IGNORANCE of the laws of economics is no excuse. Neither is the adolescent classic that everyone else was doing it. Enough to be ouch-worthy to many, yesterday’s 25-basis-point interest rate hike means the official cash rate of 0.35% is now merely close to the all-time Australian low. Speaking to Paul Murray last night, John Howard pointed this out repeatedly, laughed off the significance of the RBA’s move and scoffed at suggestions the long-expected rise would engender disenchantment with the Morrison government. But the “gold standard of prime ministers,” as Murray dubbed the former Liberal leader, missed a more crucial point. So did everybody in the hot-take media except Judith Sloan. Calling interest-free cash an “emergency rate,” Howard acquitted the government of monster spending, xeroxing A-dollars by the truck-load and contributing to inflationary pressures. “Everyone panicked” about covid, Howard explained. It’s a weak defence of leadership to argue a man couldn’t break free from a herd. No Swede, he.
Like a savvy cashier at an old drive-in, economist Sloan knows the Coalition jalopy has a freeloader in the boot; his name is Keynes. The government and its near-teal defenders – no longer interested in the precepts of conservative stewardship – are sneaking Great Society extravagance into a sales pitch about superior economic competency. This is an example of what I call spectrum creep: the process by which the LNP first normalises statism by swapping principle for expediency and then declares itself a more trustworthy practitioner of degeneracy.
“The fact is,” Sloan writes, “the fiscal response to the pandemic – or, more specifically, restrictions imposed to contain the pandemic – was excessive.” At the height of Mad Monetary Theory, federal government spending approached a third of GDP in 2020-21. This government has a harebrained tendency to head off the far left at the pass rather than bulldoze a route to its own destination. The reason Paul Kelly has to use the neologism “super-maximalism” in a condemnation of The Greens’ emission reduction ‘plans’ is that the government’s own policy – minimalist only by comparison – is utterly absurd and extreme. The Prime Minister isn’t entirely a victim of global circumstance. He has to accept responsibility for cheapening the value of a dollar and a job. He also has to take the blame for surrendering to ‘climate change’ fabulists, a political felony that will cost Australia a lot more than a bout of inflation.
CL, you and Judith Sloan are so right on this.
The problem isn’t the Liberals or Labor some much per se, or really Republicans vs Democrats in the US (noting US leftists ARE actually crazy), the biggest problem in the world today is that the Keynesians are in charge.
Like the ‘experts’ in the Netflix series Chernobyl, a mixture of hubris, laziness, fear and cowardice allowed all the appropriate caution and safety measures protecting against inflation to be systematically removed, because it was the easiest thing to do at that moment, leaving the inflation meltdown the world is currently experiencing the inevitable outcome.
It is only when governments, and the people who vote them in, learn that to live within your means is not austerity will we be able to improve our standard of living, pay our way, provide for the needy and not leave it to our children to pick up the tab.
Indeed. And the very meaning of the word ‘austerity’ has itself been perverted. I’ll believe we’re coping with austerity when the ABC is abolished.
Sloan is the best economics writer in the country. Always well-researched, she knows Labor’s so-called plans would pour more fuel on every fire but she didn’t follow the News Corp script and look the other way when the Coalition went berserk with spending for three years. Morrison and Frydenberg have normalised the Keynesian racket.
We let the bastards tax us! – It is that simple.
And to whom have the bastards committed current and future tax flows to paying?
CL on economics. more ignorance.
He happily sings the praises of Judith Sloan who was not just wrong about the ALP’s response to the GFC but badly wrong. Indeed she wrote an article suggesting no budget repair was occurring under Swan following the GFC. The Kouk demolished by pointing out none of her ‘figures came from budget papers.
Her criticism of Bernie Fraser was spot on as well. He was soft on both fiscal and monetary policy. He was Treasury Secretary when Keating and Walsh di the hard yards on spending and taxation to bring it into surplus. He was RBA governor who introduced an inflation target and who put cash rates to 18%. As for being a Keating mate he put rates up in 1996 rather than wait for the election because he wanted to keep low inflation.
Oops.. yeah CL and Sloan deserve each other.
Actually Keynesian economics is a lot tougher on fiscal policy in good times than classical economics. There is an old paper by John Quiggin and Henry Farrell which shows this. They looked at Europe pre-GFC.
We needed the stimulus and it was not excessive. If it was interest rates would have risen big time well before now.
sure the RBA has been slow and cash rates should be at 1.5% ( the neutral rate) but that is not anywhere near where they would be if the stimulus was excessive. Alas Sloan does not understand basic monetary policy.
One could and should criticise both parties as neither have any plans to reduce the structural deficit. Going forward if there is little progress on this then interest rates will lbe higher then they should be.
I suspect the ALP if they win will say like Abbott did the cupboard is bare. Like him they will be lying as PEFO did not and now does not show that.
The GFC. LOL.
Saved by resources while Rudd and history’s worst ever Treasurer – Wayne “Four Surpluses” Swan – pretended they solved the crisis by burning down Australian houses.
we did not have a recession and yes the number of houses that were burnt fell some tenfold.
Cl on economics is a good joke as i have shown.
Sloan is hopeless and lazy as I have shown. No spending then we would have had a depression. She never leant her lesson from the GFC.
We haven’t yet had a GFC – although it is clearly coming. And beyond massive.
Homer the “economist” was Australia’s most dedicated defender of pink batts.
We haven’t forgotten.
But no, you haven’t ‘shown’ anything, Homer. The ‘pandemic’ didn’t shut down the economy. Governments did. It is now established scientifically that all of the panic was unnecessary and useless.
The point I make here – correctly – is that the drunken sailor spending by Morrison has established a very bad precedent for the country and weakened the Coalition’s political standing for a generation. They can never ridicule Labor for Keynesian voodoo in the same way Peter Costello used to do when he destroyed Wayne “Four Surpluses” Swan in Question Time.
Non Mentis doesn’t display much mental flexibility, does he?
And calling on Quiggin for support? ROFLMAO!
John Quiggin?
LOL!
Really, did Australia experience a recession like almost every other country did? No because the ALP reacted quickly and well.
No lockdown then there would have been a dying boom where between 1-2 % of every person who got covid dies. Never mind the hospitals could not cope and other things like long covid.
what you are asserting has no evidence and is beyond stupid.
you and the rest never learned why you were so wrong about combatting the GFC which is why you are so wrong here as I have shown.
Link shows nothing of the kind. costello was the bloke w ho ddi not have a clue about budgetary costing in 2004. No wonder you like him.
What clowns like Homer et al did last century to economics, they are now doing to “health”.
You better get your boots on because these people are all set to regulate “health” – public health, I.e your immune system and your response to catching a cold, like they did private transactions between people starting just before this time last century.
By this time next century imagine what life and society will look like. On these pages it’ll be all: no the lockdown trigger rate must be set by the independent Reserve Health Commission at over 0.55% CFR not at the dangerous 0.048% CFR like the crazy murderous ‘Freedom Health’ Liberals are proposing!!” That there was ever at time that the entire thing was fundamentally a completely insane concept, will be completely alien and lost.
Non Mentis
No lockdown then there would have been a dying boom where between 1-2 % of every person who got covid dies.
You need to catch up with the latest research on this subject. And how does “1-2% of a person” die? More sloppy sentence construction, to go with your appalling punctuation.
which is why you are so wrong here as I have shown.
The final word should be “asserted”, not “shown”.
Link shows nothing of the kind. costello was the bloke w ho ddi not have a clue about budgetary costing in 2004. No wonder you like him.
But he did know a lot about budget surpluses. No wonder you hate him.
From the RBA.
Australia and the GFC
Relatively strong economic performance
Australia did not experience a large economic downturn or a financial crisis during the GFC. However, the pace of economic growth did slow significantly, the unemployment rate rose sharply and there was a period of heightened uncertainty. The relatively strong performance of the Australian economy and financial system during the GFC, compared with other countries, reflected a range of factors, including:
Australian banks had very small exposures to the US housing market and US banks, partly because domestic lending was very profitable.
Subprime and other high-risk loans were only a small share of lending in Australia, partly because of the historical focus on lending standards by the Australian banking regulator (the Australian Prudential Regulation Authority (APRA)).
Australia’s economy was buoyed by large resource exports to China, whose economy rebounded quickly after the initial GFC shock (mainly due to expansionary fiscal policy).
you obviously cannot read as there are plenty of papers showing not only lockdowns saved lives but those countries like Australia which had them had stronger economic growth. try Noah Smith for a start.
Also wrong again I easily demolished CL’s argument although since CL does not understand economics it wasn’t very hard and yes if you have a high taxing government and no GFC equivalent you too can have surpluses.
We did not gain from China until well after we stopped a recession from the GFC because of prudent fiscal policy.
CL obviously does not know that Swan produced quite easily the tightest budget ever produced according to budget papers. over the last 25 years the budget usually add about 0.8 points to annual GDP. Swan’s budget took 0.8 points from GDP.
Typically no-one from Catallaxy realised this. Davidson even absurdly called it an expansionary budget.
What they don’t say.
Costello reformed APRA before the GFC which created a benchmark for capacity to lend for all financial services entities. These reforms were shopped around the world by the Gillard government as best practice after the GFC.
Further, Swan panicked and imposed a bank guarantee, when as you can see from the RBA assessment above, Australian banks had limited exposure. This pushed all the non bank lenders out of the market and ensured Australian’s faced higher costs for the GFC than they needed to.
NM, you are a fool who simply parrots alp talking points.
https://fee.org/articles/study-lockdowns-had-largest-impact-in-destroying-economic-activity/
NM, GDP is Gross Domestic Product, a declining GDP doesn’t indicate a ‘tight’ budget it indicates a decline in economic activity.
Are you the imbecile who briefed Albo on his 6 point NDIS plan?
Non Mentis
you obviously cannot read as there are plenty of papers showing not only lockdowns saved lives
Just as there are plenty of papers saying the opposite.
It’s called “advocacy research”, a side effect of the curse of political correctness.
Also wrong again I easily demolished CL’s argument
Another assertion, unsupported by facts.
Typically no-one from Catallaxy realised this. Davidson even absurdly called it an expansionary budget.
Heathens!
Compulsory Taxation is theft.
So my take on these things is:
GFC was all but inevitable once Clinton allowed Freddie Mac and Fannie Mae to lend to bad credit risks in the name of good social policy AND the genuine productivity gains from the first dot.com boom of the 90’s embeded an expectation in (particularly) US consumers minds that the improvements in living standards that productivity paid for could be maintained and extended without the productivity gains themselves.
Unfortunately Bush and Greenspan fed into that by going on a massive spending spree (war deficits and easy credit) post the dom.com bust through most of the 2000’s to maintain the facade of ever increasing living standards. Most of it unearned, and all of it on borrowed money and time.
Those chickens came home to roost from 2007/8. Rather than implementing the necessary reality-based governing required (i.e. learning to live within their means and working hard to improve productivity), Obama accelerated the trend to try and buy his way out of the Great Recession and reinvent US society in his image.
Trump, for all the good he did elsewhere, accelerated it even further and Biden has been worse than the rest of them together.
This dynamic of trying to fix bad decision-making with more of the same bad decision-making has been played out all over the western world over the last 20 years, including Australia post-Howard.
Australia was saved from the GFC by 5 things (in no particular order):
1. World best prudential regulation so our banks were strong going into the GFC.
2. Incredibly strong fiscal position – structural surpluses (however they arose) and no net debt gave us scope to borrow without burdening future generations, initially at least.
3. Chinese stimulus, aka the mining boom.
4. Floating exchange rate insulated the domestic economy from wild gyrations of the world economy.
5. Short term deficit spending to cushion Australian citizens from wild gyrations of the world economy.
If the ALP had even started to return to a realistic and sustainable fiscal policy (that living within your means is not austerity) from say 2009 we would not have embeded the expectation in the minds of voters that government can, should and indeed must pay for everything any of us could possibly ever want.
Now that it is there and has been re-enforced by coalition governments (except for the Abbott/Hockey 2014 budget attempt), we are in for a hard time when our chickens come home to roost.
Yes, we are in for a hard time when the current orgy of spending needs to be reigned in. One extra factor that Australians don’t realise about the GFC is that the mortgage market is different in the US, when one defaults on a loan in the US, they just walk away and the bank cops the losses from any shortfall. We don’t have that structural problem here which is another reason we were never at risk of the same level of impact.
Excellent analysis, N.P.
This gets to the crux of what worries me about the Coalition – re MMT “candy” (as Sloan calls it) and net zero especially.
Hysterical, utter nonsense.
Lee
You are far too complimentary to Trampis.
True, John.
I am not convinced that economic mismanagement has any relation to theory, Keynes or otherwise. Today’s behaviours are much more banal, politically convenient and – generally – ignorant and lazy. Going back to Costello, who loaded up the budget with some expanses of middle class welfare, we’ve had a couple of “emergency”releases of the liquidity dam and a rising array of pork barrels, many of which appear to have no purpose other than to give away cash. Our defence spend delivers bad boats or no boats, with billions applied to the task. We have jets that do not fly. And we apparently have a giant security apparatus that, among other things, cannot detect when a near neighbour – recipient of generous funding – might decide to bat for China.
If you listen to pollies today you hear about spending. Not policies. When there is a problem, the answer invariably is a cheque.
In short, the vast hoard of cash accrued through tax is not managed, but dispensed – boosted by debt when the mood takes.
The Chinese did not help us from recession. Our exports in fact fell. Imports just fell by more. China helped us AFTER we fought off the recession.
We could not really start budget repair in 2009 because it was too soon and taxation was far too low. The ALP had tax as low as a % of GDP as it was back with Keating.
We had in fact a structural deficit hidden by a cyclical surplus. this was due to the petrol excise and income tax cuts plus the middle class welfare handouts given by Howard.
When covid first hit there were few masks because they were needed by hospital staff and we did not know of their efficacy. social distancing was well in its infancy.
The ratio of people dying of 1-2% is quite conservative if no lockdown. hospitals for one would have blown up. Thus having a heart attack under those conditions would be a death sentence as covid crowds out everyone else.
Why are deplorables utterly ignorant.
The gfc started in 2007, Chinese exports went up significantly in both 07 and 08 https://tradingeconomics.com/australia/exports/china
This is the reason there was no recession, the rest of your post is similarly a fiction.
oh dear.
no it didn’t. it was in 2008. the credit crunch was not the GFC. That is not hard to find out. the RBA was raising rates in 2007.
In the quarters that mattered when we stopped a recession exports fell. the only reason net exports rose was because imports fell more. err that is in 2008/9.
Treasury showed this when they demolished tony Makin’s alleged critique.
https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp
“It became apparent by August 2007 that the financial markets could not solve the subprime crisis and that the problems were reverberating well beyond the U.S. borders.“
Non Mentis
We realise that economics is a form of religious belief for you, but perhaps you should try for a little accuracy, rather than spouting dogma.
Why are so-called “progressives” so utterly ignorant?
When covid first hit there were few masks because they were needed by hospital staff and we did not know of their efficacy. social distancing was well in its infancy.
The ratio of people dying of 1-2% is quite conservative if no lockdown.
Actually, hospital staff were in a reasonable position to understand the specific values of masks, and should have been aware that the filtration by masks would not stop virus particles. Perhaps you could give us the data for deaths from nations hwich did not have lockdowns? You know, actual data.
firstly,
do some basic research. The RBA was putting rates up in 2007. They only started to reduce them in late 2008.
Secondly,
the Chief Medical Officer at the time said they had no research on whether masks were good or bad and there were not enough of them anyway and they needed to be reserved for hospital staff.
Why are deplorables soo stupid and ignorant.
Non Mentis
the Chief Medical Officer at the time said they had no research on whether masks were good or bad and there were not enough of them anyway and they needed to be reserved for hospital staff.
The CMO (Which one, state or Commonwealth?) seems to have been poorly informed. Tests of the effectiveness of masks even in surgery had been conducted well before the Kung Flu came along. Of course, the results did not match the “professional” opinion, so were ignored.
Why are so-called “progressives” so ill-informed and dogmatic?
PS, you seem to be responding to two different commenters. Are you too stupid, or too lazy, to separate your responses?
The rba reducing interest rates is not even a milestone used by the rba to indicate the start of the gfc, you have again provided no evidence to back up your many assertions. While I’ve provided plenty that contradict them, calling someone stupid only bites if there is a shred of truth to the claim. That I have to point this out doesn’t bode well for your credibility nm.
There is only a Chief Medical Officer at Federally level.
Err you cannot test for covid until it is here.
I was responding to two different commenters. That is why I said firstly and then secondly.
The economy would have gone backwards were there no lockdown. People would stop spending for fear of going outside and getting covid. Employers having no incentive to keep employees would have sacked employees. unemployment would have soared given no job seeker and no job keeper. It would have taken say 12-18 months for covid to go through the population so it would have been a lengthy recession with no fiscal boost.
Non Mentis
The economy would have gone backwards were there no lockdown. People would stop spending for fear of going outside and getting covid.
During the lockdown, people were unable to go outside, and markedly reduced their spending. Despite the usual cooking of the books by various official organisations, the economy did slow down markedly. Many people did lose their jobs.
Against that you use the phrase “would have” five different times. While you seem to believe that you have God like forecasting power, all you are doing is expressing your personal opinion. An honest phrase is “might have”. You can never know what might have happened had there been no lock downs.
Closed and ignorant minds don’t care about the dreadful negative impact of lockdowns on personal mental and physical health (including suicides), personal liberty, education, the economy and business.
Instead “lockdowns good and justifiable, because something could have happened.”
Lee
It’s the repetitive use of “would have” which demonstrates Trampis’ ignorance and arrogance. He cannot know what “would have” happened if something that was not done had been done. He can only speculate, based on his own prejudices.
Intellectual arrogance to the nth degree.
And you are correct, his prejudices allow him to ignore the negative aspects of lockdowns which you mention.
John; yes NT is much more of a “would have” than a “could have” person.
The former is much more along the line of “proof by assertion.”
Lee
He is big on assertions unsupported by any evidence.
Sweden and Florida prove that wrong. Even places like Denmark prove it wrong with very lightweight restrictions. There was some economic setback, but quite minimal.
And even Sydney proves you wrong … if you bother to check the statistics (I know you have not) then what you find is NSW cases peaked around mid Jan 2022, which was a few months after the time most lockdown restrictions were already gone, and there was a small secondary surge in cases in NSW early April 2022 but by that time people were well and truly over it and, generally went about their business (with some caution).
The surge in cases made people a bit nervous, but not anywhere near nervous enough to fear going outside. Most of the people I talked to feared their government far more than they ever feared a few weeks of feeling sick.
oh dear another person too lazy to check anything they have said.
google stats showed that was little difference between Sweden and Germany. One had a formal lockdown and the other an informal one.
We smashed Sweden in terms of deaths and economic progress so I do not know what weed you are smoking. you do know we are talking about no lockdowns to start with don’t you. you do know Florida is part of the USA.
The other thing is we are talking about having NO restrictions. Understand. transmission is quite quick. In Sydney hospitals were close to blowing up and we had a long lockdown. Can even a deplorable imagine what would have occurred with no lockdown. I doubt it.
Oh suicides went down world wide in lockdowns!
do deplorables even think and are they capable of thinking.
Poor old Non Mentis still desperately defending his equine excrement (that’s horse shit, for the benefit of those who never succeeded at pre-school).
Homer the numbers are not in your favour, I notice you did not actually bother posting any … but just make things up when it suits you. Here are 2019 vs 2020 numbers and no country made economic progress … they all went backwards, but Sweden beat both Germany and the USA by not going backwards as fast.
GDP per Capita in USD (see TradingEconomics, World Bank data).
Listed best to worst.
Australia: 58923.21 (2019), 58020.45 (2020), drop of 1.53%
Denmark: 57553.13 (2019), 56202.17 (2020), drop of 2.35%
Poland: 14987.42 (2019), 14588.14 (2020), drop of 2.66%
Sweden: 53490.35 (2019), 51620.70 (2020), drop of 3.50%
USA: 60836.77 (2019), 58510.24 (2020), drop of 3.82%
Germany: 43311.63 (2019), 41259.18 (2020), drop of 4.74%
Hungary: 15042.34 (2019), 14328.07 (2020), drop of 4.75%
Singapore: 61173.90 (2019), 58056.81 (2020), drop of 5.09%
Japan: 36362.36 (2019), 34366.48 (2020), drop of 5.49%
France: 38896.69 (2019), 35765.38 (2020), drop of 8.05%
Greece: 18992.66 (2019), 17436.01 (2020), drop of 8.20%
Italy: 32043.91 (2019), 29287.09 (2020), drop of 8.60%
India: 1972.76 (2020), 1797.76 (2020), drop of 8.87%
UK: 46611.84 (2019), 41811.36 (2020), drop of 10.30%
Spain: 28091.01 (2019), 24935.40 (2020), drop of 11.23%
It’s silly and pointless to compare apples with oranges … compare Sweden with other places in Europe at least … Europe on the whole had terrible COVID stats in terms of deaths per million, however Australia came out roughly equivalent to other countries in our region such as Japan, Singapore, India, etc. Australia’s simple resource intensive economy has not been so badly effected as places like Singapore which was at the centre of a bunch of supply chain woes.
The USA is a very diverse place, not one homogeneous nation, so comparing Florida with other parts of the USA (e.g. New York State, New Jersey) is a sensible comparison. If you believe weather is a factor then compare Florida with California.
Comparing New South Wales with Victoria is also sensible … Victoria had the hardest and strictest lockdowns in Australia, and also the highest total COVID deaths and higher death per capita than NSW. In almost every other way NSW and Vic are equivalent, so there’s reason to believe policies might have made the difference.
https://www.news.com.au/finance/economy/australian-economy/victorian-residents-fleeing-the-state-in-droves-according-to-new-abs-data/news-story/adf1429253d714d4bfe62fa8c08d9d4c
Victoria got the worst COVID outcomes, and an appalling economic setback … hardly a poster child for the success of lockdowns.
COVID deaths per million (see epidemic-stats, WHO data).
Totals are entire pandemic 2020 to 2022. Listed best to worst.
Singapore: 227
Japan: 237
Australia: 288
India: 373
Denmark: 1068
Germany: 1623
Sweden: 1840
France: 2237
Spain: 2241
UK: 2571
Italy: 2725
Greece: 2841
USA: 3062
Poland: 3074
Hungary: 4812
https://epidemic-stats.com/
You forgot China, Tel.
They only have 152 deaths per million. The secret is clearly the reporting!
Okay.
I say that without JobSeeker and JobKeeper, hundreds of Thousands of Australians would’ve been made homeless and living under railway bridges and sheets of corro out in the scrub.
Okay.
I say that without JobSeeker and JobKeeper, hundreds of Thousands of Australians would’ve been made homeless and living under railway bridges and sheets of corro out in the scrub.
Dickless
You can say whatever you like “could” have happened, but you cannot say it “would” have happened without evidence.
For the people who think their opinions and assertions trump facts, only six European countries had lower Covid death rates than no-lockdown Sweden (WHO figures):
https://www.dailymail.co.uk/news/article-10786649/Britain-LOWER-Covid-excess-death-rate-Spain-Germany-Italy.html