Uncle Joe’s Firing Blanks: RBA

Ouch! Governor Stevens’s return fire must have hurt Uncle Joe. Not sure about the strength of a recovery but I agree with “The longer you wait, the more ammunition you will end up having to use,” Mr Stevens said. “These things can get a sort of self-fulfilling momentum behind them.”

Housing will lead economic upturn: RBA

THE combined impact of rate cuts and the Rudd Government’s stimulus packages will create an economic recovery later this year, according to the Reserve Bank, starting with a revival in housing construction.

The bank’s governor, Glenn Stevens, endorsed the Government’s economic strategy yesterday, saying its two economic stimulus packages would boost economic growth both this year and next.

He also said the Government’s actions to guarantee both bank deposits and wholesale funding had preserved confidence in the banking system.

Appearing before the House of Representatives economics committee yesterday, Mr Stevens said the prompt actions of both the Reserve Bank and the Government would reduce the severity of the downturn.

“The path of the Australian economy is going to be considerably better than it would otherwise have been, and considerably better than a number of other countries around the world, whom we can see contracting at a very large pace,” Mr Stevens said.

He disagreed with new Opposition Treasury spokesman Joe Hockey that the Government should be saving some of its ammunition in case the downturn was protracted.

“The longer you wait, the more ammunition you will end up having to use,” Mr Stevens said. “These things can get a sort of self-fulfilling momentum behind them.”

Over To You

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47 Responses

  1. Ouch! Gittins is laying the boot into Joe as well.

    Hey, Joe: how to be better than Bishop
    http://business.smh.com.au/business/hey-joe-how-to-be-better-than-bishop-20090220-8dn3.html
    If Joe Hockey, the new shadow treasurer, is to avoid the gaffes made by his predecessor, Julie Bishop, he faces a steep learning curve. So let me help out – here’s your first tutorial, Joe.

    Most newspapers have published articles lately by economists casting doubt on the ability of governments to improve matters during economic downturns by attempting to use tax cuts or spending increases to stimulate their economies.

  2. Selective quoting to support your relentesss doomsday predictions, John?

    The article continues..

    “It’s important to understand that this is very much a minority opinion among economists. Greg Mankiw, a professor of economics at Harvard, reminds us on his blog that, according to various polls of the profession in America, 90 per cent of economists believe that budget measures have a significantly stimulative impact on an economy..”

  3. Big Joe wouldn’t be out of place at a footie game. He goes red in the face and thrusts out an accusing finger and shouts a hell of a lot…and that’s just at the pie kiosk. Just has to learn to temper his natural tendency to shout and bluster.

    Even though Governor Stevens has presented a Panglossian portrayal of Australia towards the end of 2009 his track record doesn’t imbue the minds of worried Australians. He, along with other financial mavens failed to read the tea leaves correctly.

    Let’s all wait for Governor Steven’s memoirs. I suggest he title the book: “Shit! What Happened to the Economy.”

  4. Reb

    “Not sure about the strength of a recovery” was one point I was making whilst highlighting Joe’s desperate attempts at shooting down the government.

    It wasn’t my intention to appear selective.

    I don’t have much confidence in the banking system’s ability to cope with high levels of debt in the economy..

    I mentioned to Min yesterday that banks are increasing their ATM fees to how much? Around the $2-3 mark and electronic processing should cost no more that $0.10 according to Stevens. There’s no doubt in my mind that banks have become very desperate and will try to milk everyone by any means necessary.

    Bad debts to spread, ANZ’s Smith says
    http://business.smh.com.au/business/bad-debts-to-spread-anzs-smith-says-20090220-8del.html
    Bad debts in Australia will spread from ”high-risk” businesses and customers to ”mainstream” clients, as the economy worsens, ANZ Bank’s Chief Executive Officer Michael Smith said.

    While Australia has been insulated from the ”bloodbath” of 2008, it hasn’t been immune from ”the most difficult set of economic conditions the world has faced since the Great Depression of the 1930s,” Smith said in a speech to the American Chamber of Commerce in Sydney today.

    Australian banks’ credit ratings will be reviewed by Moody’s Investors Service as the nation’s economy deteriorates, the New York-based ratings company said this week. Westpac Banking Corp., Australia’s biggest bank by market value, said on Feb. 18 first-quarter profit stalled as rising bad debts erased gains in fee income from the takeover of St. George Bank.

    ”While Australia is better positioned and has been remarkably resilient so far, it has not given us immunity, nor will it this year,” he said. ”Although Australia might, just, escape having consecutive quarters of negative GDP growth, given the emphasis which the government has placed on avoiding this, it seems certain that Australia will experience a significant economic slowdown during 2009.”

  5. Stephan

    “Even though Governor Stevens has presented a Panglossian portrayal of Australia towards the end of 2009 his track record doesn’t imbue the minds of worried Australians. He, along with other financial mavens failed to read the tea leaves correctly.”

    Watch out next month for his downward revision of the economic outlook (wink). Regardless, I’m expecting Joe to still be firing blanks (Lol). Joe’s so confident in himself that he believes he can seen the future as well.

  6. Reb

    There’s every indication that more and more households are preparing for the worst. So much so that they’re willing to place money in savings account with low interest credit. The RBA will have a hard time keeping interest rates low if inflation starts to soar.

    Households increased their share of savings to 3.9 per cent of their income in the September quarter, up from 0.2 per cent nine months before, Australian Bureau of Statistics data showed.

    Since September, the Reserve Bank of Australia (RBA) has cut the cash rate by four percentage points to a 45-year-low of 3.25 per cent in a bid to cushion a flagging economy.

    Interest rates for online savings accounts were above seven per cent in August, but have since fallen to below four per cent.

    For so long the accumulation of debt was largely ignored but now many people have woken up to the fact that they’re in too deep. The ‘stimulus’ will hopefully cushion the expected and potentially very steep decline in consumer spending (and job losses) whilst various other aspects of the package hopefully will help protect jobs.

    Then again, the potential for jobs going to the lowest bidders (namely immigrants) also poses a threat to jobs and our ability to spend, pay off our debt and keep the wheels of the economy turning sufficient enough to weather the storm that has no doubt begun.

    And as N’ pointed out yesterday

    Are you an average Australian?
    http://www.news.com.au/perthnow/story/0,21598,24050924-5015856,00.html
    ” IF you’re an average Australian you’re worth just over $250,000 have a house valued at $458,488, a mortgage of $341,000 , credit card debt of $3085 and earn $1124.50 a week.

    Only a couple more handouts to go???”

  7. I find it amusing how the Liberals used to warn us not to trust the “inexperienced” Swan, when they put up the inexperienced Bishop, and now the inexperienced Hockey.

    Swan has 15 months more experience in Treasury than either of those nitwits, and that’s not counting the months he spent as Shadow Treasurer before coming to government.

    Every day he racks up more experience, at the realest learning ground of all: the most challenging economic circumstances in many decades.

    Swan is in there, and is doing it, and has been for 15 months. Sloppy Joe’s biggest gig before his latest was Minister for Screwing Workers under the Rodent.

    Going on Swan’s growing experience and natural compassion the question, “Who do you trust to take the Australian economy through this crisis” is clearly answered:

    WAYNE SWAN

  8. Caney

    “Going on Swan’s growing experience and natural compassion the question, “Who do you trust to take the Australian economy through this crisis” is clearly answered:

    WAYNE SWAN”

    He strikes me as being competent, genuine and caring.

  9. JMc

    If you want to “check” where you fit into the “national” median or average with regard to wealth.

    This little calculator will give you a rough idea.

    Used to be one of my favourites…when I was accumulating!

    https://www.wealthbenchmarks.com.au/index.php?option=com_wealthbuilders&task=showQuickCheck&Itemid=6

  10. We live in interesting times John.

    The property market bubble has definitely burst at the top end of the market and is stagnant or dropping just about everywhere else.

    The figure that interests me about the “average Australian” is the level of credit card debt. Arguably the worst form of debt.

    If $3000 is the “average” then that means that roughly 50% of people have more than $3000 on credit.

    I think the big telling factor in the next 12 to 24 months will be whether people can hold down a job.

    For those that remain employed, the period ahead should be relatively smooth sailing – low interest rates, falling grocery prices, falling petrol prices etc..

    For those that are made redundant or unemployed for other reasons, it’s going to be really tough, particularly if they are forced into selling their home.

    My heart goes out to ordinary people who, for no fault of their own, other than wanting to have a roof over their heads that they could call their own, now find themselves in a position of negative equity.

    My partner and I are both on good incomes, have a small mortgage (by National standards), zero credit card debt, yet we both have to watch where the money goes these days.

    It really makes me wonder how people with kids survive what with school fees, cost of uniforms, childcare etc.

    It’s also tough for people who were about to retire (or in retirement) who now find that their Super funds have been wiped by as much as 50%.

    In saying that, I believe that the share market is poised to recover. There is some incredibly good buying out there now, and investors are beginning to wade back in. However, any recovery in the share market won’t be felt in the broader economy for some 6 to 18 months later.

    It’s the interim period that’s going to be tough.

    But as TB says, even if unemployment reaches 10%, that still means 90% of people are employed.

  11. I’ve always liked Wayne Swan – met him a couple of times (he used to be invited to my mother’s club and she happened to be President for just over a decade)…

    …but I was concerned about his ability to take on Treasury (and said so on Blogocracy)…I must say that he has peformed well under very trying circumstances and straight into the firing line!

    I doubt Tip Custard could do it even now, too long a fair weather politician and obviously can’t/won’t/doesn’t know how to make “hard” decisions…and I agree…Wayne Swan does demonstrate a degree of compassion…

    …still think he has some way to go and probably needs to match the compassion with a bit of steel – especially with The Robber Barons…

  12. TB

    “…still think he has some way to go and probably needs to match the compassion with a bit of steel – especially with The Robber Barons…”

    Something tells me he will.

  13. Reb

    I think you’ve got a really good grasp of the economic reality we face. And it’s us so-called ‘lefties’ who tend to emphasise with people from varying socio-economic backgrounds.

    The so-called right still believe in the ‘dog eat dog’ motivation of self-interest above all else. Damn shame really, because they are the ones who will most likely feel it the hardest. Nothing like a bit of experiential learning to change attitudes though.

  14. …I meant ’empathise’

  15. Lol, I’m not expecting much debate on this thread simply because Uncle Joe’s toast!

  16. Caney

    Your post made me think of an idea of a cartoon – Swan driving along the road in a very plain car with Green P plates on.
    Costello outside his broken down ferrari hitching in the background,
    Julie with L plates on her sporty little car crashed into a tree; and
    Hockey in a big muscle car with an L plate heading straight for the same tree Julie hit.

  17. So this is what being a champion of a free-market gets you nowadays.

    Millionaires’ row going, going … gone
    http://www.theaustralian.news.com.au/story/0,25197,25085173-2702,00.html
    ALONG the country’s wealthiest coastal strips and in its most exclusive suburbs, the collateral damage from the credit crisis is piling up.

    Three of the sprawling mansions on Hedges Avenue, the beachfront Gold Coast street known locally as “millionaires’ row”, have “contract default” or “mortgagee sale” stamped across their marketing advertisements on the internet. At least another three are listed as “urgent sale”, or “owner meets the market”.

    “Live the dream”, the catchcall of Hedges Avenue real estate, is scattered more frugally through the ads of the 20 mansions and upmarket homes listed for sale on realestate.com.au.

    On Sydney’s exclusive northern beaches, there have been dramatic reductions in house prices. One home on Ocean Road, a premier Palm Beach location valued at $17million three years ago, recently sold for $12 million, according to real estate agents.

    Around the country, prestige property prices have fallen up to 20 per cent in the hardest-hit luxury suburbs, with most of the falls happening in the latter part of last year, according to figures compiled for The Weekend Australian by property researcher RP Data.

  18. But, but, but John, what you fail to realise is that real estate agents will maintain that “now is a great time to buy!”

    (Do they ever say otherwise…)

    🙂

  19. John – brevity!

  20. Reb

    But, but, but John, what you fail to realise is that real estate agents will maintain that “now is a great time to buy!”

    (Do they ever say otherwise…)

    Lol and interest rates have never been lower than they are now. Hurry, these bargains can’t last.

  21. John..I’ve also noticed that the statement To Add to Your Investment Portfolio has disappeared from many agents’ adverts.

  22. Sh&t Joni, I thought I was showing bravery (wink)

  23. Min

    ” To Add to Your Investment Portfolio ” Ouch!

  24. “Hurry, these bargains can’t last.”

    LOL!!

  25. Dave55,

    Great portrayal. Spot on!

  26. I can see Joe squeezed into a souped up Pink Hyundai with huge spoiler and oversized mag wheels, doing burnouts and yelling obscenities at everyone from the driver’s side, while a gang of Lebanese lads shake their heads in pity.

  27. reb

    LOL

  28. Joe into damage control mode? http://www.smh.com.au/national/congenial-joe-hides-killer-blow-20090220-8dog.html?page=-1

    How many motherhood statements can one fit into one article??

  29. Lol

    “He studied arts and law at Sydney University, and in his third year seized control of the Student Representative Council to become its president. One rudimentary but hugely successful campaign tactic involved the distribution of free beer …”

    Lets see him do the ‘free beer trick’ at the next election.

  30. “There is some incredibly good buying out there now, and investors are beginning to wade back in.”

    But be aware reb that some companies are barely surviving due to the archaic nature of their industry. But due to familiarity of their brand name people get fooled into thinking they’ll climb back out of the hole. Some don’t.

    You’d hate to put a ton of money in a stagecoach company as the early automobiles were coming along.

    Tho I guess many corporations have diverse tentacles these days in order to offset contraction in some.

    Aren’t we lucky to have the internet available, providing alternative work during this downturn? Unlike inThe Depression. Crikey! the didn’t even have TV.

    It’s funny when you think about it…how many people are working for nil or bugger all money on THE NET? Somewhat like apprenticeships w/ artisans all those years ago. Happens during social/technological upheavels & transformations.

    How does the tax system work for internet companies?

    Excellent comments John et al.

    I agree that Wayne Swan comes across as much calmer these days & compassionate. I thought he was more controlled & confident during Q&A…let’s face it, you can’t give all the policies and tactics out, lest the corporate media SPINS & wrecks that which is helpful for promoting the common good, rather than the asset accumulators & tax avoiders.

    Wheras Joe reminded me of a few North American blowhards I’ve known…smart enuff, but full of themselves…he has the edge of a bully, lets off steam too easily, These CHARMERS can be deceiving…kinda like the con-artists who sell fake Rolex watches. The John Howard & his front bench meanness was enuff to last me for yonks. Australia needs real allies & positive trade during this challenging period…and firm but understanding government. People want a government that is listening. Not always one that rolls over you…like Howard’s lot did regarding the Iraq War & Workchoices.
    N’

  31. Not to query Ross too much, but is this bit pro or con?

    So far we’ve studied the permanent income hypothesis at a quite theoretical level. I’m no believer in the theory because I don’t think it stacks up empirically. It’s not a convincing explanation of how the world actually works.

    For a start, anyone who believes any tax cut is permanent hasn’t heard of bracket creep.

    All tax cuts gradually erode away in a tax system where the tax scale isn’t annually indexed for inflation.

    More significantly, like all conventional economics it assumes people act rationally at all times. But a wealth of evidence from behavioural economics says people aren’t rational in their decision making and, in particular, have terrible trouble exercising the self-control the theory assumes.

    The first argument looks a bit like an in-built stabiliser, and the second bit looks a bit like people will not notice spending a few extra dollars here and there, as opposed to a large lump already saved for them.

  32. Legion

    “More significantly, like all conventional economics it assumes people act rationally at all times. But a wealth of evidence from behavioural economics says people aren’t rational in their decision making and, in particular, have terrible trouble exercising the self-control the theory assumes.”

    Spot on Legion. EMT (Efficient Market Theory) assumes the system is self-adjusting and that all actors are rational and that the future is knowable. If this were the case we very well could allow markets to operate of their free accord.

    This is manifestly not the case, as the current crisis clearly shows.

    And if markets really were as efficient (equilibrium seeking) as many the neo-liberals believe then people like George Soros would never have been able to exploit the inefficiencies, greed and folly that is clearly evident in the global financial system. His aim now is to allocate capital and promote development , education and investment in parts of the world that have largely been ignored by financial capitalism. Which is why I’ve come to admire the man and his work.

    http://en.wikipedia.org/wiki/George_Soros
    Former Federal Reserve Chairman Paul Volcker wrote in 2003 in the foreword of Soros’ book The Alchemy of Finance:

    George Soros has made his mark as an enormously successful speculator, wise enough to largely withdraw when still way ahead of the game. The bulk of his enormous winnings is now devoted to encouraging transitional and emerging nations to become ‘open societies,’ open not only in the sense of freedom of commerce but—more important—tolerant of new ideas and different modes of thinking and behavior.”

  33. TB

    “Wealth check data input”

    Despite the financial struggle of the last few years, through no fault of my own. I’m still in sound shape. I suppose that’s a testament to me practicing what I preach.

    Cheers

    John Mc

  34. Legion

    I’d just like to note Legion that I’m finding your contributions much easier to follow of late and the insights into your reasoning extremely helpful. Not to take away from many previous contributions of course, but for the clarity of late has been jumping off the screen, which for me is a really pleasant thing to see.

    Thought you’d appreciate the feedback. The change has been an inspiration, whether you realise it or not.

    Now I’ve got to work on my own style I know.

  35. I doubt Tip Custard could do it even now, too long a fair weather politician and obviously can’t/won’t/doesn’t know how to make “hard” decisions
    TB Queensland, on February 21st, 2009 at 10:24 am Said:’

    Hay TB in case you have forgotten the budget deficit from 1991-1995 was -12, -17, -17, -13 and a big minus 10 billion dollars.

    Around 70 billions dollars down the hole in just 5 years. The ALP also sold the Commonwealth bank and Qantas but this did not turn the budget deficits into a surplus.

    When the Libs were elected in 1996 they created a budget surplus within a year and a half.

    They paid off all the debt created by the ALP and also halved the unemployment rate. It went from 8% to 4%.

    You know what TB. You do not care about the truth. You are just a blind dead immoral and dishonest ALP loyalist.

    Unemployment hits 10%- I will still vote ALP. The Australian economy is destroyed I will still vote ALP.

    Daffy Duck was handed a $20B surplus budget. Within 13 months we now have a $20B deficit budget and all you can do is praise Daffy Duck.

    You do not care about people. All you care about is the ALP.

  36. Former Liberal leader, John Hewson, in an open letter to Peter Costello:

    … I also doubt you have the skills, experience or self-confidence to have accepted the obvious job after losing the last election, namely shadow treasurer. You’d be lost without Treasury. You may have delivered 11 budgets but ask yourself honestly how many of them were actually yours, rather than Treasury’s. I am told Treasury is now drawing a sharp contrast between your little interest and involvement and that of Wayne Swan.

    http://www.smh.com.au/opinion/you-missed-your-chance-peter-20090221-8e70.html?page=-1

  37. Caney, what a blow.
    By reading it Hewson didnt think much of Costello to start with.

    Damage control is going to be funny to watch.

  38. Neil,

    What about the government debt that was left by the coalition?

    Budget papers show that we are still paying interest on government debt.

    And how would Costello bring in a budget surplus with the collapse in tax revenue due to the GFC?

  39. Aquanut,

    It’s only dimwits like Neil who still think much of Costello. Neil seems to think he was some sort of gifted guru, while everyone else knows he just had the good fortune to be treasurer during a period of remarkable prosperity that had little to do with him.

    Here’s Hewson again:

    The good economic times that Treasurer Peter Costello has enjoyed do not have a lot to do with his own economic management, a former liberal leader said.

    […]

    “Costello’s had very, very good economic circumstances for most of the time, not a lot to do of his own making,” Dr Hewson told ABC radio.

    Adelaide Now, 20 July 2007

    http://www.news.com.au/adelaidenow/story/0,22606,22103739-5005962,00.html

    While other Liberals have or are moving on, Neil sits spinning his wheels in a Costello rut.

  40. I’ve popped up a dedicated thread about the Hewson letter…

  41. Caney

    Haha, love those links.

    Labor can now get back tot the job of running the country while the opposition carefully amnage their own defeat at the next election

    ROFL

    Also had some fun reading bolts little thinkers trying to come to grips with the news. Apparently Hewson is none too popular with them

    Priceleless.

    Also, thanks for the email Min, it brightened my day (yea, I am even slower at responses than you 🙂

    As Steve Tyler once said, ‘Wherever you are, remember . The light at the end of the tunnel . May be you.’

    Amazing

  42. Neil of Sydney, on February 22nd, 2009 at 12:36 am Said: You do not care about people. All you care about is the ALP.

    I’m pretty sure other posters don’t see me that way based on many of my past posts?

    My main concern with governments and how they govern is competence, justice, truth and fainess – all issues that impact on people’s daily lives…and all issues that all governments seem to do poorly…

    Oh!… and I’m sure fellow Blogocrats will be able to quote you a number of occasions when I have severely criticised the ALP…

    …but I don’t recall you commenting much on anything but economy, Treasurers, the Liberal Party and the ALP and I have never seen a critical comment re the Liberal Party.

    Dr Hewson has in fact just shot any arguments you may have had down in flames…

  43. TB Queensland, on February 22nd, 2009 at 9:45 am

    I think you look very dapper as a strawman effigy, TB; but, I don’t know why Neil has dressed you in an all-cotton, black-and-white t-shirt for Labor Day.

  44. Legion, on February 22nd, 2009 at 2:25 pm

    Don’t you bloody start, Legion, I’ve got enough with Tom et al. I thought you were above baiting ;-D

  45. No prize for guessing who the author is:

    “Dear Mr M…

    Thank you for your letter of 12 August, 2007 concerning the global finance system.

    I have noted your views. I however disagree vehemently with your analysis that the world is facing a collapse of the financial markets. The last few days have indicated that the financial markets, with the support of the central banking institutions, are able to meet the demands that have been placed on them.

    Yours sincerely, Joe Hockey.

    http://petermartin.blogspot.com/

    Then there was his success with the Access Card:

    http://petermartin.blogspot.com/2007/09/tuesday-column-access-card-is-complete.html

    Not a good track record. Yes! The importance if history.

  46. ‘of history’.

  47. Caney

    “Costello’s had very, very good economic circumstances for most of the time, not a lot to do of his own making,” Dr Hewson told ABC radio.

    This has been a fact that’s been denied and denied, finally, someone from the Liberal Party with balls enough to call a spade a spade!

    ” Australia’s ‘age of prosperity’, as Peter Costello calls it in his memoirs, has been underwritten by the mining boom (even as manufactured exports stagnated during his tenure) and massive increases in household debt (now more than $1 trillion — about the same as the annual national output), even as the government has wound down its own debt. The national debt has in effect been privatised while, at the same time, risk has been shifted away from government and business onto the shoulders of ordinary people, in the shape of long working hours, casualisation, and the sort of uncertainty that is written in the fact that Australians take the least holidays of any western nation.

    So much for the magic of markets. ”

    Mark Davis, Author The Land of Plenty

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