Australian labour market – labour wastage rate rises above 15 per cent!

The economic news leading into today’s ABS labour force release was poor. Last week, the national accounts for the June-quarter was released and showed a marked slowing in the Australian economy during that quarter. Many commentators claimed the data wasn’t accurate and would be revised upwards. I don’t think that is the case. Yesterday, there was terrible data released relating to the drop in consumer confidence. And today’s release of the – Labour Force data – for November 2014 by the Australian Bureau of Statistics is consistent with that news. The labour market is weak and getting weaker. Employment is stumbling along and dominated by part-time employment growth. Unemployment continues to rise. Underemployment has rocketed up as working hours have fallen over the last month. The broad ABS labour underutilisation rate – the sum of unemployment and underemployment – is now at 15 per cent. That is a crisis. But the government still claims it needs to cut net public spending. For what purpose? To reduce the fiscal deficit even though this will cause a massive loss of national income and a further rise in unemployment and underemployment. And … as the current evidence suggests, the fall in activity will kill tax revenue and the fiscal deficit will rise anyway. It would be better if the government accepted its responsibility as the currency issuer and stimulated the economy with a job creation plan.
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    Posted in Labour Force | 16 Comments

    Trickle down economics – the evidence is damning

    The condition known as – Schizophrenia – describes “a mental disorder often characterized by abnormal social behavior and failure to recognize what is real”. Then again, the condition known as – Dissociative identity disorder – describes a condition where a person has “at least two distinct and relatively enduring identities or dissociated personality states that alternately control a person’s behavior”. If these states can be applied to institutions, then the OECD needs urgent medical attention. The OECD released a working paper yesterday (December 9, 2014) – Trends in Income Inequality and its Impact on Economic Growth – by Federico Cingano. It provides evidence that destroys the basic tenets of neo-liberal economics and supports a wider social and economic involvement of government in the provision of public services and infrastructure, particularly to low income groups. The fiscal implication is that deficits need to be higher.
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      Posted in Economics | 29 Comments

      A lost decade for Australia – only if we allow fools to continue governing

      It is almost unbelievable what some journalists think passes for quality writing. Today (December 9, 2014) Australians were trying to deal with the vicious new scheme designed by the Federal government to herd unemployed indigenous people in remote communities into below legal wage work-for-the-dole schemes because the government refuses to use its fiscal capacity to generate jobs where there are none, and then, just after lunch we were confronted with an article in the Fairfax press – Australia adrift: Lost decade beckons as good fortune wanes – that beggars belief. Australia will have a lost decade if it continues to elect governments, which work against the national interest. There is nothing predetermined about it. The rise and fall of the mining sector is an historical given – we have been through these cycles before. It all depends on how the Federal government deploys its fiscal policy tools. If it continues to run pro-cyclical policy (cutting when private spending is weak) then things will get worse. It we break out of the austerity trap, then the Government can easily redirect growth back to domestic spending. A major public sector job creation program and a large-scale public infrastructure redevelopment would be ideal ways to begin this policy shift.
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        Posted in Economics | 9 Comments

        “There is plenty of stimulus” – but I am struggling to see it

        “The economy is not weak enough that there needs to be more fiscal stimulus … there’s plenty of stimulus from the Reserve bank with record low interest rates” (Source). That comment came from an Australian private sector investment bank economist. It is an extraordinary comment to make and still claim status as a professional economist. What is the measure of a weak economy? Rising unemployment and underemployment, now well above 15 per cent? Negative real net national disposable income for two consecutive quarters? Real GDP growth barely a 1/3 of it previous trend rate? Because that is the reality in Australia right now and it is getting worse. Further, the RBA has cut the short-term interest rate 14 times since October 2011 and has held the rate at 2.5 per cent (a record low) since September 2013. The unemployment rate has risen by 1.1 per cent since October 2011 and 0.5 per cent since September 2013. When will these clowns in the financial markets finally realise that monetary policy is an ineffective tool for increasing aggregate demand?
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          Posted in Labour Force, National Accounts | 18 Comments

          Saturday Quiz – December 6, 2014 – answers and discussion

          Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
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            Posted in Saturday quiz | 8 Comments

            Saturday Quiz – December 6, 2014

            Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
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              Posted in Saturday quiz | 2 Comments

              Friday lay day – some home truths

              Its the Friday lay day. I thought I would share a few home truths with you that various people have alerted me to over the last week. Some interesting video viewing, while I get on with other things that have pressing deadlines. It has been quite a week in Australia. The national accounts showed we are barely growing in volume terms but in doing so our real net national disposable income growth has been negative for the last two quarters (a recession) with clear impacts of public austerity now evident. The Australian Treasurer claimed the national accounts vindicated their austerity position. Like a lot of politicians these days he trying to sell the impossible claim that cutting spending increases growth. In his case, he is also trying to tell the population that negative income growth is a positive thing and rising unemployment is a signal of policy success. Hockey claimed on the news this morning that “we have a terrific budget story to tell”. It is a strange politics.
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                Posted in Friday | 2 Comments

                The Cyprus confiscation becomes the model for bank insolvency

                I am still sifting through the documents from the recent G20 Summit in Brisbane to see what our esteemed leaders (not!) have planned as their next brilliant move to reinforce neo-liberal principles. One of the least talked about outcomes from the recently concluded G20 Summit in Brisbane were the agreed changes to the banking systems operating in the G20 nations. The dialogue started in the G20 Finance Ministers’ and Central Bank Governors’ Meeting in Washington in April 2014. Clause 8 in the official Communiqué covered the aim of the G20 “to end the problem of too-big-to-fail” and signalled the “development of proposals by the Brisbane Summit on the adequacy of gone-concern loss absorbing capacity of global systemically important banks (G-SIBs) if they fail.” The Brisbane Summit would consider these proposals. The aim was to “give home and host authorities and markets confidence that an orderly resolution of a G-SIB without exposing taxpayers to loss can be implemented”. You won’t believe what they came up with.
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                  Posted in Economics, Eurozone, US economy | 33 Comments

                  Australian national accounts – growth plummets as policy fails

                  In September, I wrote of the 2nd-quarter national accounts data that the economy was weak and getting weaker. The – September-quarter 2014 data released by the Australian Bureau of Statistics today confirms that prognosis. Weak is an understatement. Real GDP growth grew by by a miserable 0.3 per cent a further drop on the 0.5 per cent in the June-quarter 2013. The annualised growth rate of 2.7 per cent is being held up by the strong in late 2013 but something around 1.2 to 1.8 per cent per annum looking forward is a more realistic assessment of where the economy is at present. Despite a substantial fall in the terms of trade, net exports contributed 0.8 percentage points to growth while consumption contributed 0.4 points. A major decline in private and public investment shaved off 0.7 percentage points. Fiscal austerity is set to worsen, which means that the data paints a fairly gloomy picture for the Australian economy for the next year at least.
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                    Posted in National Accounts | 5 Comments

                    The inexact science of calibrating fiscal policy

                    In the showdown between France and the European Commission last week, France clearly is the winner on points, which is not surprising given the impossibility of the task the Commission had set it in meeting the Excessive Deficit Procedure (EDP) rules and the danger to the latter if France was to openly defy it. We have a sort of stand-off between the surrender monkeys – France is going along with the rules sort of and the Commission is bending the rules to save face. It is 2003 all over again. The public might actually think this EDP process is based on a fairly definite science with respect to measuring fiscal policy positions which provide unambiguous statements of deficits. The public would be very wrong if they did adopt that conclusion. In general, the applied work associated with informing the EDP process is very inexact. But, moreover, it is ideologically tainted which makes the process very damaging for any notion of prosperity. All applied work has measurement and other technical issues, which means it is always just an approximation. But when those errors are overlaid by a systematic bias against government net spending and therefore full employment, then the exercise becomes a scandal.
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                      Posted in Debriefing 101, Economics, Eurozone | 8 Comments