Geoff omitted to mention the impact of energy costs. It’s a matter of simple arithmetic to show that, all other factors held constant, a real rise in energy cost produces a real reduction in GDP. Carbon pricing causes, and is intended to cause, a switch to more expensive energy forms. While the carbon tax itself may be recycled and redistributed, with little overall effect on economic wellbeing, its effect of forcing a shift to intrinsically more expensive energy will be real.

Some of the real per capita decline in income that Geoff points out ought to be attributable to rising energy costs. Economic modellers will be able to tell us exactly how much. As part of our response to climate change, this is vital information

< The latest real GDP figures don't tell the full story. >

Gee, what an almighty understatement!

GDP, which includes all economic activity, whether it is productive or not, which turns negatives into false positives, such as the economic activity generated by smoking and drinking-related illnesses and cyclones and floods, doesn’t tell us the full story about our economic wellbeing.

Well….you don’t say!!

Oh, and it doesn’t take into account our environmental health, resource base health, the sustainability of resource provision or the highly uneven distribution of wealth.

In fact, it is the most godawful measure of economic growth, let alone quality of life!!

< Slowing GDP growth, falling terms of trade, slowing/poor productivity growth and growing population are combining to shrink Australia's per capita income 'cake'. >

YES!!

And what is the most easily manipulable factor amongst these?

Population growth.

If we were to reduce the immigration intake by a significant amount, it would no doubt have a pretty big influence on per-capita economic returns.

< How should we deal with this income recession? >

< The more durable and more honest solution is to increase productivity. >

Oh PHOOWEY to that! For as long as we have a rapidly growing population, increased productivity is just chasing its tail, trying desperately to keep the same level of economic returns up to ever-more people.

What we need is to maintain our current very high rate of productivity, not least in the mining sector, and STABILISE the demand for this productivity. That is; head directly towards a net zero immigration regime.

continued

This is really amazing. The author mentions population growth as a negative factor, then asks what we can do about fixing the apparent recession that we are supposedly in…. and doesn’t even mention a reduction in population growth as part of the solution! ( :>|

< Unless this productivity policy failure is reversed quickly, the new year will only get worse, one way or another. >

No! It is NOT a productivity failure; it is a failure to match the demand for this productivity with the supply capability.

Once again, we have the incomprehensible position taken by an article writer, who just blithely panders to an ever-increasing demand, even when the productivity supply is faltering, and offers only one real solution; to increase productivity…. which is not a real solution at all!!

This is just crackers!

BALANCE. THIS is what it has got to be all about. Balancing supply and demand, and doing it in a sustainable manner.

Pandering to an ever-increasing demand is utterly the WRONG thing to do!

Not to forget that average real wages remain below those of 1972, despite recent pay increases. Therefore, lower average real wages, plus massive increases in mortgages, leads to incredible levels of household debt. That all adds up to the economic recession you mention, if not depression.

But, as Steve Keen says, the modern neo-classical economist believes household debt cancels out, with one Australian owing another. Er, no. It's banks creating money by lending against bubble-inflated land prices for thirty years.

The US, Europe--and eventually, Australia--will fail to resolve this crisis until they realse household debt that can't be repaid won't be repaid. Therefore, the sooner mortgages are written back to market levels and loans renegotiated in the US and Europe--and eventually Australia--at current market value with banks taking their hit for risk-management negligence, the better.

Geoff could this be the start of a change of direction for you. Have you read the draft IPCC report, & realised, as they have, that the planet itself, is soon to put the lie to the whole global warming industry, as it cools.

It would appear that many involved in the IPCC are changing the rhetoric, realising that their jobs won't be around too much longer.

As Tombee said you should have included the increasing cost of energy in your analysis. The only western countries that will come out of this economic melt down will be those who start chasing China & India first. Those that don't exploit any economic advantage fully & quickly will be in the poo very deep.

Our only economic advantage is our access to cheap energy, & our mineral wealth. Frittering away most of this on a carbon tax, to be wasted by big spending government is economic suicide.

Take the plunge, & face facts. Get off the global warming train, before it finally crashes, & start promoting economic success.

We should be the home of aluminum manufacture to the world, with our advantages, but we must scrap these costs, that just keep us down & becoming another broke western economy, destroyed by the green rhetoric, & government greed.

@Hasbeen. The draft IPCC report leaked online last Friday does not support your contentions. It was leaked by Alec Rawls, one of 800 members of the climate panel and a well-known climate change sceptic.

This is only a draft document and the full final version of the document will not be released until September 2013. Papers will still be received until March 2013. There is still a rigorous peer review process going on.

Bob Ward, policy director at the Grantham Research Institute on Climate Change at the London School of Economics said the leak was "cheery picking quotes out of context".

Quite.

Hasbeen has received his review of the leaked draft IPCC report straight from the cherry-picking portals of denialist sites.

Business as usual in that respect....

So Poirot, the IPCC cherry picked the temperatures did they ?
Hmmm, gee, thats a very strange thing, I thought the Cherry Pickers
union were all "denyalists".

Now you all take note, you have not been doing your homework !

Hey Hasbeen, how about this:

The materials were posted by Alec Rawls, a former economics student at Stanford University.

Dismissals of Rawls' reading of the material, however, were swift and withering. "Based on the totality of the scientific literature as I know it, the story is bunk," said Michael Oppenheimer, a professor of geosciences and international affairs at Princeton University and one of many authors of the draft assessment.

Michael Mann, a climatologist and the director of Earth System Science Centre at Pennsylvania State University, elaborated by stating:
‘There is nothing in the new IPCC report about solar forcing that isn't already well known from the peer-reviewed literature. I myself have published work in the journal Science just a few years ago on the importance of solar forcing for understanding long-term natural variability. Despite what climate change deniers would like people to think, paleo-climate scientists such as myself have thoroughly investigated the role of solar impacts on climate for decades...But my work, and indeed all work that I'm familiar with in this area, shows that solar forcing cannot possibly explain the warming of the past half century. In fact, solar forcing has been flat over the past fifty years during which we've seen the greatest amount of warming. There is NOTHING in the new IPCC report that in any way calls that conclusion into question.”

So what climate change deniers are doing, assisted by a dishonest leaker, is to once again distort what climate scientists have actually had to say about the role of solar forcing to somehow make it sound as if there is some new development here. There isn't. There are only incremental developments in the science, all of which reinforce the conclusion that natural forcing, including solar forcing, cannot explain the warming we have seen over the past century.

As for our economy, I would say Australia is about where the US was in late 2006, blind and oblivious to the mounting economic crash heading our way!

Yes James, we do realise this leaked stuff is the product of the paid for science, & as such has been toned down dramatically.

We also realise that what ever the scientists have said has little to what will cone out, once the rent seekers playing politics with the matter at the UN, & in bankrupt governments all over the western world have rewritten anything not in line with their intentions.

Still it is nice to actually see some of what they really think.

Good for you Geoff, now why don't you have the guts to come fully clean. Keep on the gravy train, & you are headed for the crash, & be assured, those who ride the train to the crash will never be forgiven.

The article is fundamentally correct, though it does tend to accentuate the negative. Gross Domestic Income tends to be more variable than Gross Domestic Product because it is partly determined by the terms of trade, which can be quite volatile. The recent downturn in GDI reflects the weakening of Australia’s export prices in the past couple of years. However, from a longer perspective, Australia’s terms of trade in the past decade have had a strongly positive effect on incomes – for example, in the 10 years to September 2012, real GDP rose by 34.6%, but real GDI rose by 49.4%.

Freddington
Where do you get your numbers from?

According to the ABS, male average weekly earnings rose from $90.50 in September 1972 to $1,285.10, an increase of 1320%, while the Consumer Price Index (2011-12 = 100) rose from 12.2 to 101.8, an increase of 817%. Therefore, real wages are more than 50% higher than in 1972.

Tombee
Your point about energy prices is almost meaningless. You say, “all other factors held constant, a real rise in energy cost produces a real reduction in GDP”. But the same is equally true of the real cost of haircuts or tomato sauce. The key point is that other things are never equal. While energy prices have risen faster than other prices in recent years, other goods and services have recorded very low price rises or even price reductions – in part because of the high exchange rate generated by strong demand for exports. Overall, the Consumer Price Index rose by 2.0% in the past year, manufacturing input costs rose 1.2% and the domestic demand deflator by 1.9%

As Nicole Foss has recently written “it is important to understand the relevance of the European situation, not immediately obvious to those geographically far removed, with a temptation to ascribe the problems of the European periphery to local conditions.

However, the global economy is exceptionally integrated, and what happens in one location all too readily leads to financial contagion, the spread of fear, from one asset class to another, or from one country to another in the case of sovereign debt risk.

Europe is the epicentre of phase II of the credit crunch, from which waves of financial contagion can be expected to emanate for years. Several member states are effectively at sovereign debt default, with the potential to trigger credit events in the credit default swap market. Banks are over-leveraged, often highly disproportionate in comparison with their host economies and intertwined with the sovereign debt issue.

In many EU member states there are housing bubbles far larger than the American one that began to burst in phase I of the credit crunch (October 2007-March 2009). Bubbles in some states have already burst, while in other countries, housing markets are going illiquid and prices are beginning to decline. As the value of collateral falls, and economies slide deeper into recession and high unemployment, the leveraged debt will be unsupportable. Personal debt is often sky-high, even in countries which are currently considered wealthy and stable.

What is unfolding in Europe is highly relevant to the future of the whole global financial system, and where Europe is leading - into debt deflation, liquidity crunch and depression - many other countries will follow. We are in the process of crashing our global operating system. Our global credit bubble has peaked, and the debt created in the expansion years - excess claims to underlying real wealth - will not be able to be repaid.

The gargantuan pile of interlocking human promises will become nothing more than dashed expectations. The resulting credit collapse will crash both the money supply and the velocity at which the remaining money circulates in the economy."

Geoff Carmody is not addressing the reality.Our economic system is a total farce.

Private banks own our productivity by creating from nothing the money to equal it and then have the audacity express it as debt.Worse still is the fact that the inflationary money they create,also gets expressed as debt.This inflationary money depreciates the value of our currency thus our labour imput.This is double theft.

Note that because of this reality,the harder we work,the more debt we incur.This is why the West can only ever have 3% growth and additional 3% inflation so our economies are not starved of cash.China has many Govt banks and produces 80% of it's money either debt free or as a tax credit for its people.China can grow at 4 times the rate of the West.

http://www.secretofoz.com/ This is the story behind 'The Wonderful Wizard of Oz.' It had a hidden economic meaning that most have missed.I the book Dorothy had silver slippers and the not the Ruby ones of worn by Judy Garland in the movie.

In 1873 the elites of England and the USA removed all the silver money from their economies and replaced it with their Gold.Since they had most of the gold,they assumed most of the wealth.The people were then enslaved on the Yellow Brick Road of gold of enslavement.

In the Depression of the 1890's ,80% of the money was removed from their economies.It was worse than the 1930's depression.

The Cowardly Lion represented William Jennings Brian who L Frank Baum accompanied in his persuit to become President of the USA and defeat the gold bugs.

There is much more symbolism in his story.You can download it for free off youtube.Bill Still its creator and producer took the chance and made it at no cost to us.

Arjay, you do your credibility no favours.

>>This is the story behind 'The Wonderful Wizard of Oz.' It had a hidden economic meaning that most have missed.I the book Dorothy had silver slippers and the not the Ruby ones of worn by Judy Garland in the movie.<<

Yeah, right.

As supremely convincing as those Christian evangelists back in the eighties, who claimed that when played in reverse the lyrics of Queen's “another one bites the dust” become "It’s fun to smoke marijuana".

And your analysis of China's exemplary banking system doesn't bear too much examination either.

>>China has many Govt banks and produces 80% of it's money either debt free or as a tax credit for its people.<<

Here's one recent commentary.

"In 2008, the central government issued a $586 billion stimulus program to help China weather the global financial crisis, and local governments were suddenly awash in easy credit. They splurged on subways, airports, luxury condominiums, and five-star hotels -- anything that would boost short-term GDP growth. According to China's National Audit Office, local governments had amassed about $1.7 trillion of debt by the end of 2010, about 27 percent of the country's GDP -- but other estimates put the number at almost twice that. Tianjin took out more loans than any other Chinese city in 2009, increasing its outstanding debts by 47.2 percent, far above the national average."

http://www.foreignpolicy.com/articles/2012/08/03/china_s_debt_bomb

Admittedly, it was written by someone who doesn't subscribe to your Wizard of Oz theory of economic management. Nonetheless, it is quite interesting to see some facts now and again, don't you think?