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Byron Shire
May 6, 2021

Thus Spake Mungo: bet the farm

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The Reserve Bank, like so many economic pundits, has finally given up on the government of Scott Morrison.

After months, even years, of pleading for a sensible stimulus policy to drag Australia out of its torpor, Philip Lowe has conceded it’s just not going to happen and all he can do is bet the farm on his only effective weapon: interest rates.

Not that they have proved very effective to date; successive cuts have produced little if any real improvement.

But now the stubborn refusal of inflation to move upwards as a result of wages growth is reaching a crisis point.

Interest rates: beyond zero?

Reducing unemployment levels to around 4.5 per cent has become the overwhelming imperative.

So biff bam whish, the final fling – rates, already at record lows, will be slashed further, perhaps to zero and even beyond.

Whatever it takes, and if it still doesn’t work, well, at least he can say he has done his best.

Unfortunately it will almost  certainly not be enough.

The bastardly banks have already declined to pass on the latest rate cut, and will probably do the same next time around.

Their reluctance is not altruistic – it does not stem from a concern for retirees trying to live on the interest from their savings, or a worry that lower rates might reignite the property boom that has shut out the young from any prospect of owning their own homes.

The banks are acting purely from self-interest – they are worried their margins will be squeezed, and profits may decline.

 

 

 

 

Morrison and his unhappy treasurer, the floundering Josh Frydenberg, are outraged: ‘when will they ever learn?’ splutters our putative leader.

Follow the leader / profits…

But in fact the banks could make a good case that they are simply following where the government has led.

Frydenberg has insisted his budget surplus has to be the priority: nothing must interfere with it.

Treasurer Josh Frydenberg is determined the next surplus round will be on him. PHOTO: Facebook

But the banks’ own budget surplus is no more than their operating profit.

If that is the imperative for our Treasurer, surely it should be good enough for those now being jawboned.

Morrison, Frydenberg and their conservative cheer squads have constantly demanded that banks and indeed all businesses stick to their core responsibilities and not be distracted by fringe issues of social debate, like climate change and homophobia, to name a few.

Given that the core responsibility of business, and especially the banks, is to deliver the maximum benefit for their shareholders, ministers can hardly complain when they proceed to follow their adjurations.

And there is no point in arguing that the banks are too greedy, that their record profits should be trimmed  to look after their struggling clients, when the government’s entire economic policy, such as it is, demands less compassion; not some wishy-washy empathy likely to reduce the bottom line.

But even if the banks came to the party, it probably wouldn’t make much difference.

Consumer confidence M.I.A despite tax breaks

As former RBA governor, Ian Macfarlane, pointed out at the weekend, interest rate cuts have just about reached the point of no return – they are already so low that further decreases are likely to be ineffective.

Consumer confidence has simply tanked.

Confirming his analysis, August retail sales figures managed only a limp stumble forward, with no sign of a general recovery.

Indeed, two of the big discretionary spends – new cars and eating out – actually went backwards.

It is now clear budgeted tax cuts have been almost entirely ineffective – in fact it was clear last month, but the Pollyannas in the government insist, in their Macawberish way, that we should wait a few more months for the bonanza to sweep through.

Will the sedated – sorry, ‘quiet’ – Australians please wake up?

In the meantime, Morrison continues to soothe his sedated Australian with  assurances that someone, somewhere, is doing worse than they are.

Look what we have to celebrate – 27, no, 28 years of continuous economic growth!

Unfortunately, with per capita income, that which governs real living standards, now actually falling, it doesn’t feel much like growth.

But don’t worry – we still have our triple A credit rating!

Yes, Australia remains comparatively safe and stable, it’s just no-one is investing or spending.

Not much joy there.

Even our triumphant job market has its weak points – almost all (97 per cent in fact) of new jobs last year were in the public service.

Nothing wrong with public jobs, but it is obvious the private sector – the economic engine room, as Morrison like to call it – has stalled.

When economic policy fails, attack the poor (again)

So no immediate hope for the punters, and especially not for the perennial victims of Newstart.

Last week, ministers were ganging up on them: Peter Dutton (who else?) demanded that if they indulged in their democratic right to demonstrate, they should be named, shamed, stripped of their derisory welfare payments and thrown in the slammer until they learned to be grateful for the government’s benevolence.

Will people warm to Peter Dutton’s calls for naming and shaming of Newstarters who dare protest? PHOTO: Facebook

The so-called Employment Minister, Michaelia Cash, enthusiastically agreed.

The Minister for Families and Social Services, Anne Ruston, told her local paper increasing the Newstart allowance would do absolutely nothing, because the recipients would spend it on booze and drugs.

 

 

 

 

 

 

Perhaps some of them would, having been crushed into impotent despair at the refusal of the government to afford them any relief from the long-standing abject poverty in which they have been forced to exist.

However, the brutality – which the government absurdly calls “tough love” – hardly equates to an economic policy, an ambition that Morrison and Frydenberg have effectively abandoned.

Employment Minister Michaelia Cash supports attacks on the poor: did someone say let them eat? PHOTO: Facebook

Do they know it’s Christmas?

As the RBA and numerous others – including those in the international sphere which Morrison derides – are now warning, we are running out of both resources and time.

We have now entered the December quarter, the one that traditionally gives spending a big boost over the Christmas period.

The signs are not good, and if things still fail to improve in the new year, the last desperate interest cuts will have to be put on the table, before the ultimate surrender – quantitative easing, aka printing money – has to be invoked.

Of course none of this will be the government’s fault – it is all about those international headwinds, and the bastardly banks, always a handy scapegoat.

The Libs always make the best economic managers – that is an iron law of nature, so the last six years have actually been a momentous triumph.

The operation was a total success – a pity the patient is dying.

But hey, how good is ScoMo’s surgery?


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14 COMMENTS

  1. The Reserve Bank has reservations about the Big Four Banks because when the Reserve Bank being the barometer of the economy, in its wisdom, lowers interest rates to stimulate the economy, the Big Four Banks are required to comply and lower their interest rates in full accordance to convention in this country.

    • News today is the banks will scoop up $14b because of their deemed reluctance to pass on the .25 basic points drop in the official interest rate.

      Whilst the Treasurer may not be happy, what the government’s ‘unconventional monetary policy’ needs to take stock of is that lower interest rates, zero and negative interest rates have failed to stimulate economies elsewhere. So why would they work in Australia?

      You may be aware that Denmark is not paying people to take out a mortgage. The mortgage is then wrapped into a ‘covered bond’ and traded so the bank’s profit is in that debt trading. Who knows, the banks may even get to the stage of following suit?

      In the meantime, what is happening at the wider scale is a redistribution of wealth.

      Mungo’s article captured so much!!!

  2. Veterans holding the ‘Gold Card’ need to keep vigilant. It has been suggested in parliament that the Gold Card be removed. If you, your friends/family members are in receipt of a Gold Card, then please contact your local Fed member and clarify what is happening to it. Under perhaps ‘tough love’ the White Card will replace the Gold Card? Hard lobbying to keep the Gold Card or at least grandfather it should be on Veteran’s minds.

    Anyone serving in the military is signing up to give up their life for country, something that is worth remembering when the issue of the Gold Card is debated if the decision to withdraw it gets to debate

    • Thanks for bringing that to my attention, the perks that politicians receive post politics is generous .
      All things considered our Vets deserve and should
      Be entitled to more than just a Gold Card .!! .will follow
      This up with my local members..!!

      Thanks Patricia !!

  3. Surplus economies are not healthy economies.

    Especially when the country is being governed for the benefit of the ‘economy’, not the people and communities it’s meant to care for.

    When community suffers, the economy also goes into decline. So many other countries put community first, and their economies boom!

  4. New Start which should be a Kick Start in the correct
    direction is being used as a punishment. What’s next
    … razor wire? Confinement. Dutton would get a great
    feeling of pleasure out of that. Tough Love? Mental
    torture more like it. What’s to be done… take to the
    streets [the engine’s blown its brain] & let the odd
    3 wise monkeys stew in their own stupidity &
    gutless wonder. Put simply – we are at ‘war’ with our
    own government… the Libs, Nationals, Labor &
    the rest of a ragged mob of no-hopers who are
    determined to demerit everything this Country once
    stood for. The ‘Scourge’ is on them. Give me a non
    -violent street protest any day.

  5. if you believe any of this rubbish that any one has said here , i invite you over for a game of poker !! ok No wait , you will all be broke , right !! hahaha thought mango would know how currencies work by now ?? stupid or workin for the roth’s ?? and surplus economies are not healthy ?? hahaa is so ^%$^%#%^ stupid , bet your loaded up on dept hey ?? haaa slaves have to say what their masters tell them and you all are slaves , voluntary slaves , dept slaves !! the oldest trick in the book . end slavery bring in usury . wonder why you work your guts out , and owe more every year ?? just goes to show how many people buy into the gov’ / bank bullshit .. and really ?? dept is good !! hahaaaa the banks love you !!

  6. This Govt inspires Sooo…much confidence! They have such good ministers.

    Any chance of a local impeachment for incompetence?

    The Aidan Ricketts article in the Nimbin paper a couple of issues ago is well woth a read (or reprinting in the Echo?). He basically says we are living in a house of cards.

    Keep on them Mungo,

  7. One last word or two… I’ve just finished watching some
    gut & head-wrenching videos with commentary by
    Aussies of the land having their say about coal seam
    gas on their lands – the illness it causes – & what to
    expect when ‘fracking’ begins. Naturally, I am
    a member of Lock The Gate Alliance & you can
    access these stories from all over Australia & learn
    what’s confronting each & every one of us. Those
    non-believers – the Climate Change sceptics – will
    be stunned by what’s already happened & is about
    to happen. Become a member; it costs nothing

  8. A good read as always Mungo, shame about the content. Is this really what Australian’s voted for? Minimal policy, minimal government maybe we minimise politician’s wages?
    I’ve read many times before that relying on the reserve bank to stimulate the economy by lowering interest rates is a sign of a desperate government. But I don’t know what’s more worrying, that this government is willing to gamble with our economy so they can keep their(our) surplus in hopes of re-election or they think the voting population is stupid enough to do it, and unfortunately they probably will.
    There would be one positive of hyperinflation from printing more money however, we would get to see Scomo on tv pushing a wheelbarrow full of cash to the bakery saying “How good is our money!”

    Well at least I would see the funny side….

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