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The Forum > Article Comments > The power of the Murdoch media to manipulate > Comments

The power of the Murdoch media to manipulate : Comments

By Alan Austin, published 30/8/2013

Murdoch's economists are more numerous, better writers and by virtue of their broader reach have greater influence.

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Hi Rhian,

Re: “Glad to see you finally admit trade with China was significant in Australia’s recent economic performance. You have consistently denied this.”

Nonsense. Always affirmed it helped. But wasn't critical in averting recession in 2009.

Just from this discussion:

“Everyone agrees trade with China was a positive. But pretty sure none advances this with evidence as the reason Australia alone in the developed world [with Poland] averted recession.” [5 September 3:52:57]

“Of course exporting resources is highly advantageous. As is trade with China. But there seems neither theoretical basis nor supportive empirical data for the contention that Australia’s sudden recovery after being whacked by the GFC in Q4 2008 and its subsequent rise to top of the world is due to either.” [9 September 10:57:10]

“It (trade with China) helped, Rhian. Have always said that. But there’s no evidence it was critical in restoring growth and jobs after the 2008 Q4 crash. [10 September 5:15:41]

@Shadow Minister, re: “Your comment "Howard should have left net cash in the bank between 45% and 60% of GDP – instead of the miserable 7.29%" forgets that federal tax revenue was about 22-25% of GDP, and so a savings of 60% would be nearly 3 year total tax revenue.”

No. Howard and Costello received record tax revenues for eleven years. They should have accessed far more by applying optimum marginal rates instead of transfering to the rich.

They also accessed vast rivers of revenue from selling hundreds of billions worth of assets, didn’t they?

Where did the money go, SM?

Re: “+7.29% over 11 years is one hell of a lot better than the -14% left by Labor.”

No. Not if the net wealth of the nation and future income-earning and wealth-generating capacity are diminished.

Australia’s public corporations capital formation dropped a staggering 23.4% in one year - 1999/2000. Tragic mismanagement, SM!

Re: “Australia was never in danger of a deep recession.”

That’s what they said in Canada, Denmark, Japan and the UK – all of which adopted the Coalition’s recommended response.

Look what happened to them. Five negative quarters.

Cheers,

Alan
Posted by Alan Austin, Thursday, 12 September 2013 4:17:34 PM
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Alan
The paper I linked to demonstrates precisely that China was critical in restoring growth after 2008.

How do you explain Western Australia’s stellar economic performance during and since the recession, if not from the China/resources effect?
Posted by Rhian, Friday, 13 September 2013 3:46:02 PM
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Hi Rhian,

Re: “Try running a regression on the IMF and CEIC data on export growth to China and GDP growth in the past 5 years. There's a significant positive correlation.”

Correct. Positive correlation since 2001.

But the questions are:

What devastated all liberal economies in late 2008?

Why did the GFC not similarly impact developing countries or controlled economies?

What enabled just two developed economies – Australia and Poland – to recover in early 2009, averting recession and sustained high unemployment?

The best answers still appear those of the Keynesians.

It may be argued that trade with China was so vital to North Korea, East Timor and Turkmenistan that it shielded them from any 2008 downturn.

But for Australia, Hong Kong, Taiwan, Japan and South Korea, hefty trade with China did not prevent a reversal in Q4 2008 and did not bring about recovery in 2009.

Problems with Day’s research include:

1. She identifies a minuscule shift in Australia's Q1 2009 export volumes and asserts this was more significant than massive direct fiscal intervention. Specifically: “However, in the March 2009 quarter, Australia broke from the pack with modest growth in exports of 1.6 per cent over the previous quarter.”

2. She fails to account for the impact of the enormous direct stimulus to the economy in 2008-10.

3. She uses mineral export volumes rather than value. Had she used value the calculations would not have supported her contention.

4. She hasn’t examined comparable nations to see if increased volumes/values of exports to China worked elsewhere. It didn’t.

Regarding WA, Rhian, I agree trade with China has always been a positive for Australia, especially the supplier states. Hence one would expect the benefits to be most evident in WA and Queensland.

But during 2009 they weren’t.

ABS series 6202.0 shows jobs growth for the first three quarters were:

NSW: +5,800
VIC: +11,500
SA: +6,700
QLD: -800
WA: -46,900

If recovery is return to positive growth and increasing employment, we see that during Australia's critical 2009 recovery period overall, WA and Qld made no contribution, with WA lagging badly.

Cheers,

Alan
Posted by Alan Austin, Friday, 13 September 2013 6:44:17 PM
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Hi Alan

In answer to your comments on Day’s paper:

1) The growth in Australia’s export volumes in Q1 2009 was modest, but highly significant compared to the fall in exports in most other developed economies.

2) Day is addressing whether Chinese demand prevented Australia from entering a recession, and her answer is “yes”. It may also be the case that Australian stimulus spending prevented Australia from entering a recession – the two explanations are not mutually exclusive.

3) She uses export volumes because she is estimating the contribution to “real” economic growth, which is measured in volumes, not values.

4) Even if Australia was the only country in the world to enjoy growth in exports due to Chinese demand, this would not negate China’s effect in saving Australia from recession. In fact, as we have seen, many other resources exporters with strong links to China also fared comparatively well. But even if none of them had, China’s effect on Australia would still have been positive and significant.

Re resources states
The global financial crisis began in 2007. Finding a 9-month period in 2009 when the resources states recorded falls in employment does not really disprove the hypothesis that they fared better than average during and after the GFC.

The GFC peaked in September 2008. In the year to September 2008 Western Australia recorded employment growth of 5% and Qld growth of 2.9%.

Unfortunately, there is reason to distrust these data. Due to budget cuts, the Australian Bureau of Statistics cut the sample size of its Labour Force survey in July 2008. The sample was restored in late 2009 after howls of protest from statistics users, but in the intervening period the reliability of employment estimates was significantly reduced. This is especially true for small states and for short-term employment changes. The growth in employment recorded in WA in the second half of 2008 was implausibly strong given other economic data available for that time. The apparent decline in employment in the first half of 2009 may be nothing more than the unwinding of this anomaly.

http://bilbo.economicoutlook.net/blog/?p=228
http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/860B39070BE13F52CA2576410018BE6A?opendocument
Posted by Rhian, Monday, 16 September 2013 3:27:43 PM
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Hi Rhian,

Re: “The growth in Australia’s export volumes in Q1 2009 was modest, but highly significant compared to the fall in exports in most other developed economies.”

Modest is an understatement. Day asserts it was 1.6% over the previous quarter.

That’s .00068% of GDP.

To assert that this minuscule variation from one quarter to the next saved Australia – when the initial direct Keynesian intervention pumped a whacking 4.6% of GDP into the economy – seems courageous.

Re: “Day is addressing whether Chinese demand prevented Australia from entering a recession, and her answer is 'yes'. “

She may perhaps have a case if Australia like, for example, Vietnam or Laos had sailed through the GFC without any reversal. One might argue then that hefty exports to China protected the economy from any impact of the global meltdown.

But clearly it didn’t. Australia’s Q4 downturn in 2008 was deep and alarming. Something equally dramatic jolted Australia – and Poland – out of that downturn. A 1.6% rise in export volumes does not seem plausible.

Re: “She uses export volumes because she is estimating the contribution to ‘real’ economic growth, which is measured in volumes, not values.”

Not sure, Rhian. The appropriate measure seems always values, not volumes.

Do you know where Day gets her volume data? The source under Figure 3 says “ABS Cat. No. 5206.0, ABS Cat. No. 5368.0, RBA, and author’s calculations.”

But those ABS charts use values, not volumes.

Re: “Finding a 9-month period in 2009 when the resources states recorded falls in employment does not really disprove the hypothesis that they fared better than average during and after the GFC.”

Yes and no. There are two competing hypotheses regarding what reversed Australia’s Q4 2008 downturn and caused the strong growth in the first three quarters of 2009.

The resource exports to China theory would be bolstered by improved growth and jobs through 2009 in Qld and WA. The Keynesian stimulus theory would be supported by greater jobs growth in the more populous states.

The stark difference seems attributable to more than statistical method, Rhian.

Cheers,

Ala
Posted by Alan Austin, Monday, 16 September 2013 11:59:46 PM
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Alan
Re “The appropriate measure seems always values, not volumes.” You are wrong. GDP growth is by conventionally expressed in “real” terms, by the ABS, Treasury, and every other analyst.

The GDP data (5206.0) Day uses ARE volumes. Chinese export data are not, because there is no export price index for individual countries. So Day uses commodity prices to deflate exports into “real” terms comparable with the GDP data.

The “modest” 1.6% growth in real exports in March 2009 refers to total exports. In that quarter, Australia’s merchandise exports to China (current prices) rose by $2.5 billion (+30%), while total exports fell by $11.2 billion (-16.7%). Prices fell sharply in the March quarter, hence the drop in nominal exports was an increase in real terms. Day estimates that this translates into 56% real growth in exports to China, which added 1.2% to Australia’s real GDP in the quarter. As total GDP growth during the quarter was about 1.0%, Day concludes, correctly, that without growth in Chinese exports, GDP would have contracted in March 2009.

Real GDP growth in the June quarter was negligible (0.3%). Without the 0.7% of GDP contribution of growth in exports to China, GDP would have contracted in June, too.

So without growth in exports to China, Australia’s GDP would have decreased in three successive quarters – December 2008, March 2008, and June 2009.

Your “Keynsian intervention” did not add 4.6% to GDP in a single quarter. In fact, the Commonwealth’s stimulus package direct spending peaked in 2007-08, and the national accounts show that real Commonwealth consumption and investment spending fell in the December, March and June quarters of 2008-09. It is hard to separate stimulus measures from other factors driving private consumption, but this rose by just 0.1% in the March quarter 2009. So stimulus alone definitely did not deliver GDP growth in the March quarter 2009.

The ABS employment data show that WA’s employment rose 5.7% in the year to December 2008 but fell 1.2% in the year to December 2009. Neither number looks plausible to me.
Posted by Rhian, Tuesday, 17 September 2013 12:19:47 PM
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