Tuesday, January 05, 2016

The 2016 Australian outlook

In the three days since I wrote Saturday Morning Musings - the 2016 global outlookthe execution of the Saudi cleric Nimr al-Nimr and the subsequent breakdown of diplomatic relations between Saudi Arabia and Iran has further complicated the position in the Middle East. At the same time, the European migration crisis has led Denmark to impose temporary border controls on travelers from Germany. This followed the imposition by Sweden of temporary border controls between Sweden and Denmark, a move that directly affected (among other things) commuter traffic in the greater Copenhagen area. This extends into Sweden. Finally, release of the latest  Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) suggests that Chinese manufacturing output is continuing to slow.

I am not sure that any of this affects the conclusions I reached in my outlook piece, but they are useful reminders of the dynamics affecting the 2016 global outlook.

Turning now to the Australian outlook for 2016, there will be elections this year in the Northern Territory (27 August), the Australian Capital Territory (15 October 2016) and, most importantly, at national level. 

The timing and form of the Federal election is still uncertain. The Prime Minister previously indicated October as the most likely date, but political events may lead him to call an earlier poll. This piece by the ABC's Antony Green outlines the choices open to Mr Turnbull. 

I will talk further about elections and election issues in a moment. Within all those prospective issues there is one central issue, the economy. That will finally determine just what happens over 2016. I say that partly because the differences between Labor and Coalition are differences at the margin, partly because economic events will determine what the Australian Government can finally do.

The graph shows movements in commodity prices on which the value of Australian exports is so dependent. The mining investment boom that flowed from the price rises has ended. The mining export boom flowing from the additional investment is underway in volume terms, but its value has been constrained by declining commodity prices, a decline partly offset in domestic terms by a fall in the value of the Australian dollar that has increased returns in Australian dollar terms.

The fall in the value of the Australian dollar has eased the adjustment process flowing from the decline and then end of the mining investment boom. This was a most unusual boom by Australian standards, for it was not followed by a recession as conventionally measured. However, it was followed by an income recession with real incomes falling. This aided adjustment and the maintenance of employment, but also adversely affected Australian Government revenues, increasing the deficit. 

The global economic outlook is clouded, with economic growth slowing. Middle East turmoil does not help this. Slower growth in Asia in general and China in particular reduces demand for Australian products. Aided by the low dollar, Australian manufacturing is finally expanding if from a low base.However, growth in the services sector that had supported adjustment appears to have stalled. The most likely scenario for 2016 is slow growth with continuing declines in Australian real incomes.

The income outlook severely constrains the Commonwealth Government's freedom to move, constraints accentuated by the way it has set stated budget parameters. The Opposition has a little more freedom, but it too is locked into specific budget constraints. Because neither side has much room to move, policy debate will focus on those  areas at the margin where there is some apparent room to do things or, alternatively, not. This makes industrial relations, tax and micro-economic reform key battle areas. 

Three weeks ago I would have said that Mr Shorten's position was terminal. I expected him to be replaced closer to the election by someone who might minimise losses. Just as Mr Abbott's greatest advantage as Opposition Leader was Labor dysfunction, so Mr Shorten's was Liberal dysfunction. Mr Turnbull turned that around,.but then the wheels came off. 

I don't have time this morning to trace either the Mal Brough or Jamie Brigg's matters including Minister Dutton's SMS in a way that would make sense to a person outside Australia. Prime Minister Turnbull has finally been forced to intervene. The whole thing bears a striking resemblance to the way in which first Mr Rudd then Ms Gillard, then Mr Rudd and then Mr Abbott were brought down by an accumulating series of previous political errors. 

From a purely personal viewpoint, I found both the Jamie Briggs and later Dutton matters quite distasteful. Just focusing on Mr Dutton, you don't have to get into the question of what is or is not sexist to find the language and attitude displayed distressing. It was, or so it seemed to me, both rude and nasty. It left me with the thought that I don't want that man making decisions that affect me or the people I care about. I just don't trust his judgement or his fairness. That is, I think, the real issue, for I don't think that I'm alone in my feelings.


Anonymous said...

Must be a very slow news week if all you can find to get huffy about is a second rate polly doing what is done when away from home. Jamie (seriously, stop right there - 'Jamie'?) Briggs acted like any other inebriated fool away from home. Stop the press!

My daughter works in the same department. If ever she posed for such a selfie - pixellated or not - she would be deserving of a swift kick in the nether regions. Hopefully Pixie will get same from someone higher up, and will be more circumspect in future - if she now has one.

Jamie displayed bad judgement, not for the first time. Pixie should be seen as foolish at the very least; out at a bar with two male imbeciles after midnight?

Double standard? No. You are in charge of you.


Jim Belshaw said...

Good morning, kvd. I was quite careful in what I said. However, just to amplify a little in terms of the issues involved.

I do not know the facts of the original incident. I would accept that there is a degree of hypocrisy in some of the responses to it. Then we have the leaks around the matter, leaks that did further damage to all those involved as well as the Government. Then Minister Dutton further complicates the whole thing.

Staying with my personal reactions as compared to my professional judgement on impacts, I first really came across the blokey swearing atmosphere in senior executive meetings at my old department back in the eighties. I was actually quite shocked. You may call me naive here, but I hadn't seen it before (and that includes all my active political involvements)and didn't like it. I also thought it dangerous and distracting because of the way it affected behaviour and judgement, creating a barrier to sensible thought.

Looking at the totality of the Briggs matter including especially the leaks and Mr Dutton's sms, we have a pattern of behaviour that I found personally distasteful and unacceptable. It also led to errors of judgement of the type I have seen before, inflicting serious personal and political pain.

Anonymous said...

Jim I accept, and agree with your personal reactions. My point more is that neither party exhibited much in the way of considered judgement, and I don't believe "being female" automatically gives one a free pass - not that you in any way suggested that.

The post referenced below starts with Briggs, but goes much wider, into things we have talked about over the past little while, and which far more interesting than Briggs himself. I'd be interested in your reaction at some point:


Best for '16

Jim Belshaw said...

Best for 16 to you, kvd. Will look at the post and come back to you.

Jim Belshaw said...

Interesting post including the comments. I suppose that one might add to the list of "unsuitables" started in comments Winston Churchill and Henry Parkes. I don't accept Andrew's apparent point that the old distinction between the private and public space no longer holds. It's interesting, too, just how the definitions of "acceptable" behaviour have shifted with time as indeed have the dividing lines between public and private space.

Obviously I agree with the general point about the failure of the metro media to report on regional issues. However, that is not connected with the decline of the regional media. It's always been true and indeed is arguably better now because the internet makes local and regional stuff more readily available.

The stuff on the Nats is interesting. I have commented on the Party's failure to re-present itself as other than just a ill-defined subgroup within the Coalition. I have mixed views on Barnaby. I don't think he really has a coherent political view. Or at least I'm not certain what it is. For the latest on his leadership run - http://www.canberratimes.com.au/federal-politics/political-news/im-ready-to-lead-barnaby-joyce-to-become-deputy-pm-but-not-everyones-happy-20160106-gm0e9n.html

The position in his own seat is interesting and one that I have been following. If you measure it by commentary he is in a degree of trouble because of the conflict over mining on the Liverpool Plains. It also looks as though Tony Windsor may run again. I'm actually not sure at the level of real trouble, nor would I assume that Tony could get his seat back. There is a real skew in the commentary that makes it difficult to measure effects across the seat as a whole including the very different urban centres