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Byron Shire
May 16, 2021

Thus Spake Mungo: Australia catches up to Greece… in a baaad way

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The PM says Aussies jobs and growth are swell… we’ll have what he’s having!

At last, Scott Morrison’s torpid government realises it is in danger of being mugged by reality.

Not yet, of course – there are still a few peaceful weeks in which ignorance will remain bliss, in which wishful thinking may be preserved in the hope of another ScoMo miracle.

But after last week’s report from the International Monetary Fund, it is no longer feasible to pretend the Australian economy is in safe hands and can continue to muddle through without at least a modicum of intervention.

Aussie battler in ‘real trouble’

The IMF is, as always, tactful and cautious – the problem is a global one; many of the issues are beyond the control of individual governments, the international slowdown will not be countered unless the international situation can be remedied.

But even within the scenario of doom and gloom, the Australian malaise stands out.

Growth will be slashed over the coming year, and the little Aussie battler, the survivor of 28 years of uninterrupted positive progress, is in real trouble, with no obvious relief in sight.

Australia’s growth is now expected to be feebler than that of Greece, long derided as a failed economy, the basket case of Europe.

 

 

 

 

The apologists insist the comparison is absurd – Greece actually went into recession, and is now recovering from a very low base.

But that is precisely the point: Greece is on the way up, while Australia is on the way down. And it is not a gentle decline, a managed correction: it is a plummet.

Blindly diving into the unknown

The new figures forecast indicate a drop of more than a full percentage point in just over 12 months, a plunge of nearly a third on the earlier prediction.

This is not just a minor glitch – it is a dive into the unknown.

But it isn’t entirely unexpected; serious economists, notably those from the Reserve Bank, have been warning for many months that the wheels have been falling off, and that the government’s response – or rather the lack of it – has been utterly inadequate to reverse the trend.

Morrison and his troops, especially his determinedly optimistic treasurer, Josh Frydenberg, have simply denied the bad news and last week they continued to hold their leaky lines: this was not a time for panic, what was needed was the calm, stable and measured approach that could only be delivered by the coalition.

The trouble is that the approach has been less ‘calm, stable and measured’, than catatonic; in keeping faith with his quiet Australians, Morrison has been hitting the valium, sedating his denialism with assurances that even if there were a few headwinds, things could have been much worse – and would have been, if the reckless, destructive, wrecking-ball policies of Labor had been in play.

Well, that is at least debatable – but in any case it is utterly irrelevant.

Labor, as Morrison keeps telling us whenever he gets the chance, in fact lost the last election, and its former policies no longer apply – nor is it likely that they will be rehashed in 2022, not that anyone – let alone Morrison – is looking that far ahead.

Morrison’s ‘fairy-tales’ vs the IMF

His hypothetical fairy story exists entirely within his own delusional bubble; screaming about $387 billion worth of new taxes (there weren’t, in fact, but why spoil a good lie) has nothing to do with anything.

Bragging about all the new jobs he has created, which have only kept pace with the rate of immigration, is almost equally meaningless at a time when real per capita living standards are dropping.

Morrison and Frydenberg tried to make a big deal over the September unemployment figure – it fell marginally, but only because the participation rate also dropped, indicating not that things were improving, but that some discouraged punters had now given up trying to find work.

And the bad news is that the IMF reckons that not only will unemployment be stuck in the doldrums for the next two years, but it might even get worse – as might just about everything else.

The RBA’s ambition for a 4.5 per cent number, which it says is necessary to start wages moving again, looks further away than ever.

Government ‘spin doctors’ set to work

Not much to cheer about, and given the prestige of the international body, even Morrison is reluctant to shoot the messenger.

So instead, he is preparing to try and find a few more helpful envoys of his own.

But first, as always, procrastinate: wait for next month’s figures, because improbably, but just possibly, the long awaited trickle of the interest rate reductions and tax cuts will finally dribble through to a cash-splash from consumers and investors alike.

Then the economy will rebound – like an ibex on steroids – glory, hallelujah! And if – when – that does not happen, just wait a bit longer, until the Silly Season, when, with any luck, there will be plenty of distractions before this financial year’s Mid-year and Economic Fiscal Outlook (MYEFO) is revealed.

Morrison’s spin doctors are presumably already massaging the unavoidable Mid Year Economic and Fiscal Outlook, because this time there will be no place to hide: but this does not mean they will not obfuscate and dissemble, because that is what they do.

Even Frydenberg is preparing the ground for some kind of tentative back down – let’s face it, he would look pretty silly if he finally delivered his cherished surplus in the depths of a recession.

So there are, just visible, signs of movement – come December, that the situation could be reviewed.

What will happen to the surplus?!

Obviously the surplus must remain sacrosanct, but it could, perhaps, be shaved, tweaked a little, to provide a touch of the stimulus which just about everyone else has been pleading for, for months.

Even Morrison is wavering – he has suddenly discovered that surplus is not just an end in itself, but an economic tool – perhaps like himself.

A surplus is predominantly insurance against economic stagnation. And the first step is for Morrison and Frydenberg to admit the clear evidence that the stagnation exists.

They may not accept the verdict of the IMF, a bunch of unelected foreigners, but if it is confirmed by MYEFO, this will be the king hit – reality will strike back. And then, Merry Christmas.


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17 COMMENTS

  1. As always Mungo….straight through the political spin that is so focused on keeping the electorate believing in fairy tales.
    Amongst all the things happening in the financial landscape, I’m anxious about, but not exclusive to,
    (a) ASIC proposed ruling on retail derivatives has generated ‘a flood of submissions’ from the players in the industry to protect their ‘weapons of mass destruction’. If ASIC doesn’t go ahead with the proposed ruling which will curb this insidious gambling then retail deposits held by individuals, businesses and superannuation funds, in fact any entity that has deposits in a financial institution, are exposed to BAIL IN i.e. the government’s legislative instrument that allows deposits to be converted into assets (they are currently unsecured loans to a financial institution) and written down/off
    (b) a government guarantee scheme called the Financial Claims Scheme that won’t work and certainly will not guarantee account holders up to $250K of their deposits
    (c) the overnight money market which is in crisis and is the core of the global financial system…..banks are no longer trusting banks
    Fortunately, fairy tales have consequences. Some people don’t believe in them! In the last few days there have been reports in the media that currency is disappearing out of circulation. I strongly suspect that people are fed up with the spin that Mungo is alerting too and taking their savings out of the bank and hoarding it. They have done that in Europe and Japan so why not in Australia? It’s a natural defence that people can be expected to do.
    We rely on you Mungo keep us up to s what on the bankers and politicians’ evil game that is currently in play.
    Solution in the immediate time would be to
    (a) ban derivatives that don’t have an immediate asset backing and are off the balance sheet of banks
    (b) separate retail banking (the meat and potatoes of banking that lends to house mortgages and small business) from the investment banking which is high risk and outright gambling and expects, under the current business structure to have their bets covered by our deposits

  2. As always Mungo, on the money. For mine, I believe that what Morrison and Frydenburg are aiming to do is tough out the strident calls for policy action until there is some evidence of an economic rebound. The aim, possibly based on optimistic forecasts, is that by the next election there will be positive signs. At that point, there will be the usual claims that the LNP policies have actually worked and they were always working despite the naysayers. There will be the proclamation of the LNP economic management genius allied with the usual claims that things would have been much, much worse under Labor and there will be massive pork-barrelling designed to buy votes (well, it worked for Howard didn’t it!). The much vaunted infrastructure spending will suddenly materialise, especially in LNP seats. And, making matters worse, is that we as a country are stupid enough to re-elect a government that has been the most incompetent and corrupt in living memory. We think we will be doing that to stop those shifty and nasty Labor folks seizing power, but the reality will be that we have fallen under the spell of a lying charlatan who just happens to have the gift of lying as though he isn’t.

  3. Times are getting stranger, Mungo. Is The Flying Burger
    & our Primed-Minister [wearing his dribble-bib] getting
    closer to a surplus confession? Time flees when you’re
    having fun.

  4. Why make light of another country’s ( Greece ) recent difficulties. It all rather poor form. Greece’s difficulties have had real impacts on Greece’s citizens for some years now. Whether Greece is / was better or worse than us doesn’t change the deteriorating circumstances for Aussies right now.

  5. Seriously anyone would think we have a socialist
    Government in power ..Mungo wakeup from your dream!! ” socialist labor party “are not in Government, the unthinkable happened months ago mungo you and the ABC cant come to terms
    with the reality that the coalition are in power ..!
    Never have i seen such a bunch of lefty wannabes
    In the labor ranks ..have learnt nothing from losing
    The election..just keep going with your climate emergency BS . And please keep that Kristina Keneally in the ranks how good is she going !
    Labor why dont you just join the Greens , you seem
    To spend so much time together , your policies
    Are no different.. one happy family!.. labor were
    Once a party for the workers , not anymore
    Sold us out to foreign workers on these dodgy
    Visa ..and so have the coalition!! What a kick in
    The backside for poor families when mum and dad
    Cant get a position because of foreign workers .
    And can give a example..on a huge project, and
    Suddenly 4 bus load of foreign workers arrive
    Who are these people we ask the unions!! Oh these
    Workers are here because they cant find any of these tradesmen in Australia the Government
    Advices.. What a load of crap !! 100s of Aussies
    Applied for the same jobs , only to be told
    Sorry we are full ..sold out by the Government
    Labor and the coalition..so labor come back to the
    Workers thats why i voted for you for 20 years ..

  6. What is this… it’s let’s take our ‘moody blues’ out on Mungo so
    we can all feel better? No-one’s making fun of Greece – on the
    contrary – that country’s at least making a recovery. We’re not
    capable of doing that my peaceful voters… accept it. It’s what
    you wanted & now you have it. The doom & gloom that awaits
    us is complements of the parliament we have in power; get it?
    Labor’s practically useless – not even Penny Wong can fix it
    because she’d have to do it on her own. So, understand now
    that just about everyone of us has had a gut full. There’s no
    -where to go. ScoMo can yack away & hide behind his fairy-
    taling self for a little while. As for most of us – we’ve turned
    our backs on him. The media ‘black-outs’ speak loud & clear.
    We need a clean sweep. Salesmen can’t manage countries.

  7. Things with the current is really dire. Just look at the AUD. It has gone down the drain after being flushed down the toilet. It maybe great news to exporters. Which incur a 30% profit .More profitable to give a tax cut than raising real wages. I do not have figures but an increase of just a dollar an hour would make a big incentive. That equates to $40 a week (8hr day) then add that for a year $2080. But big business says it going to affect their bottom line. A lame argument. A bit in line with if you raise the Newstart allowance the recipients would make a bee line for their “dealer” or get juiced on alcohol. Also suggesting that unemployed Greenies should be better employed in a business involved in chainsaw manufacturing. Here’s the thing so called democracy is being given the free choice to who we vote for. That stigma lasts five minutes when we cast that vote every four years. after that we fall in back being backseat drivers on a bus that has no stops on a route unknown to everyone being guided by officials whose interests is in a cabal that enriches itself. We are not considered citizens. As employees we are told we should be grateful. For every job advertised there are five applicants. Wage rises are fanatically declined. and whistle blowers deemed anti Australian from a government that loosely governs, albeit buying the rumor and selling the facts.

  8. What’s wrong with chainsaw manufacturing? Presumably we can choose how we use them. Ninety per cent of this garble I don’t understand, probably because it stems from Socialism 102 and I didn’t get past 101which was all about the distribution of the goodies. We have had a serious drought and fire seasons for years. And green legislation which we have now makes incentive obsolete. The government is not there to give us stuff, though it does that, it’s there to create the circumstances by which things might happen. Or not and that’s the nature of nature, ask a tiger what it thinks about its kill, it doesn’t, but we have to live withe Mary Poppins Greens and Labor can’t decide.

  9. Robot – you got it! The Gov-er-mint is there to
    remove anything of any worth any-one of us
    has unless it’s a billionaire. Now we know that
    if we get sick we quietly go & sit in our corner
    & die even if we have ‘cover’. Insurance is yet
    another wank. Forget that super fund too – it
    won’t be there when you need it… ‘& the
    wheel, it goes round & round. The painted
    ponies go up & down… we’re captives on the
    merry-go-round of time.’ [Words by Buffy
    Saint-Marie].

  10. I thought that was Joni Mitchell, but common enough words to belong to a lot of people, blood sweat and tears, spinning wheel? Lots of people investing in solar, then finding they need a small room of batteries as well and maybe they catch fire, the solar itself not the best we have, yet, that’s yet to come from the space station, and aluminium batteries maybe, instead of lithium ion. At least five companies in the world with turnover in the billions based on renewable. Gore would have a slice in every one. The new tech is good. After all nuclear power is still just steam power. It’s only this push, like the push in Sydney 150 years ago, and the batts issue more recently, too much haste. I consider each drink I pour, before I pour it. The wait is worth the consideration, the consideration is worth the question.

  11. Buffy Sainte-Marie wrote ‘Universal Soldier’ & Donivan made
    a hit of it. She also wrote ‘Up where we Belong’, Cocker’s hit.
    Cree Indians – singer-songwriters aren’t our every-day hits.
    “Coincidence And likely Stories” is a fine CD & on the net.
    Quote…
    ‘Who brought the bomb wrapped up
    in business cards
    and stained with steak?
    Who hires a maid to wash his money?
    Who keeps politicians on the take?
    Money junkies all over the world
    trample us on their way to the bank’… etc
    Worth listening to I reckon. Yeah ‘Uranium
    burns a hole in forever, it just
    gets out of control. Windego’

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