Turmoil-enomics VI

And on the sixth day we still had no idea where we were on the rollercoaster… were we going back up, or were we going back down. How many more ups and downs are there?

So here is Wednesdays thread for all talk of the economy and the markets


43 Responses

  1. “So here is Wednesdays thread for all talk of the economy and the markets”

    It’s follow the leader downward today:

    Stocks get hit by recession fears
    Wall Street retreats as earnings jitters take hold.

  2. Elizabeth Knight of the SMH raises some obvious concerns today. Frankly, I don’t think we seen the last of the bad news yet. But the hangover is something I’m not looking forward to neither. This crisis was always bound to impact heavily on the real economy.

    If that was bad, just wait for the hangover

    It was a cautiously optimistic executive team from the National Australia Bank that fronted investors yesterday to present its results for the 2008 financial year of crisis. The signs of optimism are tentative and understandable, as only a fool would be declaring the worst is over.

    In just the past couple of weeks the first signs have emerged that the money is flowing around the world financial system. It has moved from total paralysis to some muscle twitch.

    But we have experienced reprieves already in the past year, and the recent advance could be reversed if the global economy feels any new shocks.

    But let’s be positive for a moment and assume the worst of the global credit crisis is over. The next question – and in my assessment the bigger question – is how bad the hangover will be, at least in Australia.

    The US and most of Europe is now in recession, and growth in China is slowing. The financial crisis was too far advanced and any easing far too late to stave off recession in the US and Britain.

  3. Just listening to the weather on ABC702 (like any good lefty does) and the temp today in Sydney is half what it was on Sunday. The weatherman joked that the temps were more volatile than the markets at the moment…. ain’t that true :-/

  4. This bank guarantee looks like a political disaster for the government. I noticed a comment on this site a couple of days ago speculating about withdrawing from one institution and putting the money in another, guaranteed, institution.

    When punters start speculating about moving their money around like this, intuition tells you that the policy has missed the mark. Unintended consequences had better be rectified quickly.

    The “quick and decisive” action is one thing, hitting the right balance is the critical component in economic policy.

  5. Then again – the temp in Sydney today obviously disproves global warming – as I am sure Mr Bolt will point out.

  6. Ah so now Tom you see what was wrong with Howard’s 11 years of decisiveness if what you say is true.

    But what has occurred with the bank guarantee is not a political disaster, unless you listen to Turnbull and Bishop, and nobody in their right minds are doing that. Turnbull even got it completely wrong in saying Australia was the only country in the world to put in a 100% guarantee.

    The problem that has occurred is for deposits over one million dollars, and Swan is moving as Europe did in requiring an insurance premium for amounts over one million.

    The other thing that the opposition are beating up are mortgage trustees and other small investment houses (of which James Packer has one). Because their investments weren’t guaranteed (and why should the government guarantee them, they are investments not savings banks) the investors made a run on them to move the money to the guaranteed bank deposits.

    So what it now boils down to according to Turnbull and Bishop the government should also guarantee investments, which can collapse in good economic times as Westpoint and many other investment houses that went under during Howard’s reign proved.

    So just where does this guaranteeing people’s funds end?

  7. Here’s an article on how The Australian got it wrong on the government’s policy and Turnbull/Bishop wrongly jumped onto the bandwagon.


    If you want the facts then do these things; don’t read The Australian, take anything the opposition says as true and take the government.’s word without researching first.

  8. “…don’t read The Australian, take anything the opposition says as true and take the government.’s word without researching first.”Adrian

    Good advice. Glenn Milne in particular is a transparent vessel for obfuscating fact with opinion. Some of the “guest” authors at the OZ are also of dubious conservative thinktank origin.

  9. Adrian, this economic difficulty appears to be more serious than any we have experienced for at least a generation.

    Even on this blog we’ve seen people speculating about the security of specific financial institutions. This type of speculation is obviously widespread. Hence the need to ensure that the government guarantee does not have unintended consequences, such as distorting the decisions that people may normally make.

    I don’t think this commentary is political, I certainly don’t think the rear vision mirror stuff about Howard adds much to the discussion.

    The devil is always in the detail, and I stand by the comment that it is all very fine to be “quick and decisive” (I think you have used similar terms in the past), but getting the detail right, without unintended consequences is critical.

    But to clarify –
    – I’ve consistently supported additional payments to pensioners, one off or otherwise (you? the term bribe springs to mind)
    – I oppose the additional subsidy for home owners, first or otherwise. Housing prices need to decline, not be artificially propped up.
    – I hope the bank guarantee works, and that the detail is worked out.

  10. Tom

    But to clarify –
    – I’ve consistently supported additional payments to pensioners, one off or otherwise (you? the term bribe springs to mind)
    – I oppose the additional subsidy for home owners, first or otherwise. Housing prices need to decline, not be artificially propped up.
    – I hope the bank guarantee works, and that the detail is worked out.”

    I’m with you on all counts.

  11. So Tom Rudd should have sent this off to a committee?

  12. Adrian – “So Tom Rudd should have sent this off to a committee?”

    No. I think Rudd should have –

    – Obtained the direct advice of both Treasury and the Reserve Bank. It is important for public confidence that the significant public institutions be overtly locked in to the decisions. It is important that the government obtain the best advice directly, and act on it.
    – Accepted the (insincere?) offer of the opposition to act in a bipartisan manner, and used this against them (politically) if they behaved politically. It would have helped fend off the political opportunism now creeping in. And there’re politicians, by definition they will behave politically.

    I don’t think either of these activities would have delayed action. I do think that the government was driven, politically, to rapid and (unilateral) decisive action. No problem at all with being rapid and decisive, as long as loose ends are tidied up. That’s what is going on now, I hope it is successful.

    Thanks John.

  13. I feel like I’m missing out on all the fun – been laid up in bed with the flu.

    Just watched Bishop’s performance on Lateline last night (you can stream it straight off the ABC news front page at the moment) and … WTF was the point that she was trying to make – that the Government somehow lied that it had acted on RBA advice because it had only received that advice through Treasury? FFS

    Tom, you seem to have picked up the same argument – namely, that the Government shouldn’t have acted on second hand info from the Treasury but instead got it straight from the RBA – Why? If you can’t trust the head of Treasury to pass on this sort of info – who can you?

    This article from the ABC site explains the situation pretty well:


    As I said yesterday – or was it Monday (head’s been a bit stuffy for a couple of days now), the rate of change in economic circles has been so dramatic over the past month, it would have been pointless doing economic projections of the stimulus package because it would have been out of date by the time it was released. From the ABC Article:

    Treasury’s David Gruen has also told the committee no new economic forecasts since mid-September were given to the Government prior to the announcement of its bank guarantee or the $10.4 billion economic stimulus package.

    Dr Gruen says an update on forecasts could have taken a week, by which time they would have been out of date due to fast-moving international events.

    “We could have locked ourselves in a room with the September forecasts and the new information that had accumulated since they were finalised and spent two or three days coming up with a coherent set of forecasts,” he said.

    “Had we done so however it was clear that international events were moving so rapidly that when we emerged from that hypothetical room after a couple of days we would have wanted to rip the forecasts up and start again.”

  14. As an aside, after watching that Bishop interview, I’m going to start calling her Blinky – check out haw rapidly she blinks when she is under pressure in an interview.

    Another point, as a lawyer – I have lost any respect I may have had for her legal talents – if she is going to rely on the evidence of her own conviction as proof that something occurred (ie -” it must have because I think it would be inconceivable that it couldn’t have occurred”, her client is going to be sent to gaol for a long time. Just reading the reports of Ken Henry’s answers to senate estimates – she would have fallen into the old trap of asking a question that she doesn’t know the answer to.

  15. The bipartisanship offer was a scam and all it would have done is cause the opposition to take all claim for the praise that came out of this action. If these minor hiccups had of happened under a bipartisanship banner the opposition would have been blaming the government by saying they wanted to do more but weren’t allowed. Whichever way you look at it that was not a viable option as it was not made as any genuine bipartisanship gesture but purely as a political one.

    The government did get advice from both Treasury and the RBA along with other economic advisors and economic institutions, along with looking at the Irish (who were the first to 100% guarantee) and the other European and Asian nations who also 100% guaranteed, all said the plan was the right one, including the opposition who also fully supported it until as usual they changed tact and decried it, then supported it, then decried it and I think that’s where we are with them at the moment, though by Friday they could be supporting it again.

  16. Adrian of Nowra:

    “all said the plan was the right one, including the opposition who also fully supported it until as usual they changed tact and decried it, then supported it, then decried it and I think that’s where we are with them at the moment, though by Friday they could be supporting it again…”

    Well said Adrian. That’s my take on it also.

    First we had Talcum, saying the $20K cap wasn’t enough, then saying that the unlimited cap was good, and now we have Crazy Eyes trying to make out that there’s some scandal involved!!

    It must be a lonely place to be – devoid of any original thought and desprately clambering for some sort of relevance.

    meanwhile Rudd is just gazumping the Libs all over the place..!

    “Take that, Talcum” *biff*

    “Take this Eyes” *boff*


  17. That’s all fine with me Adrian.

    I did say that we could rely on politicians to behave politically. Nothing surprising there. Minor difference over whether the RBA input should have been direct or not.

    But the critical question is – what is your position on the one off payment to pensioners? And has your opinion changed over recent times?

    A bribe at one time, and responsible economic policy at another?

  18. Tom,

    I realise your question is directed at Adrian but if I may …

    Had this been given prior to an election, and in the absence of the financial turmoil, it would clearly have been a bribe – the one off handouts given by Howard (and reissued by Rudd following outcry) were, if not bribes, then very poor policy. They did not address the core issue of week to week financial stress by pensioners, nor were they directed towards stimulating growth or driving down inflation.

    Rudd I believe was out politicked by the Libs into giving the pensioners the one off payments (but then again , what else was he to do – they clearly needed the cash) and then again with the bill to increase the pension. What the Libs did wrong was to only have a narrow subset of pensioners included in the Bill and also stuff up with the senate introduction – this gave Labor ground to oppose what I am sure many of them probably supported, at least in part. However, by opposing the bill and saying that Labor’s response would come in the following budget, the Libs had effectively wedged Labor into a position where they looked like heartless bastards who wouldn’t give any relief to struggling pensioners in the interim – something I am sure almost everyone on the Government Benches would have wanted to do in some form.

    Along comes the real threat of a recession (it was already there to some extent but not as looming) and an economic stimulus was needed. To pump money back into the economy quickly, there are really only 2 ways of doing this – tax cuts or handouts (infrastructure spending has too much lag time). Tax cuts suck because the money they free up is relatively small and a lot wont be spen; they also face the problem that they are hard to reverse at a time when government revenue is likely to become more important to fund increased unemployment benefits etc). What the package needed was lots of money that would be spent quickly – this left only handouts. The handouts needed to be given in a way that ensured they were spent quickly and pretty much in full – cash to pensioners would be, as would cash to families with kids – esp around x-mas time. By including the pensioners in the stimulus package, the Government managed to give ALL pensioners some relief and frame it as being economically responsible. Further more, the way in which the money is delivered does not scupper the Government’s plans to reform the pension system next year.

    The inclusion of pensioners in the stimulus package is not a bribe but it is politically opportune for the Government. I also think it is pretty good economic policy for the times we are now in.

  19. Dave, the point I’m making is simple.

    It is best to be very cynical about politicians of all persuasions. Rest assured, we can never be cynical enough about their motives.

    These days (as distinct from the good old days) no side of politics bases decision on principle. Allocate principle to any political party and you’ll be disappointed.

    My basic point is – regardless of economic circumstances, if pensioners are offered more money, I’ll support the payment. The various justifications/pros/cons is window dressing for political purposes.

  20. Oh dear, things really aren’t going the liberals way.

    Treasury secretary Ken Henry faced questions by Coalition MPs at Senate estimates over the Government’s economic security plan, which guarantees bank deposits, and the $10 billion stimulus.

    Dr Henry rejected claims Reserve Bank governor Glenn Stevens had concerns about the Government’s unlimited bank deposit guarantee before it was announced, saying today they were of “one mind”.

    Dr Henry also told Parliament this morning the idea of raising a guarantee on bank deposits from $20,000 to a larger or unlimited guarantee was first raised by the Government with officials after Opposition Leader Malcolm Turnbull suggested it.

    Asked when the idea of extending the $20,000 bank deposit guarantee was first raised, he replied: “… Hard to say. I suspect the day the Leader of the Opposition suggested it might not be adequate.”

    Earlier, Dr Henry clashed with Liberal frontbencher Eric Abetz over his aggressive cross-examination, asking him at one point: “I’m sorry. Was there a question in that?”

    Liberal Senator Helen Coonan said yesterday’s front page of The Australian newspaper said the Government had ignored the RBA’s strongly-voiced concerns about the impact of an unlimited guarantee scheme in its rush to announce the scheme.

    “I have seen that article and I have already indicated that the article is just plain wrong, and it’s not helpful,” Dr Henry said.

    Senator Coonan interjected saying that it may it not be helpful, “but it may be right”.

    “The members of the committee may think that’s a matter of some mirth … The Australian newspaper has not handled these issues particularly well,” Dr Henry said.

    “The story on the front of yesterday’s Australian newspaper was wrong, spelt W-R-O-N-G.”

    I like this guy!

    “I’m sorry. Was there a question in that?”

    LOL!! Priceless!!

    🙂 🙂 🙂

  21. They just do not get it, do they? The coalition think that they are still in government. Poor diddums.

    Maybe Tony Jones can use that on Bishop: “Was there an answer in that?”


  22. Tom,

    The cynic in me says that the Government jumped at the opportunity to give the money to the pensioners. However, I’ll give them credit here because the way it was done actually kills two birds with one stone. If it had been done the way the libs wanted – the $30/week increase, there would have been a few billion less to use as stimulus. I don’t for a sec pretend that Labor planned this to play out as it did but the final outcome is pretty good. Policy has triumphed over populism but a popular outcome has also resulted.

    BTW – I get that you aren’t a Howard or Lib supporter and probably swing more Labor’s way than anywhere – it’s just that you don’t like unions and their influence they have on Labor Party policy and preselection. I think Adrian has taken your anti-union bias the wrong way but I could be wrong. I also tend to agree with you on the Union-Labor issue but then again, that is the origins of the Party and much of the reason for its strength. It would be good to have a strong progressive/centrist party that doesn’t have any strong business, religious or union affiliations but hey – I guess we can always hope.

  23. joni and reb,

    Miglo has been at Senate Estimates today hasn’t he – can’t wait to hear his report.

  24. I see the stock market is down again.

    The cowboys are doing well out of this I bet.

  25. My god, Senator Abetz blatantly called Dr Henry a liar in Senator Estimates because Dr Henry did not give the answer the opposition wanted.

    …and double my god aren’t the opposition a rabble of squawking hens, now dropping all support for the 10.4 billion handout and trying to pin anything and everything onto Swan.

    The mortgage funds and investment houses are now behind the government in the insurance fee for deposits over one million in banks. So the opposition, who first accused the government of not doing anything for this sector and stuffing up the handout, are now calling the insurance premium a new tax on the rich.

  26. Adrian,

    What do you expect with Turnbull at the helm???

    Nelson was a much saner leader but the party machine blocked his policy shift…talk about shooting one’s own foot.

  27. The next few years are going to be a lot harder than many people realise. I well remember our financial researcher/novelist ( 🙂 just jokin’ JMc ) John McPhilbin, saying, last year, that the recovery from the “coming” downturn in the market could take up to five years…only a couple of us (if memory serves me) agreed at the time, with many still pumped up to buy, buy, buy (and a few don’t be stupids and a couple of what a bunch of pessimists)!

    The news (if you haven’t noticed) gets progressively grimmer as the truth gets in the way of optimistic jargon…

    A consumer products analyst based in China, Michael Dunne, said: “China will not compensate for falls in the rest of the world. It’s not going to be the saviour.”

    and this…

    when students (used to – TB) return to China with their Melbourne degrees, it’s (was – TB) just a matter of choosing which job to take… Last week Professor Davis found that most of the graduates he had sent back in July were still looking for jobs. The few who were now employed had found that their salary premium had shrunk dramatically.


    Put that story together with this…

    AUSTRALIA’S jobless rate will more than double between now and 2010, when over one million people are expected to be out of work, as the global economic slowdown weighs on China (according to JP Morgan)…

    …and this…

    An ABC News story today reported that 50% of China’s toy manufacturers had closed their doors – no sales…

    …and it paints a grim picture for at least two of those five years…

    …the predicament we ALL face has taken on a personal note as my eldest grandson will finish high school this year with his HSC and a Certificate III in 3D Graphics – but not much in the way of job prospects…we have one strong “lead” with Rio Tinto (his dad’s a contractor there and there may be some traineeships going)…

    …I can’t help thninking we (as a family) may be among the lucky one’s – there’s going to be a lot of shock, a lot of pain and certainly a lot of WTF! (eg Turnbull & Bishop trying to score points off government, treasury and RBA decision making)

    …but Granda, where did all that money go?

  28. This whole political point scoring and bad attempts at populism by the opposition are just plain counter productive this early in the cycle and especially in the current financial climate.

    The government hasn’t even been in 12 months yet and the opposition have already changed leaders, and I bet Turnbull didn’t want to lead this early.

    This early in the cycle the opposition would be far better just sitting back taking notes (the good and bad of the government), making alternate policy, holding the government to account for broken promises and for bad policy but only when it can be irrefutably shown it’s bad policy, which may also require some time to find out. Now is the time for a patient opposition setting itself up as a credible alternative.

    This coming out with all shot guns blazing scattering pellets anywhere and everywhere is backfiring on them, and the polls reflect this and will continue to reflect this as long as they keep it up.

    Footnote: It would also help if they totally cleaned out the old Howard brigade.

  29. Adiran, so much in your post I agree with its a pity we don’t advise the Libs!

    Begs the question who is?

    Can’t get the idea out of my head that Howard still has a big hand in all this and maybe that’s why Custard has still got the sulks – he couldn’t move if he wanted to – never had the balls anyway!

    Bishop’s performance last night was childish and churlish – she was lucky the questions weren’t even deeper!

    As for Turncoat, you already know I suspect him of being bought out by Howard over the Republic Referendum – and he is still in the thrall of the powerbroker(s) – dancing to the tune of the backroom boys…

    There is a lot going on in the background of this particular opposition that may make interesting reading in a decade or so (always nice to be able to say – that’s what we were saying in 1980, 1990, 2007, 2008 etc.) when the truth finally surfaces…and the Libs accuse the ALP of factions and in fighting. LOL!

    Whoever is ruling the roost now is making a bloody awful fist of it and it smacks of the lousy decisions made last year from about January on…and perhaps earlier!

    The Australian public has got its head around Howard style politics now and Turnbull, Bishop, Abbot (notice he’s back out of the woodwork and..) Payne (how aptly surnamed) are in a slow meltdown – question then arises – who next – maybe the “other” Ms Bishop will finally get a go (once touted as a possible PM – GMAB!

    …but Granda, where did all that money go?

  30. TB,

    I’m starting to believe that the coalition is in its decline as a political force in the future.

    That leaves a void to be filled and I believe the Greens are incapable of stepping up to the plate to offer an alternative government.

    A one party system does not exemplify a true democracy in my opinion and this is a concern.

    I believe a new centrist party is the only solution, if this was achieved without the machine that is prevalent in the parties now then this nation would be in a better position to face the challenges that are evident in a mature manner.


  31. …but, but, scaper both the major parties are centrist…

    What both parties need to do is get back to BASICS.

    (Eg I prefer to live in a society rather than survive in an economy!)

    I’m not sure we need a “new” Liberal Party so much as new management – don’t forget the Liberal Party has a long and miserable history to use as a foundation… 🙂

    …and I agree absolutely, the Greens are NOT the answer, quite frankly they frighten me (I can see Stalags in their eyes when they accost me at polling booths or shopping centres!)

    I know what you’re hinting at – The Great Southern Cross Party – can’t fool me!

    …as for the economy…

    ….but Granda, where did all that money go?

  32. Howard still has his finger in the pie in the guise of one Nick Minchin. You need look no further for all their current woes and woeful political performances than that man.

    As I said there has to be a complete clean out of the Howardistas, and Minchin should be the top of the cull list.

    I see potential in Turnbull and actually preferred him above Rudd and most other potential candidates out there until he firstly did the back deal to get millions to a mate for making rain from cloudless skies, and then he started kow towing to the radical right, the Howardistas.

  33. (Hope I’m not interfering here, Adrian, but if you want to separate the three words in your pen-name you can do it in the WP -> my account -> change profile options.)

  34. Well Dave, I’ve explained in the past that I spent many years supporting the ALP quite actively. Eventually I gave up on principles and took up cynicism.

    I voted informal at the last election. First time the ALP didn’t get my vote.

    I seriously think that the union affiliation structure is past its use by date.

    So far the government is doing a good job. I’d have no reason not to support them in preference to the conservatives at the moment.

  35. The GSC party…no way mate!

    What is required is the removal of the billy goats and the replacement with deers, the stoicism is remarkable to a point that we seem to be meandering on this road to nowhere!!!

    I remain critical of not only the structure but the performance of this and certainly the last federal government.

    Sometimes in my mind I believe the duties of the both levels of parliament should be reversed.

  36. Nah decided to keep it that way. Saw it in WP when they gave it as the default and thought buggerit, looks good.

    Btw the Michael Brissenden in tonight’s 7:30 Report nailed it when he stated the opposition cannot stay out of the limelight and will say and do anything to get media time whether the statements and accusations are factual or not. And they accuse Rudd of being a media whore.

    This is self defeating for the opposition. As much as they were in the limelight for 11½ years, now is not the time to be attention seeking with utter crap and baseless attacks on the government and government departments along with their heads. Stupid, and is just another reason to clear out the Howardistas. They have been in the media for so long they have withdrawals when they don’t get attention, so are screwing the opposition in their lust for more media time.

    The 7:30 Report also highlighted that Turnbull and Dr Henry have history in that Turnbull told him to pull his head in when he criticised the government for not consulting Treasury over the $10 billion Murray-Darling water scheme, plus another barney over some other economic matter and another run in when he was shadow treasurer.

    Telling isn’t it, that when in government they had no hesitation in bypassing Treasury on multi-billion dollar policies but now accuse the government of bypassing Treasury (apparently falsely based on a report from the Australian) as though it’s the greatest political violation ever committed.

  37. The interview of Turnbull on 7.30 report was awesome political viewing. Did you notice Turnbull’s ‘thank you’ through gritted teeth at the end. 😀

  38. Hi Dave, it looks like you had a few judging by your avatar.

  39. Missed the interview as I was called away by the phone and a minor family problem (sister) that was made out to be the end of the world. I’ll catch up with it online later tonight or tomorrow.

  40. scaper

    Most pictures of me are usually taken after a few – that one is no exception but it was closer to the start of the night rather than the end.

    Adrian – it’s definitely worth checking out – I haven’t seen Turnbull that uncomfortable in an interview – he got quite aggressive with lots of angry finger pointing and the like.

  41. From another blog I got this quote from Malcolm in the interview:

    ”I accept Henry/Stevens are honest but we must question their assertions”

    Did he really say that. Yes they are honest but they are lying whilst being honest.

    Again here are the completely mixed statements from the opposition. During the 9 hours they grilled Dr Henry, from Coonan, Abetz and no less than seven other Liberal ministers (they flooded Senate Estimates) all more or less accused Henry and Stevens of lying. Now we have Turnbull coming out and saying they weren’t lying, so why did his team waste 9 hours of a person’s time accusing him of lying when Malcolm believed he was honest all along?

    Now do you see why it would be much better for the opposition to take a step back and for a while stay out of the limelight as much as possible. The more they try to make negative news by attacking the government the more they make even more negative news about themselves. This isn’t necessary for an opposition this early in a cycle. Start building up the attacks against the government in the last 18 months of their term after having gathered ammunition against them and established your own credibility. Have fleshed out and verifiable policy ready to go. Then ramp up in the election year.

    Talk about shooting yourself in the foot early in the game and establishing yourself as a dysfunctional opposition that is in no way deserving of government.

  42. Adrian – Yep, he said that, a number of times in fact, just in different words and always followed up by assertions that Ken Henry was a very capable and honest person.

    The video is available on the ABC site now:


  43. WOW!
    I just watched the 730 Report interview. Turnbull is just as bad – if not worse than Bishop.

    You can tell when a politician is lost when they start repeating (Kerry, Kerry, Kerry) the interviewers name repeatedly.

    Dreadful performance. Come back Brendan, we need you!

Comments are closed.

%d bloggers like this: