News That's Fit To Punt - 08/Feb/2017

That John Alexander?

Long time readers know of my immensely low pinion of John Alexander as tennis commentator. He was simply terrible, in as much as he offered no technical insight and often ascribe bad motives to the characters of the players, much like an armchair psychology buff. A typical line of John Alexander commentary would be that a player X missed a shot because he has a bad character. It drove me away from watching tennis on channel 7.

Anyway, it has been the big surprise of his time in politics that he backs building a high speed rail network in this country, and all for the right reasons. He is still continuing his push, and even getting called a crusader for it.

Crusading Turnbull government MP John Alexander, who has supported a debate about negative gearing, said vision and innovation needed to replace the "debilitating political argument" about housing. 

A bipartisan committee chaired by Mr Alexander backed his vision for high-speed rail, recommending the government seek proposals for a link between the two major cities, and evaluate ways to raise private capital through value capture. 

Under that model, previously trumpeted by Prime Minister Malcolm Turnbull, major infrastructure is privately funded by the increase in land values that accompanies the creation of new or larger cities made possible by that infrastructure.

(edit) 

"It would appear there's a perfect storm of opportunity to liberate [regional] cities through high-speed rail," Mr Alexander previously told Fairfax Media. "You will push up prices enormously around Goulburn; people will be delighted." 

But he warned on Tuesday the report's ambitious goals were only achievable if all three levels of government co-operated and were "willing to forgo individual revenues to ultimately maximise total revenues". 

Mr Turnbull and the new assistant minister to the treasurer, Michael Sukkar, have promised the government will say more about housing affordability this year, as Labor continues to push for negative gearing reform.

It's kind of crazy that the only person in government making any bloody sense is John Alexander.

About That Housing Situation...

Turns out the record private sector debt is now sitting at about a trillion dollars, and the cracks are beginning to show. Don't be fooled by the price rises in Sydney and Melbourne, there's substantial pressure on the housing bubble right now.

Homeowners, consumers and property investors around Australia are making more calls to financial helplines as three warning signs back up the spike in demand: mortgage arrears are creeping up, lenders' bad debt provisions have increased and personal insolvencies are near an all-time high.

"It's steadily out of control -- I don't know of too many financial counselling services where demand doesn't exceed supply," said Fiona Guthrie, chief executive officer of Financial Counselling Australia, who says the biggest increase in calls is from people suffering mortgage stress. "There are more people who have got mortgages that they can't afford to pay."

(edit) 

"There's so much household debt that a couple of rate hikes here would completely knock the wind out of the housing market, and a lot of people would be impacted by it," said Gareth Aird, economist at Commonwealth Bank.That's partly why he doesn't think the RBA will lift rates until 2018 at the earliest. 

While most borrowers in Sydney have plenty of equity in their homes as prices keep rising, that's not the case elsewhere. In the mining state of Western Australia, which is struggling to cope with the end of an investment boom, more than 10 per cent of mortgage holders have little or no equity buffer, according to a Roy Morgan report last week. In South Australia and Queensland, 8 per cent and 7.2 per cent of borrowers respectively are in negative equity. 

That may not matter if you're a homeowner with a secure job and comfortably servicing your mortgage. But Australia's labour market is far from solid, with the RBA citing it as one of the economy's biggest uncertainties. The jobless rate rose for the second straight month in December to 5.8 per cent, while underemployment -- the number of workers wanting more hours -- is near an all-time high. At the same time, wages growth is the lowest on record.

It's notably unaffordable, everybody's been so eager to get into it, there are signs of housing being over-bought everywhere. It's okay in the main but the fracture lines are running elsewhere. Hmmm...

The truth is that the RBA sort of glommed into this problem by keeping rates low for such a long time, and because nobody's ever had the negative signal for the market, there's a profound belief that it only goes in one direction, up. All the while they invited the other parts of the economy needed the low interest rates, but also, by under-measuring inflation they've given themselves even more reasons to keep the rates low. If the average household debt is 187% of income, you know it's not sustainable - but all the while they've not really addressed the irrational exuberance.  

Politics being what is, its practitioners like to emphasise different parts of problems instead of talking about the private sector debt for what it is, and despite the more-than-abundant evidence that there's a  property bubble in progress, the politicians have sought to characterise all this as a 'housing affordability' problem. Implicit in this shifting of focus is the idea that the problem isn't with the property bubble, it's with the people who can't afford to get in on the same RBA-funded gravy train investment. Even more pernicious in that shifty little manoeuvre is the idea that they want to keep the asset price gains, and to that end - all the politicians are property owners and investors, as well as the big wigs at the RBA - these people will do and say anything to talk down the bubble. A simple cui bono examination explains how the interest rates stay low in a bid to keep the asset prices inflated.

As somebody who dabbles in the equities market, I find the utter lack of caution for the bubble to be quite absurd. Markets by their very nature are meant to go upend down. The fact that the housing market in Australia hasn't fallen to historic norms in a very long time, can only mean there's long way to fall when the perfect storm will hit.

Housing never falls, right? We all love housing. In case you're wondering how this all shows up in our political rhetoric, have a look at this next one:

"I've Got Mine, You Can't Have Yours" Says Malcolm Turnbull

This is pretty ugly.

Prime Minister Malcolm Turnbull has unleashed a blistering attack on Opposition Leader Bill Shorten, slamming him as a "simpering sycophant" and a "parasite" who yearns for his own harbourside mansion. 

The energetic end to Question Time came after Mr Shorten launched his own barbs at the Prime Minister, accusing him of attacking families, attacking standards of living, of being tough on pensioners and soft on banks. 

"The Prime Minister is seriously the most out-of-touch personality to ever hold this great office of Prime Minister," Mr Shorten said. 

Mr Turnbull's response, which led to the rare display of Coalition members thumping their desks, was brutal and an effort to counter attacks on his personal wealth just days after he revealed his $1.7 million donation to the Liberal Party. 

Mr Turnbull said Mr Shorten was a "would-be tribune of the people" and accused him of rising to prominence by networking with prominent Melbourne businessmen like Richard Pratt. 

"There was never a union leader in Melbourne that tucked his knees under more billionaire's tables than the Leader of the Opposition," he said. 

"He lapped it up, yes, he lapped it up." 

The Prime Minister accused Mr Shorten of "knocking back Dick Pratt's Cristal" and looking forward to living at the personal expense of taxpayers. 

"This sycophant, blowing hard in the House of Representatives, sucking hard in the living rooms of Melbourne, what a hypocrite," Mr Turnbull said.
"They call themselves the Labor Party; well Mr Speaker, manual labour is a Mexican band as far as they are concerned. Most of them have never done a day's work in their lives."

If you are an egalitarian liberal as Malcolm Turnbull claims he is, how can he begrudge his fellow citizen for wanting a Harbourside Mansion when he has one himself? I mean, what's wrong with that aspiration if it's good enough for himself? 

How can Bill Shorten be a parasite just because he has had career benefactors, when Malcolm Turnbull himself had a career benefactor in Kerry Packer? People need a break here and there. What is so morally objectionable about that reality? 

It's really weird how the conservatives have a thing about harbourside mansions. Barnaby Joyce recently said people should move out of Sydney because not everybody can afford a harbour views. If you notice, its only the coalition talking about harbourside mansions. It's not as if the ALP's in Parliament screaming everybody needs a harbourside mansion. 

You'd think these people never watched 'The Castle'. 

 

Quick Shots - 02/Jun/2016

What Yanis Said About Australia

Walk-Off HBP sent in this one a little while ago. Former Greek Minister For Financial Crises Yanis Varoufakis recently was in Australia and was asked a few questions about our economy. This bit sort of popped out so I'm quoting it here:

“The first thing that has to happen in this country is to recognise two truths that are escaping this electorate, and especially the elites. 

“Firstly, Australia does not have a debt problem. The idea that Australia is on the verge of becoming a new Greece would be touchingly funny if it were not so catastrophic in its ineptitude. Australia does not have a public debt problem, it has a private debt problem. 

“Truth number two: the Australian social economy is not sustainable as it is. At the moment, if you look at the current account deficit, Australia lives beyond its means – and when I say Australia, I mean upper-middle-class people. The luxurious lifestyle is not supported by the Australian economy. It’s supported by a bubble, and it is never a good idea to rely on the proposition that a bubble will always be there to support you.

“So private debt is the problem. And secondly, because of this private debt, you have a bubble, which is constantly inflated through money coming into this country for speculative purposes.” 

Varoufakis is unequivocal in his conviction that current growth – which he likens to a Ponzi scheme – needs to be replaced with growth that comes from producing goods. 

“Australia is switching away from producing stuff. Even good companies like Cochlear, who have been very innovative in the past, have been financialised. They’re moving away from doing stuff to shuffling paper around. That would be my first priority [if I were Australian treasurer]: how to go back to actually doing things.”

I jokingly asked him who this read like and he answered yours truly so... just saying, it's not like the views expressed here are off the planet. At least the former Finance Minister of Greece is espousing them as well. 

Varoufakis is pretty unequivocal about the idiocy of allowing the auto manufacturing industry to leave Australia. It's worth noting that the flip-side of Varoufakis' concern for manufacturing is that the more FIRE - finance, insurance and real estate- sectors grow in proportion to the rest of the economy, the less the economy seems to be able to grow. That is to say, the more 'financialised' an economy becomes a great part of the economy is taken up with the activity of shuffling paper wealth around. This is typically soon the USA here Manufacturing went from 30% of GDP to about 11%, and the FIRE sector went from 13% to about 24%. If the economy is producing things at around 10% and yet the paper shuffling wealth is 25%, it's not surprising you get low growth as well as lo wages growth and gross inequality.

This Damned Election In Australia

The one forgivable aspect of elections in Australia is that under the Westminster system these campaigns tend to go for weeks and not 18months like over in the USA. Even so, Malcolm Turnbull has opted to go for one of the longest campaigns leading up to the polls and well, there's still a good month to go before we show up at the voting booths.

Even so, things are running so tepid and boring, people are conjecturing whether Bill Shorten is - how do you put this? - trying as hard as he can to win this election. That maybe he's secretly going for a two-election strategy instead of trying to seize the day.

Electorally, in the wake of the Rudd-Gillard years, Shorten's approach prioritises the reconnection of the ALP with its disillusioned base over attracting the extra middle-ground voters needed to win an election. And that in turn explains why insiders in both camps report Labor is doing better in its heartland - i.e. safe seats it already holds - than it is in the marginals where swinging voters will decide the election. 

The result could be a repeat of 1998 - a sizeable swing to Labor for only a modest return of new seats. Yet for Shorten personally, that would bring an upwelling of affection from the Labor faithful, casting him as a defeated leader who had fought the good fight for "Labor" values - very useful if your challenger is the darling of the rank-and-file, the Left's Anthony Albanese.

All of this suggests Shorten may well be already thinking about his own survival as leader beyond the horizon. Don't expect him to use the term or even to accept the logic, but the inescapable conclusion is that he has a two-election strategy having concluded months ago that gaining the 19 Coalition seats needed to win on July 2 is unachievable.

In other words, he's really not putting the hard yards into winning the middle. It's a bummer because of the thought of Turnbull getting a full term and then continuing with these Abbott-esque policy positions is going to be a real drag. You kind of wish Shorten would go hard for the Lodge this time around, if only to make up for the ridiculous loss in 2013.

The more interesting news to do with the elections coming from fringier areas. Like ABC friends who want to target Coalition seats. 

"Vote Mal, Eat Pal" Pt. 2

You Have Got To Be Kidding Me

The government wants to claw back some money without raising taxes or closing loopholes for their own rich constituents, so the new idea is to collect HECS debts from the dead.

The Turnbull government is considering the controversial move of collecting student debts from the dead, as well as increasing university fees, as it seeks to find higher education savings in the May budget. 

Former education minister Christopher Pyne backed the idea of recovering HECS from deceased estates two years ago, but was quickly shut down by Tony Abbott to avoid a scare campaign on the sensitive issue. Labor slammed the idea as a "death tax" - even though most other loans, such as mortgages and credit card debt, must be repaid upon death. 

Ending the HECS write-off from deceased estates worth over $100,000 would save up to $800 million a year, according to leading higher education analyst Andrew Norton.

Sources in the higher education sector said the proposal had been raised in recent discussions with Education Minister Simon Birmingham, who is under pressure to find substantial savings in his portfolio. 

Asked if he was considering recovering HECS from deceased estates, Senator Birmingham said: "The costs to taxpayers of higher education over recent years have grown dramatically "Since 2009, taxpayer funding for Commonwealth supported places in higher education has increased by 59 per cent as compared to nominal growth of GDP that has risen by 29 per cent."

It's downright evil, is what it is. I get it that they have pressing needs to shore up revenue but increasing Tertiary Fees, sticking the student with the massive debt, and then chasing them beyond death and into the grave for that debt seems like a total breakdown in the social contract. The model of user-pays and education as vocational training model that successive Australian Governments have been pushing should mean that when a person is dead-but-in-debt, they are no long in their vocation (I can't believe I had to write that just then) and therefore are no longer beneficiaries of the said user-pay vocational training. 

It's bad enough that this government like its predecessors is downright anti-intellectual. Reducing education to vocational training happened under the Hawke-Keating government when they committed to the Dawkins reforms. Connecting up the earning potential of university graduates and then lining up a fee in correspondence to future earnings was a Howard Government decision. None of these decisions understand education at all. The point of education is to understand the world in broader terms - whether it be through science or the arts - so that when they are eventually employed, they can work with a wider perspective on what it means to be doing that work.  

The anti-intellectualism of this government is so deep, it views education strictly as a means of creating taxpayers. Tertiary education is clearly the means of extracting bigger tax money out of Tertiary graduates, and that's it. And should they die young, this government is saying the tax from the unearned money over the career of the dead person still belongs to the government. They don't understand that even talking about this makes for a great disincentive for people to get more educated, when in fact our democracy needs as many educated people it can get - and by educated, I'm not talking about vocationally trained people, I'm talking about people who can do critical thinking and analysis. 

Just when did our government get so stupid and so evil all in the one go? 

Steven Keen Says Recession By 2017

Here's the article. In a nutshell, for all this talk of 25years of constant growth, parts of it were accomplished by going deeper into debt for the private sector to goose demand through the rough patches. Now it has gotten to the point where Australia's private sector is the most indebted per capita in the world. The consequence of all this is that there can't be much debt that can piled on top, and any drop in debt will usher in a collapse in demand. There's nowhere to go with the debt upwards, and the only way for demand is down. 

This is the inevitable debt crunch coming Australia’s way, but conventional economists are oblivious to this danger because they’ve brainwashed themselves to ignore private debt as just a “pure redistribution”, to quote Ben Bernanke. This deluded textbook thinking is why Bernanke didn’t see the GFC coming. 

The day of reckoning can be delayed by encouraging yet more private borrowing, which the RBA can attempt to do by cutting interest rates, and the government can reduce the crunch by running a large budget deficit. But these are likely to happen after a crisis rather than before it, because our Reserve Bank and our politicians are as oblivious to the dangers of private debt today as Bernanke was back in 2007. 

The 2016 election could be a good one to lose.

Yes, it could be a real bugger. I sure wonder what the debt crunch is going to look like in Sydney. 

The RBA is taking a steady-as-she-goes view on the economy. This would lead one to suspect that Glenn Stevens isn't likely to see the next downturn coming over the horizon. Of course, there probably isn't much more he and the RBA can do at this point. They're not going to raise interest rates for a whole gaggle of reasons, and they're not going to cut them any more because the worst isn't here just yet, but chances are we're sill headed towards Zero Interest Rate Policy when this recession arrives. We're just suckers for punishment.

Shutting Out The Scientists

The true hallmark of this Coalition Government is its anti-intellectualism, which is exemplified by its constant shift to appease those who deny climate change is happening or that it is man made. As such, it tends to find itself on the wrong end of science and scientific fact quite a bit. Indeed, they are slashing the budget to actually study the climate at the CSIRO.

One of CSIRO's main climate science units planned to slash four out of five researchers, all but eliminating its monitoring and climate modelling research, a new document reveals. 

The cuts are contained in an analysis for the Oceans & Atmosphere division, dated January 25, 2016. CSIRO handed over the document to the Senate committee investigating plans to slash 350 staff overall, and it has been made public on the Senate's website.

Doubts over the rationale and planning of the cuts flared on Tuesday in another CSIRO section facing deep job losses, with many Land & Water staff walking out of a meeting with chief executive Larry Marshall.

"People got fed up of having their questions marginalised, trivialised, and with being lied to," one senior researcher told Fairfax media. He added the division's head, Paul Hardisty​, had led the walkout. 

"We understand CSIRO scientists are passionate about their science and also about some of the changes to the structure of their organisation," a CSIRO spokesman said, declining to elaborate on the meeting. "CSIRO is committed to continuing to have open and transparent dialogue with staff and hearing staff views and concerns." 

The new document, though, highlights the extent of the original cuts being considered by CSIRO before pressure – including from thousands of international scientists – prompted a scaling back of the job losses.

The rest of the article makes for depressing reading. 

Here's what I don't get. This government is pretty disdainful about the Arts. Here it is also having a go at Science, making stupendous cuts. It doesn't really put its money where its mouth is at when it comes to Engineering or manufacturing or any kind of secondary industry - it tells us outright we can't compete and is happy to ship those jobs abroad. They shut down the automotive industry. They won't build VFTs, sabotage their own NBN, but they'll build more unwanted motorways so they can collect more tolls. They won't build submarines, they'll opt to buy them instead. They'll allow agricultural land to be sold off to overseas interests. They tell us our economy is going to be built on construction and housing and service sector jobs. And let's not forget they want to squeeze HECS debt out of the dead. 

Just what kind of country do they think they're building here? On the evidence, you'd have to conclude even they have no idea whatsoever. 

News That's Fit To Punt - 02/Oct/2015

The Bubble We Had To Have

Not sure how people construct notions like that, but here you can see it as the headline.

"The government has to try and talk it down and say it's inflated, but at the same time all they can try and do is control the ongoing growth as best they can," Mr Van-Petersen said. "If they wanted to prick it, they could, but Australia simply cannot afford to." 

New Zealand and Singapore have enacted strong policies to force adjustments in housing markets and Mr Van-Petersen said Australia could easily deflate the bubble by pulling the stamp duty tax charged to foreign buyers from properties of more than $15 million to, say, $1.5 million. 

But the property market is one of the few areas of the economy that is growing adequately as terms of trade plummet and mining companies shed value because commodity prices are falling in light of a slowing China. 

"Australia can't afford for property to have a hard landing. If housing prices bust, the banks will get hit hard. And then what is there? It's in everyone's interests right now."

Pretty spooky when they couch it that way. There are lots of places and things that can't afford to have hard landing - for instance China - but we know they're going through one as we speak; and if we are to understand correctly how our real estate market is connected to the Chinese economy and the money trying to get out of China, then it's likely not going to be the happy 9.8% growth prognostication.

What Banks Are Doing To Hide Bad Credit

You won't hear this anywhere else. This is my exclusive. :)
Recently a 20year old kid borrowed 25k from one of the Big Four banks. At the time he had a steady job, and he had the patter to sound like he was a good bet to pay it back. So they lent him 25k with a 5year repayment schedule. He then went and splurged the 25k on what you and I might surmise are more toys than chattels or assets. Then he lost his job and couldn't pay. Thus he marched into the bank and told them the situation. They asked him just how much he could pay, and he replied $20 a month. So the bank said that was okay and took the $20 per month on good faith. It took a few months for him to find a job again but by then the bank unilaterally closed out the account, saying the 25k had ben paid (news to the kid, he couldn't imagine who it might be). What happened is unclear, but basically the bank told him because the loan had been paid off, the loan account was closed.

I know it sound amazing but it's true. The bank closed out the 25k in bad debt by writing it off quietly, rather than pursue the money. The 20year old kid effectively walked out of the bank 20k or so richer, for no reason other than the bank didn't want that bad loan on its books. So the banks purged the bad loan off its books.

The question you should be asking yourself is, just how much of this kind of things going on? How safe then are the Big Four banks? I'll leave that with you to decide.

There's Water On Mars

The big announcement of the week was that NASA says there's liquid water on Mars. It seems like it's been coming for a long time, but it's taken until 2015 for NASA to verify all the data and say, yes, there's liquid water on Mars. If you stop to think about it, it seems quite obvious that there would be water, and liquid water at that given the conditions of the planet, but that is just an aside. Science says, not until all the data is in, is it incontrovertible, so here we are.

The weirder turn was how Ridley Scott knew that NASA knew, but couldn't revise his film 'The Martian' to include that new discovery, because it would have let the cat out of the bag. Ridley Scott also made news in that he spoke to Foreign Minister Julie Bishop saying he wanted to shoot the sequels to 'Prometheus' in Australia.

The fact that there is liquid water on Mars bodes well for a possible future human colony on Mars.What doesn't bode well still are the low gravity, thin atmosphere and punishingly cold temperatures. It's not like we can grow things with much ease on Mars which means we won't be getting a food cycle happening easily. Ironically, what Mars needs for human habitation is a good dose of greenhouse effect.

View From The Couch - 17/Sep/2015

The Crippling Global Debt

Walk-Off HBP had this little conversation he wanted to share. It's Satyajit Das talking about the problems of our global economy. The gist of it is pretty much in line with the prevailing observations about where we are in the debt cycle. There's a mention of Hyman Minsky in there as well, describing the various stage of debt financing and how the Australian housing market is definitely in the third phase out of three phases wherein it is no capable of paying off the loan principle or interest, and the only hope of making the money back is through capital gains of the underlying asset.

Satyajit Das' cheery interview leads us to understand that there is no real distinction between public and private sector debt, which in turn means our colossal private sector debt in Australia is ergo problem for the government and society at large. Not that it matter much today, but when Tony Abbott was going on about the debt, he really should have looked at the private sector debt instead of the government sector debt.

Even so, Das doesn't think there's much governments can really do to address this problem. After all, when looked at globally, since the peak of the GFC we've leveraged up 17% more global debt rather than pay any of it down. Nobody really deleverages, nobody really get through austerity and austerity in of itself does nothing to address the large mountain of debt. Das doesn't think debt jubilee is even possible without wholesale destruction of value.

Which is in many ways the crux of the problems. Nobody wants to give up the price tag on what they are sitting on. The people who carry on how there is no property bubble in Australia do so on the basis of trend lines and market relativism (so to speak) but completely ignore the absolute numbers and what they mean. They argue "It's in line with what things are worth" and totally ignore the fact that "worth" might be the most contestable notions - much more so than "I never had sex with that woman" or "I am not a crook". Thus, as Das points out, we're living in houses with price tags that have been 'financialised' and inflated - but we're happy to bask in the wealth effect which is the dtluionary thought that we got wealthier sitting in our houses doing nothing. Worse still, the inflated price represents how global capital tried to find returns and being unable to do so, landed in housing. As the money recedes when debts are called in, people's positions are exposed, and suddenly the price tags don't look so tenable any more.

Yet the world over there are people who borrowed money to buy things and when the debt gets called in early, are forced to cash out on the spot and lose money, or work very hard to stave off the debt collector. The post-GFC world has been marked by one effort after the other to secure these positions of 2007, trying to fix them in amber so people don't have give up their positions, their things, their assets that they got through borrowed money. The reason we kick the can down the road is essentially to preserve those people. And to that end the world has seen Quantitative Easing to facilitate that there is enough cashflow otherwise to make up for the debts that *can't* be called in, added with the monetary easing through low interest rates.

If that's not spooky, I don't know what is. We're doing all this "kicking-of-the-can-down-the-road" so Deutsche Bank doesn't blow up over Greek Bonds and derivative products based on Greek Bonds. Thus the Greeks have to wear austerity to save a German bank except of course in Iceland, they just let the banks fail. It probably worked out a lot better for Iceland to do so. The Greeks have no such choice. But Greece is actually what the future looks like for many parts of the 'Emerging Markets' world. Global debt will rob sovereignty from nations, communities, right down to individual people.

On Tony Abbott Being A Sore Loser

Look, he might be a sook. In the vernacular I grew up with, we call those, sore losers. Being a sook is what my office cat does on Fridays. Sore losers is what humans do, even when they're told not to do it. Kevin Rudd was a sore loser too, but hey, he came back like a champion. At least, my old tennis coach PB would mount those kinds of post-hoc argument: "That's what Champions do!" (Bless you PB wherever you are today.)

Julia Gllard's speech about being a woman wasn't everything and wasn't nothing, but something, was her only sore loser moment. Judging from 'The Killing Season' she does like to kid herself of a lot of things, but she doesn't seem to go sore all that often.

...but Tony Abbott? he's just.... argh...  For fuck's sake he faxed in his resignation to Sir Peter Cosgrove. Who the fuck does that in this day and age?  It says everything about the man who came to power promising ruin the NBN and 'fulfilled that sorry promise". To the end, a techno-loser, unfit to be PM in the 21st Century.

So I get it - he's a sook AND a sore loser. If you don't get it there's something wrong with you. But then this is a nation of sore winners, which is  a category I've never comes across outside Australia. Yes, we as a people can bask in the moments of great defeats and deep humiliation even though we won the war, so make of it what you will. Tony Abbott was in some limited ways, an exemplar of his nation.

News That's Fit To Punt - 16/Mar/2015

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. 

The Debt Limit In China

The Crash That's Taking A While

For the better part of this decade so far, there has been talk that China and its property bubble and ghost city would come to a crash-landing of sorts instead of a much mooted soft-landing. One of the things about these different landings as described by economists is that nobody really manages a 'soft-landing', and those that appear to be soft-landings usually involve kicking the can down the road through stimulus spending. Theses partly why we are beset with the feeling that ever since the GFC of 2008, we've seen this before and China hasn't exactly blown up and crashed on the tarmac so  things likely are going to be okay. This is classic normalcy bias wherein we're inclined to think things are going as normal even when things are wildly spinning away from normalcy.

Just exactly how well or unwell China is doing is up for a lot of debate. The cracks started to show last year around May when companies started to default on their bonds, but "a Mysterious Mr. X" would altruistically save the day by buying out the debt position. Most would have read that Mr. X to have been an agent of the Chinese central bank, not wishing to start a credit crisis or a bank run, stuck a fingering the hole in the dyke. All the same, the Chinese government has been announcing that it has been growing at a pace of well over 7% for some years now, so we tend to get lulled into a sense of false security. After all, if China is growing at 7%p.a., it can surely pay off all its debts unlike the first world nations that can't seem to muster 1% growth.

And so, we come to this interesting video:


Anne Stevenson-Yang's presentation essentially kicks the rungs out of everybody's perception of the Chinese economy. It's much worse than one would think and it's in too much debt to do any heavy-lifting for the world. -2% on consumer spending? Zero growth? Saturation debt and no new credit as most of the credit issued is used to rollover old debt? I don't know about you, but she sure talks up a scary set of figures, and she may well be right. That Bob Davis isn't exactly doing a good job of refuting her well-researched points - he sounds more like he is trying to hose down the burst of bad news erupting from her research.

That is some badness she's painting there. It's certainly a far cry from the rosy, "China is growing at 7% p.a. rate" story the world has been swallowing hook-line-and-sinker for some years. As Ms Stevenson-Yang notes, that figure is what we might call "aspirational" in the sense that when the politburo announces the GDP growth, the industry uses it as a target benchmark. It most likely has no bearing to what is happening in reality at all.

For some time it's been postulated that China has been overly optimistic (we won't say lying, because they're aspirational figures, not measured ones), and so the real economy in China is not as large as people think it is based on the yearly announced figures. So China right now might just be a victim of its own PR success, with not enough of a developed economy to do the kinds of lifting through its consumer spending. This would explain the static non-growth in consumer spending figures Ms. Stevenson-Yang has been able to capture through her research.

And so property prices are sagging and commodity prices are falling and state-owned-enterprises are having a devil of a time paying of debts but they keep on making stuff because they need to keep making stuff, regardless of how little it returns. The ramification for Australia is frightening, for Australia has been riding a commodity boom on the back of China for better part of two decades, which explains how Australia hashed sustained economic growth for 22years.

That's all about to end.

The crazy thing is that what Australia and its people have done with the commodity bonanza is spent it and spent it big on housing. We earned this foreign currency and subsequently tried out-bidding one another for housing. Worse still, just as with the Dutch disease, the mining sector and its success, combined with the stampede toward real estate has hollowed out the economy. Manufacturing has totally been beaten out of Australia and handed over to Asia. We haven't grown a lot of industry to take the place of mining as an driver of the economy and have hitched our wagons to housing as the next engine for growth. Alarmingly, Australians have gorged upon debt so that private debt is at an alarming, historic high.

In short, we might have missed the full impact of the GFC, but that's only because China kicked the can down the road for us. When China undergoes its hard-landing, then of course there will be so many debt positions that will get unwound. As Ms Stevenson-Yang notes, at this point in time, the only question is whether it ends with a bang or a whimper. From the figures, it looks like it's going toe a bang and that would suggest the shock to the Australian economy is going to be substantial.

We can predict going back to the early 90's when the Australian dollar was US50cents, and unemployment sat closer to 10% than 5%. If the Coalition Government is still going to be banging on about surpluses then and trying their austerity measures, you can count on the RBA will be slashing interest rates right down to ZIRP. At that point, the GFC would have finally arrived on to our shores.

Miscreants On A Mission

The Predictable Drive In To The Ditch

The news this week is that Tony Abbott's poll figures suck more than ever. Hands up if you find his surprising? No? Didn't think so.

The really interesting bit in all of the commentary is how Tony Abbott is trying to characterise his first year and a bit in government by saying there are accomplishments a plenty to go with the things they couldn't get done. In the list are things like the repeal of the Carbon Tax and the Mining tax. He doesn't seem to understand that these taxes weren't some idle notions dreamt up by the Left to destroy conservative Australia, but fairly important planks of public policy, in as much as revenue raising for the government was concerned.

For a guy who came to power banging on about deficits, Tony Abbott sure has't helped himself as Prime Minster if he thought the high points of his government were abolishing taxes that were paying for useful things. It also ignores the great retreat of car manufacturing out of Australia, a sequence of events precipitated by TonyAbbott's own government. The point being, all the accomplishments he lists are things that probably need not ought to have been done, while all the things for which he is receiving blame and rancorous criticism and - let's face it - hollered insults are things also he shouldn't have undertaken especially because they are his ideological projects.

In short he may well claim the glass is half full but it's no good if the fluid in the glass is urine.

The Tricky Submarine Situation

Not a lot of people are standing up to point out the problem with the ASC. It's a shame that the person making the most sense is Paul Sheehan. Maybe it's like a broken clock being correct twice a day, but after he pens his usual poisonous character assassinations of the ALP politicians, he points out something that needs to be pointed out (God knows I hate quoting this man):

"ASC was delivering no submarines in 2009 for $1 billion. They have not improved their output … They are $350 million over budget on three air-warfare destroyer builds. I am being conservative. It is probably more than $600 million but because the data is so bad I cannot tell you. You wonder why I am worried about ASC and what they are delivering to the Australian taxpayer. Do you wonder why I wouldn't trust them to build a canoe?" 

At last the truth about this from a defence minister. Billions of dollars have been poured down the drain by both sides of politics on this giant pork barrel for South Australia. The ASC could build a canoe, but it would cost a million dollars and spend more time in repairs than on the water. 

The ASC has accumulated an abominable record of cost over-runs and should never have been awarded the air warfare destroyer contract. Johnston's refreshing candour was an admission that the ASC has been a financial sinkhole for decades. It is more a strategic liability than a strategic asset. 

Senator Johnston is also the first Defence Minister in a hundred years to seriously confront the bullying sub-culture in the Australian military, which has a recorded history of rationalising these practices dating back to 1913. 

And there's the crux of the biscuit. The ASC has been going for some time chomping up money at a greater rate than desired while delivering sub-standard product (pun unintended). There is no competition for the ASC, so if the Australian government dreams up a product it needs, the ASC is there to take the money and waste it until it delivers a poor product that roughly approximates the brief. It's a happy little monopoly where there is no need to cut costs or make savings.

Yet this very monopoly has led to the notion that Australia should buy ready-made subs off the shelf from Japan, which is causing a lot of heartburn in the ranks of the white Australian sentimentalists. After all, how could we fight them in Kokoda and Darwin and wherever else and suffer the indignities of the Burma railway; and then buy their bloody submarines? Why indeed? The noises coming out of Tokyo and in particular the Maritime Self Defence Service is the mirror opposite where they would rather not part with hard won know-how of how to run proper submarine fleets, just for mere filthy lucre. Why indeed? (And I say, with allies like that, who needs the Chinese?)

It is a rational and sensible idea to buy the submarines from Japan. However it is obvious as daylight that it won't be happening. It's a bit like the high speed railway thing - If they ever decided to do it, they'd have to ask the Japanese to help, and of course, rural Australia would have a fit. It's about as likely as buying Space Rockets from Japan, Fighter Jets from Japan, Helicopter carriers from Japan, Tanks from Japan, small arms from Japan, communication devices from Japan... You get the picture. Cultural sensitivities being what they are, it's going to be "No Jap Sub, No Jap Anything."

And this is before we mention the problem of not having our own industry to build our own defensive wares. Bob Katter knows all about that one.

This leaves the Abbott Government squirming and Defence Minister Johnston twisting in the wind because they don't want to keep throwing money at the ASC. But they need to keep throwing money at the ASC because it's pork-barrelling that has to be done. And while I am a decidedly pinko leftist social democrat sort of dude, I have to say the ALP argument that buying subs from Japan is bad because of job losses in South Australia, seems too much of an endorsement of pork-barrelling.

So what can they do? They ought to split up ASC vertical into three companies and make them compete for tenders for contracts. It's the only way: Break up the monopoly. It's one thing they should be looking at privatising. But you know they won't - and more's the pity.

A Decade Of Pain To Come

This one's from Walk-Off HBP who is probably rightfully worried that things can get worse than merely having a government of miscreants and nincompoops. Yes, it seems if things don't look bad enough now, they can get a whole lot worse.

My worry has more to do with Abbott's economic priorities, which ignore how rapidly the world is changing around the Lucky Country. Although Abbott has talked about diversifying the economy away from its dependence on China, his policies have effectively done the opposite. 

Where the previous government moved to tax outsized mining profits to fund investment in education and infrastructure, Abbott has changed incentives so that commodities and mining companies become a bigger share of the economy and have an even bigger voice in politics. Scrapping plans for a carbon tax, and resisting any serious limits on emissions, has made the economy more vulnerable to international shocks and made Australia a punch line at this week's global climate talks in Lima, Peru.

Instead of undertaking painful and costly restructuring, Abbott has prodded the central bank to loosen monetary policy more and more. Whether all that easy money is pushing Australia toward a subprime-loan crisis has now become a matter of serious debate.
Over the last year, anytime a journalist asked Abbott or Treasurer Joe Hockey about frothy real-estate prices, they were dismissed as nervous nellies. When I probed Hockey myself in September in Sydney, he derided such views as "rather lazy analysis". 

Yet in an interim report in July, David Murray, the former head of Commonwealth Bank of Australia, called the surge in housing debt since 1997 and banks' exposure to mortgages a significant risk. Since that time, Murray's panel said, "household leverage has almost doubled," and "higher household indebtedness and the greater proportion of mortgages on bank balance sheets mean that an extreme event in the housing market would have significant implications for financial stability and economic growth." 

On Sunday, in the final report to emerge from his yearlong inquiry, Murray urged specific reforms, including cuts in much-loved housing tax breaks. The report called for "unquestionably strong" capital levels, which could force the four biggest banks to keep another $25 billion on hand for a rainy day.

It's a bit long but then, the list of things the miscreants and nincompoops are doing is long. What can I do? Some times I think we must look like idiots to the world. Here we are donning the hair shirt of unnecessary austerity and going around pretending that Global Warming isn't real. It's not exactly a government of integrity and clear-thinking that we've voted in for ourselves.

Clearly we're idiots. 

Is Public Debt Worse Than Private Debt?

Stupid Is As ... Stupid Governs

Tony Abbott ran into flack with his interview with Karl Stefanovic. You'd think an interview with Karl would be mostly soft-toss fluff balls in the morning, but no. Karl sent a question right at Tony Abbott's head, pointing out that the ALP is being about as obstructionist as he was when he was in opposition. If it worked for Tony and the Coalition, why wouldn't Bill Shorten do the same?

Of course, in the dissembling that followed, Tony Abbott said that the mission of his government was to reduce the deficit so future generations would not have to live under the burden of debt. Now, this is a very curious construction because to cut back on the deficit, his own government is proposing deregulating the tertiary education sector, whites predicted to raise student debt substantially. In other words, the Coalition are under the delusion that if the debt doesn't show up on the government's ledger as public debt, this is somehow greatly beneficial to the people who will be saddled with the debt.

What Tony Abbott is proposing is to privatise the debt right back onto the future generations. With minimal public debt, subsequent governments would look great for future politicians, but individuals would be saddled with massive private debt incurred for getting an education.

Now, I'm not suggesting public debt isn't a problem - especially if it is massive like Japan's debt. That being said one wonders if Tony Abbott has taken a closer look at the ballooning private sector debt in Australia, the repayments for which are slowing down the economy. It makes no sense adding even more on to this pile, just so the government can pretend to be doing something important through washing its hands of education funding. Clearly it's a crock.

News That's Fit To Punt - 05/Oct/2014

Private Sector Debt Is Worse Than People Thought

Better put on your best Don Draper incredulous ironic face and ask  "really?"

It seems we're up to our necks in credit card debt of all things. something like 2million people are close to defaulting on their credit card payments.

That includes about 600,000 people who are at "high to extreme risk" of defaulting, an analysis of credit records by credit agency Veda shows. 

The analysis comes from extrapolation of almost 1 million "VedaScores", which is a number up to 1200 that summarises an individual's credit record. 

The national average VedaScore is 760 and a score of 200 means the person has a 50 per cent chance of having an "adverse credit event" within the next 12 months.

Pretty wonderful how this news turns up this month when markets are at their highest alert awaiting a October meltdown. The Coalition has banged on long enough about debt being a problem, but they've mostly been targeting public sector debt. Adding insult to the injury of looking in the long place, they've long made a case that the budget is in a crisis because of these public sector debts when in fact the public sector debts have been pretty minimal when compared to the rest of the OECD nations. If public debt is as bad as they've been saying then, you'd think all these other countries would be in a panic. I see no panic in the countries except the outliers of the Euro zone, the PIIGS, and even that panic seems to have been mollified. 

What's not been discussed has been private sector debt, and clearly people are up to their necks in credit card debt. If the property prices are any indication, then most people with a mortgage are up to their necks in debt - and should property prices stagnate or fall, they'll be in over their heads. This is all stuff Steve Keen has been talking about. 

If and when the big correction hits, there are going to be a significant number of people holding housing as stranded assets or drowning assets. The RBA would predictably cut interest rates down to close to zero, initiating  ZIRP regime here. The only way the people drowning in debt will get a bail out from the government would be if the government did what the Rudd government did, which was to shove money into people's accounts. That would effectively help to keep the asset prices afloat like it did last time. Somehow I can't imagine this government repeating that largesse. The more likely scenario is that they'll let those people go to the wall- because it would be the same logic they used to refuse to give more money to the automobile manufacturers. And you can just imagine all this sanctimonious talk about "moral hazard".

How About The Moral Hazard Of Not Taxing International Corporations?

Here's an article that talks about the fine line between tax avoidance and tax evasion. 

Billionaire retailer Harvey said it was "morally wrong" to avoid paying tax in your home country. Indeed, as Harvey Norman already operates in Ireland and Singapore, it would be easy for him to dodge tax. 

Others such as the head of Google Australia, Maile Carnegie, have decried the media "naming and shaming" corporations on tax. Sadly, naming and shaming is the only thing which works. Without naming and shaming, there would have been no parliamentary inquiry. 

Now, there is finally the prospect that real people may have to come out of hiding, front a public forum and explain how it is that their corporations reap billions of dollars selling goods and services in Australia to people in Australia while paying virtually no tax. 

In the extraordinary lengths to which they go to avoid tax, aided and abetted by government, Facebook provides a classic case. Although it has a market value of $US200 billion ($228 billion) and sales of $US10 billion-plus, Facebook managed to win an exemption from the corporate regulator in order to class itself as – to quote the exemption, "a small pty company controlled by a foreign coy which is not part of large group". 

What part of $200 billion is not large? The point is that it did that to skive out of having to file consolidated financial statements in which it would have to provide greater disclosures on tax and transactions with its associates offshore.

So the big question is whether there will be an inquiry or not. We are guessing that this Coalition government will not proceed with this, despite having made noises about corporate tax evasion being an issue for raising revenue.

It's going to be an interesting week.

Hottest Grand Final Day 

Rugby League is a game that has long pissed me off so much I have very little nice to say about it, but today's grand final did offer up a wonderful little story and chart:

Fairfax Media has compiled the data for the temperature on every grand final day in the past 105 seasons of the NRL.

"Mother nature is turning up the heat just in time for the highly anticipated grand final," Weatherzone's Ben McBurney said. 

"The city is being blessed this October long weekend with warm and sunny conditions due to a persistent region of high pressure and northerly winds dragging down heat from the interior."

Isn't that just grand? I love how there is a line of best fit pointing ever upward, with that kicker of a rise for this year. It's a miracle 2013's Grand Final Day was as cool as it was, given that it broke all kinds of records. (Thanks to Pleiades who supplied that link).

That ought to give pause to deniers, but I imagine even this will sail right past them. 

Quick Shots 01/Jan/2014

Hey, First Post Of the Year From Me

I've been busy watching a few silly movies on FetchTV in between the seasonal obligations. It's pretty cool watching on FetchTV because it saves the on the trip to the video store if nothing else and it sure beats buying more media. I've been stuck in the bad habit of buying stuff because I still have the carry-over from the ear when DVDs were actually worth something. It was ever so brief, but they were important for a good half a decade there until Blu-Ray came along and scotched that little bubble.

My New Years resolution last year was that I shouldn't just buy more media, but a) sometimes it is easier to just buy the box set and b) sometimes it's better to own than rent and c) it's impossible to stick to arbitrary rules meant that I bought my fair share of stuff. It's a bit of a worry if you can't remember if you've bought something or simply watched it on a rented bit of media, but if I think I'm going to go, "you have to watch this scene!?" or "you just have to hear this guitar solo!" then it's better to own this stuff.

Still, it's weird having a pile of this media that grew to be irrelevant so quickly. At least with LPs and CDs, there's an argument to be made that mp3s are a their best worse than either LPs or CDs, and that moving on to just data on hard disks isn't really an improvement in your listening pleasure. Besides which, you can squeeze a hello of a lot more out of LPs and CDs by having better speakers and amplifiers. Video is different.

With 4k TV looming in the not too distant future, even the marvelous Blu-Ray 1080p format is going to look pretty outdated in the next few years. I'm sure there's 8k and 16k TVs beyond that, and without an NBN pumping at last 50mbps it's going to be difficult to run the IPTV services on 4k and up download services, so maybe buying media won't become totally extinct. Let me just say, 4k is gorgeous. You're going to want this much more than the time you went from SD PAL or NTSC to HDTV. (That being said, I do seriously  wonder if there's any joy in seeing 4k TV footage of Kanye West or Miley Cyrus twerking.)

Getting Bad Advice

The news this week that's been most grating has been this business of Maurice Newman proclaiming that climate science on global warming is delusional.

In an opinion piece in The Australian newspaper, Maurice Newman, the Prime Minister's pick as head of his Business Advisory Council, claimed high energy costs caused by the carbon tax and the renewable energy target, introduced by the Howard government, had eroded Australia's competitiveness. Under Labor and the Greens, Australia had been taken ''hostage'' by ''climate change madness'', Mr Newman wrote.

"Newman!!"

It's really no big deal except for the fact that it's wrong and willfully wrong, and that he is slated to offer up advice to the Prime Minister based on this kind of idiotic denialism. If nothing else, it shows Tony Abbott still thinks the science on this is 'complete crap'. What's even weirder is that because the first 100days of Tony Abbott's time in office was 'complete crap', we're not surprised in the least bit find that his business advisor is a highly motivated climate change denialist.

Can We Please Stop With The Government Debt Hysteria?

This one came in from Skarp last week but I've been a bit preoccupied. Paul Sheehan - he of the rather squeaky voice and reflexively right-leaning views - wrote this rather tawdry column.

At 12.30 on Tuesday, Hockey, who has also been the stand-out thespian of the new federal parliament, will unveil the real horror, dysfunction and narcissism of Kevin Rudd's contribution to Australian political history, disably assisted by Julia Gillard. Hockey will release the mid-year economic and fiscal outlook, known in the trade as MYEFO, which will show a budget deficit much worse than Labor led us to believe, probably close to $50 billion, debt obligations much higher than Labor led us to believe, and unfunded liabilities that are so irresponsibly crushing the government will have to walk away from many of them. The most monumental folly is the National Broadband Network, whose economic rationale was worked out on a piece of paper by Rudd. The scheme subsequently created by former communications minister Stephen Conroy would cost more than $70 billion and never recover its cost of capital. The Abbott government will have to start again.

The way that paragraph is written, you'd think that the sky was going to cave in. Fortunately, professor Steve Keen had this article as a retort:

I’m not going to debate (or defend) Kevin Rudd’s personality, but getting this hysterical over a $50 billion deficit in a $1.5 trillion economy? Oh come on: that is slightly less than 3 per cent of GDP (the precise GDP figure is $1.525 trillion, according to the Australian Bureau of Statistics). Comparable figures for some of our trading partners are 5.5 per cent for the USA, 6 per cent for the UK, and 10 per cent for Japan. Australia’s deficit for 2013 is almost 50 per cent below the expected average for the OECD of 4.8 per cent of GDP.

Of course, finding that out doesn’t require a trip overseas: all you have to do is search the web. But what a trip overseas might alert Sheehan to is the economic performance of the rest of the planet – and especially of those parts of it that, as he does, make the size of the government deficit the only stick by which economic performance is measured.

The rest of the article is Keen dismantling Sheehan's stated position that all this debt is somehow crippling and wrong.Austerity i a terrible thing; not to mention the fact that it doesn't work.

You sort of wonder how people like Paul Sheehan keep jobs as columnists. It's like he gets paid not for his thinking and critical faculties - which on the whole seem faulty anyway - but for how hard his blowhard entries blow. And they really blow. Sheehan's symptomatic of what's making the media market worse in this era. You just can't trust what any of these sloppy commentators write.  but somehow they're up there with a public soapbox on the SMH masthead spreading his kind of nonsense. I mean really! Why do they have to give 'equal time' to stupidity and misinformation?

But back to Keen's take home message about Government debt:

I would far rather see governments acknowledging the problem of private debt, and doing something concrete to reduce it – since the financial sector should never have been allowed to create much of that debt in the first place. But as a second best policy, government spending should buffer the impact of the decline in private sector deleveraging. To do otherwise is to turn a serious recession into a genuine Depression – as Europe has done.

Behind the veneer of apparent fiscal prudence, that is what hysterical articles like Sheehan’s are encouraging – in utter denial both of the actual cause of the crisis and, more importantly for a journalist, in ignorance of what even casual empiricism shows has been the actual impact of austerity.

That, just about sums it all up.