Buggered, Apparently.

You’ve got to laugh when even lauded predictors of future economic conditions Access Economics dispenses with the usual financial rigmarole and simply states that the Australian economy is “buggered”.

All along we’ve been told how Australia will avoid a recession (or just have a brief and mild one) due to China’s demand for our resources.  Well it sounds like the party’s definitely over.

Treasure Wayne Swan has conceded that “China and other emerging economies, now caught up in this crisis, are expected to slow much more sharply than previously anticipated.”

Access Economics director Chris Richardson said Mr Swan would already have more updated, unpublished Treasury forecasts that exposed the extent of the problems facing his budget.

“The Government knows how ugly things are. None of this is a surprise to them,” he said.

Access Economics said the federal budget was “buggered” because of its heavy reliance on company taxes and royalties – both of which would be hit hard by the collapse in commodity prices.

The national fiscal deficit could blow out to $29.4 billion in 2011-12. Such a shortfall could cripple the Government’s capacity to deliver promised tax cuts, maintain programs, cushion the cost of its emissions trading scheme and fund infrastructure spending plans.

Access Economics warns that the Government and Opposition could “freeze in the headlights” as a result, choosing to shore up existing handouts to the middle class and to the car industry rather than making the politically difficult decision to cut them in favour of more worthy uses, such as building infrastructure.

Following on from the Access Economics dire outlook, Alan Kohler had this to say (thanks to TB Queensland for the link):

“Access is forecasting economic growth of 0.8 per cent for 2008/09, including a recession during 2009 (but not necessarily two successive quarters of negative growth). It then expects 2.4 per cent growth in 2009/10 and 2.7 per cent in 2010/11.”

“This is pure guesswork. Forecasting a recession for 2009 is not a guess because the recession has already begun; after this year absolutely anything is possible.”

“The Government’s position is even sillier. Treasury is currently sitting on a MYEFO forecast for nominal GDP in 2008/09 of 7.75 per cent. That’s right – your eyes don’t deceive you: 7.75 per cent!”

“The forecast for 2009/10 is 3 per cent; for 2010/11 it’s 4.25 per cent and 2011/12 it’s (pick a number) 4.25 per cent. The fine print explains that the figures for 2008/09 and 2009/10 are “forecasts” while those for the other two years are “projections”.

“Whatever. They’re all wrong” says Kohler. 

Interesting in that Kohler concedes, as many of us here at Blogocrats have been saying for some time:

“Access Economics’ latest Business Outlook commentary today is mostly an exhibit of how little notice we should take of forecasts, even those from good economists.”

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48 Responses

  1. I think it is quite evident that the economy is slowing and may fall into recession. However, it is quite irresponsible of the media to report mere guess work by financial commentators as fact.

    “including a recession during 2009 (but not necessarily two successive quarters of negative growth)”

    “”“ Forecasting a recession for 2009 is not a guess because the recession has already begun.”

    Really? My understanding of a recession is at least
    two successive quarters of negative growth. We haven’t had that yet. In fact, not one quarter of negative growth has been officially recorded.

  2. simply states that the Australian economy is “buggered”

    Yes, that was the thing that struck me most about the Access Economics forecast (after the fact that it was just another guess – why don’t they ask any of us for our guesses; they are just as likely to be accurate?): the introduction of a new technical term, sure to be added to the economics lexicon alongside similar scientific descriptors, like “stuffed” and “rooted”.

  3. Very good post reb… scary, but good.

  4. I’m certainly no economists , in fact I have trouble counting how many home brews I have had at a certain stage ( leave that to Mrs. Lang , and she’s always right ;)), however having lived in the country all my life, I’m more than glad I do now. Cost of living and the caution of employment and the expense to maintain employment must be outright depressing for some. That’s without keeping a roof, kids and sanity in the fold,tough times ahead for a while, no doubt. Please don’t take this the wrong way,when I can kill a sheep, gather garden produce,barter a bit here and there,and generally ‘get by’, I ponder how city folk can adjust to less fortunate times than they may have had and get at least some partial peace. Hope to all the future is no too ragged..(Back to a brew,hay Mrs. Lang, this is number ……)

  5. That should have been ‘hey or ‘hoy’, ah, itt’l do.

  6. I’ve always liked the term “negative growth’ – ever since I was introduced to the term at college, I knew economics was just more BS – how can you possibly grow negatively? Surely if its negative – its a loss!

    …and the other term I hate is “made a loss” as my financial management lecturer used to say – you suffer a loss – you make a profit! 🙄

    How can ordinary folk possibly understand this type of double-speak…

    BTW Lang Mack – “clink” – just poured myself a Wild Turkey and The Minister for War, Water, Finance & Fun, chose a Baileys on ice – with a dash of milk (rather than her usual G&T) 😀

  7. Boom goes the boom

    Property market in free fall
    http://www.theaustralian.news.com.au/story/0,25197,24929833-2702,00.html
    THE West Australian property market is being decimated following the evaporation of the resources boom, with values of $1 million-plus properties plummeting 20 per cent and the equivalent of more than two years’ supply of homes flooding real estate agencies.

    In Geraldton, rents have slumped 8 per cent and in the state’s northwest fibro shacks that had been fetching rents of $1000 a week are sitting vacant as formerly high-paid mining executives face widespread retrenchment.

    Real Estate Institute of Western Australia deputy president David Airey said there had been just 85 sales in Perth’s affluent western suburbs in the three months to December, down from 150 the previous quarter and 300 at the same time in 2007. “Properties … purchased as recently as a year ago have been listed or sold below their original asking price,” he said.

  8. joni, on January 19th, 2009 at 5:32 pm Said:

    Very good post reb… scary, but good.

    Lol If I’d posted it, the bullets would be flying

  9. My hurt pride aside reb (wink), it is a very good post.

    I see your blinkers have come off well and truly now (lol)

  10. johnmcphilbin, on January 19th, 2009 at 6:33 pm Said:
    joni, on January 19th, 2009 at 5:32 pm Said:

    Very good post reb… scary, but good.

    Lol If I’d posted it, the bullets would be flying

    😆 😆 😆 😆 😆 😆

  11. “Access Economics said the federal budget was “buggered” because of its heavy reliance on company taxes and royalties – both of which would be hit hard by the collapse in commodity prices.”

    In its last 4 years of the Howard govt, they had a windfall of an extra $29b in sales tax generated by the resources boom. Thanks to China, Australia received a fairly healthy pay rise.

    What happened to that $29b? It went towards election bribes.

    If only they had kept it aside for a rainy day, or at least invested it into infrastructure.

    I think that a large part of our trouble now is a result of their sloppiness.

  12. I thought you’d get a kick out if those comments TB (I haven’t been able to get the grin off my face since I seen it)

  13. Access Economics are just another mob of forecasters with the same amount of rubbish credibility yes we are having tough times but we need to see real figures. Property markets increase and decline all over the country all of the time. Markets in country towns declined for many years last decade, where were the prophets of doom then. Now we are in tight economic circumstances things are being blown totally out of proportion.

    Rents slump in Geraldton, yes but what were they before the mining boom. Did this happen in the 1980s when mines went bust as well. Cycles, things happen in cycles. People today seem to think things like this have never happened before.Fibro shacks should never have demanded that sort of rent in the first place.

    Maybe sales in affluent suburbs have slowed because people are waiting to see what happens. Why sell at a loss, why not just pull the property off the market, unless of course you have no choice.

  14. Miglo

    “In its last 4 years of the Howard govt, they had a windfall of an extra $29b in sales tax generated by the resources boom. Thanks to China, Australia received a fairly healthy pay rise.

    What happened to that $29b? It went towards election bribes.

    If only they had kept it aside for a rainy day, or at least invested it into infrastructure.

    I think that a large part of our trouble now is a result of their sloppiness.”

    Spot on Migs

    Howard and Costello’s Value Lost in Waste
    https://blogocrats.wordpress.com/2008/11/25/howard-and-costellos-value-lost-in-waste/

    “Howard and Costello’s Policy Failure

    The current economy circumstances bring into focus the inept, short-sighted and hopelessly misguided handling of the economy in the final years of Howard and Costello government. In the period from about 2003 – 2004, Howard and Costello were continually surprised by the size of the budget surplus as the economy boomed on the back of a once in a century surge in national income from the staggering strength in commodity prices and remarkable growth in Australia’s major trading partners.

    Instead of saving for a rainy day or building war chest of money for when this bubble burst (insert your own cliché!), they spent the windfall fiscal gains like drunken sailors, which fuelled a surge in inflation, which in turn caused the RBA to hike rates aggressively, which in turn is one reason why Australia is so vulnerable now to the global slow down. Right now, the near certain collapse of the terms of trade and the risk of a deep recession are not helped by this past profligacy.

    These may be moot points at the moment, but there is a lesson for the Rudd and Swan government.

    Had Howard and Costello managed the economy well and accumulated much of the windfall gain in large Budget surpluses in the period 2004 to 2007, inflation pressures would not have been as intense, the RBA would not have hiked as dramatically as the government would have somewhere between $50 billion and $75 billion is spare cash to support the economy at its time of need. Simply put, the government would now have greater flexibility to cut taxes and increase spending when the economy is cascading towards recession.”

  15. John,

    The info for my post, ironically, came from a talk I attended by Chris Richardson of Access Economics.

  16. Good post. Things are pretty dire, that’s for sure.

    So much for all that Chauncey Gardiner stuff about the fundamentals being sound.

    It really makes you wonder how the bozos running the show can justify those mega salaries they were (and are) paying themselves. What a bunch of tossers. Lets face it, they weren’t asleep at the wheel, they were drunk. Personally, I’d like to see a bit of payback and hopefully the ACSC will oblige in that regard.

    And as for China pulling us outa the shit, they’ll be lucky to be able to keep themselves in rice and noodles. The way things are going, there’s going to be a lot of cheap second-hand Mercs on the market in Beijing, that’s for sure.

    It also makes you wonder what Howard and Costello were doing pissing-away all that loot the Government dragged-in by way of taxes during the mining boom years. The incompetent bastards blew the lot on pork and payola. Now while I think it’s great that Bowral got it’s Don Bradman Memorial Pavillion and Mudgee it’s tennis courts or whatever, maybe they shoulda laid some aside for a rainy day, cause it sure is pissing-down now.

    I hope Rudd is smart enough to ditch the next round of Tax Cuts.

    The Government is going to need every penny it can get its mitts-on to kick-start the economy and the Budget will clearly be going into deficit as things stand. Effectively “borrowing” money to hand-out tax cuts is just plain stupid.

  17. So much for all that Chauncey Gardiner stuff about the fundamentals being sound. (Evan).

    Evan, I think that Chauncey Gardiner lived on in the form of Peter Costello. He really did think he could walk on water.

  18. Miglo

    John,

    The info for my post, ironically, came from a talk I attended by Chris Richardson of Access Economics.

    Migs, I personally think that many of the facts have been suppressed by bias media.

  19. John,

    Yes, it did occur to me during his talk that the media had failed to promote the discourse of anti-Howardism in popular consciousness.

  20. Shane I agree re cycles but I’m afraid this is no ordinary “cycle” JMc and I, “doomed” this, many, many months ago on Blogocracy (although we take a different approach, we seem to reach very similar conclusions) – and the worst is yet to come…

    …see that big white thing out there? Its an iceberg…and you’re on the ship that is unsinkable…

    …like the rest of us you have a choice…

    …just go to dinner and listen to the lovely orchestra and order all that lovely food and…

    …just rely on the captain and crew…who, BTW have never sailed these waters at such speed before…or…

    … find your lifejacket – check out your lifeboat station – make sure you know where all your family are…

    …and order sandwiches and coffe and take them up on deck…keep an eye on that iceberg and plan what you’ll do – if the ships hits it…

    …I can’t speak for JMc but it seems that those that want to survive will…those that believe the propaganda – might…and I for one take no joy in posting bad news…

    …I might remind other posters/readers that JMc and I have nothing to gain with our posts – we just can’t understand why others still deny the “obvious” – please correct me if I’m wrong JMc…

  21. Jesus f**king Christ, JMc! I just looked at, nay, saw! your avatar! 😯

  22. i just saw your pic John, is there anything i do to help?

    (im drunk and joking John)

  23. Thats not even funny but stupid, sorry john.

  24. JMc,

    I recognise that guy, but your pic doesn’t do him justice:

    http://www.news.com.au/perthnow/gallery/0,21592,5036844-5010140-7,00.html

  25. lol thanx tony,(i was fooled)

    I will now be taking donations to help John.

  26. I will now be taking donations to help John.

    Due to the economic downturn I think it prudent that I not contribute.

  27. TB

    My world has not caved in yet, neither has many others, ask Scaper if his business is going bust.

    Prophets of doom I refuse to join your gang. 🙂

    I remain watchful from the sidelines.

  28. NP Aquanut. (Will you take an IOU?)

  29. Tony, i just asked John and his hair nearly attacked me, i cant

  30. Hmmm, OK aqua. I know: how ’bout some crispy new toilet paper carbon credits instead?

  31. wayne swan just stuck his hand up, i’ll take it

  32. “What happened to that $29b? It went towards election bribes.

    If only they had kept it aside for a rainy day, or at least invested it into infrastructure.

    I think that a large part of our trouble now is a result of their sloppiness.”

    Well said Miglo. The Howard Government gave us a structural budget deficit. They wasted the extra money on bonus cash handouts and numerous other uneccessary programs, and arguably some tax cuts that were not needed.

  33. Tony

    I love this picture it’s actually a ‘mugshot’ I got from the DT.

    http://www.news.com.au/dailytelegraph/gallery/0,22056,5036844-5010140-1,00.html

  34. Always humbling to be in the presence of a genius or two. Good to see that TB and John Mcp having made their millions over the years are now prepared to share their investment expertise.

    For a longer term view.

    http://finance.yahoo.com/echarts?s=%5EDJI#chart3:symbol=dji;range=19281014,20090116;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on

    I note that Quiggin is saying that nationalising banks in some countries is the best option by way of proceeding. Indeed they are interesting times.

    http://johnquiggin.com/index.php/archives/2009/01/19/what-to-do-with-nationalised-banks/#comments

  35. I never pictured you being photographed by the establishment while you had the delirium tremors John.

  36. Toiletboss

    I’ve got to admit I’ve had a few shockers over the years and wouldn’t at all be surprised if I looked even worse than the photo.

    Nature5

    Sadly, I haven’t made millions – long story. And no, I wasn’t a ‘robber baron’

  37. The Australian economy is well placed to withstand turbulence in international financial markets, Treasurer Wayne Swan says.

    http://business.theage.com.au/business/australia-can-deal-with-market-turbulence–swan-20080123-1nmt.html

    The Budget forecast for 2009-10 has also been revised down from $19.7 billion to $3.6 billion.

    Mr Swan says the decreased forecast surplus is due to “massive reductions” in tax revenue, with tax receipts revised down by $4.9 billion in 2008-09, $12.2 billion in 2009-10, $12.4 billion in 2010-11 and $7.9 billion in 2011-12.

    “These are all a direct consequence in what’s occurred in global equity markets and the impact of that on capital gains tax, the impacts of credit market turmoil, weaker global growth and the falling terms of trade,” he said.

    Mr Swan says the figures are a dramatic reminder that the country is not immune from global financial market turmoil.
    http://www.abc.net.au/news/stories/2008/11/05/2410663.htm

    I think I can detect the dead hand of professional idiot, PJ Keating, writing Swan’s speeches. I wonder if Mr Swan will be forced to carry spare underpants with him when he gets about the country just like Mr Keating was forced to do. Want to find Mr Swan? It’s simple, just follow the trail of brown smelly stuff.

  38. “Want to find Mr Swan? It’s simple, just follow the trail of brown smelly stuff.”Stephan

    Much of it dribbling from Wayne’s deadpan mouth.
    The entire Coalition frontbench can be tracked in the same way.

  39. Nature5

    I think it’s important to point out that my own motivation to maintain a commentary and opinion of what’s been happening has never an attempt at being ‘ contrary for the sake of being contrary’, it’s because some of the warning signs have been so clear. I’m sure TB has a similar motive.

    Also, I’ve found that most contributors at Bogocracy and Blogocrats to be sensitive and sensible in their views and opinions of current events. My aim has simply been to get people thinking and hopefully more educated than they may have previously been.

    Additionally, the feedback is on average of very high quality.

    I care very much about confronting the lies and deceptions that surround economics, especially by politicians.

  40. John,

    “Sadly, I haven’t made millions”

    Sorry to hear that. Must have been bad luck. But as some say “Luck’s a million’.

    TB on the other hand ‘takes a different approach’. Perhaps his strategy is more deserving of accolades.

    BTW, Note the trend line.

    http://www.marketwatch.com/news/story/market-bottom-sight-again/story.aspx?guid=%7BEA94AC84%2D50FB%2D4C77%2DA107%2DFAB68B606D03%7D&siteid=yhoof

  41. johnmcphilbin,

    “because some of the warning signs have been so clear”

    Indeed they have. But your choice of commentator tends to be (almost) exclusively on the negative side. For example, your link to the character who’s been advising people to get out of equities since 1996 is evidence of that. Since 1996 and the present, dividends have been quite good. Equities have been good. It was your choice to choose the negative guy and in so doing you ignored his track record. What does that suggest? A search for something? But what?

    While I’m not disputing that things are bad and likely to get worse (in an economic sense) life in Australia has much to celebrate. Also in the longer term Australia with its mineral deposits is very well placed.

    Always looking for the downside (real as it may be) is not conducive to good mental health, regardless of the satisfaction it may bring in the short term.

    You have made your point about ‘market failure’ and made it very well. And I agree with the failure of neoliberalism as the prevailing ‘common sense’. But maybe it’s time to move on?

  42. Nature5

    Here we go, ‘accentuate the positive, eliminate the negative’. In the world of economics and financial markets that’s the quickest way to miss what’s happening in reality.

    There are always positives and negatives, however, after years of many positives the system became increasingly unstable. That’s a fact.

    Perhaps the difference between you and I is, I actual review facts and work off a series of economic models. As a former business and labour analyst this stuff comes as second nature and I’ve learned not to ignore reality no matter ho unpleasant it may be.

    For example, as previously posted

    http://blogs.news.com.au/news/blogocracy/index.php/news/comments/land_of_plenty_guest_post_by_mark_davis/desc/P60/

    “To be exact leadership does not seem to be aware that the normal functioning of our economy leads to financial trauma and crises, inflation, currency depreciations, unemployment and poverty, in the midst of what could be virtual universal affluence. In short, financially complex capitalism is inherently flawed.”

    Hyman Minsky 1986

    “Over a a protracted period of good times, capitalist economies tend to move from a structure dominated by hedge finance units to a structure in which there is a large weight to units engaged in speculative and Ponzi financing”

    Hyman Minsky 1992

    Minsky would not attribute the crisis to “irrational exuberance” or “manias” or “bubbles.” Those who were caught up in the boom behaved “rationally,” at least according to the “model of the model” they had developed
    to guide their behavior. That model included the prospective course of asset prices, future income, behavior of policymakers, and ability to hedge risks or shift them onto others. It is only in retrospect that we can see the
    boom for what it was: mass delusion propagated in part by policymakers and those with vested interests.

    However, a large part of the blame must be laid
    on the relative stability experienced over the past couple of decades—the tranquility that made the boom possible also created fragility because,according to Minsky, stability is destabilizing.

    The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility.

    It think it is far too simple to attribute the current crisis to a speculative boom in real estate, to excessive monetary ease, or even to lax supervision. The causes are complex and have developed over a very long period.As such, solutions will also be multifaceted, tentative,and contingent upon continued evolution of the financial system, with an eye to longer-term trends that have made the system much more prone to crisis, in my opinion..
    John McPhilbin of NSW
    Tue 23 Sep 08 (02:43pm)

  43. Nature5

    I should also point out that I’m sensible with money but not obsessed and the thought of markets crashing tells me that there are going to be some really valuable bargains in the offering.

    Having said that ‘I don’t like the fact that so many have lost so much’

  44. Nature5

    “You have made your point about ‘market failure’ and made it very well. And I agree with the failure of neoliberalism as the prevailing ‘common sense’. But maybe it’s time to move on?

    Nearly all the subject on Blogocrats address some kind of inequity or injustice, such is life. But this crisis has a long way to go and you’ll see more and more debate as authorities try to come to terms with fixing it and making sure it doesn’t happen again.

    So, will I move on because you don’t like the issue? Frankly, no I won’t be. I simply can’t pretend to eliminate the negative and accentuate the positive because it will make you happy. Reality sucks, that’s simply a fact.

  45. “Reality sucks, that’s simply a fact.”

    Couldn’t agree more. And what you write has no affect on my hapiness. And that’s also a fact.

    Perhaps a few other facts are in order, Are you aware John that we are all going to die? That’s the truth. Some of us will die horrible deaths. That’s a fact. Now what we need is for someone to keep telling us that on a daily basis. Better still on the hour every hour.

    We could have guest posts from all types of sufferers who could describe in detail the agony they are going through. And it would be the truth.

    John it is also the truth that money is only one aspect of life. To focus on that at the expense of all else is sad.

  46. Unfortunately, money makes much of the world go round Nature5. It effects so many aspects of our lives.

  47. ” It effects so many aspects of our lives.”

    Almost but not quite. John, for you, it apparently ‘effects’ lives. For me, it ‘affects’ lives.

    Money is but a means to an end not the end itself.

  48. ‘Money is but a means to an end not the end itself.’

    I wish everyone were as philosophical (wink)

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