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Abbott's Economy: Wages Down, Now Investment and Growth Down

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David Libra

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Joined: 27 Jul 2003
Location: Andromeda

PostPosted: Sat Dec 06, 2014 12:23 am
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Out of curiosity, how much of this can be blamed on this government's actions as opposed to global trends (or, as much as I loathe to say it, previous government decisions)?
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pietillidie 



Joined: 07 Jan 2005


PostPosted: Sat Dec 06, 2014 1:12 am
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David wrote:
Out of curiosity, how much of this can be blamed on this government's actions as opposed to global trends (or, as much as I loathe to say it, previous government decisions)?

It goes back to Howard, where the government started taking boom-time windfalls and mismanaging them, letting the structure of the economy decay by over-focusing on mining, creating a middle-class welfare dependency, and refusing to broaden the economic base by investing in other clearly under-developed revenue streams such as tourism, education and science and technology.

Instead, they handed a shabby array of cowboy mining thugs political influence, cut science funding, talked down education and knowledge, and handed natural monopoly infrastructure to investment banks to prop up fixed income streams. All during a period when global companies were finding newer and more ingenious ways to pay less tax and create less jobs by playing countries off against each other during the aggressive reassertion of Anglo-American imperialism under Bush and Blair.

Even worse, Abbott in opposition continued peddling this rubbish at a time the ALP, even in its supposed disarray, managed the economy solidly and rightly tried to use a carbon price and mining tax to induce essential structural economic change even as it dealt with the GFC. But Abbott and his cronies swiftly put pay to that, entering an election on an aggressively anti-development, anti-modernisation Cold War platform, destroying any hope of dealing with what were already seriously compounding issues based on a new global economics.

Just to cement the deal, the narcissistic twat pushed ahead with plans for outdated, ideological budget cuts on the eve of a substantial global commodity price drop. That's overtly shocking economic mismanagement in aid of political self aggrandisement and the justification of failed 1980s economic ideology. Consider that was on top of his party's support for two GFC-inducing wars and the ongoing instability and costs associated therewith, including the heightening of local Arab-Muslim racism and all of the costs which accompany that, such as the political effects of asylum seeker hysteria and the financial costs of the militarisation of "border protection".

So, yes, you can clearly blame the Glibs very heavily for the extent of the present situation, and for setting in motion a deceitful and highly destructive public comprehension of the matter which is leading everyone down a productivity-crushing path to a mining thug-controlled, low-income job providing, culturally dumb and structurally inflexible economy—much like those of the more impoverished, conservative US states.

The ALP's role in this, of course, centres on its cowardly kowtowing to the stupid bastards and their foaming, Neanderthal minions, going back to Beazley, and for getting tainted with the poison of corporate-union corruption under conditions of an economically fundamentalist, dirty and morally hazardous privatisation ideology. Instead, the ALP should have taken a temporary hit over asylum seekers for an election or two to maintain credibility, and thus the capacity to implement serious large-scale, government-level, so-called "third sphere" structural productivity reforms when they were needed—such as at this very time.

Now, only one narrow sector of the economy and its financiers have their hands on the direction of the nation, and your salary, quality of life and career hopes, as well as those of your family, are not their concern. And neither is the broader good of the nation.

The grave fear now is that this train has been set in motion and is likely to be very hard to stop, let alone reverse. (Do you really want to hold your breath waiting for another Keating? Because that sort of structural productivity shift is what it will take in the current global economic context of competitive decline; no amount of brainless cost cutting will create a drop more of productivity and competitiveness).

In addition, as I say, no single matter has the ability to lock in the present horrific economic "policy" than boat people hysteria and paranoia, and the economic ignorance which accompanies it, set as it is against the broader psychological backdrop of the relative decline of Anglo-Americano-Euro economies vis-a-vis the rest of the world. (And don't get me started on the uptick of like racist fever in the UK and Europe and its potential to cause havoc here, too).

The hijacking of people's psychiatries with competitive fear and hatred, in a milieu which challenges long-entrenched, bigoted assumptions of cultural superiority, is a highly fertile soil upon which such a self-destructive economics can thrive. Unfortunately, this looks an awful lot like the unholy intersection of events many of us have feared for some time now, and it is one that could easily provide a path to American-style social polarisation and dysfunction—without the benefits of imperial dominance.

Locally, you can thank that grossly negligent weasel, John Howard, for letting the genie out of the bottle in the first instance, and for giving succour to the once cloistered fruit bats and weirdos in his party, such as the extremist idiot in office today.

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Wokko Pisces

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Joined: 04 Oct 2005


PostPosted: Sun Dec 07, 2014 4:34 pm
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Surplus labor would be the main thing that would drive down wages. Any country that allows mass immigration will end up with surplus labour. The labour market is like any other economy, supply and demand drive pricing and if there is no scarcity then prices are low. There is a labor surplus in this country (high unemployment, particularly low skilled/manual employment) already so if we want wages to go up then start curbing the amount of new people we bring in. The main beneficiary of mass immigration policies are the wealthy employers who can keep wages low and profits up. No surprise that government has kept a steady flow of cheap labour coming into the country for decades to keep their corporate overlords happy.
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pietillidie 



Joined: 07 Jan 2005


PostPosted: Mon Dec 08, 2014 12:43 am
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Wokko wrote:
Surplus labor would be the main thing that would drive down wages. Any country that allows mass immigration will end up with surplus labour. The labour market is like any other economy, supply and demand drive pricing and if there is no scarcity then prices are low. There is a labor surplus in this country (high unemployment, particularly low skilled/manual employment) already so if we want wages to go up then start curbing the amount of new people we bring in. The main beneficiary of mass immigration policies are the wealthy employers who can keep wages low and profits up. No surprise that government has kept a steady flow of cheap labour coming into the country for decades to keep their corporate overlords happy.

See my comments in the asylum seekers thread on bad economics. You're applying the one principle of economics you've heard of—supply and demand—to economies which have many other things going on in them, such as surplus returns to input. You're talking about a steady-state, zero-sum economy, not one like those which exist on planet Earth whereby:

> input > surplus output > circulation > competitive reallocation to demand >

Thus, for the same reasons population growth does not cause unemployment, it also does not cause wage contraction.

The type of break required to lower wages in an earthly context is one where external parties outbid the local economy for capital allocation. External parties do this through efficiency/productivity premiums to specialisation, labour and technology. And, as you can see, population has nothing to do with that, except perhaps in the complete opposite direction you're claiming: Returns to scale. NZ will never be able to lure Wall Street to Auckland or Silicon Valley to Queenstown no matter how hard it tries!

Australia is getting wealthier purely because it is able to outbid external parties through its own efficiencies and specialisations. And it takes various competitive advantages to sustain that, some natural (e.g., land capital; proximity to Asia), some developed (e.g., the entire infrastructure of agricultural science, law, training, low tariff efficiency pressures, etc.).

To get the serious decline in real wages you're seeing over time across commodity cycles you're either looking at (a) a decline in competitiveness, and/or (b) wage polarisation through structural employment problems. When Hawke-Keating resolved the wage inflation problem that had smashed Howard when he was the most useless treasurer the nation has seen, wage inflation was never going to be a serious problem, allowing sustained booms of the sort Howard rode like a drunk cowboy.

And here's exactly where Howard and his fanatical conservative ideology enter the economics. The other side of H-K's reforms were productivity and competitiveness reforms. The H-K compact with the unions was this: If you help us stop wage inflation getting out of hand every time the economy is looking up, we will take care of long-run wages by investing in national productivity and competitiveness.

Instead, slime bag Howard and co. took that compact and shat on it. Wages came under control (the data is very, very clear on that), but Howard started his ideological culture wars (e.g., work choices) and racist hate panic (e.g., children overboard) to justify not holding up investments in productivity and competitiveness. That's why I hate that weasel like no other: The chance of a nation coming to such a sane realisation as H-K did is extremely rare, and that effwit ruined it.

Now, as for the impact of the GFC, Australia mostly traveled through that okay because competitive capital found a safer home here than elsewhere due to Australia's Asian economy dependencies. That's why you're seeing a contraction now and not when everyone else was smashed: Commodity prices are the primary cause of the problem here as expected and as always known because that's the free capital shot in the arm our competitive advantages bring us.

And here's where that nutcracker Abbott and self-serving thugs such as Rinehart and Murdoch who oppose structural economic reforms are up to their necks in blame for what you see right now: We knew this would happen as night follows day. It was not just the bleeding obvious, it was expected, known and assumed.

In other words, this present challenge is a post Hawke-Keating challenge that has nothing to do with population and nothing to do with the GFC. H-K beat wage inflation, but they never got the chance to beat commodity busts by broadening and then strengthening national revenue streams.

That was the job of all who followed, and they've failed miserably at it, even though those revenue streams—education; tourism; the natural sciences and natural science-based engineering; the use of high-levels of education, freedom, and cultural and sub-cultural diversity to bring together a high-value technology, software, digital design, media and film production sector—are staring them in the face. Just think of what the improved stabilisation of the dollar through greater economic diversification alone could do for tourism and education; it's an absolute outrage and shame.

But what do we have instead? A narrow, outdated cultural debate that is both economically dumb and deformed by the irrationalities of racial bigotry, class warfare and group identity. The global economy is creating jobs at the top and bottom of the wage spectrum, and all you get here is talk of cuts and leaners, instead of ways of creating competitiveness in the middle of those two wage poles. When someone tries to do something serious about it, especially in a timely manner, you get idiotic debt panic, talk of global leaners, and provincial red herring topics such as a dumb focus on the construction and trades sectors—tertiary economic activities that have little to do with productivity and national competitiveness and are mere side effects and lagging economic indicators.

Meanwhile, rational efforts to signal major structural change to the competitive engine room of the economy, such as through a price on carbon, are approached with the sanity and comprehension of a rabid hound.

Some of us having been pushing for such problems to be addressed for years as part of holding up the other side of H-K's productivity compact with the unions and nation at large. Those middle-income jobs are the test of Australian economic policy because society can't progress without them and it will take effort and nous to replace the jobs being lost with quality alternatives, especially when the free hit of commodity prices does its periodic disappearing trick. And it is those stupid bastards in the Glib camp, their dumbo thug billionaire masters, and the corrupt unions who are now in bed with them through inefficient, morally-hazardous privatisation deals, who are most to blame for ruining our prospects of dealing with that problem.

And, as I say, that process is now politically locked in by the poisonous insanity of Howard's racist hate vote and ideological culture wars.

The economy as an organic entity creates, absorbs and re-articulates surplus output from any human it stumbles across. But it can't do that to the nation's benefit when our surplus output is being sucked away to more competitive countries. That has nothing to do with population growth, and everything to do with failed productivity policy. Slashing budgets, blaming leaners, and privatisating national assets is the mugs and cowards way of avoiding far more difficult and serious challenges for the very short-term gain of very few people.

You can't break a country up into parts and liquidate it like a Romney vulture takeover, but you sure as hell can ruin a great thing by being irresponsible, cowardly and captured scum bags.

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David Libra

I dare you to try


Joined: 27 Jul 2003
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PostPosted: Mon Dec 08, 2014 5:53 am
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I don't really follow cricket, but I'd say that's a six.
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London Dave Aquarius

Ješte jedna pivo prosím


Joined: 16 Dec 1998
Location: Iceland on Thames

PostPosted: Wed Dec 10, 2014 4:46 pm
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David wrote:
I don't really follow cricket, but I'd say that's a six.


More like QED
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pietillidie 



Joined: 07 Jan 2005


PostPosted: Tue Dec 16, 2014 11:03 pm
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Consumer confidence plunges to 3-year low


SMH wrote:
Consumer sentiment has fallen to its lowest point in more than three years, with the respondents to the latest Westpac-Melbourne Institute survey painting a bleak outlook for the economy for the next 12 months.

The bank's chief economist Bill Evans described the 5.7 per cent fall in the Consumer Sentiment Index, from 96.6 in November to 91.1 in December, as "a very disturbing result".

http://www.smh.com.au/business/the-economy/consumer-confidence-plunges-to-3year-low-20141210-123y2g.html


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Culprit Cancer



Joined: 06 Feb 2003
Location: Port Melbourne

PostPosted: Wed Dec 17, 2014 8:10 am
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The Economy is slowing, an increase in unemployment is expected and what do we do, soften 457 Visa regulations. These clowns in charge will put us back to the 50's.
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pietillidie 



Joined: 07 Jan 2005


PostPosted: Wed Mar 04, 2015 10:35 pm
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Great to see Abbott's ISIS Strategy (Irresponsible Subversion of Intelligent Scrutiny) is working a treat with the usual bright folk who just can't get the YouTube videos out of their heads even as Abbott's economy declines further:

Bloomberg Business wrote:
Australia’s Economy Grew Slower Than Forecast Last Quarter

The Reserve Bank of Australia kept its key interest rate unchanged at a record low Tuesday, after cutting in February, as it seeks to encourage spending by consumers and companies to offset falling mining investment. Australian firms, outside of property, have opted to pay dividends or salt away cash rather than invest in new projects.

Recent quarterly growth rates “like that are clearly below trend and are consistent with the idea that the cash rate should be going lower,” said Tom Kennedy, an economist at JPMorgan Chase & Co. in Sydney. The RBA will cut by 25 basis points in May “with a risk of a lower cash rate from there,” he said.


http://www.bloomberg.com/news/articles/2015-03-04/australia-s-economy-expanded-slower-than-forecast-last-quarter

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Dave The Man Scorpio



Joined: 01 Apr 2005
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PostPosted: Wed Mar 04, 2015 10:40 pm
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Just another reason why Abbott and the Libs are F**KING up Australia
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Mugwump 



Joined: 28 Jul 2007
Location: Between London and Melbourne

PostPosted: Thu Mar 05, 2015 8:39 am
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David wrote:
I don't really follow cricket, but I'd say that's a six.


Yep, 6/10 sounds about right.

Keating did many good things, but his reign made little difference to the diversity of Australia's economy, despite the rhetoric, and the great China boom and its effect in commodity prices was just emerging when he left office. It has shaped Australia's economy ever since, for good and for ill. China took off, and especially since the great Chinese credit boom post 2008. I agree that Howard and Rudd shoudl have made more of it. Blaming Abbott for the end of the wave, however, is irrational. If national income and capital spending declines, as it has, wages will tend to slow unless labour has special bargaining power. Only those with a blind visceral need to blame Abbott for absolutely everything will feel the need to hold him responsible for the end of the mining boom and the fact that the strong dollar crushed many marginal industries between 2000-2012.

Also, there is a reason they teach you supply and demand in first year economics. Of course bringing in lots of unskilled labour (supply increase)will cause downward pressure on wages, as unskilled labour is most vulnerable to technology and offshoring (demand reduction). "Surplus output" and "competitive allocation to demand" smell like oddball terms for profit and capital lending. Is that what you meant ?

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Tannin Capricorn

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Joined: 06 Aug 2006
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PostPosted: Thu Mar 05, 2015 9:15 am
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pietillidie wrote:
Howard when he was the most useless treasurer the nation has seen


Pietillidie, meet Joe Hockey. Joe Hockey, meet Pietillidie.

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Culprit Cancer



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PostPosted: Thu Mar 05, 2015 9:34 am
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Tannin wrote:
pietillidie wrote:
Howard when he was the most useless treasurer the nation has seen


Pietillidie, meet Joe Hockey. Joe Hockey, meet Pietillidie.
How many months does it take Joe to do a budget? Laughing
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pietillidie 



Joined: 07 Jan 2005


PostPosted: Thu Mar 05, 2015 9:52 am
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Mugwump wrote:
David wrote:
I don't really follow cricket, but I'd say that's a six.

Also, there is a reason they teach you supply and demand in first year economics. Of course bringing in lots of unskilled labour (supply increase)will cause downward pressure on wages, as unskilled labour is most vulnerable to technology and offshoring (demand reduction). "Surplus output" and "competitive allocation to demand" smell like oddball terms for profit and capital lending. Is that what you meant ?

I think you'll find it's taught in first year because you're not supposed to make the bad mistake of applying really basic microeconomic functions like supply and demand to the macroeconomics of actual, scale economies.

And you're also not supposed to make the bad mistake of confusing lower-paid work with off-shored work given a huge portion of lower-paid work cannot and will never be moved offshore because it is geographically moored.

"And we will save 280,000 dollars a quarter if we offshore our cooking to Indonesia and our cleaning to the Philippines. Fortunately, our new hyper-travel machine is almost complete."

Thus we are getting wage polarisation and a cleanout of middle-class jobs instead; repetitive intellectual and communicative tasks can indeed be automated and offshored.

So no, David, under conditions of growth, mobility and change, immigration makes virtually no difference at all to the unemployment rate, a non-imaginary claim which accords with the empirical facts rather than the backyard myths. You'd have to be talking a massive influx of refugees, or maybe a severely contracting economy for it to register. But I know you worked that out yourself because, unlike Mugwump, you haven't noticed a positive correlation between population and the unemployment rate across the world!

Perhaps if we hand out contraceptives now we can cut the unemployment rate in 2040!

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Tannin Capricorn

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PostPosted: Thu Mar 05, 2015 10:18 am
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Mugwump wrote:
China took off, and especially since the great Chinese credit boom post 2008. I agree that Howard and Rudd shoudl have made more of it. Blaming Abbott for the end of the wave, however, is irrational. If national income and capital spending declines, as it has, wages will tend to slow unless labour has special bargaining power. Only those with a blind visceral need to blame Abbott for absolutely everything will feel the need to hold him responsible for the end of the mining boom and the fact that the strong dollar crushed many marginal industries between 2000-2012.


There are three main factors depressing wages. (Maybe more than three, but these are the three that come readily to mind.)

1: The mismanagent of the mining boom by Howard. (And also those who have followed, but Howard was the primary culprit. Rudd actually tried to fix this up, but in such an incompetent way that he got nowhere.) Howard encouraged the boom to grow too quickly, pushing up costs and reducing efficiency. Instead of a sustained, steady growth, Howard went for an unsustainable growth level and made the usual boom bust cycle worse than ever. The boom phase of the cycle pushed up costs (including wage costs) all across the country (not just in the mining industry) and caused shortages of skilled labour and critical infrastructure. Worse, it pushed the dollar up to insane heights, and that crippled industry all over Australia.

2: Mismanagement of the mining boom revenue by Howard and Costello. Instead of using the revenue to build a better Australia, and instead of putting it aside for the future, Howard pissed it up against the wall of unnecessary and expensive middle class welfare, unsustainable tax cuts, and worst of all, massive tax lurks for the wealthy which have transferred vast amounts from the young and the poor to the old and rich. Howard also provided huge subsidies and tax breaks to the (mostly foreign owned) mining industry such that it pays less than half as much tax on revenue as other industries. This fed back intro the overheated boom making it worse still (of course companies spend more faster when you are offering them tax-free profits - they get in while the getting is good) and crippled our future revenue - once the money has got out of the country it is gone forever; and once the boom slows down, the crazy-low percentage tax rate on mining profits isn't enough to sustain the nation anymore.

The net result of (1) and (2) is that we now have high unemployment and low revenue. Then throw in

(3) Crashing broader economy driven by the collapse of manufacturing and export businesses (largely caused by the high dollar), lack of capital expenditure, and most recently kicked into overdrive by Abbott's savage job cuts. On top of that, throw in Abbott's insane war on the renewable energy industry which was a booming employer until Abbott camje in, and his war on incomes for everyone except the rich - he even tried to cut pay for his darling defence force! - and, last factor in this witches brew, the widespread lack of business confidence, which flows directly from Abbott's incompetent economic policies.

Most of the blame here belongs to Howard & Costello: Rudd did nothing effective to help (apart from his laudable defeat of the GFC which cripled almost every other country - credit where it is due there) and threw in some extra harm with one last round of unsustainable tax cuts; Gillard didn't have enough time or political capital to have much impact either way, and Abbott /Hockey have done nothing except pour petrol on the fire.

The dollar has dropped to a sensible level now (for reasons largely unrelated to any government); the question becomes (a) will the benefits of a lower dollar be enough to get us out of this mess (given that we have already trashed so much of our industry), and (b) will they arrive in time?

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