It was the night before Budget Night..

And Nick Minchin and Helen Coonan are saying that they’re going to hold the Labor Government to account to make sure that “no election promises are broken!”

Oh, the irony of it all….

Let this be our open Budget discussion thread…..

150 Responses

  1. It was the night before Budget Night…& all throughout the house not a creature was stirring…except for Joe Hockey who had snuck to the fridge with a plan to gormandise its’ contents, Helen Coonan who shuffled through the basement like the Thing That Should Not Be; & delicate Malcolm who was hiding under the staircase whimpering.
    In the master bedroom Kevin & Wayne were cavorting through a bloody orgy that would have made Gilles de Rais proud.

  2. So it’s OK to oppose aspects of workchoices which were part of the Government’s promises, and it’s OK to oppose the early introduction of an ETS (again an election commitment) but they will hold the Government to all their other election commitments – sheesh. Talk about irresponsible, when the budget bottom line changes as dramatically as it has since the election promises were made (based on budget projections at the time), every Government should be prepared to walk away from promises. Let the electorate punish them if they think they deserve it.

    As an aside, it would be interesting to see the budget line at the moment if the Libs had won the last election given the last Government’s promises at the last election far exceeded those of Labor’s. Me thinks that they would have walked away from some of those promises in the current situation.

  3. Well, as long as the government continues t spend our money so prudently on things like home insulation (particularly for those that can afford it themselves) and middle class handouts (cash only), I’ll be cheering them on!!

  4. Good point, Dave. Yes, they were committed to even bigger spending. Remember Kevin Rudd saying during the election campaign: “This reckless spending has got to stop!”

    They had such a record of massive spending ($314 billion between the 2004-2005 budget and the 2007 election) that it would have been very difficult for them to slam on the brakes.

    I hope the government uses your angle on the argument.

  5. Ah yes, but are they breaking “core promises”?

    See the Liberals are very particular about those types of things…

  6. bravo Tom!

    Your dishonest mockery is very convincing today.

    Front page of the OZ today has everyone bracing for the blame to be put on Howard. I believe there is some talk in there of cutting out middle class welfare & changes to private health etc.
    To me these are good things. I have no problem with…

    “The Australian revealed last Friday that Mr Swan would slash Mr Howard’s 30 per cent rebates on private health insurance, applying means tests for singles earning more than $74,000 a year and couples on more than $150,000”

    Most of the criticism of “attacking the rich” no doubt comes from those with something to lose who can most afford to lose it.

  7. And also at the Oz and now tucked away under Blogs is:

    What is clear with hindsight is that the Coalition wrote cheques to the electorate that would bounce once the mining boom turned to bust. It wasn’t the election tax cuts that broke the budget, but the combination of tax cuts and handouts in the final term of the Coalition.

  8. “Most of the criticism of “attacking the rich” no doubt comes from those with something to lose who can most afford to lose it.”


    “What pushes the masses into the camp of socialism is, even more than the illusion that socialism will make them richer, the expectation that it will curb all those who are better than they themselves are.”

    Ludwig von Mises……

  9. Toiletb..I’ve read some of the most ridiculous statements re the means testing of private health insurance. One that comes to mind from some (idiot) is that he will now not be working as hard so as keep his wage/salary under the $150,000 mark..umm.

    Love this one:

    Soo, previously someone earning say $48g pa pays taxes so that those wealthy enough to be able to afford private health insurance can have A Year’s Free Movie Tickets, popcorn included? via their ‘health’ insurance.

  10. @Sparta:
    and yet, the fact remains that the biggest cuts are coming from those much more able to afford them.

    Seriously, unless you have ten children and a couple of wives to feed – $150,000 p.a. is a very respectable wage. Why should the government be helping them pay private health insurance & the like when people earning 1/3rd that amount have trouble getting it in the first place?

    But, you know, continue attacking those that complain rather than address their grievances. After all, they “never had it so good” right?

  11. Peter Hartcher released a book last week (it was launched by Peter Costello) about the final months of Howard and the first few months of Rudd.

    Costello is quoted as saying that he instructed Teasury not to disclose the budget to Howard because all Howard would want to do is spend, spend spend.

    It’s not hard to see that the previous government were real masters at stuffing things up.

  12. “But, you know, continue attacking those that complain rather than address their grievances. After all, they “never had it so good” right?”

    I simply do not understand the contempt so many have for those who have done well and why so many insist this as an issue of “fairness”? What percentage of all taxes do high income earners pay in general in Australia anyway? That’s an honest question…….

  13. Why am I not suprised….Apparently top earners simply aren’t doing enough….What happened to fairness….

  14. Toiletboss,

    In regards to PHI credits, you have to be kidding me….

  15. Sparta,

    I suspect the percentage is quite low as a % of total revenues, at least in good years when Company tax and Capital Gains Tax reciepts are quite high.

    Bear in mind though that we aren’t talking about increasing the taxes paid by higher income earners, we are simply looking at whether these people should receive further tax cuts or some of the concessions generally handed out across the board. Ultimately this means that higher income earners pay more tax as a % of the income than those on lower incomes but if the alternative is to go further into debt or remain in debt for longer through lower tax receipts and more handouts, surely those who can most afford the ‘relative’ increases are those that do contribute. This isn’t an issue of bashing the higher wage earners or some ‘politics of envy’ crap; its just basic budgeting.

    Tax receipts will need to increase to pay of the Government debt – that’s a fact of life. The Government is supposedly committed to the promised tax cuts which will benefit high income earners (those earning over $180K) by $41/ week. This equates to around an extra what, $2000k/year – If they lose the 30% rebate on private health care, I suspect that they will still be better off by around $1500/year.

  16. Dave55,

    Interesting……I have only just started to familiarize myself with the tax system down under….Currently trying to get a grasp but a bit disheartened to see comments that indeed lend themselves to the “politics of envy” that you mention.

  17. As a high income earner, I’m all for lowering the benefits given to high income earners. We might like them, but we don’t need them and there are far more important priorities in our society.

    As the famous US judge Oliver Wendell Holmes once said

    “I like to pay taxes. With them I buy civilization”.

  18. I simply do not understand the contempt so many have for those who have done well and why so many insist this as an issue of “fairness”?

    Who said anything about “contempt”? I’m not exactly earning $150K p.a. (I wish!), but I am well north of the “average wage”. I am one of those that has “done well”.

    As for the insisting this is about “fairness”, I personally don’t see why the issue shouldn’t be about fairness. If you have $20 in charity to give – do you give it to the wealthy guy or to the person that needs it. The government is for all Australians, not just the wealthy ones. Why is there even a question about them helping those that need it most?

  19. My mistake – right name, wrong profession. Oliver Wendell Holmes was a physician, poet, professor, author. I don’t think he was ever a judge.

  20. And Loth and Tol likewise. I would certainly trade my private care rebate for another nurse to be able to be employed at Caritas Christi public in palliative care.

  21. It seems that everyone here is celebrating the loss by some of the family tax benefit b, and the health insurance rebate – such people don’t even get any stimulus cash.

    I bet most earners over $150k have already insulated their homes too.

    Perhaps we could have a thread where people could post their thanks for the sacrifice made by those earning over $150k.

  22. Top earners and asset holders generally have far more opportunities to structure their tax affairs so as to minimise their average tax rate. And they generally do so.

    To make valid comparisons you have to look at ALL taxes, not just income tax – this includes sales tax, GST and various state taxes. Those taxes tend to have a bigger impact (on the average total tax paid) on poorer people than they do (on the average total tax paid) by richer people.

    This paper (in PDF format) argues for another tax bracket for very high income earners. Take or leave the argument, but it has some interesting stats. On page 4 it reports that the average (income) tax rate paid by those earning over $1M per year in 2005-06 was 20% – so focusing on the 45% top marginal rate isn’t very indicative.

  23. Tom,

    How about this one:

    Thanks rich people!!

  24. Tom, you’re probably right you know. People who earn over $150 BIG ONES pa probably have had enough money to be able afford to purchase their own insulation eons ago. Damnation, something else for the undeserving poor people such as pensioners to help them reduce their power bills.

  25. “Sigh………”

    I’m not a socialist.

    As I said,
    Most of the criticism of “attacking the rich” no doubt comes from those with something to lose who can most afford to lose it.

    Presumably none of the “well off” will starve or become homeless if the gov curbs a little profligacy?

  26. “Perhaps we could have a thread where people could post their thanks for the sacrifice made by those earning over $150k.”
    As much as I’m tempted to accommodate your request…I haven’t quite forgotten what happened the last time that I did…!!!

  27. Sparta, it’s sort of like the politics of envy in reverse where the wealthy consider themselves as more deserving of tax payer funded handouts than those who need social welfare assistance.

    Unfortunately, compared with the US Australia has a sad history of lack of philanthropy. A few examples, but not a scratch on what the wealthy in the US provide viz scholarships, funds and donations.

  28. Presumably none of the “well off” will starve or become homeless if the gov curbs a little profligacy?

    Maybe they indeed will with multi-million dollar mansions losing tens of thousands in value day by day. Might just have to settle for 3m for the holiday home at Noosa..b*gger we might have to holiday at home this year..Broome looks nice 😉

  29. Min, interesting point – especially since in the US the very wealthy (particularly those in the financial sector) have done awfully well out of the taxpayer, particularly in the last year.

    And I’d say Australia has more of a history of (government) provision of “social goods” than reliance on philanthropy, and given the choice between the two I prefer the former.

  30. Most people seem to think that there is a public benefit by having a significant proportion of the population take out private heath insurance, and remain insured through to their mature years.

    I also recall a graph indicating the past declining levels of private insurance, with the trend (to some extent) reversed following introduction of the rebate.

    The issue is whether the rebate exists as some form of tax dodge for some higher earners, or whether it is an instrument of public policy to reduce the call on the public health system.

    If there is an increase in the call on the stretched public system, this change will be seen as very short sighted.

  31. Loth, and I agree. Philanthropy is at the whim of an individual no doubt often due to things such as tithing. But of course this has been rorted by many off-beat religions (and perhaps some less off-beat).

    Was just thinking about JWH’s attempt at social engineering – pay married women to stay at home and penalise single mothers by placing them on lower benefits and insisting that they go to work. Run down public hospitals, but subsidise private health insurance (12 months free movie tickets and all).

    I am certain that the above examples (and others), in JWH’s mind would act as an encouragement for people to do better. Or maybe it was meant to keep the workers in their place..but that’s very socialist of me isn’t it.

  32. Yes, Min. I’d rather the government “ran up” public hospitals and public schools and public universities and the like to sufficiently excellent standards – and let anyone who wanted to pay for anything on top/instead of that go for it – on their own $.

    The “user pays” argument is very American, and it leads to stratification of society (which has been getting notable worse in the US over the decades), limited opportunities for many, and wasted development of one of our most flexible resources – people. An educated and healthy workforce is an asset that business can exploit…

  33. “The “user pays” argument is very American”

    Really? It doesn’t apply elsewhere? This comment really falls well short of one that is informed.

  34. “the expectation that it will curb all those who are better than they themselves are.”
    Ludwig von Mises……

    BETTER?…or more fortunate?

  35. I’ve seen two separate reports indicating that the average Federal tax rate (which I _think_ – don’t quote me – includes federal individual income taxes, federal corporate taxes, payroll taxes and estate taxes, the last of which I believe affects only quite large inheritances) for the top 0.01% of US earners is around 30-32%.

    Not sure how the top 0.01% compare to the Aussie $1M earners I referenced earlier (both in terms of income levels, and the different taxes counted in the different reports). However the Aussies are apparently paying 20% in income taxes, so maybe there’s a case the most wealthy should come to Australia to lower their total tax… 😉

    One fly in the ointment is that they would have to give up US citizenship in order to do so because the US taxes worldwide income even whilst resident overseas, and I seem to recall some provision saying that they could still tax you for 10(?) more years if they made a determination that your citizenship change was for tax avoidance(?)/reduction(?) purposes.

    I’m betting some accountant or consulting firm somewhere has done these sorts of calculations, but I’m not sure they would put it out there for all of us to see.

  36. How very true Loth. One of my less than favorites is how JWH limited the opportunities for country kids to attend university. Once upon a time if you were a country kid and had to live away from home in order to attend university that you qualified as ‘independent’ and therefore Austudy. Austudy was later altered to mean either over 25yrs, or married, or had worked earning X for 18 months (while most uni courses allow for only 12 months deferral) or from an ‘at risk’ home environment.

    The result of course has been a substantial reduction in children from country high schools attending university.

    I don’t expect anything in the forthcoming budget due to the global downturn/mega reduction in incoming revenue, but in the next budget I would love to see some sort of addressing of this issue.

  37. “If there is an increase in the call on the stretched public system, this change will be seen as very short sighted.”Tom

    I agree Tom.
    But if it plays well to the majority who don’t earn exorbitant amounts it may be just short sighted enough to factor into re-election for Special K & Co.

    It’s plain that my comrades & I are just waiting for Julia to take the mantle before the vicious communist agenda can be properly implemented & the calculated extermination of the upper crust can begin with alphabetical-order incinerations of the rich in city squares.

  38. Tom, I wasn’t trying to say that it doesn’t apply elsewhere. I’m familiar with the US and Australia, but not the other couple of hundred countries in the world. It’s very American in the sense that it’s ingrained in a significant portion of both the populace and the political class there.

  39. Oh good.

    Luckily Toiletboss my name is Tom.

    So please exterminate Miglo first, then Reb.

  40. In my defence…

    I once lived in a rented flat.

    I know what it’s like to not know where one’s next bottle of Coonawarra Shiraz is coming from.

    I know what it’s like to live on struggle street.

    (or at least “struggle street heights”)…

  41. I realise Lotharson that you are familiar with the US.

    Though instead of looking at everything thorough the prism of that experience, have a look at the health systems operating in many other reasonably wealthy countries. There are plenty of examples that support a greater or reduced private sector role.

    When it comes to health care, I don’t think “user pays” is a concept even remotely particular to the USA.

  42. 2003 NY Times article reporting (in part) on a US Bureau of Labor and Statistics study that reported on the (almost) total tax burden for different quintiles. (You’ve still got to be careful how the definitions are made and data collected…)

    This blog post references that article and provides a graphic that apparently came with it (unconfirmed). The reported effective total government tax receipt rates for the five quintiles (starting from the bottom 20%) were:


  43. Tom, when I brought it up I was talking about “user pays” as a political principle that parties may seek to apply across many areas, not specifically health care. The introduction of that meme here seemed likely – given JWH’s philosophical and political connections – to be inspired by its American form and expression.

    But speaking specifically of healthcare, and seeing you know more about it, perhaps you could share your knowledge of these health care systems in wealthy countries that are “user pays” with us? It might help to define what “user pays” means in this context so we’re all on the same page.

  44. I’m not setting myself up an expert on international health/hospital funding and delivery systems, I’m only familiar with some because of travel and residency experience.

    I’m simply pointing out a lazy habit. That many simply find it too easy to make a disparaging, nationality based remark. Yours was an example of this.

  45. “I’m not setting myself up an expert….”

    Well that makes a change….

  46. Amazing that the Coalition has no problems in voting down key Labor election promises when it suits them but will hold them to task (as per Reb’s quote), to ensure no election promises are broken.

    “The Opposition and the two Independent Senators have also delayed consideration for two months of the Government’s $30 billion so-called Rudd Bank to ensure foreign lines of credit and Labor’s second attempt to overhaul political donations.”

  47. If there is an increase in the call on the stretched public system, this change will be seen as very short sighted.

    The public system would not be so ‘stretched’ if genuine health reform was undertaken in this country.

    We need to have the power taken out of the hands of health providers and given to health users (you and me).

    Ministers who supposedly represent the community will not take on the vested interests of the powerful health provider lobby and the Private Health insurance industry which distort the market. The only voice deliberately ignored by all in the health debate is that of the user eg us in the community. It is time for the voice of the citizens to be heard in healthcare.

    a health policy
    for australia: reclaiming universal health care

    Time to confront our citizenship deficit

  48. Turnbull is going to be dead meat should he be (again) just obstructionist rather than being able to lay out well formulated and costed alternative policies. Am wondering what he is planning to argue against..increase in the single pension, reduction in welfare handouts for the wealthy, no spending on infrastructure??

  49. “We need to have the power taken out of the hands of health providers and given to health users (you and me). ”

    Amen to that comrade kitty, seriously.

  50. I was having a think back to the Ye Olde days. This was when everyone regardless of income could receive the best health care available in a public hospital. People who took out Private health insurance did so because they wanted to either attend a private hospital or have a private room in a public hospital and to have their choice of specialist rather than the duty doctor.

    It was most definitely not because they wanted to attend alternative health ‘professionals’, have gym memberships paid for nor to have 12 months of movie tickets.

  51. Who to believe???,25197,25461801-12377,00.html

    Unemployment at 10% without the handouts according to a Treasury report that was most probably sanitised by the PM’s office?

    Or this…,25197,25461556-601,00.html

    Twenty years to pay down the debt?

    I reckon they are both full of shit!

  52. Just as a matter of interest, perhaps someone could explain the artificial means test of $150k?

    Why is a single income household means tested at $150K, when a dual income household where both partners earn (say) $80K not?

    Given the progressive tax scales, the dual income household is far better off.

  53. Re Costello..

    “Costello Denies Misleading Parliament; Treasury Releases Executive Minute On IR…Reacting to ongoing speculation about his prime ministerial ambitions, Costello backed away from suggestions he would challenge John Howard for the prime ministership in the early months of 2006.”

    Nope, I don’t trust Costello as far as I can throw him. However, one thing was correct, he did indeed never challenge John Howard.

  54. I love it: “Despite the huge obstacle of previous government waste, we’ve been able to keep a lid on unemployment”. Okay, so it’s politics! I’m eager to here the Opposition’s response. K. Rudd has done a really good imitation of JWH and is just as likely to get away with it.

    Jobless rate would be 10pc without stimulus, says Kevin Rudd,25197,25461801-12377,00.html
    THE forecast jobless rate would be as high as 10 per cent without the stimulus measures the Government has put in place according to Treasury advice, Prime Minister Kevin Rudd says.

    The advice, to be published in the Budget which will be unveiled tomorrow night, says the nearly $90 billion in stimulus spending has helped to reduce unemployment queues, Mr Rudd said.

    “This Treasury advice finds that if the Government had done nothing, national unemployment in Australia would have been forecast to reach 10 per cent,” he said.

    The jobless rate for April fell unexpectedly to 5.4 per cent last week, a fall of 0.3 per cent, but it is predicted by some forecasters to rise to 8.5 per cent in the coming year.

    Mr Rudd said the Government action meant a significantly lower unemployment forecast would be in the Budget papers.

    “This Treasury analysis calculates the stark human cost of doing nothing,” Mr Rudd said.

    “This advice is the final nail in the coffin for those who argue that government’s should do nothing to support jobs during a global recession.”

  55. Lol I’m eager to [here] hear

  56. I like this…“This advice is the final nail in the coffin for those who argue that government’s should do nothing to support jobs during a global recession.”

    I thought the definition of recession was two quarters of negative growth?

    How much has the government got left in its ‘WAR CHEST’ when we actually go into full blown recession???

  57. Scaper, you know how long it takes to get major infrastructure projects up and running. If there is a recession, at least it won’t be due to a lack of trying. So far all that we have had from Turnbull is tax cuts.

  58. Min, I’m all for the infrastructure component and I’m referring to the handouts.

    I just hope that there has been enough funds set aside for unemployment benefits and more importantly, retraining!

    I hope the government has got their forward estimates right as they failed abysmally last year on this front.

  59. That many simply find it too easy to make a disparaging, nationality based remark. Yours was an example of this.

    Well, you’re free to think whatever you want about whether *this* was an example of that phenomenon. And I could have certainly worded it both more precisely, and as less of a general pronouncement.

    But as the author of the comment in question, it was intended to be disparaging of the outcomes of “user pays” philosophy as seen in the US, and it included a reference to the US precisely because
    (a) that’s the other system I have most recent direct extensive experience of, and
    (b) that’s the country that JWH (at least) seemed to get the most political inspiration from (and not just for “user pays” principles).

    So the national reference seemed quite trenchant to me.

    As I said, I’m quite happy for someone else to educate us about any systems where “user pays” works well, and perhaps discuss how those systems are structured in order to achieve good outcomes.

  60. Is there a system out there that has a consumption tax but no income tax?

  61. Gotcha scaps. Hopefully more for retraining than for unemployment benefits as of course Australia never did recover from a skills shortage courtesy of chronic and continual underinvestment in training over the past decade+

    I tend to agree with Meganomics at the Oz:

    This doesn’t reflect well on anyone. John Howard and Peter Costello must take most of the responsibility because they delivered what have now proved to be unfunded tax cuts and handouts between 2004 and 2007.

    But Labor must share some of the responsibility because it gambled in opposition that the Coalition knew what it was doing. For instance, Kevin Rudd took the $10 billion-a-year tax cuts the Coalition announced on the first day of the 2007 election campaign at face value.

  62. A consumption tax but no income tax? A consumption tax is the GST, but no income tax. This is old age pensioners in Australia.

  63. Lotharson, if you substituted some other social/economic observation/generalisation for “user pays” and another nationality for “American” in your comment of 2.55, I think you might get the perspective that I’m suggesting.

    But is anyone going to outline the rationale for means testing a single income household of $150K, that supports 2 adults and 2 children, but the same household is not means tested if there are 2 people earning a total of $160K?

    Perhaps those most inclined towards means testing (and you know who you are) could offer a rationale.

  64. Speaking of pensioners…it would be bad form not to give them $30 per week increase in my opinion.

  65. Wouldn’t it be nice to live in a society rather than an economy?

    …but if they touch my tax free super for over 60!!!!!!!!!!!

  66. They had jolly well better scaper. I believe that it was 1993 since there was a real increase in the pension. Howard provided the original $500 handout as a supposed compensation for pensioners having to pay tax via the GST..well and truly eaten up via increases in services, charges, dentist bills. One estimate states somewhere between $1,200 and $1,400pa.

  67. So please exterminate Miglo first, then Reb.

    Reb, the peasants are revolting.

  68. Min, I heard a rumour that the government will be halving the Utility Allowance!

    Give with one hand and take with the other?

  69. Scaper, I’ll put my neck out and suggest that that IS only a rumour.

  70. Reb, uneasy is the head that wears the crown. That Rasputin of bloggers (Tom) will wield his sword at the first opportunity.

  71. tom, I’m really not sure, but wonder if the means testing of single income >$150,000 is to correct the anomaly where a family on a relatively high single income can claim Family Tax B Benefit (welfare for the wealthy).

    The DINK’s are assessed on their taxable incomes but can’t claim FTB as it is only for single income families.

  72. Tom at 4:37 pm:

    Why is a single income household means tested at $150K, when a dual income household where both partners earn (say) $80K not?

    Perhaps you can explain which benefit(s) you’re referring to here Tom – I thought for most Centrelink payments, both incomes are taken into account.

  73. There are ads everywhere encouraging us fags to fess up to being in a relationship – for the sake of slashing Centrelink entitlements etc.

    Funny how the Government is happy to acknowledge our relationships when it’s going to be to our financial detriment, but happily choose to ignore the value of our relationships when it comes to things like societal recognition and dignity.

  74. if you substituted some other social/economic observation/generalisation for “user pays” and another nationality for “American” in your comment of 2.55, I think you might get the perspective that I’m suggesting.

    Well, I *think* I get the perspective you’re suggesting, but I may be wrong seeing you’re responding like this. I think it’s more about generalization from specifics than about using specific examples, which I already agreed was a fair point. Did you have something else in mind?

  75. Scaper

    How much has the government got left in its ‘WAR CHEST’ when we actually go into full blown recession???

    Don’t worry Scap, we can always blame it on JWH and China.

    China slips deeper into deflation
    China fell deeper into deflation in April, but economists said the central bank was unlikely to shift policy as a result and expressed confidence that prices would be rising again before the end of the year.

    Consumer prices fell 1.5% in the year to April, marking the third consecutive month of deflation after a 1.2% fall in the 12 months to March, the National Bureau of Statistics said on Monday.

    Factory gate prices fell 6.6% in the year to April, the rate of decline accelerating from a 6.0% drop in the 12 months to March.

  76. Reb

    For a person who used to live in a rented flat, you’ve certainly come a long way (wink)

    Banks give VIP treatment to exclusive customers,26860,25457554-5015795,00.html
    OUR wealthiest are being lured to join an exclusive high-roller banking club even as the credit crunch continues to bite.

    The Daily Telegraph can reveal a group of mega-rich have entrusted a combined $5 billion to a scheme run by NAB.

    The Swiss-style banking service caters for every need – from holiday bookings, limousine hire, football, concert and opera tickets to trust structures, estate planning, taxation, business loans, philanthropy and sharemarket investments.

    Prominent clients of the “NAB Family Office” include rebster, editor of Blogocrats

    Membership to the VIP club is by invitation-only and requires a minimum investment of $20 million.

  77. John, the developments in Japan will be interesting, Ponzi Scheme comes to mind.

    Have you seen the latest figures on China’s steel production anywhere?

  78. John, for $1M+ in fees a year, you’d want to be waited on hand and foot…

    …but I tend do be uncomfortable having that sort of experience (never mind that I’m almost exactly $20M short of the necessary $20M minimum investment…)

  79. Have you seen the latest figures on China’s steel production anywhere? No Scap, would be interesting though.

    Lotharsson, I agree, the excess pampering for the fee strikes me as being a disgraceful overindulgence. I might try the service next year (LOL)

  80. If one isn’t a great ape interested in shorting the wires at the local Zoo, I guess there’s always this for bending the bars of the potential stag-deflation exhibit at the shopping maul…WORLD STEEL REVIEW, April 2009…or this…U.S. Steel files trade complaint against China for steel dumping…to keep the post-Christmas reveries chugging along. Personally, though, I’d be just as interested in checking the fine-prints on the various, other-denominated stimuli, as impressive as splashes of ink about splashes of cash are without their articulating how those quanta are designed to function and flow in other domestic economies, and thence globally.

  81. John McPhilbin, on May 11th, 2009 at 7:09 pm

    Shhh, or you’ll reveal that some of us were sufficiently intrigued to go digging deeper into the backgrounds, relationships, and sub-cultures of the various Mustafa ‘Crazy John’ McPhilbins Ilhans and the rest of the Moustaffers running advertorials on the gilt-service, one-stop kebab shop operating out of the lovely, six-storey, open-plan Melbourne headquarters of the NAB’s PWI unit. Family office, indeed; which was not the least of the piece’s insinuations; and well worth the dig, if one is so inclined and isn’t otherwise intent on blowing wide open the vaults of Credit-Suisse to see who has moved the hole-y cheddar there. 😉

  82. A somewhat interesting piece of framing from Gittins…Tax cuts replace Howard-invented cash splash.

  83. Stirling Newberry usually has some interesting facts and (often provocative) perspective. This one is “The Depression That Hayek Built”.

    This one talks about the Irish financial crisis, the eyepopping Spanish unemployment rate, the US private sector employment crash – and some thoughts on the ideologies involved.

  84. And speaking of provocative, I don’t know how many of you know about The Rude Pundit. And I don’t know how many of you want to know. But some of you might.

    Serious warning – he’s very very very rude. There’s almost no facet of human behaviour, particularly human sexual behaviour, that’s off limits as metaphorical fodder.

    But wow, can he put together a (very rude) but highly illustrative analogy that skewers stupidity…

    If you are even remotely likely to find it offensive, don’t visit his blog (which is pretty US-focused).

  85. Crap. Older people in the US whose life savings have disappeared are trying to get work, which makes unemployment and underemployment worse 😦

  86. Total changes in US private payrolls is in uncharted territory. And there’s no need to say, it’s not in a good way.

  87. This guy thinks the US bank “stress tests” were a joke, and is backed up by the Wall Street Journal reporting that different metrics were used than expected, and the results were “negotiated down” by the banks.

    Which gives everyone a lot of confidence, I’m sure…

  88. A US perspective on paying for college (i.e. University), which is mostly insanely expensive, at least by our standards, and is at least somewhat related to the concept of “user pays” for various services.

    It’s not out of the ordinary for parents to start saving from birth. There are various government tax shelters to help out – and the author used to an oversight board for a program in one State. Many of them put people into fairly high risk investments, and now they can’t afford college fees.

  89. I haven’t caught up with this morning’s reading..but for those who haven’t already seen it and slightly off topic, Joe Hockey gets a Brain Wash…priceless!

  90. It seems that the government is quite comfortable about breaking various election promises, but implement misdirected, ill conceived and wasteful spending (eg insulation) that was not part of its election commitment.

    They break promises because they’re politicians, and one side is no more ethical than the other. That ought to be the lesson for the naïve that thought otherwise.

  91. But Tom, they’ve saved 200,000 jobs.

  92. I love how its being framed, would Howard and Costello do it any different? I don’t think so:

    TODAY’S federal budget will forecast a record deficit of $58 billion for next financial year while also claiming that the Government’s stimulus packages will save 200,000 people from losing their jobs

    With the two stimulus packages worth a combined $52 billion, the average cost of each job saved will be $260,000.

    Budget: a path back to surplus

    * May 12, 2009 – 9:30AM

    The federal budget will be about jobs, nation-building and a path back to surplus, federal Treasurer Wayne Swan says.

    The budget is expected to forecast a $58 billion budget deficit for 2009/10, downward revisions of growth, and a jobless rate prediction for 2010 above the 7.0 per cent forecast made in February.

    “There are no easy answers when you are facing a revenue writedown of something like $200 billion,” Mr Swan told reporters in his traditional pre-budget doorstop in Canberra.

    “That means difficult decisions and difficult decisions we accept full responsibility for.”

  93. That’s great news John. How many jobs has $4,000,000,000 worth of insulation created so far?

    I’ll be interested to note whether anyone says that unnecessary insulation is worth more than implementation of a core (or even non core?) election promise.

  94. From the Treasurer,… beautiful stuff,25197,25464129-5017272,00.html
    Article from: The Australian

    TONIGHT’S budget has been framed against the most challenging and complex of economic backdrops in almost 80 years. Not since the Great Depression has the world faced a more savage, synchronised contraction in economic output.

    The consequences of this global event for Australia are now obvious; economic growth is contracting, government revenue has been decimated and, despite last week’s data, unemployment is rising.

    This massive global downturn – virtually unprecedented in scale – means Australia has been dragged into recession as well. Its impact has been devastating: in lost output, lost investment, lost jobs and lost income. It is especially tough for families when unemployment hits.

    In these circumstances the task before the Government is perhaps the most complex in our modern economic history.

    In short, this budget must keep stimulus and investment flowing to support the economy in tough times, and lock in savings that will get us back to surplus when the tough times have passed. We must do this while also making the essential long-term investments that put in place the building blocks of a more productive and competitive economy into the future.

  95. Tom

    Insulation will protect us from the elements when our power gets turned off (wink).

  96. I see and understand now John. He’s persuaded me.

    Though it does seem to be a long winded way of saying – “we are breaking some of our (non core?) election promises, we’d prefer to spend your money on unnecessary home insulation rather than keep our word.”

  97. I think you’ll find that insulation was part of the short-term strategy to inject funds into the economy in order to off-set expected job losses. Things have deteriorated significantly since that initiative was announced and the housing/building industry as a whole needs short-and long term focus and funds.

    With the property bubble set to burst affordability continues to be a major issue.

    The Housing Crisis
    Volume 284, Issues in Society

  98. Tom, I could be wrong but the few birbies I’ve been communicating with are all saying the same thing.

  99. Lol Timely reminder, almost forgot I ever posted it.

    Howard and Costello’s Value Lost in Waste

  100. Perhaps someone could refer me to the qualification that Mr Rudd used; you know the one where he must have said – ‘We’ll keep our word, unless things change. In which case we won’t”

    He must have said this or something similar, because if he didn’t everyone here would be posting things like – “this government can’t be trusted, just like the last one.”

    And then everyone would start making disparaging references about Mrs Rudd.

  101. Tom

    John Maynard Keynes once famously said “when the facts change I change my mind, what do you do sir?”

    This was never going to be straightforward nor are the solutions.

  102. …if you don’t bend you end up breaking’ Howard found that out at the last election Tom. Some promises are meant to be broken.

  103. …for the common good, I should add.

  104. Just for the record Tom, I thought the FHOG was reckless policy and was bound to cause more harm than good.

    Property bubble ‘set to burst’
    FIRST home buyers are leaping aboard a sinking ship, with house prices set to fall about 20 per cent in the next two years, an Australian National University economist says.

    Professor Quentin Grafton said house prices could not continue to grow at a faster rate than incomes and consumer prices.

    This “property bubble” was about to deflate, he said, and first-timers, encouraged through government grants to buy at the top of the market, could be over-committed when hit by job losses and, later, higher interest rates.

    “First home buyers who don’t have much of a deposit and can barely afford their mortgage payments on the current interest rates, they’ll be in trouble,” Professor Grafton said.

    “I wouldn’t be surprised if overall we get a 20 per cent decline in nominal house prices over about the next two years.”

    This could lead to borrowers owing more than they own, he said.

    “Ultimately, house prices have to be related to the ordinary prices that we pay for other goods and services and our incomes.

    “In the past decade, house prices have gone up about 50 per cent in terms of that ratio. That is not sustainable, and certainly won’t be sustainable as the recession bites.”

    Professor Grafton’s comments coincide with house-price data showing small but steady gains in the first three months of this year.

    RP Data-Rismark, which is used by the Australian Stock Exchange, reported that Melbourne values grew 2.4 per cent and national values 1.6 per cent. Rival group Australian Property Monitors said median prices were up 0.1 per cent nationally.

    Christopher Joye, of funds manager Rismark, said despite the “unsubstantiated, hyperbolic claims of some renegades”, the figures suggested a “slow house price recovery”.

    While house prices fell about 3 per cent in capital cities last year, most of the damage was done in August, when interest rates were at their highest, he said.

    “With home loan rates now falling, we’ve seen a massive increase in affordability,” Mr Joye said. “That (1.6 per cent) growth is a very encouraging outcome. It shows a natural resilience.”

    He said an increasing number of buyers were investors “positively gearing” — looking to make money from rent rather than declare tax losses, as in the past. He cited the Reserve Bank’s latest financial stability report, which suggested that the substantial gap between incomes and house prices was permanent.

  105. John, with the greatest of respect, that’s not true.

    People still refer to Howard’s pledge of “no GST” even though he specifically went into an election with a commitment to introduce one. Possibly circumstances changed for him too.

    The fact is that this government has abandoned election promises, on the basis of its preferred spending priorities.

    With a budget deficit of $58 billion, and $4 billion stupid and wasteful spending on home insulation, how much are the broke promises worth?

    When Rudd made the various election commitments, I presume he was aware of how much they were worth.

    My criticism is particularly directed to the vocal critics of the previous government who seemed to enjoy endlessly lecturing everyone about “core and non core” election promises. There are plenty of them that participate on this site.

  106. My criticism is particularly directed to the vocal critics of the previous government who seemed to enjoy endlessly lecturing everyone about “core and non core” election promises. There are plenty of them that participate on this site.

    Lol Tom, Oh, okay, the a few hypo[blogo]crats?

  107. …this is a very political site, so keep on swinging Tom. I tend to view all political promises with skepticism. But any attempt to point out facts as largely meaningless in many forums.

    I suppose that’s the fun of it all.

  108. Tom, you really do have a problem with insulation don’t you. And again (sigh), it’s good for the environment viz big reductions in fuel bills for heating and cooling – it assists people such as pensioners who are far more likely to live in a non-insulated homes; comfort (sometimes life-saving) and reduction of fuel bills. Hopefully it will help pensioners who are too worried to turn on the heater just in case they cannot afford to pay the gas and the electricity bills.

    It assists small and big businesses – it assists employment..for example if you were retrenched then it would take only a few weeks training for you to get a job rather than a 4 year trade course.

    Locally (Tweed Heads area), a neighbor reports that all insulation tradies are fully booked for at least the next 2 months [true story]. One needs 2 quotes and she contacted 6. Sounds to me to be great stimulus for local small businesses.

  109. Yes Min, I think spending billions on insulation is very poor policy. I also think cash handouts weren’t particularly wise.

    $4,000,000,000 worth of insulation could be spent to better effect.

    I particularly object to this stupid and wasteful spending when the government will break promises specifically made by Mr Rudd prior to his election.

    I don’t mind if pensioners get insulation if they want or need it. Everyone else can be herded up and told to get it installed, in the exactly the same way pool owners had to install fences.

    But Min, on this occasion, it is the deliberate breaking of specific election promises and the hypocrisy/silence of the “core/non core” bandwagon that is of most concern.

  110. John, this is the latest I can find on Chinese steel production.

    Last year production was up 2.9% and is forecast to be up 5% this year so where is this shortfall exactly on tax receipts on our commodities?

    We’ve had a surplus on trade for ten months in a row and something is not quite right with what Swan has been blubbering about concerning the proportion of the deficit been blamed on tax receipts!

    Now, if the handouts have worked it would be unreasonable to say there has been a reduction in domestic tax receipts, wouldn’t you say?

    I thought I heard on the news this morning that the PM said that the handouts saved 200,000 jobs…that is impossible to believe!

    This government can blame the GFC, the last government or whatever to deflect the blame for their shoddy economic management but after tonight they will be exposed for what they are…incompetent!

  111. Lol Good on you Scap, keep up the good form. From what I understand the Chinese have been stockpiling over the last 18 months or so. Their aim from what I can gather is to bring forward the negotiation of price contracts by cutting demand significantly. BHP and RIO were making a killing.

  112. ..should also add that significant drops in global demand helped slow the demand as well. China were essentially ahead of themselves when they ran into trouble. Doesn’t exactly bode well for short-medium term demand given their rate of economic growth and output has cooled significantly since the boom..

  113. I have a hunch that Seano might turn up…

  114. Thanks Scap

    Looks like the huge stimulus they put together has accelerated things somewhat. What about pricing? Our exports may have increased, however, much lower prices are bound to hurt revenues significantly.

    China’s massive export machine — on which the nation’s economy depends — has been hit hard since late last year as the global financial crisis has hurt overseas demand.

    The slowdown has led to the closure of thousands of exporting factories in the country’s manufacturing heartlands.

    Chinese authorities in November unveiled a 4 trillion yuan ($765 billion) stimulus package to combat the crisis and to stimulate domestic demand.

    Separately, investment in fixed assets in Chinese cities was up 30.5 per cent in the first four months of 2009 compared with the same period a year ago.

    The figure, released by the National Bureau of Statistics, is a prime indicator of the Government’s progress in lifting growth by injecting massive amounts of funds into infrastructure projects.

    Investment in rail and other transport was up by a massive 94.2 per cent, according to the bureau, indicating that some of this public money was gradually starting to have an effect.

  115. Now that it appears that Kevin Rudd will prove to be just as expedient with truth and with election promises as his predecessor, perhaps our attention can now turn to finding a disparaging nickname for his wife!

    Because last time it was so much fun, why not do it again!!!

  116. The danger Scap, long term is China’s ability to weather significant declines to their exports.

    Morgan Stanley Asia chairman Stephen Roach makes an important point. From what I can gather, the Chinese Government seem to be moving in the right direction.

    Global balance has to be adjusted to prevent further crisis,28124,25225214-643,00.html
    THERE are concerns policymakers could be setting the stage for another global crisis if they do not address the imbalance between the US economy and the rest of the world.

    Morgan Stanley Asia chairman Stephen Roach believes efforts to restore the US to its pre-credit crunch global powerhouse status could be dangerous.

    “What I’m most worried about is that the policymakers around the world want to stop the adjustments in the sense of keeping the global economy frozen in its pre-bubble state, with the US consumer driving most of the demand side of the economy and the Chinese producer increasingly driving the supply side,” he said in an interview on ABC TV yesterday.

    “If we don’t rebalance the world, then you know in a few years we will be talking about another crisis.”

  117. Yep, infrastructure is the panacea but we got handouts that were not really the long term bang for OUR buck.

    Hopefully our infrastructure projects will kick in the next two years that will deliver prosperity.

    Did you know that a great deal of our last winters cereal crop is sitting in silos and in some cases on the ground under tarps because of the export bottlenecks?

  118. Hold on Tom, lets wait and see just how hard(core) they are about their previous promises.

  119. Tom

    There is a big difference between a politician who breaks a promise and admits it up front, and another who tries to make up a new term (non-core). That is where Howard was caught out because he tried to wiggle out of the truth.

    Promises can be broken, as long as you are honest about them.

  120. I don’t think that’s what happened Joni.

    For example, many continued to rely on the “no GST” promise by Howard, even though he expressly went to a subsequent election with a proposal to introduce a GST.

    What we will hear from Rudd and Swan will be lots of lame rationale about how the world has changed, so broken promises are legitimate.

    He’s my context – with a deficit of $58 billion, $4 billion on insulation, over $10 billion on cash handouts, etc, etc, I’ll just want to know how much the broken promises save.

    Not much will be my tip. So it will be crap when they make a limp excuse about changed circumstances. These broken promises will be so that they can appease the left and social security sector, talk about the “tough decisions” they’ve made and walk away from a commitment that they deliberately made.

    It will have nothing to do with the money or the economy.

  121. No Tom. Howard is caught out on the GST because he was stupid enough to make the “never ever” statement. That is what gets brought up – his hubris overcame his political nouse.

    And as John says, let’s see what promises are broken before we start to get worked up.

  122. Joni – We already know that there will be various means tests applied, where there Rudd undertook to apply none and make no changes.

    The leaks are there to soften us up.

    Howard won an election with a GST policy; Rudd was elected less than 2 years ago, and will now proceed to break promises.

    Have you thought up a nickname for Therese yet?

  123. please consider this a strike throughof “there”

  124. Tom

    I do not and did not bring any comments about JH’s wife into any comments.

  125. Apologies, then I should have said –

    “Have youse thought up a nickname for Therese yet?”

    A great thread idea, no doubt everyone would love to post something hilarious but (mildly?) insulting, just like they did before about the previous PMs wife!

  126. Yep, infrastructure is the panacea but we got handouts that were not really the long term bang for OUR buck.

    I’m not sure what you’re driving at, because the handouts were NOT MEANT to be long-term. They were meant to have a shorter term effect in the gap between the “now” and the point in time when new infrastructure projects could get going.

  127. Tom, for someone who took me to task recently for a comment which could be read to be drawing a generalization from a specific example, you are arguing a lot about “some” would this and “some” did that and “some” (unspecified) promises will be broken. Not having your memory for the facts you appear to be referencing, it does look a bit like a generalization unsupported by specfics. Do you think it would help your argument to reference specific cases?

  128. Tom

    I do not think that I have seen any insulting names for Janette. Ever.

  129. Lotharson, I took you to task over a nationality based generalisation which many would regard as offensive if directed towards a national/racial/ethnic group other than Americans.

    That’s all.

    With regard to broken promises, Rudd expressly undertook to make no changes to the health insurance rebate, he went into plenty of detail about how and why there would be no changes.

    I’m simply making sure that this evening and tomorrow we are all prepared to join in a chorus of “THAT’S BULLS#@T RUDD”, just like we did with the previous PM.

  130. Lotharsson, so you are saying that the handouts will tie us over to the infrastructure projects get up and going in a year or two?

    If there had to be handouts it would have been prudent to do such when we are officially in recession, not before the fact.

    I’m still scratching my head on this insulation thing, it is a minor component of the building industry and what are the flow on effects from this in the economy?

  131. Joni, Janette Howard was constantly referred to as “Hyacinth” on Blogocracy and elsewhere.

    This nickname was derived from Hyacinth Bucket, a snobby, offensive, social climbing type on a BBC comedy.

  132. With apologies. A computer crash due to downloading the latest version of Internet Explorer. Plus I can’t find my glasses.

    If anyone has emailed since yesterday, please resend.

  133. Scaper..I would have been thinking that you would have been the one to understand short term economic stimulus. It certainly is only as you say a small component of the building industry, however one that can have long term benefits viz savings on power bills.

    Step next obviously is long term projects.

  134. Tom, you say that insulation for pensioners et al is ‘poor policy’. And so what other short term stimulus for the economy/provides jobs would you suggest?

    I certainly have a list viz long term projects which requires upskilling (given the skills shortage) but cannot think of anything better than insulation viz SHORT TERM…creates jobs, reduces power bills.

  135. Min, where is the justification of tax payers money going into private house improvements considering the fact that the government has scuttled the solar industry by subjecting a means test on the rebate.

    It’s not on for income but it is for a property worth a half million dollars?

    I quote that figure because that is how much the shack next door is worth.

  136. Min, why should there be a stimulus in the first place???

    We are not even in recession yet!

  137. Min – “Tom, you say that insulation for pensioners et al is ‘poor policy’.”

    No Min that is entirely the opposite of what I have said.

    I have no problem if you don’t bother to read my posts, but it is best if you don’t then misrepresent my opinions. I’ve been at pains to say that I don’t find a problem in providing insulation to pensioners.

    As for stimulus, I’ve pointed out that the quality of housing for many pensioners is a scandal. The government should spend the $4 billion providing labour intensive home improvement – garden mulching, painting, fixing the roof, guttering and/or insulation for example.

    I fail to see how this is an inferior stimulus or social policy to insulation. Particularly when the insulation is to be provided to people that can afford it. It is stupid, wasteful, poorly directed expenditure by the government

  138. ‘we are not even in a recession yet’. Me thinks that we are on the cusp and so short term stimulus to keep the bods spending and the tradies in jobs is a good way to go.

    Obviously stage next must be mega infrastructure projects plus weaning the middle and upper classes off the government teat re handouts.

  139. John I excused? Will most definitely try to catch up tomorrow morning, computer willing. Hugs.

  140. Tom, no matter what Swan delivers tonight I am sure that you’ll be livid about it.

    Might I ask that you look at the big picture – what’s in it for the country rather than (the expected) what’s in it for you.

    If you have to sacrifice a few cents so that someone else can have a hot meal then feel good about it.

    If promises are broken and they can be justified then I’m OK with that.

    A mate onced promised me a meal at a restaurant but he lost his job. He had to break his promise. I didn’t mind. The Rudd Government has lost a lot of its income. Expect changes.

    One thing I’m looking forward to when the budget is delivered are the shrill screams from the opposition, who are blatantly unaware of the global recession. They will get a laugh from me.

  141. Just wondering if someone can explain this to me from this link,25197,25440881-2702,00.html

    “China helps us to second-best trade surplus”

    Apparently in April we had our second best trade surplus ever. This from the link

    “A MASSIVE surge in exports to China has allowed Australia to shrug off the downturn in global trade and report its second-best trade surplus”

    and also

    “Imports overall were down 3per cent, mainly because of fewer aircraft purchases.

    Exports were helped by strong wheat sales, which were up by more than 40 per cent, with farm-exports overall rising 9.9 per cent to $2.9 billion.

    However the export story would have been very different were it not for the contribution of China, whose purchases of Australian goods leapt from $3.5billion in February, itself a record, to $4.4 billion in March. China’s purchases from Australia had never exceeded $3 billion a month until last August.”

    Apparently our terms of trade are still quite good. How come this massive drop of revenue for the budget??? The only thing that makes sense to me is that Treasury is factoring in future falls in prices for our mineral.

  142. Migs…an exceptional plus down to earth Aussie explanantion.

    PS due to the computer crash (mentioned) above or on another thread..sigh..and am with good old Bessie the elderly computer and so I don’t have your email address. more baby pics sighs all…I can see it now.

  143. Neil

    One month’s figures Neil. Lets see China have implemented a huge stimulus, Japan, our largest trading partner has all but collapsed. World trade overall is dismal.

    Lets get the figures on the overall impact before we start screaming ‘incompetent liars’

    Take Iron Ore as an example, the boom’s over globally meaning that the premium prices once demanded by your BHP’s and RIO TINTO’s have limited shelf life.

    After a decade of uninterrupted growth, how do miners and their suppliers cope with contracting markets and falling prices ?” 21/1/09

    The iron ore and steel market is currently suffering the effects of the global credit crisis. This year’s event will aim to provide you with vital information, strategies and relationship building opportunities which may help you through this difficult period of uncertainty and low commodity prices.

    The 2009 event will be carefully crafted to address the challenges created by the current financial market including

    * economic outlook
    * forecast supply and demand
    * pricing
    * project updates (expansions, care and maintenance operations)
    * financing alternatives for projects in times of a global credit crunch
    * infrastructure challenges
    * potential mergers
    * the importance of critical mass and optimization

  144. One month’s figures Neil. Lets see China have implemented a huge stimulus, Japan, our largest trading partner has all but collapsed. World trade overall is dismal.
    John McPhilbin, on May 12th, 2009 at 6:54 pm Said:

    John- world trade may be dismal but ours doesn’t appear to be. Last month we had our second largest trade surplus ever. Peter Costello apparently has stated that our current terms of trade are as good now as when he was treasurer except for the last couple of years of his government.

    So why the sudden crash in revenue?? I think the budget figures are a forecast and I guess Treasury is forecasting massive drops in prices for our minerals

  145. Neil

    So why the sudden crash in revenue?? I think the budget figures are a forecast and I guess Treasury is forecasting massive drops in prices for our minerals

    I’d say you’re close to the mark. Also remember that significant price cuts are expected along with slowing demand from China. The following may give a hint as to why we’re seeing severe downward estimates.

    Rio Tinto Group and BHP Billiton Ltd., the world’s second- and third-largest iron ore exporters, may be forced to cut prices by 15 percent next year, ending six years of gains, because of slowing demand from steel mills in Asia.

    Contract prices for benchmark Australian ore for the year starting April 1 may fall to 122.96 cents per dry metric ton unit, or about $78 a metric ton, from a record 144.66 cents, according to the median estimate of 11 analysts surveyed by Bloomberg News.

    “There’s no doubt steel production has been cut,” John Veldhuizen, an analyst at BBY Ltd., said by phone from Sydney. “We have probably seen peak commodity prices.”

    The worst global financial crisis since the Great Depression has curbed demand from builders and carmakers, damped prices and prompted steel mills in Asia, Europe and the U.S. to curb output. Cia. Vale do Rio Doce, the world’s biggest exporter of iron ore, had its 2009 earnings forecast cut by almost a quarter by Goldman Sachs Group Inc.

    ArcelorMittal, the world’s biggest steelmaker, said yesterday it will slash production by as much as 35 percent in the U.S. and 30 percent in Europe after prices tumbled. The Luxembourg-based company forecast earnings will slide as much as 48 percent to $2.5 billion in the fourth quarter.

    Nippon, BaosteelNippon Steel Corp., the world’s second-biggest steelmaker, Baosteel Group Corp., China’s biggest mill, and South Korea’s Posco are among the biggest customers of the three ore producers that control about three-quarters of global supply.

    Rio, battling a $85 billion hostile bid from BHP, dropped 8.7 percent to A$79.06 at 11:27 a.m. Sydney time on the Australian stock exchange. Melbourne-based BHP, the world’s biggest mining company, declined 7 percent to A$29.39. Fortescue Metals Group Ltd., Australia’s third-largest exporter, slid 6.9 percent and Mt. Gibson Iron Ltd. fell 4.3 percent.

    Cash prices for ore imported by China, the world’s largest buyer, slumped for an 11th straight week to at least 13 percent lower than contract prices. Prices at Qingdao, China’s biggest port handling the ore, fell 100 yuan to 540 yuan ($79) a metric ton in the week ended Oct. 31, the lowest since at least June 2006, according to Beijing Antaike Information Development Co.

    Output in China, the world’s largest steelmaking nation, declined 9.1 percent in September, the Brussels-based World Steel Association said Oct. 22. Global production will fall 5 percent in 2009, Peter Marcus, managing partner of research firm World Steel Dynamics, said from Kaohsiung, Taiwan this week.

    Oversupplied Market“Clearly the steel production cuts have been quite sharp and quite significant to date,” Alex Tonks, a Sydney-based commodities analyst at Citigroup Inc., said by phone. “It is certainly slowing down and the market on our numbers will be oversupplied” in 2009, he said.

    To be sure, Merrill Lynch & Co., Credit Suisse Group and Macquarie Group Ltd. expected prices to remain unchanged at a record, according to the survey.

    “Closures of high-cost Chinese iron ore operations are expected to prevent a much bigger fall,” Macquarie said in a Nov. 5 report. About 20 percent of China’s output is losing money and further production may be cut by the end of the year, Macquarie said. The forecasts in the Bloomberg survey ranged from 40 percent cut to no change.

    Chinese steelmakers have started initial talks for 2009 contract iron ore prices with Vale, Rio Tinto and BHP, Shan Shanghua, secretary general of the China Iron & Steel Association said Oct. 23. Talks are expected to be “very difficult” given the slowing global economy, he said. Maanshan Iron & Steel Co. and Shougang Corp. have said they are cutting output.

  146. Neil, have a play around with the dates on this chart – most interesting – try 1992 to 2009 for example:

    The commentary is also informative:

    The widening trade surplus from the world’s biggest shipper of coal and iron ore may help Australia’s economy emerge from its first recession in two decades sooner than many other nations. Central Governor Glenn Stevens left the benchmark lending rate at a 49-year low of 3 percent yesterday and said record cuts to borrowing costs and government spending will help fuel a recovery.

    Imports fell 3 percent to A$22.1 billion. Imports of capital goods, such as machinery, dropped 12 percent.

    Exports were little changed at A$24.6 billion in March, today’s report showed. Agricultural shipments rose 10 percent, while coal fell 5 percent.

  147. Comments on this thread now closed.

    Please continue the discussion on the new Budget Fallout Post..


Comments are closed.

%d bloggers like this: