Tuesday, July 06, 2004
It's the stupid economy...
In the same day that Mr Howard stepped up his attack on what he believes is a lack of economic management skills in the Opposition, Access economics released a report showing that the latest Coalition budget surplus may stretch the imagination somewhat.
The Howard government has made its mark on the economy, inheriting a budget deficit from Keating, and then putting up the sail of fiscal responsibility. This sail was duly blown along by the gale force winds of a booming world economy and abnormally high growth in China and the tiger economies of South East Asia, where we have a substantial trade relationships. The Howard government has continued to take credit for the economic results, and in part, they are entitled to do so.
On the other hand, with an increasingly global economy, economic prosperity has less to do with domestic policy and more to do with the overwhelming force of global economic climate. And essentially, this is the way that the free-market, Howard government likes it.
And because Australians are essentially naive or apathetic when it comes to economic matters, Howard promotes the free market economy (free from government intervention) but then takes credit for consequences over which he knows he has little control. When the market dips, the converse is true as governments then begin to explain the merits of an unpredictable business cycle. Don't blame us, we can only work on domestic levers, it's that damn economy thing...
So when you hear Howard saying things like, "We have brought record low interest rates," or "unemployment is at its lowest in years," bear in mind that the market has helped more than Howard's pulling on levers. In any case, both of the above consequences are directly related to the Reserve Bank's monetary policy, which is independent of the government. The Howard government should not be taking the credit for monetary policy or interest rates.
Claims that unemployment has fallen are untrue unless the movements in underemployment are noted. Underemployment has increased several hundred times over. In other words, more people have jobs, but lots more people aren't working full time, and are thus working below capacity. Often this leads to problems when workers fall into a gap between a welfare payment and a low paying job, and earn no more than welfare when working part time, thus remaining on the poverty line.
So whilst Prime Minister John Howard is saying things like, "in my view Mark Latham doesn't have the financial management record or skills to properly run the Australian economy." then we should be weighing that up with statements from Access economics like the following ones: "drastic action might be needed after the election to keep the budget in surplus... (as) estimates of taxes from company profits ha(ve) been overstated," or "The Howard Government's $52 billion spending spree in the May budget had left Treasury cupboards distressingly bare and would create pressure to push up interest rates."
Sometimes if you find the middle ground between commentators and the government, then move a little toward the commentators, you'll find truth lurking.
The Howard government has made its mark on the economy, inheriting a budget deficit from Keating, and then putting up the sail of fiscal responsibility. This sail was duly blown along by the gale force winds of a booming world economy and abnormally high growth in China and the tiger economies of South East Asia, where we have a substantial trade relationships. The Howard government has continued to take credit for the economic results, and in part, they are entitled to do so.
On the other hand, with an increasingly global economy, economic prosperity has less to do with domestic policy and more to do with the overwhelming force of global economic climate. And essentially, this is the way that the free-market, Howard government likes it.
And because Australians are essentially naive or apathetic when it comes to economic matters, Howard promotes the free market economy (free from government intervention) but then takes credit for consequences over which he knows he has little control. When the market dips, the converse is true as governments then begin to explain the merits of an unpredictable business cycle. Don't blame us, we can only work on domestic levers, it's that damn economy thing...
So when you hear Howard saying things like, "We have brought record low interest rates," or "unemployment is at its lowest in years," bear in mind that the market has helped more than Howard's pulling on levers. In any case, both of the above consequences are directly related to the Reserve Bank's monetary policy, which is independent of the government. The Howard government should not be taking the credit for monetary policy or interest rates.
Claims that unemployment has fallen are untrue unless the movements in underemployment are noted. Underemployment has increased several hundred times over. In other words, more people have jobs, but lots more people aren't working full time, and are thus working below capacity. Often this leads to problems when workers fall into a gap between a welfare payment and a low paying job, and earn no more than welfare when working part time, thus remaining on the poverty line.
So whilst Prime Minister John Howard is saying things like, "in my view Mark Latham doesn't have the financial management record or skills to properly run the Australian economy." then we should be weighing that up with statements from Access economics like the following ones: "drastic action might be needed after the election to keep the budget in surplus... (as) estimates of taxes from company profits ha(ve) been overstated," or "The Howard Government's $52 billion spending spree in the May budget had left Treasury cupboards distressingly bare and would create pressure to push up interest rates."
Sometimes if you find the middle ground between commentators and the government, then move a little toward the commentators, you'll find truth lurking.
