Shock: Business Union Supports Labor

Greg Evans, director of industry policy and economics at the Australian Chamber of Commerce and Industry says:

By and large we believe the Government’s strategy to deal with the economic slowdown is the correct strategy the fiscal package announced by the Federal Government late last year, but also the beginning of this year.

Which to me seems the opposite to what the liberal party is saying. So it seems that the business unions are supporting Labor and not their own people. So the business unions and the conservative as not such a “perfect match” after all.

Midweek Mayhem!!

Welcome to Midweek Mayhem!

Our midweek thread where we get to talk about anything and everything – now catering to the intellect of Channel Seven viewers.

Now it might just be me (and Tom of Melbourne, I suspect too), that in the reb household our television viewing is largely limited to ABC1, SBS and ABC2.

Sometimes I will occasionally sneek over to Channel 7 to catch Today Tonight – for pure entertainment’s sake – or Border Security for its high-camp drama – the place where everyone gets stopped for “acting suspiciously.” I’ve often wondered what constitutes “suspicious behaviour” but then my mind tends to wander off.

But I digress.

It was during one of these brief interludes at Channel 7, where I came across an advertisement for a TV show called “Australia’s Got Talent.”

Apparently this is a competitive show where participants demonstrate remarkable talents that they’ve acquired through years of training, hard work and dedication.

I imagined that this is one of those worldwide syndicated shows, where the same show in China might feature a two-year old child reciting Beethoven’s fifth symphony on a grand piano, or in Britain might demonstrate the nimble fortitude of two nine-year old blind twins performing a synchronised ballet routine to the Nutcracker Suite.

That would be impressive I thought, as I poured myself another glass of Shiraz and marvelled at how I narrowly avoiding spilling any on the Versace rug.

It wasn’t long before I came to realise that our local version of this showcase of talent, has a considerably lower standard of entry.

Grant Denyer, the diminutive doll-like host of the show, was practically wetting himself with excitement as he revealed that tonight’s show featured a guest performer who could whistle “Delilah” through a couple of cheezels stuffed up his nostrils, while another contestant bearing a baseball cap covered in mentos prepared to immerse his head in a bucket of cola. Apparently thus creating a chemical reaction that would cause much froth and bubble. “Wait til you see what happens next!!” hollered a fever-pitched Denyer.

Personally I wanted to see a team of people rush on stage and hold his head down until it exploded, but that wasn’t to be.

“All this and more” screamed an apopletic Denyer “on Australia’s Got Talent!!”

“Australia’s Got Talent?” I wondered, with a kind of semi-dazed expression, If that’s the best we can do, we’re in a lot more trouble than I thought.

Where’s All The Good News Gone?

Personally, I think the RBA are risking their credibility, but who’s to say they’ll remember anything they’ve said or done when good times return.  That is, if they return any time soon, of course.  We can only speculate.

Well, today The Daily Reckoning sent me the following:

The Economic Illiterati Speak

The Daily Reckoning Australia
–No news is good news. Or is it, good news is not news?

–Either way, the Reserve Bank of Australia departed from the global interest rate playbook yesterday. It left the cash-rate unchanged at a 45-year low of 3.25%.

–The “Australian economy has not experienced the sort of large contraction seen elsewhere,” wrote RBA Governor Glenn Stevens in the note that went out with the announcement. “The Australian financial system remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers.”

–Blah blah blah.

–Okay okay. What has changed?

–Well, this is not the best news in the world for first home buyers, or for pensioners and anyone living off a fixed income. And the stock market doesn’t seem especially enthused about it either, given the early action today. The only positive reaction came from the AUD/USD. With Aussie rates fixed for another month, the yield advantage over the U.S. currency might (maybe) make the Aussie attractive to the last three risk-taking traders on the market (although given the current global state of fear, we’re not expecting a carry trade to resume any time soon).

–There was an absurd reaction though, among the economic illiterati. The RBA’s relatively reassuring assessment of Australia’s current status seemed to please most of the pundits on TV last night. “We have it bad, true,” you could imagine them saying, “but not as bad as everyone else. In fact, we have it so not bad, we’re not going to cut rates-just to show you how not bad we have it!”

— Australia’s economy held up in the fourth quarter, only just. The ABS reports that fourth-quarter GDP shrank by one-tenth of one percent. We know things weren’t so flash in China, Japan, America and nearly everywhere else on the planet.

–If Australia’s economy grows this year, it’s going to have a lot to do with the success of China’s $585 billion infrastructure stimulus plan. But that’s only if that plan works. And by works, we mean that it stimulates demand for Aussie resources.

I know my recent thread China’s Implosion Could See Re-Run Of Great Depression’ did seem a little dramatic.

SO, it’s all eyes on China to help pull us up by the bootstraps? Let’s hope their economy doesn’t implode then.  See. Some good news.

I also had the audacity to explain Why This Aint No Ordinary Recession Concern

I concluded by quoted Ross Gittins:

Punchline: as everyone from the International Monetary Fund to the US Federal Reserve chairman, Ben Bernanke, has warned, until the Americans fix their blocked banking system, no amount of fiscal stimulus or interest-rate cuts will make any difference.

Our economy will remain in trouble until they do.

And the The Daily Reckoning article concludes with:

–The bad news is that the global system of delivering credit and capital to businesses that can put it to efficient and productive use is broken. It’s a giant sucking wound on the body economic. Or, if you prefer, a mangled limb.

–Rather than amputating it, regulators and politicians are pouring more public resources into propping up the people and institutions that have failed. Whether they are doing it out of ignorance, ineptitude, collusion, or genuine conviction is irrelevant. They are effectively stealing future resources away from productive activity and using them to prop up unproductive activity for the sake of engineering GDP numbers that give the illusion of growth and normality.

So, what will happen next? I think it’s anyone’s guess.  And far from being reassurring the RBA are obviously trying to sit on reb’s fence.

Over to You

Recession Obsession II

Economic data to be released today will indicate whether Australia is technically in or approaching recession.

However, the RBA’s decision to leave interest rates on hold suggests that things may not be as bad as we’ve been led to believe.

ANZ’s Mr Hogan predicts today’s GDP to be essentially flat. Not great when you look at Australia’s average of 0.75-0.8 growth per quarter, but not too bad compared to many other economies.

“Negative GDP suggests the economy is shrinking,” says Mr Hogan. “It would be seen as the first leg of a technical recession, which is defined as two consecutive quarters of negative growth.”

CommSec’s Mr Sebastian expects 0.4 per cent growth.

“Now keep in mind virtually all advanced economies around the globe have had negative growth or are in recession. What that says about Australia is we stand far apart from our global peers,” he said.

The data is likely to show rural sector is doing well, because a low dollar means their products sell cheaply overseas.

“So you’ve got this massive global economy shrinking, but Australia managed to hold their slice of the pie because of a weaker Australian dollar,”says Mr Sebastian.

In terms on unemployment, a positive figure today would mean that job cuts may not be as bad as Australian workers are bracing for.

“Unemployment will rise, but it will be a steady crawl instead of massive job shedding,” says Mr Sebastian.

“If you just get a steady crawl in unemployment we will see a period of steady economic slowdown, but not the steady contraction we’ve seen overseas.”

Turning to interest rates, Australia has had some of the highest interest rates in the world, which gives the RBA more leeway to stimulate the economy down the track. But positive data on housing and retail sales mean the RBA is taking a wait and see approach.

“A strong GDP result means the RBA will not have to cut significantly. We’re actually forecasting a 2.5 per cent cash rate low,” says Mr Sebastian.

“Certainly further cuts are on their way, we’re not out of the woods yet but we’re not going to see the substantial rate cuts we’ve seen of 1 per cent.”

Despite the pessimism constantly touted in mainstream media, Mr Sebastian believes recession ‘could be avoided.’

“Retail sales in December alone were the best results we had since the Sydney Olympics,” says Mr Sebastian.

“So consumers were out there on a spending spree, and they weren’t buying consumables. It was big ticket items like the plasma screen, or furniture.”

All that spending is one reason the Reserve Bank kept interest rates steady yesterday, he says.

“They looked at the result and said ‘you know, things aren’t as bad as we’ve made them out to be.”

If Australia can avoid slipping backwards on economic growth, we may be able to avoid a recession, says Mr Sebastian.

“It’s likely with further stimulus and further interest rate cuts, Australia may get out of this particularly global meltdown with a slowdown rather than a recession.”

So it appears that things may not be as bad as we have been led to believe. I guess we’ll find out later today when the figures are released.

If they are not as dire as predicted then this will equate to an overwhelming endorsement of the Government’s handling of the crisis.

Perhaps, “The World’s Greatest Treasurer” will need to hand over the tiara.

Regardless of the outcome, the spin from both sides, as usual, should be entertaining…


The Australian economy contracted in the final three months of last year, surprising analysts and suggesting the nation will enter a recession this year, triggering more job losses. The Australian dollar sank on the news.

Gross domestic product growth for the fourth quarter dipped 0.5%, the Australian Bureau of Statistics said, following a 0.1% rise in the third quarter. Analysts surveyed by Bloomberg expected the economy to grow by 0.2% in the fourth quarter.

In a report just in from SMH...

”This is inevitably the first quarter of Australia’s recession, that it’s currently in,” said Matt Robinson of Moody’s

”It makes a mockery of the comment from RBA yesterday that Australia hasn’t seen the sizeable contraction in demand that other economies have seen.”

Excluding the farm sector, the economy shrank by 0.8% alone. The main drags on the economy were a slump in manufacturing, which lopped 0.5 percentage points off the quarterly growth rate, while property and services subtracted 0.3 percentage points.

For the year, the economy expanded 0.3%, less than expectations of a 1.2% increase according to a Bloomberg survey.

The poor national accounts figures come one day after the Reserve Bank justified a decision to leave interest rates unchanged in part because the economy had not “experienced the sort of large contraction seen elsewhere.”

Macquarie senior economist Brian Redican said there were surprises in today’s release with consumption and investment weaker than partial indicators suggested, and suggesting the RBA will have to take out its rate axe again.

”It’s a bit of a dog’s breakfast,” he said

”The RBA must be very confident that spending is holding up better than all the surveys suggest, but that’s a big risk. A cut of 50 basis points next month has to be a good bet now.”

The RBA decided to hold rates steady at a 1964 low, citing the strength of the Australian financial system and the flow-through effects of the 4 percentage points in cuts already made since September.

The Australian dollar fell on the announcement, dropping almost one US cent to 62.93 US cents in recent trade, down from 63.86 US cents. Stocks were also weakened, with the main indexes retreating to be about 2.2% lower for the day.

The December quarter was the weakest since the final three months of 2000, when the introduction of the GST distorted the economy and produced a 0.9% contraction.

Australia’s unemployment rate is now running at about 4.8%, a tally that’s set to rise in coming months as companies shed workers to remain in business.

In the past week, firms have announced thousands of job cuts, including at Pacific Brands, Robert Bosch, and Lend Lease.

”For all intents and purposes, today’s data confirms the Australian economy is indeed in recession,” said Macquarie interest rate strategist Rory Robertson. ”The good news is that the recession here is substantially smaller than the US, UK and elsewhere. But the next year or two are going to be a difficult time for the Australian economy.”

Australia is yet to enter a ”technical recession” – considered to be two straight quarters of shrinkage – because the third quarter of last year remained in positive territory. The meagre 0.1% growth for the period was left unrevised by the ABS. The bureau did chip away at the September quarter’s annualised growth figure, lowering it to 1.8% from 1.9%.

Flick Crit: The Reader

My latest film review on Cinema Takes:

The Reader: not just another holocaust movie

The Reader is a complex film that explores themes of love, barbarity, guilt, shame and secrecy. The triumph of the human spirit is often hard to find as the horror of the holocaust is revisited through a different lens, a seemingly ordinary but very flawed German woman.

There are many ghosts haunting this excellent movie besides its holocaust victims.

Twenty five years ago Meryl Streep won a Best Actress in a Leading Role in Sophie’s Choice. Kate Winslet took the glittering oscar prize this year in competition with Meryl’s outstanding portrayal of Sister Aloysius Beauvier in Doubt. Sophie and Hanna both have secrets that embody the mystery in each narrative. In Hanna’s case her personal shame takes precedence over public condemnation but her secret is barely disguised from early on in the film. We are warned by a teacher’s remarks that literature is about characters trying to keep their secrets hidden.

Amon Goeth, the crazed commandant from Schindler’s List was played by Ralph Fiennes. He received a nomination for Best Actor in a Supporting Role. The Academy of Motion Picture Arts and Sciences certainly like holocaust movies.

For more please click here.