with develop the North is largely missing from this Paper.Pest, soils and transport costs have always been the killer here. What we can say with a degree of certainty is that there is scope for expanding irrigation, but that it's likely to be quite slow. Not sure how water trading will help. This comes into its own when a market is there.

I am unable to make a judgment on how the proposals will help the live meat trade, beyond noting that improved infrastructure will help. Ditto, I think, so far as aquaculture is concerned. Here, intuitively, there is scope if the markets are there.

With agriculture, it comes back to markets. The local markets will grow, the southern markets will grow, while access to Indonesia will improve and the market there grow as incomes rise.However, this brings in another point.

Relations with Neighboring Countries.

There is a certain tension in the White Paper on relations with surrounding countries and especially relations with Indonesia. Access to close markets is played up as a positive, but this is somewhat disconnected with current policies. No doubt that will pass.

Roads, Rail and Other Infrastructure

Investment in transport and communications infrastructure will clearly help. Here I would make two points. It is not clear to me how the concessional loan fund will work at this point. I'm not saying it won't work, just that I don't know how.The second is the impact of improved intra-Northern Australia links. I'm not saying anything profound here, just curious.

My feeling is that as intra-Northern communications improves, Darwin's economic reach will spread. Connected, I also think that it will encourage flows of goods and especially people in ways we cannot see now.

Tourism

I would expect external tourism to grow regardless of the White paper. This is likely to benefit Darwin most of all as an entry point. If we look at Jakarta as a destination, there are (I think) presently no direct flights from Broome, Cairns or Townsville. Actually, I'm not sure there are any from Darwin! I thought that there were.

I selected Jakarta because it is a major port in a large population country adjacent to much of Northern Australia. I had not expected the connections to be so sparse. Still, I don't think that it affects my point.

Education and Science

I would expect some gains here flowing from higher investment in research and in education promotion. I'm not sure, however, how much this will pay back in real gains. I can see, for example, Charles Darwin gaining from student numbers simply because it is close to parts of Indonesia. I t is harder to see James Cook gaining.

Migration

Then White Paper does deal with certain migration issues including tourist and short term work arrangements. However, there is no reference to broader migration issues such as PNG migration into North Queensland or Indonesian migration into the Northern territory. I would have thought that this would follow from closer links and especially Indonesia and the Northern Territory.

The Dynamics of it all

The dynamics of this type of initiative interests me. Now here I'm simply not sure.Assume that the White Paper delivers on its objectives. We are going to have a bigger North, but it won't be a single North despite the growing inter-connections. My feeling is that we are, in fact, going to have three Norths reflecting current boundaries and differing geographies - a Kimberley North, a Darwin and southern NT North and a Far North Queensland North, each very different. And the winner is? - Darwin. What do you think? .      

        .  

 

Musings on left and right: does it matter?

Its been quite cold and wet in Sydney. Technically, Sydney has a sub-tropical climate, so we are not geared to the combination of cold and wet. I wish the rain would go inland where it's really wanted!

Looking at my stats, the most visited post this month by a country mile is Mixed income/rental models in social housing. That's actually good to see.

Today's post is triggered by a piece Tim Dunlop on the Drum: A good political 'narrative' is no substitute for actions. Here I want to focus not on the general points made by Mr Dunlop but on one point summarised in the following quote:

For a start, it (the argument) overlooks the fact that mainstream discourse is dominated by right wing voices - a case I have made time and time again.

I don't think that statement is true.

Like many of us, I struggle to make meaning of the distinction between right and left. Personally, I just don't fit in with the conventional definitions. The pop quizzes place me just to the left of center on the range of criteria used in judgement. However, on particular issues I span from far left to well on the right. It depends on the issue.

Accepting definitional ambiguities, it is hard to see that mainstream discourse is dominated by the right. The usual argument is to point to the dominance of the Murdoch press or the influence of certain talk back radio hosts. They are important in slices of the market, but they are not dominant. If you move beyond the media to include the totality of mainstream discourse, the case is a little stronger, especially in the public policy sphere.

Now here we have to come back to definitions again.What do we mean by right wing voices? There is, I think, a dominant thread that argues for a reduced role for government, for lower taxes, for deficit reduction. I think that its also true that this thread gained its dominance from right voices and intellectuals dating back many generations and from conditions at that time. But this thread, this way of thinking, is not totally dominant.

For every right wing think tank, there is an opposing one. For every newspaper such as the Australian Financial Review, by far the most important of the right wing voices on economic matters, you have an opposing one. You only have to look at the rise of the Guardian in Australia to see the size of the center left market.

Most importantly, and to the despair of elements of the right, they have actually been losing the battle for public opinion. You only have to look at the response to the 2014 Australian budget to see that.

One of the real difficulties for the right is actually trying to define what it really is. The right has always been riven by internal tensions, for there are many different rights.

There is the libertarian right, that group that focuses on individual rights and freedoms and takes pride in a long intellectual tradition. This is the right of Hayek, of Adam Smith.or David Hume, of Friedman or Thatcher. It is also the right that came to establish a now challenged dominant position in economic and public policy more broadly.

This right contrasts with the statist right. Central to the statist right is either the preservation of the existing order (the state) or, conversely, its replacement by a new order that will better promote the state. Mr Abbott arguably belongs to first, Adolf Hitler the second. Both groups overlap with other political definitions such as conservatism or populism. In Germany, conservative forces supported Adolf Hitler because they saw him (wrongly) as protecting or re-establishing an existing order threatened by Bolshevism.

In all this, the real problem for the left is that the intellectual framework that guided the left over the last two hundred years has simply collapsed. In turn, this has created a problem for the right, for over that time the right has partly defined itself in opposition to the left. Both are confused.

I first became really aware of these tensions when I was researching the Country Party, for this was a party that initially defined itself in terms of opposing the nostrums of left and right, seeking to distinguish itself from both, How do you do that when the left-right world view is just so dominant? What language do you use when you are challenging the established order, rejecting some things, accepting others?

I'm not sure that I ever came up with an answer. I could point to the Party's successes during that tension period when it was opposing both views, but in the end it got sucked in to the existing structure.

I have sometimes compared the Country Part to the Greens because they faced similar electoral challenges in a day to day sense. Unlike the Country Party, the Greens are a left party. Like the old Country Party, their challenge is to determine to what extent they will compromise their views to achieve power. .      .       .        .        

Blogs, aquifers and basic instincts

Good morning, Welcome to Thursday 18 June 2015.

In a comment on Randy McDonald's A Bit more Detail, ianmoore3000 wrote:

I have become quite bad at reading other people’s blogs.Which is bad as I know that part of the internet’s magic is that no one reads your blog if you don’t read anyone else’s.

Ian is right of, of course. It happens to me too. So in that previous paragraph, I have given you links to two blogs, Randy's (always worth a check) plus Ian's World War 1 Live, also worth a check.

Staying with blogging, Evan pointed me to this link on blogging: How To Find Where Your Potential Readers Hang Out. Several people have recently asked me what is involved in establishing/growing a blog. I know after all this time, but just don't focus on it very much. Perhaps a consolidation post along the lines "So you want to become a blogger?"

 In a piece originally from the Washington Post (attributed), the Canberra Times reports New NASA data shows how the world is running out of water. That heading is not quite true. The piece is actually about the way we appear to be depleting some of the world's largest underground aquifers. I have been wondering about that, for the depleting aquifers are in very sensitive areas.

The world's most stressed aquifer — defined as suffering rapid depletion with little or no sign of recharging — was the Arabian Aquifer, a water source used by more than 60 million people. That was followed by the Indus Basin in India and Pakistan, then the Murzuk-Djado Basin in Libya and Niger.

California's current water problems have been widely reported, attracting attention because the area is so populated, wealthy and media centric. California (and the US) has the wealth to resolve the problem. Not so sure about Africa.

Finally, the Canberra Times has a piece that came from Bloomburgs - Don't dismiss Greece's baser instincts - that I want to come back to later.

Have you noticed, by the way, how often I now refer to the Canberra Times? I have actually become quite addicted to it. Fairfax Media has been trumpeting the rise of the Canberra Times web site as one of its successes and indeed it is. But the reason I started going to the Canberra Times is that it carries major stories from other Fairfax .papers that I cannot easily access because of the pay restriction.

As an analyst, it is not unusual for me to, say, hit the Sydney Morning Herald stories eight or nine times in a single day. I always link to those stories I select, but I very quickly run up against the 30 story maximum month intake before the pay wall comes in.

No doubt Fairfax will change this. But, for the moment, the Canberra Times is my major national newspaper and all by historical accident. It's still counted as a Fairfax regional paper dating back to Rural Press.

Postscript

Interesting piece on the impact of water shortages in India. I'm not able to judge its accuracy.

The Killing Season part 2

Early this morning I watched episode episode 2 of the ABC drama, the Killing Season. It was quite gripping.
I am not in a position to make a judgment about the overall accuracy of the program, in part because I was commenting on many of those events as they occurred and am biased, in part because I am too far from the main players to form an independent view. However, two very brief observations.

The first was a degree of pleasure in the way I got some things right and very early in terms of problems with Mr Rudd's style and the workings of that Government. The second was a more despairing conclusion, the way in which Canberra pressures, including the need to respond to short term polling events, forced the Rudd Government off course.

I am not in a position to judge Mr Rudd's psychological state during the period. I am sure that he was over-tired and stressed, in part because he tried to do too much. It was clear that the whole Government was taking on too many issues at the one time. And yet, it seems to me that the Government lost its policy compass and that was the reason it finally failed.

In the discussions that took place over toppling Mr Rudd, there seems to have been nothing about policy or indeed values, it was all about style and winning. Whatever the faults may have been in Mr Rudd's style, he did have views about the direction the country should go, about the things that were important. I may not agree, but I can recognise that.

I'll be blowed if I know what those who overthrew him believed beyond the need to stay in power.

Postscript

I see that Neil Whitfield has also written on this. Includes a reference to my past writing.

Postscript 2

In writing  this piece, I focused on the past. Obviously it plays into current politics. In this sense, it's manna from heaven for Mr Abbott at a time when the Government is struggling with multiple messes that, arguably, reflect its own Ruddian/Gillard failings.        

Has the Abbott Government simply become incompetent?

A lot around at the moment. Daniel Flitton in the Canberra Times reports on the latest Lowy Institute poll of Australians' attitudes towards global issues. As I write, the poll itself does not appear to be up yet on the Lowy Institute web site. However, the Flitton piece appears to give a good summary. Peter Hartcher's commentary on the results is also worth a read.

Daniel Flitton summarises the results in this way:

Australians are feeling more unsafe than at any other time in a decade, seized by fears of terrorism and a bleak view of the economy.

But the Abbott government has not much profited from the anxiety – or even won much credit for the hardline stance against asylum seeker boats – and risks losing touch with yet another public shift in concern about the danger of global warming.

I think that there is  growing disconnect between the Australian Government's messages and community reaction. I think that there is also a similar if perhaps smaller disconnect between the Labour Party and community reaction.

Back in 2006, I complained (Words and Manners - the use and abuse of "the punters") about the condescending use of the term punter or mug punter to describe the electorate, a point now made by Peter Hartcher. I actually think things have got better here. When I wrote, the term was almost universal among the commentariat who dominated the TV political programs. On one program, the one that triggered the post, I must have heard the term punter used twenty times.

Australian aren't dumb. They face a political system in which message and spin, the achievement of instant political gain, the avoidance of risk, has dominated for a number of years. People get their information from a variety of sources. They hold their own views that may shift slowly. They also remember. As time passes, previous views, actions and decisions become discredited, are seen in a different way.  

 In politics, you have to win to do things. The political cycle is relatively short term. People focus on the now. Yet the reality is that the things that come to be seen as good, as significant, are often not those that formed the heart (and heat) of political debate at the time. 

One of the difficult things for those actively most involved, me included, lies in the way that the things we believe most strongly, are most passionate about, may simply be rejected immediately and in indeed in the long term. That's reality.

My personal view, and it is only that, is that the Abbott Government will come to be seen as one of Australia's failed Governments. This is not a party political position, nor is it based just on divergences between my values and those espoused by the Government. My difficulty is a practical one. 

For the life of me, I cannot see a path that will allow this Government to achieve positive longer term objectives. It's just so locked into the negative and short term. It does have a longer term ideas about economic and social structures in Australia. I may disagree with some of these, but can at least debate them. But even these are lost in the morass of a Government that seems to be ruled by fears and slogans, that appears to be willing to do whatever it takes to achieve what?

Consider the current mess over the alleged payments of bribes to people smugglers to return boats to Indonesia. Practically, if it happened you either deny it (lie) or say that you will investigate. Some ministers did deny. By then obfuscating on the woolly grounds of not commenting on operational matters, the Government has created a significant incident, further complicating (among other things) our relations with Indonesia.

 I can't see a way out of this beyond further mess. Maybe the Government can find one. At this point, it just strikes me as incompetence.

Postscript

The level of textual detail in this report on what just took place on the high seas with that boat makes it highly credible. I would be interested, Legal Eagle comes to mind, on just how many laws were broken.

Since I first added this postscript, apparent information about previous payments has become available, leading to backtracking by Labor and exposing Opposition leader Shorten to criticism. I would have thought that these latest payments were of a different order,

When I said that I couldn't see a way out for the Government on this one, I hadn't counted on Labor!

The Lowy Institute poll I referred to is now on-line. The timing is a little unfortunate, since it indicates a further cooling in Australian popular perceptions of Indonesia, something that has been picked in the Indonesian media such as this story in the Jakarta Post.

Postscript 2

The Melbourne Age  has come out with two editorials (here, here) that essentially suggest that the Abbott Government has lost its moral compass.

More details on the boat transaction from ABC.And here. And I should just record that Mr Turnbull appears to have broken ranks on the citizenship issue.                 

Monday Forum - another what you will

Another Monday Forum with no real idea as to what topic to suggest.

Was the treatment of the scientist Tim Hunt another case of crazy political correctness?   Did Australia actually pay people smugglers, or is this another case of Australian PM Abbott confusing the hell out of everybody?  If you were a polyamorist life coach, how would you define the curriculum?

The Philae probe has woken up. Are you a space nut? I am. Today is the 800th anniversary of the signing of the Magna Carta. It seems just like yesterday.

Did 19th German painter Caspar David Friedrich like to mix a touch of gothic with his romantic landscapes? He sure looks like an intense chap in this portrait! What is the best Australian movie of all time?

I leave it all in your hands to go whatever direction you like!

Postscript

Leaked cabinet documents on the citizenship question.

Sunday Essay - is this the Eurasian century?

There was an interesting piece recently by Matthew Susse on the Lowy Institute blog, Putin's pivot: The Russians are coming to Asia, about the shift in Russia's strategic focus towards the east. This makes a degree of sense on economic and security grounds, but it is also another sign in the continuing shifts in directions within Asia that are, I suspect, not well recognised in Australia.

In an earlier post I mentioned that I had been reading the travels of Marco Polo travelled what was known as The Great Silk Road that stretched from Europe to China with a southern sea route involving the subcontinent. The book paints a picture of life and commercial and cultural interaction across a vast space.

Marco Polo travelled in the 13th century. By then, the Great Silk Road was near the end of its practical life Political, military and religious conflicts broke the land route, while the rise of Western European shipping provided an effective alternative. However, now the Great Silk Road is coming back, driven by a China with memories of its imperial past.

Three articles in by Robert Berke in oilprice.com provide a useful introduction - here, here, here. Russia's strategic objectives mesh, at least at this point, with those of China. Russia wants to preserve its influence across its old territories but, and more importantly, it wants new markets for its oils and gas in China. By the way, I don't know if you noticed, but Gazprom appears to be a major sponsor of the current soccer Women's World Cup. Congrats, by the way, to the Australian team for their win over Nigeria.

Considerable doubts have been raised about the geopolitical problems facing the Chinese initiative. I think that these miss a key point. We are talking relatively long time periods, several decades. As the roads and railway lines spread, so will trade. In a way, I also think that the Chinese are hedging their bets here. If the recreation of the southern Silk Road with all its various projects lags, they still have fast routes to Europe via Russia.

No where so far as I have seen, I may well have missed something, will you see references to the rise of Eurasia as a continent.We are used to thinking of Europe and Asia as separate continents. They are not. They are a single land  mass that has never been fully integrated because of distance. This is changing quite quickly.

I think that this is important. In Australia. we like to talk of this as the Asian or Asian Pacific century.What happens if this is actually the Eurasian century?  What does Australia do then?        

• x

Saturday Morning Musings - the importance of the small

The changing patterns of Australian life always interest me.

Down in Canberra, the Canberra Time's Amelia Mills reports on local use of crowd funding techniques to help fund start up businesses. I have been watching the growth of crowd funding for a number of years now. It's a useful technique in that it provides an alternative flexible funding mechanism. However, I have often mused on just how you make it work. Intuitively, just putting it out there and hoping that the world (or at least that tiny slice you need) would come seemed highly fraught.

Amelia's piece makes the point that successful crowd funding is actually hard work. Yes, I know that there are cases of apparent instant success, but you generally find that these are play to an already established base. Otherwise, you have to work at getting to those who might contribute.

This one comes from the Meanwhile in Australia Facebook page. I had to laugh. Mind you, Roos are no laughing matter on country roads. They are actually a reasonably common cause of accidents.

Returning to Canberra, Lucy Bladen reports on commercial revitalisation at the University of Canberra where new shops and facilities are revitalising parts of the campus. In an apparently unrelated story, Joseph Hinchliffe in the Sydney Morning Herald reports on the opening of a barber shop in Moree by Lloyd Munro jnr. Munro is a very well known Moree Aboriginal name.

The link between the two stories lies in community revitalisation, actions that will improve the fabric of life in particular areas. It's a long time since I have been on the University of Canberra campus, so I can't present a current picture, but the University appears to be following a clever strategy. Mr Munro's case is more an example of individual endeavour.

Today, we live in a mega world. Everything has to be big. It shapes Australia's cities while ignoring Australia's country. The cranes that dot particular areas of Sydney are big. The redevelopment projects are big. In many cases you need to be big just to meet compliance and regulatory costs.

In all this, it's important to recognise the importance of the small, the individual, for this is where character and texture comes from. Even in very large developments, the final success or failure comes from the new residents, from those who open cafes or shops. .

There is a meme here that I would like to extend. For the moment, crowd funding is important because it offers a new vehicle for the small.

Mixed income/rental models in social housing

I have recently been involved in discussions on the development of a new social housing policy for NSW. For those who are interested, you will find the background papers here. It's been quite an interesting and, I think, useful process. The photo shows the Lilyfield Development.

One of the issues under consideration was the possibility of introducing what are called mixed models. At present, social housing is reserved for those on low to very low incomes and, increasingly, for priority cases with complex needs. One effect is that rental streams have been dropping, maintenance costs rising, leading to an increasing financial loss across the whole system. In simple terms, social housing is going broke.

A mixed model involves relaxing the income eligibility and priority needs constraint to allow a greater variety of people to access social housing at varying rents up to market rents and beyond. This approach offers a number of social benefits:

• It allows people to stay in social housing as their income rises, just paying more. This can be combined with home ownership options, moving the social housing system back towards its original social advancement role.
• It reduces the potential disincentive created by income eligibility rules that are so tight that people may knock back work or reduce working hours for fear of losing their home. 
• It means greater variety in social housing tenants, thus reducing the problems that can arise when you concentrate the most disadvantaged in particular locations. 
• Importantly, it improves the financial viability of the social housing system itself.

The  big disadvantage, of course, is that it means that some of most disadvantaged may miss out on housing.  It is almost impossible politically to justify this. The counter argument always is that governments should just buy or build more social housing. Sadly, that's not going to happen to the scale required, nor would it address the financial viability problems now plaguing the system.

Mind you, it would be easier to sell if governments were to say that we are going to have a mixed model, but will build a certain quantity of additional houses to cushion the short term effects.

Earlier, I referred to market rents and beyond. How on earth  can you charge more than market rent for a social housing property? To understand this, you need to understand something about the dynamics of the rental  market place.

Rental properties fall into two primary groups. The first are owner occupied properties that have come onto the market because the owners have moved away for a period. Lease terms are generally short or shorter term. The second group is investor owned properties. Here you can get terms that roll out to years, but the market is still unstable as investor circumstances change and they decide to sell the property.

This creates two problems from the viewpoint of renters. One is simply uncertainty, when will things change? The second is the transaction costs associated dwelling shifts.To illustrate the second, we came down to Sydney in 1996. Over the period to the final break-up of the household in early 2013, we moved six times. One move was our choice, the others were all instigated by owners whose circumstances had changed. Each move cost us over $2,000 as well as inconvenience, costs that have to be added to weekly rentals to get the real rental cost.

This simple maths explains why social housing providers as long term providers may be able to charge a premium above notional market rents. Ignoring the uncertainty factors associated with rental and the inconvenience factors in moving, if the transaction costs associated with moving average out to $20 per week over a ten year period, then the social housing provider might charge $15 extra a week and still leave the tenant better off. That would certainly help the viability of the social housing system.

It would also increase the capital management options open to the social housing system in that parcels of houses under longer term lease at good rents could be packaged and sold to an insatiable superannuation market place. The system might retain the property and tenancy management functions on a fee for service basis.

In the world I am talking about, the private sector is likely to follow if it looks like they are going to make money. As they do, the social need for this type of public or NGO provided housing will decline.

Further musings on the GFC and the lessons for economic policy

Discussion on That Australian life - the Killing Season, Mr Rudd and the GFC, has focused on the extent to which Australia did better in economic terms during the Global Financial Crisis than other developed countries and, if so, to what extent Government policy contributed.

As suggested by this Reserve Bank of New Zealand graph, I don't think that there can be much doubt that Australia did do better. The question then becomes why.

One of the difficulties in answering this question lies in the need to avoid lumping all the Government measures into a bucket simply called stimulus measures and then to evaluate the total package. This doesn't work very well, for the GFC went through stages as did Government responses. A government measure or measures that were appropriate at one point may be inappropriate at another. This brings in the problem of lags, especially with capital spending. 

Yesterday (10 June 2015), Australian Reserve Bank delivered a useful and reflective speech on the global and domestic economies, trying to give some sense of what we have learned over the past couple of years. The speech if worth reading in full. It's not complicated, just informative. Here I want to make a few short observations. 

First, incomes in Europe as a whole have still to return to their pre GFC levels. If you think about it, that's a very large aggregate loss that cannot be recovered. Australia avoided that outcome.

Secondly, monetary policy has really done what it can. I think it true that its impact has weakened in all countries. Further, and this is something that I have written about, the wash of global liquidity has created its own problems, including the sheer difficulty in knowing how to unwind that liquidity without creating consequent problems. 

One of the difficulties that riddles the debate between the Keynesians and those who oppose them lies in conflicting time horizons.  I no longer pretend to have the technical skills or current professional knowledge or, for that matter, the time to define and understand the conflicting threads in the discussion. Keeping things very simple, Keynesian economics deals with shorter term macro-economic fluctuations, but is not especially good at dealing with longer term issues. 

In his gentle way, the Governor points to the need for fiscal action to supplement monetary policy. However, he also points to problems including the need for longer term structural reform, as well as lag problems with stepped-up infrastructure spend and the need to actually have an infrastructure pipeline. This, too, is something that I have written about.

In the case of the GFC, Governments around the world looked to increasing infrastructure spend as a way out. I couldn't see it because the shovel ready projects just weren't there. I got one thing very wrong. Given the lags involved in capital spend with a vacant pipeline, I expected the stepped up infrastructure spend to actually create economic over-reach, coming into full flood as the global economy was already recovering. I overestimated the likely recovery by a very considerable margin.

However, in Australia where (I think) the combined policy initial reactions were quick and reasonably well targeted, it did happen. We would have been better off scaling back some of the economic stimulus measures rather than treating them as targets that must be met. There  was waste. I don't think that anybody can deny that.

I leave it to you to read the Governor's speech. I would be interested in your reactions.        .       

That Australian life - the Killing Season, Mr Rudd and the GFC

This morning I watched the first episode of the new ABC political documentary, The Killing Season, on the Rudd-Gillard years.  The photo shows former Prime Minister Kevin Rudd being interviewed by Sarah Ferguson or the program.

I guess that I am a political junky, so these series are always of interest to me. However, in this case I was more interested in the part of the story that related to the unfolding of the Global Financial Crisis.

I was in Shanghai when Lehman Brothers applied for bankruptcy protection on 15 September 2008. From my hotel room, I watched the crisis unfolding. It was theatre, and I'm not sure that I realised the full extent of the problem. I really should review my writings here. Time makes one's memory selective!

I guess I first became aware of the Australian impact when I read a September 2013 piece by  Elizabeth Knight: 'They came with suitcases for cash': Westpac chief. I had been surprised upon my return to Australia at what I perceived to be a degree of popular panic that seemed totally unwarranted by the country's economic position. That panic was far greater than I realised.

One of the messages that I drew from the documentary, and one that stands greatly to Mr Rudd's credit, lies in his early identification of the global problem. Here I think that ex-Treasury Secretary provides a generous and, I think, objective view of Mr Rudd's contribution. Mr Rudd identified the global significance of the sub-prime problem early, certainly earlier than Treasury, and put in place considerable worst-case planning. From memory, the word gaming  was used to describe the process. As a consequence, Australia was in a position to respond and to respond quickly as the crisis unfolded.

 As the crisis developed, Mr Rudd's strengths finally became his weaknesses. I wrote from an early point about Mr Rudd's administrative and management weaknesses, about his command and control style. That style appears to have been very important in ensuring an effective response to the GFC, but later became a growing  problem.

In all this, after watching the first episode, I am rather glad that Mr Rudd became PM when he did.
Would the opposition have one so well? I don't think so. Their ideological blinkers would have limited the response. They would have been too slow, too constrained. Australia would have experienced recession and could have suffered a bank crash.

Reflections on life and history

There weren't a lot of comments on yesterday's Forum Post, Monday Forum - sooky movies, but a lot of common choices.

I think that we all  need things that will in one way or another nourish the souls. I was reminded of this last week when I met an Aboriginal colleague by accident at a bus stop in the city. She was on her way to Waterloo where she has been working in the local housing office.

I first met her on the Aboriginal staff mentoring program I participated in 2009 extending into 2010. I learned a lot on that program. On the bus we chatted about the problems she faced on a day to day basis in dealing with entrenched social disadvantage including the associated violence. It's not easy.

The day after I signed a lease on my current place, I walked round the area in the early morning (it was just daylight) to get a feel for the area. I hadn't moved in, I just wanted to know. There I met the bird lady for the first time, feeding the kookaburras by throwing meat into the air. The kookaburras always came first before other birds could be fed. I guess that she was in her mid seventies. I'm not very good with ages.

Over the last few years I got to know her quite well. She lived in the social housing old people's complex created as infill behind the housing across the road. It's all low level and very attractive. Then she was bashed on her front verandah in an apparently random attack.

 I hadn't seen her since, so asked a neighbour yesterday how she was.It was a far more savage bashing than I had realised, brutal. Even after two and a half months rehab, she may never be able to come home. I still walk around the area in the early morning and still feel safe, but am far aware of chance and the random nature of events.      

The painting is by Arthur Streeton, Sunlight (Cutting on a hot road) 1895. I was searching for Streeton material as part of the process of bringing my backlogged 2015 Express History revisited columns on line. I am bringing them up on the date they should have been published at the rate of one a day.

 There is a bit of a balm in it. Looking at them as a stream in this way reveals the bad, but also the good. The Streeton post itself will come up tomorrow. The linkage to the local came via Howard Hinton and the paintings at the New England Regional Art Museum. In turn, that drew me to artists camps that sprang up around Mosman and Streeton. I must say I really liked the descriptions of the camps!

Immersion in the past exposes you to the bad as well as the good, to the sorrows and tragedies as well as the triumphs.Sometimes, sheer survival is triumph enough in itself. But most of all, the thing that keeps me going is that it is all just so damn interesting!

In all this, one of the enduring challenges and indeed fascinations lies in how just to tell the story to make it interesting. If you think about it from your school days and looking only at the columns, I am writing the equivalent of a five hundred word history essay each week every week, year after year.And all that as only a small part of what I try to do.

Because it interests me, I really should explain at some point just how I do that, But, for now, day seven of my new life has dawned and I must move on. Maybe that even might help some students embroiled in the current cheating scandals that I had originally intended to write about today?
 

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