by Alan Thornhill
Welcome to “the silly season.”
At the risk of revealing one of the news industry’s deeper secrets, we can confirm that’s the name often given to times like the present, when so many solid newsmakers are on leave, or travelling, that traditional news sources tend to dry up.
Those with less compelling stories to tell can then step in to plug the gap.
Sometimes it works.
Indeed the growing national debt stories that Joe Hockey and Tony Abbott told, before the last Federal election, became so powerful that the then Labor government fell, in their wake.
And Joe Hockey, who became Treasurer, after that election, went right on telling his highly alliterative stories of Labor’s looming ”debt and deficit disasters.”
Most notably, perhaps, in his budget speech last May.
He said then:-
“We inherited $123 billion of deficits when we came to office.
“We have now brought that down to $82 billion over the next 4 years.
“This is despite the fact that we have lost $90 billion in expected tax revenue over the same period.
And added:-“We have now brought that down to $82 billion over the next 4 years.
But we have moved on since then.
So Mr Hockey’s successor, Scott Morrison, the new Treasurer, will need to do more than simply adopt Mr Hockey’s arguments, when he delivers his Mid Year Economic and Fiscal Outlook, or MYEFO, document on Tuesday (this week).
The Turnbull government has already tried to do that with its recently published Innovation Statement.
There is more work to be done in that area, too.
But how is it all looking, on an interim basis, now?
Westpac economist, Andrew Hanlan, isn’t exactly bubbling with enthusiasm,.
He is predicting “a modest further slippage”in the government’s budget position, with the revelation of a further $4 billion deterioration in the Turnbull government’s likely deficit for 2015-16.
Not good, but not necessarily disastrous either.
In fact, a development of that kind could draw attention to a serious weakness, in the debate so far.
It has been based on the unspoken assumption that debt – particularly big debt – is always a bad thing?
But is it?
Young couples, who take on a big mortgage to acquire their first home, often find later in life that it turns out later to be an excellent investment, as property prices rise.
The same kind of thing can happen with government investments, too.
And they, too, face risks.
Malcolm Turnbull’s pre-election decision to go for a national internet system that will be slower than the best available – simply because it was cheaper – is now looking highly questionable in that regard.
It will give our better equipped rivals, like France, a permanent advantage in a highly competitive world.
Regardless of who is, technically right or wrong, in this argument, we should be looking for a better perspective on it all.
That can be hard to find.
But it is essential in this highly competitive world.
by Alan Thornhill
As you read this, a delegation of Australian politicians will be flying out to the Pacific to meet local islanders
Steven Ciobo, the Minister for International Development and the Pacific, who will be leading the group, said it would be visiting Fiji, Tonga, Samoa and Solomon Islands.
He said the delegation would be observing the outcome of Australia’s aid and investment in the region.
Its aim would be to strengthen Australia’s relations with its Pacific neighbours.
But that’s only half of the story.
Members of the delegation may well find themselves spending more time listening than they expect.
Australian aid is welcomed – and highly valued – in the Pacific.
But that has never meant that it is above criticism.
One senior Pacific politician, for example, liked to talk about what he called “boomerang aid.”.
His point was that too much of the money that Australia sets aside, to help the people of the Pacific, actually ends up in the pockets of Australian aid workers, instead.
So who is going on this trip, for Australia?
Mr Ciobo said the members of the bi-partisan delegation he is leading are Nola Marino the Chief Government Whip, Jane Prentice, the Federal Member for Ryan, Sharon Claydon the Federal Member for Newcastle and NSW Senator, Deborah O’Neill.
These are serious people doing an important job, in Mr Ciobo’s view.
As he says:“the delegation underlines the strength and breadth of support in Australia for closer relations with our region.”
That declaration will be welcomed in the Pacific.
Tongans, in particular, often feel their geographically isolated position in the world very keenly.
So they won’t be allowing these Australian politicians to fly back home without knowing how they see the great issues of the day.
And for Pacific Islanders, no issue is greater than climate change.
For they know, all too well, that if rising sea temperatures, cause the Antarctic ice sheet to melt, many of the beautiful islands they call home, would simply disappear beneath the sea.
The BBC reports that World leaders, meeting in Paris last week, approved a draft text they hope will form the basis of an agreement to curb global carbon emissions.
The 48-page document will be discussed by ministers today.
They will try to arrive at a comprehensive settlement on outstanding issues this month,
Some of them will be tricky.
The French climate ambassador has warned that major political differences still need to be resolved.
Delegates from 195 countries worked through the night at the conference centre in Le Bourget, conscious of a Saturday deadline imposed by the French president.
The aim now is to turn this draft text into a long-term agreement.
And although they are on the other side of the world, Pacific Islanders are determined to make their voices heard, in support of that objective.
With good reason.
They have already seen what can go wrong, when many people feel compelled to leave home, for whatever reason.
These include civil war.
That’s what happened in the Solomon Islands, when 30,000 islanders from Malaita took to the sea in canoes, intending to settle on the island of Guadalcanal.
That gave the world an early glimpse of what the results of large population movements can be.
So Australia – and the world – have good reason to press their climate change negotiators for a tight agreement.
by Alan Thornhill
Tumbling export prices are hitting the Australian economy hard.
Business, governments and Australian families are all feeling the squeeze.
Trade figures, the Bureau of Statistics has just released, tell the story.
They show a $3.3 billion trade deficit in October, as key export prices continued to fall.
The sharper than expected fall – of $829 million – during the month was concentrated in areas which were once star performers.
These included iron ore, rural goods metals and gold.
Westpac economist, Andrew Hanlan, said Australia’s export earnings “took a hit from lower global commodity prices” during the month.
But Imports were little changed rising – 0.2per cent – and meeting expectations.
That left Australia with a $902 million blowout in its trade deficit for the month.
Mr Hanlan said the key take–out is that Australia’s terms of trade, which fell –2.3 per cent in the September quarter – and 10.4 in the 12 months to the end of September- had weakened further at the start of the December quarter.
“This sizeable retracement in the terms of trade from an historic high is squeezing national income, adversely impacting businesses, households and governments,” he said.
by Alan Thornhill
At its meeting today, the Reserve bank. Board decided to leave the cash rate unchanged at 2.0 per cent.
In a statement afterwards the bank’s Governor, Glenn Stevens, said the global economy is expanding at a moderate pace.
He noted that there had been some softening in conditions in the Asian region,.
But Mr Stevens also said there had been “continuing US growth and a recovery in Europe.”
He said:” Key commodity prices are much lower than a year ago.”
Mr Stevens said, this reflected “increased supply, including from Australia, as well as weaker demand.”
He warned:“Australia’s terms of trade are falling.”
Mr Stevens said:“ (the)Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy.”
Hoowever, her added:“Volatility in financial markets has abated somewhat for the moment.
“ While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative,” Mr Stevens said.
“In Australia, the available information suggests that moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector.”
“ While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year.”
“This has been accompanied by stronger growth in employment and a steady rate of unemployment.”
“Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet.”
“Inflation is forecast to be consistent with the target over the next one to two years.”
“n such circumstances, monetary policy needs to be accommodative.”
“ Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative.”
“ Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up.”
“Growth in lending to investors in the housing market has eased.”
“Supervisory measures are helping to contain risks that may arise from the housing market. “
Mr Stevens said:“The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities.”
“ In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets.”
“The Australian dollar is adjusting to the significant declines in key commodity prices.”
“At today’s meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate.”
“Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”
“The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” Mr Stevens said.
For Immediate Release
Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
The global economy is expanding at a moderate pace, with some softening in conditions in the Asian region, continuing US growth and a recovery in Europe. Key commodity prices are much lower than a year ago, reflecting increased supply, including from Australia, as well as weaker demand. Australia’s terms of trade are falling.
The Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy. Volatility in financial markets has abated somewhat for the moment. While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative.
In Australia, the available information suggests that moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector. While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year. This has been accompanied by stronger growth in employment and a steady rate of unemployment.
Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet. Inflation is forecast to be consistent with the target over the next one to two years.
In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative. Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up. Growth in lending to investors in the housing market has eased. Supervisory measures are helping to contain risks that may arise from the housing market.
The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities. In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets. The Australian dollar is adjusting to the significant declines in key commodity prices.
At today’s meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
by Alan Thornhill
The Turnbull government has maintained its lead over Labor in the latest Morgan poll.
It would easily win an election held today.
The poll results, published today , give the government 56 per cent support, on a two party preferred basis, to Labor’s 44 per cent.
They also show confidence in the government up 2.5 points to 122, its highest level since March 2011.
Pollster Gary Morgan said the study showed the Turnbull Government’s honeymoon continuing as Australia heads towards Christmas.
This week Prime Minister Turnbull has travelled to the Commonwealth Heads of Government Meeting in Malta – his first meeting with the Queen since becoming Prime Minister – and on to the United Nations Climate Conference in Paris.
“However, despite the issues of Global Warming and terrorism dominating the news headlines lately, Turnbull’s most important task as Prime Minister is to ensure a growing Australian economy which provides gainful employment to as many Australians as possible.”
“Ultimately it is job creation and sustainable economic growth in Australia which will decide the success or otherwise of Turnbull’s Prime Ministership,” Mr Morgan said.
“To be a successful Prime Minister Turnbull needs to take advantage of the boost to confidence his ascension to the top job has created …. and not allow Labor and the Greens to obstruct the implementation of overdue reforms to the Australian economy.
“If they continue to hold-up needed reforms, Turnbull must bypass this ‘blackmail’ and let Australian electors decide by calling an election early in 2016.” Mr Morgan added.
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by Alan Thornhill
Some might call it a mini-budget.
All the Prime Minister said, in an interview with Leigh Sales on the ABC last night, though, is that his government would release “an innovation statement” within the next two weeks.
Well, perhaps he did add a little dressing, to make the prospect enticing.
By promising, for example, that he would would “set out a very large number of substantial measures. to drive the innovation that would ensure that Australians, their children and grandchildren, will have great jobs.”
“…better jobs in the future that will drive our economy,” he added.
Then he laid it on the line.
“I don’t think anybody has any doubt that if we are to remain the high wage, generous social welfare net country, first world country that we want to be then we need to be more innovative, more competitive, more productive and the innovation statement will be a good example of the measures the government is undertaking to achieve that.”
Yet Mr Turnbull, himself, has some catching up to do in this regard.
He saddled Australia with the pursuit of an internet system which, even if achieved, would offer speeds be well below those of many other first world countries, such as France.
Of course, with its vast expanses to connect, Australia does have difficult – and expensive – problems to overcome, in building anything that could – even remotely – be called a fast internet system.
Yet the picture emerging from Mr Turnbull’s attempt to do so – on the cheap – has not been impressive, so far.
Long waits for connection.
There can be no doubt about one thing.
This “innovation statement, when it appears, will be drawn up to underwrite Mr Turnbull’s bid for re-election next year.
Politically, his situation has its difficulties, despite what some are calling his initial “honeymoon” period.
He is still the man who became Prime Minister, without a popular mandate.
And he is not short of opponents who stand ready to remind him of that fact, if he starts making mistakes, as most Prime Ministers do, as they start to settle into office.
Mr Turnbull also declared during his interview last night that he is “comfortable” in his new job.
But make no mistake.
His handling of the Brough affair is already being watched very closely.
by Alan Thornhill
Australian scientists are urging the Turnbull government to take a lead at the world climate change talks which open in Paris this week.
The Australian Academy of Science says this – and global co-operation – will be essential if we are to avoid the worst effects of global climate change.
Delegates from more than 190 countries are heading to Paris this week in an attempt to reach an agreement to reduce greenhouse gas emissions and limit global warming.
In a statement today, the Academy’s President Professor Andrew Holmes urged world governments to take note of the scientific evidence and the implications of inaction.
“The science is clear, we need to move to net zero carbon emissions by the second half of this century to avoid serious impacts on our health, our economies and on our environment.
“Paris will be a critical turning point along the path to a carbon neutral world,” Professor Holmes said.
“Australia has an important responsibility, as one of the world’s biggest per capita emitters, to show leadership at this important moment in history.
“As the world’s twelfth largest economy, we also have the capacity to do our fair share.
“Australia has some of the best climate scientists in the world and a wealth of expertise in clean energy; we have the opportunity to play a leading role,” Professor Holmes added.
“The national commitments so far are promising and Australia’s own post-2030 targets are an important start but now is not the time for complacency.
“We must understand that the only sustainable long-term goal is net zero-emissions and the risks are too great to keep on our current high emissions path.”
In a submission to the Australian government in May, the Academy recommended cuts in greenhouse gas emissions 30 to 40 per cent below 2000 levels by 2030.
An attempt by Australia to take a lead at the Paris talks would be likely to have high impact.
That’s because of the record of previous Australian leaders, including Tony Abbott, of dismissing climate change science.
The Coalition’s approach to tackling climate change, by subsidising big polluters, in an attempt to persuade them to change their ways, hasn’t impressed climate change scientists either.
Nor has the willingness of government MPs to speak up for the coal lobby in parliament.
by Alan Thornhill
A Reserve Bank chief says Australia can expect to benefit from changing patterns of demand in China and Asia generally.
Christopher Kent, the bank’s Assistant Governor (Economic), made the observation at a UBS conference in Sydney today.
He said a slowing in the Chinese economy had already affected Australia in at least two ways..
First, the substantial slowing in industrial production has contributed to a further decline in commodity prices over the course of this year,” Mr Kent said.
Second, the shift in demand towards services and agricultural products within China and the Asian region more broadly presents new opportunities for Australian exporters.
And he added:“ While our comparative advantages in service industries are perhaps less obvious than they are for mineral resources, the rise in the demand for services from a large and increasingly wealthier populace in our region will no doubt be to our benefit.
Mr Kent also said:”The easing in the growth of the Chinese economy over the past year or so has two related parts.
The economy is slowing as it matures, and this is to be expected.
Overlaying that, there has been a substantial slowing in the industrial sector, linked in part to earlier excesses in construction.
How all of this will play out and the effects on the Australian economy are uncertain.
But he added:I’ll briefly highlight some possibilities.”
“Let me be clear though, many of these have positive implications for our economy.
It is natural for the speed of China’s economic development to ease and for its nature to evolve.”
He also said:”part of this reflects slower growth of the working-age population, which is now in decline.
Other than increasing the retirement age, there is little that can be done to alter that in the coming years, notwithstanding the ending of the one-child policy.
“However, growth continues to be supported by the process of urbanisation, which uses commodities intensively.”
“This has further to run, albeit at a more gradual pace.”
“Productivity growth appears to be slowing as windfall gains from earlier reforms have waned.”
“But there remains a large gap between productivity in China and in advanced economies.”
“That gap could be closed more quickly via additional reforms to allow a greater role for market forces in allocating productive resources.”
“The authorities have expressed support for such reforms.”
“The authorities would also like to see growth rebalancing from investment towards consumption.”
“That is happening gradually.”
“It is also being accompanied by a rise in the share of activity accounted for by the services sector as the economy develops and household incomes rise.”
“While these longer-run changes imply a decline in the growth rates of investment and industrial production, both have also experienced a noticeable cyclical slowing over the past year or more,” Mr Kent said.
“As earlier excesses in residential construction gave rise to a large stock of unsold housing, house prices declined and so too did housing construction.”
“Sales and prices have recovered a bit since the start of this year, but there is little sign to date of a sustained improvement in construction activity.”
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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