We Said The Same Thing About Julia Gillard
The not so big news is that the Federal Liberal MPs are unhappy with their Prime Minister. Former Minister and prominent-blowhard columnist Amanda Vanstone was heard making this remark in a 'Four Corners' episode:
Speaking on the ABC's Four Corners program, Ms Vanstone said it would be a simple mathematical calculation in the end which would determine Mr Abbott's grip on his job.
"Understand this, as you get closer, every marginal seat member is thinking 'I could lose my seat', every safe seat member is thinking 'we could lose government and I won't have a chance of being a minister and I might be too old next time', so they're gonna be looking at what the polling says and whether they can win and they will stick with a prime minister who can win and they'll cut one off who can't," she said.
They're not words you want to see spelt out if you're Tony Abbott, but I remember these moments on the ALP side when Julia Gillard's polls stayed at 27% approval rating for months on end. All kinds of arguments were mounted as to why she should be doing better but ultimately she never recovered, and the backbenchers removed her for Kevin Rudd in order to "save the furniture". Oh what fun times those weren't.
So the rough locus of politics being what it is, it's unsurprising that Amanda Vanstone can see the writing on the wall for Tony Abbott's Prime Ministership. He might have gotten himself a 6month reprieve but if the next Budget dogs it like the last - and let's face it, the last one is still dogging it, - then he may not have that 6months grace that he thought he had won at the spill.
None of this is really new news. What's more interesting is that the electorate has moved on to a post-Tony-Abbott sort of brain-space and have essentially written him off. The SMH has pulled the article from its site but this morning it was reporting that the swinging voters Western Suburbs of Sydney had abandoned Tony Abbott and called him an embarrassment. It was so bad the article is now off the main page and has to be dredged up by Google.
In the groups, Mr Abbott was described as "just very incompetent and an embarrassment internationally" by one participant.
Another said Mr Abbott was "an embarrassment. He is an absolute embarrassment. Every time he opens his mouth he just says the wrong thing."
Some participants viewed Mr Abbott as unreliable and untrustworthy.
"He doesn't present well," said one participant. "He doesn't give you ... no matter what he's talking about, you don't feel confident."
One woman declared: "He could be talking about the weather and you'd still think, oh… I don't know."
The latest Fairfax/Ipsos NSW poll revealed close to one in 10 voters who supported the Coalition at the 2011 state election intend to change their vote on March 28 due to the performance of the Abbott government.
You'd hate reading that if you were a Liberal MP, no?
I Owe, I Owe, It's Off To Work We Go
It's not exactly news that Australia's private sector debt is a much bigger problem than the public sector (i.e. Government) debt. Here is an article outlining just how bad it is.
Barclays chief economist for Australia Kieran Davies says private sector debt-to-income gearing is currently at an all-time high of 206 per cent, up from a pre-global financial crisis (GFC) level of 191 per cent. This put Australia just within the top 25 per cent of the world when it comes to leverage.
However, when it comes to household debt - which includes mortgages, credit cards, overdrafts and personal loans - Australia leads the global field, according to Mr Davies, with credit continuing to pile up while the rest of the developed world is paying it down.
Using nominal gross domestic product, the bank estimates household debt at 130 per cent of GDP, which is the highest level on record.
The ratio compares with 78 per cent globally, down from an all-time high of 81 per cent in 2010. However, Australia is not too far ahead of a range of European countries.
"Examining the distribution of household debt, Australia has the highest gearing of our large sample of countries, although it was practically a tie with Denmark (129 per cent of GDP)," Mr Davies said.
"Switzerland (120 per cent) [and] the Netherlands (115 per cent ) were the next closest countries."
And so there it is, in fairly easy to read charts. The problem of course is that the more government tries to cut its expenditure, the more the private sector takes on debt. So to some extent the private sector debt reflects the government cuts that have already taken place - except it's not businesses taking on the debt.
Mr Davies also found that while consumers and mortgagors are busy racking up debts, Australian companies have become more thrifty.
It said that non-financial corporations reduced their gearing from 84 per cent of GDP in 2008, as the GFC began to bite, to 67 per cent in 2011. It was the first period in which outright debt levels fell since the early-1990s recession, said Mr Davies.
Companies had since leveraged up again to where debt represents 76 per cent of GDP. Even still, corporate Australia was markedly more prudent than the country's individuals.
"Although Australian corporate leverage is high by past standards, it is surprisingly low compared with other industrialised countries," said Mr Davies.
"That is, world leverage, calculated as the simple average of the sample of countries, is currently 106 per cent of GDP, down modestly from the all-time high of 111 per cent of GDP reached in 2009."
The bank warns that risks continue to build in economy, particular as the Reserve Bank of Australia eases monetary policy.
So, to some extent the government is right in trying to contract and cut, given that the Private business sector can afford to take on more debt... but for the housing bubble. And so, the RBA can't exactly be cutting rates even more unless it wants the housing bubble to go even more ballistic.
But back-tracking a bit, you wonder how the RBA might have found itself in this rather silly position. My best guess is that ever since they changed the way they calculate CPI, they've been under-reporting inflation; and this under-reporting of inflation has been going on for some time, which bolstered easier monetary policy in the last 20+years. We know this because the cost-of-living has been skyrocketing ahead of CPI for the duration. Which means households have been getting a sweeter deal on property in the last 20years which accounts for the great housing bubble we've managed to engender. It's easy to see in hindsight, but who's really counting? Nobody's owning up to it; they were denying it even existed as recently as last year.
In a very real way, we can now see the interest rate should be sitting higher but for the GFC where every other central bank has embarked on easy-money and ZIRP and QE programs which has essentially dragged our own RBA towards a similar kind of easing. It really is a rock and a hard place. If they raise rates, it would cool down the housing market but it will discourage the already low business investment, smash confidence and raise unemployment. If they go towards ZIRP, the housing bubble will continue to expand, and when the next crisis hits, it would be time to print money so the banks that are too-big-to-fail, don't blow up.
But, as the Demtel man used to say, there's more. If the AUD keeps falling past the US75c mark, the import prices will go up significantly enough that even the artificially suppressed CPI will register the inflation. In which case, interest rates would have to go up, and with it will go housing prices and consumer confidence. Inevitably we're going to hit a recession. The question is how deep it's going to be and for how long. If 20years of growth comes to a shuddering stop, then it might be a very long recession.
And, as the Demtel man used to say, there's even more...
The Free Set Of Stake Knives In Our Backs
The engine for the 24year run of growth of the Australian economy, Communist China is - to not put too fine a point on it - pretty fucked up.
So where does Shambaugh see evidence of imminent collapse? He lists five "telling indications of the regime's vulnerability".
First is that "China's economic elites have one foot out the door, and they are ready to flee en masse if the system really begins to crumble". He cites a survey of 393 millionaires and billionaires by Shanghai's Hurun Research Institute; 64 per cent said that they were emigrating, or planning to do so.
Second is Xi's harsh political repression: "A more secure and confident government would not institute such a severe crackdown. It is a symptom of the party leadership's deep anxiety and insecurity".
Third is the hollowness of official belief in Xi's doctrines. Officials are only going through the motions, he says. He recalls sitting through a conference on Xi's call for a "China Dream" where it was "evident that the propaganda had lost its power". Demand for a pamphlet by Xi was so feeble at the Central Party School bookshop that the sales staff were giving it away.
Fourth, Shambaugh says, corruption runs deep and will outlive Xi's anti-corruption purge, which will succeed only in enraging powerful interests.
Finally, the economy "for all the Western views of it as an unstoppable juggernaut is stuck in a series of systemic traps from which there is no easy exit," he says. Xi's attempt to break the traps, his economic reform plan, is encountering stiff internal resistance.
The exact manner and timing of collapse, says Shambaugh, is impossible to predict.
Predicting the demise of China's regime is not quite as startling as it might seem. In some ways it's entirely routine.
The blindness of the West to the imminent collapse of the Soviet Union was a chastening experience. Analysts since have been hyperalert to a Chinese Communist downfall.
And there we have it. Peter Hatcher spends the rest of article making a case for why it might not be so fucked up, but the economic problems are starting to mount up - and they are remarkably like the problems faced by the rest of the developed world. Too much government debt, a housing bubble, capital flight, ageing population and stagnant growth. And generally speaking the case against a Chinese collapse are just as based on inductive reasoning as those who predict it on the basis of history.
Plus, we know that the GDP reported by the Chinese is often party wish-casting and no reflection of reality. It may take a while yet for complete collapse but the collapse in commodity prices is telling us quite a lot about how bad things are in China. It was enough to prompt Gina Rinehart to hurriedly sell up her stake in Fairfax Publishing.
Absence Of Sustained Leadership
Just a quick note about NSW politics which goes to the polls in a fortnight. In the last so many years since Bob Carr retied, it has gone: Iemma (37months), Rees (15months), Kenneally (27months), O'Farrell (37months), Baird (11months). It's pretty choppy no mater how you look at it. Iemma won an election but Rees didn't get to one, Kenneally was booted out for Morbid Obeidity, O'Farrell did himself in with the wine bottle gift thing and Baird is trying to keep government with just under 12 moths under his belt.
This has run parallel to Rudd I (30months) Gillard (36months), Rudd II (3months), Abbott (18months and counting to the end). What we can discern from all this is that even if you're offering good government from a managerial point of view or policy aspiration point of view or operational point of view, 3years is about the grace you get from your own party, and this is so short because the party gets so little grace from the electorate. And apart from Rudd and most parts of O'Farrell, bits of Rees and start of Kenneally, and Baird where polls were good, extreme unpopularity in polls essentially drives change.
I would posit that what has happened is that the electorate has chosen the polls as a means of sending a message when they cannot vote. With the ever tightening news cycle and the advent of social media, everything has to be immediate, and this is reflected in the fast an furious change of leaders on both sides. It is no accident that Tony Abbott is in strife. If he thinks the people vote in a Prime Minister, then he has to accept that the polls are telling him they made a mistake and want him gone.
I am yet to decide if this is an improvement or a form of political decadence, but I do think Australia has hit some kind of new phase in democratic politics that is quite peculiar. It may not end if and when Turnbull or Julie Bishop take over, and when they lose, it won't change with Bill Shorten in the Lodge.
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