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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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Alan, I agree. But it’s not just Murdoch that we should be concerned about. As you say; Fairfax does it too. And indeed this enormous bias exists throughout the business sector - where there is a powerful vested-interest profit-motive-driven push for continuous rapid growth.

This is often presented as a totally unqualified take-it-for-granted growth-is-good-and-faster-growth-is-better mentality, without any attempt to separate the good and bad aspects of growth.

I share your belief that Labor didn’t do too badly with the pink batts scheme (thankyou for convincing me about this in your previous article and discussion) and some of its other programs (not including its changes to border-protection!) and I appreciate that our national debt situation is nowhere near as bad as we are often told.

But Labor is still massively onside with the big-business growth push! When it comes down to it, there is really scant little difference between them and the Coalition in this regard.

So it begs the question: just exactly what is Murdoch’s motive for presenting such a strong bias against Labor?
Posted by Ludwig, Friday, 30 August 2013 10:06:35 AM
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Here are some numbers.
When the Howard Government was elected Australia Government Debt To GDP (AGD/GDP) stood at 31.1%. After 11 years it had been reduced to 9.7%; it could have been lower but Costello decided to kept $50 billion of government securities on issue so as to maintain a bond market. (This is turning out to be a brilliant decision>)

Since the Labor Government was elected in late 2007 (AGD/GDP has risen to 22.9% at a time when Australia’s terms of trade had never been higher. All your figures about growth and employment are meaningless if a government borrows and spends like crazy.

The figures below are staggering.

Date (30 June) Gross Debt ($ millions)
2007 58,284
2008 60,462
2009 101,147
2010 147,133
2011 191,291
2012 233,976

The Labor Government has injected nearly $200 billion in to Australian economy for what? A lot of school halls used rarely and a broadband network that after six years connects 33,000 homes.

My favourite comment of the week was were the opening lines is a speech made by Trevor Sykes. “I would like to begin by apologising to Jim Cairns who until now I thought was the worst treasurer that Australia had ever produced. In addition I think the audience should give a round of applause to Judy Morosi – Her distracting of Jim Cairns from the cares of office obviously saved Australia billions. We have now seen what Labor government can truly achieve under Wayne Swan.

A UK central banker once said me the UK economy is old and governments can stuff it up but it would take real genius to stuff up the Australian economy.”
Posted by EQ, Friday, 30 August 2013 10:37:14 AM
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Clearly EQ works for the Australian.

EQ care to name the UK Central banker?......Care to present some evidense?.....
no thought not what you have done though is prove the author contention very nicely. No facts, just comment

Why didn't you compare australian angiast other contries?
Why not ask the builders, suppliers that built those school halls what they would have done without that work?

No wouldn't want to get reality mixed up with the message you want to send.
Posted by Cobber the hound, Friday, 30 August 2013 11:40:33 AM
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Hi Alan,

Having failed to get any traction with your previous two economic missives, for which you got severely hammered here on OLO, you now want to do a Gillard, It’s all the “meedja’s” fault.

Give it up Alan.

Only those who cannot think for themselves because they subscribe to “groupthink” or ideology are vulnerable to any lasting effect from the media. The majority of Australians soak the news up from multiple sources, analyze it, weed out the rhetoric, undo the spin, look at the source of the story, divide it by two and then come up with their assessment.

I haven’t actually come across anyone nominating “The Alan Austin Weekly” as a source of incisive news analysis yet, but keep up the good work; you are helping keep the ALP tragedy front and center in all our waking hours and out of our lives for several generations.

Yesterday Sportsbet paid out on the election betting nine days before the election. It’s looking like people such as you have done a marvelous job on finishing off what was left of the ALP, many thanks. Credit where it’s due, you did have some help from Fairfax and the ABC.

The ALP reminds me of the remnants of Napoleons army as they trudged back from Russia.

My baseball bat in nicely polished, the champagne is in the chiller and the popcorn is ready. Our election eve party is set to be a cracker as we celebrate the ALP 50 seats to the LNP’s 90 seat win. Next year we are looking forward to the “bonus” party as the double dissolution wipes out the remnants of the Greens in the Senate.

We even have the “Alan Austin” prize, you’re famous. A case of beer or bottle of wine (not French) for the reveler nominating the top three highest profile ALP casualties. Not that there are many high profilers left after the mass resignations but hey, the ALP won’t need any for several generations anyway.

Le cat she is dead non? She not bounces no more?

But hope springs eternal.
Posted by spindoc, Friday, 30 August 2013 1:59:09 PM
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Spindoc has set up his web in a tiny, damp hole deep in the soil where the Sun of Intellect never shines.

Only the size of a money spider, Spindoc thinks that he and the stick insects that form the Coalition are hugely important. What they are is little better than an insatiable, greedy rabble of would-be's if they could-be's who love buckets of money but only for them and their insatiable ilk.

At least LABOR, though they lack management skills, has a heart! It judges people by what they do to improve everyone's lot rather than measure success by whether you live in Vaucluse or on the Harbour foreshores while your exotic limo drives past homeless people and families living on park benches or under railway bridges.

Spindoc might get a few moments in the sun should the Colation, with Murdoch's help, win the election. If they do, the salt of the earth type people, who are capable of caring and sharing, are in for a hard time while the rich get richer!
Posted by David G, Friday, 30 August 2013 3:11:39 PM
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Oh do stop it David G, lest my flood of tears wipe out a whole suburb. Labor's got a heart? Well you might be right David, but if KRuddy has one, it is made of stone. Why else do you think he is sinking so quickly. With luck he will not resurface to trouble Labor & or the real people again.

You say "At least LABOR, though they lack management skills, has a heart! It judges people by what they do to improve everyone's lot rather than measure success by whether you live in Vaucluse or on the Harbour foreshores while your exotic limo drives past homeless people and families living on park benches or under railway bridges." Again be careful self delusion can be devastating when you finally wake up to the truth.

Indecently, just who's policies do you think put your poor homeless there. It wouldn't be labors policies now would it, much aided by a flood of boat people taking up all the public housing intended for Ozzies do you think? Ops sorry, shouldn't use that word should I?

Oh & another little gem of wisdom for you, it is those out in the bush here, driving around in old Hilux & Holden utes that are sick of worrying about your underprivileged & homeless.

Like my neighbor turf farmer, who has been trying to find a worker for months, or the 80 year old dairy farmer, who can't find someone to give him even one day a week off.

They both have sheds much more comfortable than park benches workers could live in too.
Posted by Hasbeen, Friday, 30 August 2013 3:50:04 PM
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Alan,
You at least supply adequate evidence to support you views.

Your detractors ignore the loss of assets that occurred under Howard, losses to the public good that are still occurring under the neo-liberal state governments.

Sovereign government debt for goods for sale for the domestic currency is not a real problem if the debt has been incurred to build or improve 'common good' assets.

Elsewhere today I have commented on an item by J D Alt at New Economic Perspectives. Alt makes the point that the USA went from being in deep depression in 1937 to having the most powerful economy ever known by the end of WW2. One thing they didn't do was worry about debt. To keep inflation at bay during the period when production was devoted to war goods (One Liberator bomber per hour from a Ford factory) they sold war bonds. At the end of the war the government bought back the war bonds and the people had the money to buy the vast production of non war goods that by then were becoming available.

I wish those commenting would learn something about the reality of economics. They might learn to understand updated Keynesian Theory. The information is readily available as is the supporting empirical evidence.

In a drastic situation the Australian "Gang of Four", Rudd, Swan and Gillard and Tanner, with some help form other competent cabinet members did an excellent job. A vote for Abbott is a vote for Murdoch and for others who deliberately mislead.
Posted by Foyle, Friday, 30 August 2013 4:22:09 PM
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EQ quotes what he/she read in the Murdoch press. The BER was about more than just 'school halls'. In fact schools received what they asked for. EQ, find an actual source.

SpinDoc doesn't seem to have an argument at all.

In answer to the question about WHY Murdoch is doing this, one need only go to Tom Watson - that it's about business. How does Labor affect M's business plan? People have suggested it may be that the NBN (the real one) threatens his business structure, viz-a-viz Fox. Personally, I look to his history with public broadcasters - I recall the Murdochs thought the BBC was theirs by right, and I think there was a similar stoush with Mark Scott re the ABC. Certainly, Sky would have been handed the ABC's regional arm had the LNP been in government. And the IPA, the LNP's ultimate source of 'policy', wants the ABC broken up and sold off. Murdoch stands ready.

And of course, with Murdoch already trying to drag Labor down over several years - while Tony Abbott gnashed his teeth because Julia G wouldn't just 'lay down and die' - Labor then added to Murdoch's list of reasons to kill any Labor govt by attempting to inject some accountability into the media mix. Very unfortunately, it didn't happen.

M must know that this can't go on. Well, I suppose it can and would under the LNP. But under any responsible govt, media ownership of 70% of all outlets is clearly a case of power corrupting and absolute power corrupting absolutely. This, on top of the obvious fact that the media landscape is changing and ought to be looked at for all the implications of this, really does call for a serious overhaul of legislation and, in the end, a serious look at ownership rights.

No sane and reasonable person could doubt this. And of course, this is the last thing Murdoch wants.

Incidentally, if the information people receive is the opposite of the truth, and they base their vote on this, how would you say our democracy is going?
Posted by jcro, Friday, 30 August 2013 5:10:20 PM
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maybe Newscorp is still in loathing over backing Rudd in 07. They probably feel very silly after backing the worst Government in Australia's history. They are probably over compensating making sure they make up just a little for their neglicence to the Australian public. At least they have faced up to their mistake unlike Alan.
Posted by runner, Friday, 30 August 2013 5:15:20 PM
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Good morning.

Intriguing discussion, as always. Thank you.

@Ludwig. Agree with this. (And thank you.)

Re, “So it begs the question: just exactly what is Murdoch’s motive for presenting such a strong bias against Labor?”

Consensus seems to be that Labor’s NBN and communications policy generally serve the interests of the Australian people ahead of the interests of Rupert Murdoch. Coalition policy is the other way around.

Analysis here: http://nofibs.com.au/2013/02/27/why-are-pay-tv-providers-and-news-limited-so-afraid-of-the-nbn-final-words-for-a-dying-beast/

@EQ.

Re, “The figures below are staggering.”

Really, EQ?

Context is vital. That is probably the central failure of the economists who work for Australia’s mainstream media. Point two in the article.

Here's another set of IMF figures showing (30 June) Gross Debt (national currency billions) for 2012:

UK 1,390
Sweden 1,355
Canada 1,557
Iceland 1,693
France 1,831
Germany 2,167
China 11,866
USA 16,708
Japan 1,132,174
Vietnam 1,528,147
Indonesia 1,978,358

Australia 404

No-one in any of these countries thinks their debt is “staggering”. No-one in Australia should either. The only ones who do are readers of the Murdoch press. Not the writers – they know they are writing nonsense.

Re: “The Labor Government has injected nearly $200 billion into Australian economy for what? A lot of school halls used rarely and a broadband network that after six years connects 33,000 homes.”

This relates to point six in the article: where is the accurate appraisal of the phenomenal increase in Australia’s productive infrastructure over the last six years?

Some of it is at the Bureau of Statistics. Some is here:

http://www.infrastructureaustralia.gov.au/

The fact that Australia alone in the world spent so much money so rapidly on valuable infrastructure is the main reason economists and commentators abroad regard the Rudd Government as the world’s best economic managers.

From around 10th-ranked economy in 2007, Australia rocketed to the top through the global financial crisis, didn't it, EQ?

Figures from the IMF, the World Bank, the OECD, the CIA, Heritage Foundation and elsewhere all show Australia's economy to be not just the strongest globally now - but the strongest the world has ever seen.

Don't believe the liars, EQ.

Cheers,

Alan A
Posted by Alan Austin, Friday, 30 August 2013 5:33:26 PM
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jcro,

Rubbish. Murdock does not have “media ownership of 70% of all outlets”. In Australia News Corp owns only 22% of media publications and has circulation of 53%. You need to stop listening to KRudd and do your own research. That way you won’t sound so bloody stupid.

That said your gaff on Murdoch was the high point of your post. The rest was struggling to be juvenile, ill informed, ideological claptrap. Well done, Mummy must be proud.

Foyle, you have reached rock bottom and started digging. What are you doing on September 8th? Oh I forgot, giving another lecture on New Economic Perspectives.

David G.
13. Attack Independent Thought - Critical thinking is discouraged as prideful and sinful, blind acceptance encouraged.
14. Absolutism - They insist on total, unquestioning obedience and submission to the group, both actions AND thoughts
23. Exhibits a dramatic loss of spontaneity and sense of humor.
I have this sneaky feeling that you thought your post was original, humorous, creative and intelligent, when it was in fact drawn from the script of the Simpsons.

Doh!
Posted by spindoc, Friday, 30 August 2013 5:43:08 PM
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At least LABOR, though they lack management skills, has a heart!
David G,
I suppose you believe in Santa Claus as well !
Posted by individual, Friday, 30 August 2013 6:26:35 PM
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The sad truth, Alan, is that you are doing for the Labor government what the Labor government should have been doing for itself.

For reasons that I continually fail to fathom, the ALP seems to follow the Murdoch script as much as anyone else does. They seem to think that one day the electorate will wake up and realise what an excellent job they've done in successfully steering the country through the greatest global financial disaster in history. As my kids say: Yeah, right! They don't seem to understand that, not only should they be blowing their own trumpet all day every day, they have to get a bit nasty and play the Coalition at their own game.

Why don't they make it clear to the electorate that it's a no-brainer that Murdoch wants the ALP out because he wants the NBN ditched so as to eliminate all competition for his Sky channel?

Why don't they make it clear he wants the ALP out because the Labor government wants to make the media more accountable for the crap they publish?

Why don't they make it clear he wants the ALP out because his personal think-tanks - the IPA and Australian Business Institute - hate the fact that Australian workers are still subject to disgusting perks like permanent tenure, superannuation, long-service leave, sick leave, holiday pay, unfair dismissal security and, shock horror, a minimum wage?!

Why don't they make it clear that Murdoch wants the public service gone, finished, destroyed - never to rise again - because the public service is the only organisation left in the Western world that is still accountable to the public and not compromised by the profit motive?

But do the ALP spruikers ever mention any of this? The short answer is: NO, never. Why?

All I can assume is that the main ALP players have been drugged and photographed in a sleazy hotel room in bed with a prostitute.
Posted by Killarney, Saturday, 31 August 2013 4:24:51 AM
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When are Lefties going to ditch what are now centuries old blinkers and realise that bosses don't wear Top Hat's and carry on like Scrooge McDuck. For God sakes we have moved on to a new millennium, bosses don't have it in for their workers.

The only right bast___s are the same type of right lowlifes who play games in councils when someone wants a driveway or allocates a coal mine to a "Mate". It is not an economic problem per se but a moral failing common to power.

Workers include most bosses now, the least "worker" group would have to be the Left, Professional Students, Humanity Profs, machine pollies, credit card wielding Union Warlords and Green nutcases.
Posted by McCackie, Saturday, 31 August 2013 6:32:40 AM
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Alan

Why is it that you can't respond to my basic point; even by uber-Keynesian Paul Krugman's definitions (and pretty much all mainstream keynesians) fiscal stimulus is only necessary when interest rates are zero and monetary policy is out of ammo. Not the case in Australia.
Posted by Grim23, Saturday, 31 August 2013 7:12:14 AM
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Thanks for this input,

@Spindoc: Seems unfair to criticise Jcro – or Mr Rudd – for saying Murdoch has “media ownership of 70% of all outlets”.

Murdoch’s people have spouted this for years – even though clearly untrue – as is most of what they write.

For example, Stephen Brook in The Australian on August 15, 2011, penned this admission:

“With the Greens pushing for an inquiry into print media and a strong desire on the part of the federal government to introduce a privacy law, the mythical mantra of 70 per cent has become a bit of a stick with which to beat the [Murdoch] company. The statistic has gained very wide currency, not least because the figure has sometimes been touted by the company's aggressive sales teams.”

No. Not sometimes. Countless times – until they realised it worked against them.

Yes, it’s a lie. But, like most pervasive lies in Australia, it originated with Murdoch’s people.

@Killarney, re: “They [the Labor Government] don't seem to understand that, not only should they be blowing their own trumpet all day every day, they have to get a bit nasty and play the Coalition at their own game.”

No. It’s not supposed to work like that, Killarney.

In a liberal democracy, the government governs. The treasurer manages the economy. Other ministers manage their portfolios.

The media is supposed to write about what is actually happening: outcomes, reforms, progress, growth and development. And difficulties.

Your Government has exceptionally good reporting – weekly, monthly and quarterly reports, daily media releases, and regular press conferences. I subscribe to these from Australia, as I do from our Government here in France and from elsewhere.

The problem unique to Australia is that your mainstream media receive and read regular reports and media releases, then routinely falsify the situation.

[North Korea has the same problem in reverse.]

The issue is not with your Government, Killarney. It is squarely with your malicious, lying media.

No?

@Grim23: More than happy to respond.

You’ve been an excellent correspondent here. Sorry if I've missed a question.

Please re-post.

Cheers,

Alan A
Posted by Alan Austin, Saturday, 31 August 2013 9:05:47 AM
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I see Spindoc still doesn't actually have an argument
Posted by jcro, Saturday, 31 August 2013 5:00:53 PM
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However, it is not in fact in doubt by anyone at all that Australia has the most concentrated media ownership the world. Here is a discussion about this: http://theconversation.com/australias-lamentable-media-diversity-needs-a-regulatory-fix-12942
Posted by jcro, Saturday, 31 August 2013 5:07:59 PM
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Hi all,

Actually, it would be interesting and important to have actual figures on media ownership. So far, I've found an issue brief from the Centre for Policy Development, titled:
Media Ownership and Regulation in Australia, by Rob Harding-Smith, CPD Researcher. it's dated August 2011, and says:

'With the exception of Sydney and Melbourne, no large urban center has more than one daily newspaper. There are only two national daily papers in Australia today, the Australian and the Australian Financial Review. Only the Canberra Times and the West Australian were outside the ownership of the two major organisations, however in 2007 the owner of the Canberra Times, Rural Press Limited, merged with the Fairfax group, leaving one.
News Limited controls the majority of the newspaper market in Australia with almost 70 per cent of the market-share within the capitals compared to 21 per cent for Fairfax. The two big organisations also own many smaller papers as well as the majority of suburban titles. A small number of companies also control the commercial radio and television networks and this number is soon set to decrease following the takeover of Austero by Southern Cross. Pay television in Australia is dominated by Foxtel (25 per cent owned by News Limited) and Austar (merger with Foxtel pending), and the four highest rating Internet news services are owned by the existing news sources.'

Looking forward to a good discussion with less invective.
Posted by jcro, Saturday, 31 August 2013 6:05:22 PM
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Interesting but I hardly ever read a Murdoch paper. The best journalists, who actually understand their topic, write for the Australian Financial Review, the Economist or Bloomberg and they know what a mess countries like France are in. Australia would be very foolish to emulate anything which they do.
Posted by Yabby, Saturday, 31 August 2013 6:35:06 PM
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Alan, I agree that the bias in the Murdoch media is a huge issue, as it has misled the Australian people and given them a false basis on which to cast their vote and decide whether to support or denounce all manner of government initiatives.

It really does amount to an enormously undemocratic aspect of our (pseudo)democracy.

But it is only one part of a much bigger issue; the enormous bias exerted by the business sector in general.

There really is the most amazing bias towards never-ending rapid population growth, which is directly related to the vested interests of the property development sector and indeed just about every other business sector.

I note in particular when Gillard said that she was in favour of a “sustainable Australia not a big Australia”, she was smartly put in her place by the powers that be and despite many calls for her to elaborate on it, we never heard anything of the sort from her again!

That’s how powerful that particular lobby is.

But you seem to go along with it! You apparently have no problem with the current rate of immigration or with it continuing at a high level indefinitely. Hence no problem with the domestic demand for infrastructure, services and everything else continuing to rapidly increase. This is despite our current, past and future struggles to build and improve infrastructure and services. In short, this type of growth works diametrically against our efforts to build much-needed I&S, and makes sure that even with our best efforts, more I&S will always be much-needed!

I must say, I don’t understand your overarching position here: you are very strongly against the bias of Murdoch but not at all against this much bigger and more important bias.

If we were to somehow make Murdoch politically neutral, it would help but ultimately not do a great deal to address this greater problem.

We really do need to make government independent of the sway of the big and powerful end of town. This is a whole lot more important than making Murdoch politically neutral.
Posted by Ludwig, Saturday, 31 August 2013 8:08:07 PM
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The media has the power to sell products, set fashions, promote ideas, alter values, create heroes or villains, endorse opinions, champion causes, stimulate debate, sponsor charities, cause controversies, incite rebellions, provoke wars, approve candidates, criticise policy, arouse emotions, and destroy governments, a fact that all governments, both democratic and totalitarian, are fully aware of.

And the media people like Alan Austen are also most acutely aware of it.

What we are seeing in Alan Austin's latest whine is who gets to own this incredible power? In the past there was little cultural diversity in the media. The media reflected the values and attitudes of the tertiary educated, left wing elitist class who generally infested it. But Rupert Murdoch did not become super rich because he was dumb. He realised that the media was not reflecting the values and attitudes of the majority of the population and that the continued promotion by the media of unpopular and deviant ideas was really beginning to grate on the public.

Murdoch made himself rich because he is a lot smarter than Alan Austin. He knew that creating media which reflected the majority opinion (instead of talking down to the populace) would sell. Naturally, this does not go down well with Alan and his finger wagging mates.

Alan and his friends who were once the almost exclusive owners of this incredible media power have been squeezed out of their privileged position and they are not happy about that. This is why they endlessly groan about the Murdoch media and every other right wing media that is giving the public what they want, instead of preaching down to them with all the imperiousness of evangelical fundamentalists.
Posted by LEGO, Sunday, 1 September 2013 5:42:04 AM
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The reason that Murdoch has such a big readership is precisely because he can gauge the mood of the people, provide accurate and investigative reporting, and incisive, broad, and relevant opinion.

The reason Alan and other left whingers are largely ignored by the public is because they provide exclusively partisan opinion, no new facts or information, and analysis so flawed a primary school child can pick it apart.

Murdoch has in the past supported both Labor in Aus and Labour in the UK, and the left whingers were singing his praise. Now that Newscorp (and the majority of Australians) have decided that Labor is incompetent and dysfunctional, now the left whingers have decided that Newscorp is the great Satan.

To me it sounds like an excuse for failing "We wouldn't have lost the election if Newscorp had not reported our failures!"

As Chris Kenny says:

"LABOR often allocates blame elsewhere for election defeats: in 1975 it was John Kerr and Rupert Murdoch; in 2001 it was the Tampa asylum-seeker standoff; and in 1996 it seemed to be the voting public.

This time Kevin Rudd is getting in early by blaming Murdoch again because the alternative is to receive the same treatment as Mark Latham, who in 2004 was made to wear all the ignominy of Labor's failings.

But with howls about media bias being amplified by the ABC, it is worth pointing out their absurdity. Any serious search for jaundiced coverage should focus on those who have attempted to make a case for the government's re-election. But dodging blame and questioning motives are just ways to forestall necessary self-examination."
Posted by Shadow Minister, Sunday, 1 September 2013 7:11:59 AM
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Alan, I would suggest the Rudd imbeciiles do as Tony Abbott does. Stop feeding their enemies. Abbott refuses to be interviewed by the ABC. His message is getting out regardless and his enemies are dismissed by thinking people. His enemies seem content to be merely talking to themselves. Graham Young undertook research on who listens to the ABC. He found it was a case of lefties talking to lefties. Few others botherred to listen.
Abbott by his actions seems to agree.

Oh, I'll an7swer your question before you ask.
Yes the Murdoch media is more influential than the ABC. The ABC doesn't present a broad spectrum of ideas.
Posted by imajulianutter, Sunday, 1 September 2013 8:24:42 AM
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Hi again Ludwig,

Re: “the Murdoch media is a huge issue, as it has misled the Australian people and given them a false basis on which to cast their vote and decide whether to support or denounce all manner of government initiatives.”

Correct.

Re: “It really does amount to an enormously undemocratic aspect of our (pseudo)democracy.”

Correct also.

Re: “You apparently have no problem with the current rate of immigration or with it continuing at a high level indefinitely.”

Yes and no, Ludwig. The nations doing best providing jobs, income, wealth, health care, retirement security and quality of life for their citizens are also the countries with positive net migration.

For example, Australia, Canada, the USA, Luxembourg, Liechtenstein, United Arab Emirates, Qatar, Singapore and Hong Kong. These are in the top 25 nations by net intake. So positive migration correlates with economic wellbeing.

Economists claim that an expanding population requires increasing infrastructure and services – as you acknowledge – which in turn provides employment for workers, profits for entrepreneurs and increased net assets for everyone.

In Australia, you have positive growth, high job participation, low taxes, very low net debt, all triple A credit ratings since November 2011, and your median wealth now is the highest the world has ever seen.

Re: “We really do need to make government independent of the sway of the big and powerful end of town. This is a whole lot more important than making Murdoch politically neutral.”

Yes and no, Ludwig. Agree completely about abuse of corporate power. But in a democracy, the people elect representatives who make laws to ensure corporations operate for the greater good.

In some countries, Australia being the most dramatic example, many people have no idea who to elect because they have a distorted understanding of what's going on in the world because a large section of the media is controlled by a criminal organisation which fabricates and lies routinely.

So the beginning of justice, democracy and sound corporate affairs policy must be allowing citizens to have open access to accurate information.

No?

Cheers,

Alan A
Posted by Alan Austin, Sunday, 1 September 2013 8:49:33 AM
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Thanks for the detailed response Alan.

<< The nations doing best providing jobs, income, wealth, health care, retirement security and quality of life for their citizens are also the countries with positive net migration…. So positive migration correlates with economic wellbeing. >>

Yes but that doesn’t indicate causality. It could well be that some or all of these countries have a high quality of life despite their immigration intake.

These are the sorts of countries that are attractive to immigrants. As with Australia, they are no doubt highly influenced by the big end of town pushing for high immigration for vested-interest reasons, and like us, their governments kowtow to it!

It also begs the questions; if high immigration does improve economic wellbeing as much as your correlation might suggest, then why haven’t we or some of these countries got a considerably higher intake?

And why aren’t poorer countries pushing to increase their intakes?

Could it be that they can see that one of their fundamental problems, in just about all cases, is population stress and that the last thing they need is to increase that sort of growth further?

In short, high immigration does not improve our quality of life or future wellbeing. It might make the conventional economics look better. But this is based on some highly dodgy measures like GDP, is blind to the importance of balancing supply and demand, and places no value on resources that are not generating income here and now and hence doesn’t work at all well as an indicator of future wellbeing.

<< In Australia, you have positive growth, high job participation, low taxes, very low net debt, all triple A credit ratings since November 2011, and your median wealth now is the highest the world has ever seen. >>

Yes but is this due to high immigration? Why couldn’t we have this with a net zero immigration policy??

continued
Posted by Ludwig, Sunday, 1 September 2013 9:08:53 PM
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<< So the beginning of justice, democracy and sound corporate affairs policy must be allowing citizens to have open access to accurate information. No? >>

Yes. But as a fundamental part of this we need to STOP being told simplistically that growth is good and faster growth is better.

This is one of the most fundamentally inaccurate and corruptive messages that we have heard constantly over the years, from business-people, economists and politicians alike.

This idea, that we have to have rapid growth, of the type that we have always had, and thus be hooked into a ever-upward spiral of bigger demand and bigger supply… which is presented as so obvious that it is beyond questioning… sits right at the core of the misinformation that corrupts our democracy and gravely threatens our future wellbeing.

Neutralising Murdoch (if that could be done) without addressing this broader issue is not likely to get us very far.
Posted by Ludwig, Sunday, 1 September 2013 9:12:09 PM
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Greetings all,

Thanks for this discussion.

@LEGO, re: “He (Rupert Murdoch) knew that creating media which reflected the majority opinion would sell.”

See how you go on this quiz, Lego:

https://newmatilda.com/2013/06/21/wonderful-world-walkley-winners

@Shadow Minister, re “mood of the people”. See how you go on this one:

https://newmatilda.com/2013/07/26/mining-boom-really-over

@Imajulianutter, re: “Abbott refuses to be interviewed by the ABC”, try this:

https://newmatilda.com/2013/08/02/say-hello-tony-abbott-and-friends

@Ludwig, re: “Yes but that [correlation between immigration and economic wellbeing] doesn’t indicate causality. It could well be that some or all of these countries have a high quality of life despite their immigration intake.”

Agree with this.

My point was simply to query the implication that high immigration might have negative consequences for the economy. Doesn’t seem so.

Re: “It also begs the questions; if high immigration does improve economic wellbeing as much as your correlation might suggest, then why haven’t we or some of these countries got a considerably higher intake?”

Good question. Is there research into this that you know of, Ludwig? Would be intriguing to examine.

Re: “And why aren’t poorer countries pushing to increase their intakes? Could it be that they can see that one of their fundamental problems … is population stress and that the last thing they need is to increase that sort of growth further?”

Yes, agree with this also. Some redistribution of the world’s population seems desirable. But surely Australia is one country well-placed to absorb the overpopulation elsewhere.

Re: “In short, high immigration does not improve our quality of life or future wellbeing.”

Not sure this has yet been demonstrated either way, Ludwig.

Do you accept that Australia today has the best-managed economy in the world? If so, is this perhaps an argument for maintaining the status quo?

Re: “Neutralising Murdoch (if that could be done) without addressing this broader issue is not likely to get us very far.”

Correct. Neutralising Murdoch is only the beginning for Australia to grow into a mature, independent, well-informed democracy.

But it is an important first step.

Thanks for your continuing input here, Ludwig. Please respond with anything further you may have.

Cheers,

Alan A
Posted by Alan Austin, Sunday, 1 September 2013 10:40:48 PM
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Alan,

The confected figures in NM are a pathetic attempt to paper over Labor's failures. Yes jobs did increase, but unemployment increased faster, and the new jobs were almost exclusively casual. Dudd, Bowen, and Wong tried the same deceit last week with a confected costing of LNP costings and got slapped down by the treasury for fraud.

The result is that Dudd is nearly as low as Juliar when he undermined her, and Abbott is surging ahead as preferred PM.

While your fantasies might be believed by the Labor faithful, the real world is not interested. They find more truth in the Australian.
Posted by Shadow Minister, Monday, 2 September 2013 6:12:02 AM
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Sorry, Alan Austin, I don't debate against links. If you want to cross swords with me then draw your sword and let's get at it. I know that you have your hands full at the moment with so many people kicking the crap out of you, but fobbing me off with sneery one liners or demanding I do all the work is not going to cut it with me.

I repeat that you whole argument is simply a Trojan Horse for your real agenda, that the left wing trendies are aghast that they have lost control of the power of the press to people like Murdoch.

You boys blew it, because you used the media to propagate a message which was fundamentally hostile to the very people you depended on to keep your industry solvent. Telling the very people that are buying your media that they are all knuckle dragging Neanderthals who steal aboriginal babies and treat people like that traitor Hicks abominably is a sure way to pee off your customers. And then you wonder why the public tells you and your trendy mates to far cough and they buy Murdoch or listen to Alan Jones?
Posted by LEGO, Monday, 2 September 2013 6:14:31 AM
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Hello again Shadow Minister,

So I gather you scored zero out of 12 on that quiz.

Hmmm. Never mind. Most readers of The Australian do.

Okay. Try this one:

https://newmatilda.com/2013/03/15/could-you-be-treasurer-take-our-quiz

Hello again LEGO,

So I gather you also scored zero out of 12 on your quiz.

Hmmm. I see. But you read The Australian also.

Okay. Here's another one for you:

https://newmatilda.com/2012/03/23/pin-tip-iceberg

And here's a clue for free: Whatever you have read about these topics in the Murdoch media is nearly always the opposite of the truth.

Cheers,

Alan A
Posted by Alan Austin, Monday, 2 September 2013 6:45:58 AM
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Alan, in further response to your post of 1 September 2013 8:49:33 AM…

You wrote:

<< Agree completely about abuse of corporate power. But in a democracy, the people elect representatives who make laws to ensure corporations operate for the greater good.

In some countries, Australia being the most dramatic example, many people have no idea who to elect because they have a distorted understanding of what's going on in the world because a large section of the media is controlled by a criminal organisation which fabricates and lies routinely. >>

Isn’t that a tad contradictory? The people elect those reps based on a lot of dodgy information! And the choice of who to elect amounts to no choice at all, as in most cases they effectively only get to choose between two parties which both pander like all buggery to corporate power!!

Indeed, people who join those parties and get preselected as candidates automatically have fundamentally flawed doctrines as it concerns the continuous growth bias!

And then the party that is supposed to present the alternative view to manic continuous rapid expansionism and antisustainability, the Greens, has failed dismally to do so… which is something I really don’t understand and find most disillusioning.

I reckon the Rudd/Gillard government has tried to assert its authority and make corporations operate just a little more for the greater good - with the carbon tax, MRRT, etc, but the business lobby has howled it down and effectively asserted its power over government…. with the very significant assistance of Murdoch!

<< …controlled by a criminal organisation which fabricates and lies routinely. >>

Wow!!

I can’t say whether it is as bad as that, but I will assert that our government is dismally failing in its duty of care by pandering as strongly as it does to the big end of town, notwithstanding some attempts to do the right thing. Criminally so? Maybe. Shirking its responsibility to the people of our country in the longer term? Absolutely.

As bad as Labor is, they are definitely better than the Coalition in this all-important regard.
Posted by Ludwig, Monday, 2 September 2013 9:02:37 AM
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i get..most of my..media via my ears[radio/tv]
and when..i think i hear a factoid..[like just now aguy said super funds =8 trillion..inaussie

,my..mind says prove it
get it in writing

is that with..public super/the slush fund..
plus private industry..or what..thats where news papers have let us down

putting faCT..NOT OPINION..INTO HARD COPY..
documenting history..the full day today movements..
the hard copy record..of this all too fast moving spoken opinion

is full transcript..media
too much to..ask for..to hell with sport
Posted by one under god, Monday, 2 September 2013 9:58:05 AM
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Hi LEGO and SM,

That last response from Alan Austin is really fascinating.

When the enamel is scratched away the groupthinkers angry, juvenile, activist glory is exposed.

As discussed on another thread, groupthink and over simplistic solutions are replacing thoughtful analysis and rationalization of complex issues.

I thought it worth comparing Alan’s responses as he abandons his “link wars” and resorts to being snide and emotional.

Alan, it seems you fit the same pattern of a socio-educational problem. Your cases are built upon a list of web Links that reflect only your “feelings” about things and not about how they really are.

These complex issues require analysis, context, relevance, research, and most importantly a willingness to absorb information from various diverse perspectives in order to form a rational position.

For those who are unable to perform these tasks for themselves there is always “groupthink” as a fallback. Many group thinkers they seek to blame the great Satan, the USA, big oil, Israel, capitalism et al, for you the great Satan is Murdoch.

You refuse to recognize that the genre of proselytized activist media you represent has failed and naturally, you need to blame something other than self, you chose Murdoch.

From your responses to posters, it seems that emotion acts as a filter that blocks any capacity to rationalize. You don’t actually “read” or “comprehend”, you just “feel”. You feed of other posters by using their responses not as alternative views, but triggers for your vast arsenal of predetermined groupthink ammunition.

Which explains why your links serve only to reinforce your own feeling about the topic rather than provide evidence that you are seeking and analyzing broader perspectives.

LEGO previously asked the question << What do these people use for brains? >>

I suggested in response. “The answer must be they don’t. Not because they don’t have a brain, I’m sure that they all have high intellects. But they are driven by emotion, they are intellectually lazy, they like being told what they already feel and they lack the investigative rigor of the socially balanced”.
Posted by spindoc, Monday, 2 September 2013 10:05:59 AM
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Alan,

I have grown beyond doing these juvenile "quizzes"

I could do one starting:

The abolition of pacific solution increase illegal boat arrivals by about:

a 50%
b 500%
c 5 000% or
d 50 000%

PS the answer is d

The lowest that Labor's deficit exceeded the budget since 2007:

a $1bn
b $5bn
c $10bn
d $20bn

PS the answer is d

etc.

But relying on the dross from NM and IA, you have probably forgotten how to think.
Posted by Shadow Minister, Monday, 2 September 2013 1:03:03 PM
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Hi again Ludwig,

Yes, agree with most of that.

Perhaps not this: “in most cases they effectively only get to choose between two parties which both pander like all buggery to corporate power!”

The two major political forces deal with corporate power differently.

There’s a stark difference with big tobacco, for example:

http://www.youtube.com/watch?v=bHc-SssCaRg

Validated and itemised here:

http://www.aec.gov.au/Parties_and_Representatives/financial_disclosure/index.htm

Yes, the Murdoch organisation was found by the Leveson inquiry to have engaged in extensive criminal activity in Britain.

Happy to provide examples of fabricated stories in Australia, Ludwig. There’s no shortage.

@Shadow Minister, for you:

Alan's facebook/NewMatilda election 2013 instant quiz #158

The most thorough investigation of any media corporation in history recently concluded in Britain.

Which of these assertions did the Leveson Parliamentary investigation find true of Rupert Murdoch:

(a) his newspapers deliberately invent stories with no factual basis.

(b) his editors are reckless in running sensational stories, with no consideration for the harm they cause innocent victims.

(c) his employees deploy covert surveillance, blagging and deception with no public interest justification.

(d) his newspapers vigorously resist complaints. When an apology is required, his papers get their own back by high-volume, extremely personal attacks on those who challenge them.

(e) discriminatory, sensational or unbalanced reporting in relation to ethnic minorities, immigrants and asylum seekers is routine in his company, not just an aberration.

(f) Rupert Murdoch is not a fit person to run a major international company.

(g) all of the above.

@Spindoc, for you:

Alan's facebook/NewMatilda election 2013 instant quiz #159

The extent of criminal activity in the global Murdoch empire is seldom reported in Australia. None of the mainstream media – Murdoch, Fairfax or the ABC – will touch the subject.

So take a guess at the number of people, including senior Murdoch executives and police officers, arrested and formally charged as a result of the illegal phone-hacking scandal in Britain. [Just in Britain. Just the phone-hacking, not other criminal activities elsewhere]:

(a) 14 arrested, 3 charged
(b) 34 arrested, 6 charged
(c) 64 arrested, 13 charged
(d) 104 arrested, 31 charged
(e) one too few

Cheers,

AA
Posted by Alan Austin, Monday, 2 September 2013 4:47:29 PM
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Alan, you still don't get it. No matter what Murdoch thinks, people are not silly. Just ask the business community what a disaster labour has been. Just ask farmers what a disaster labour has been for them. Not a single one of them seems to know a thing about farming, our second most important export industry. They have paid a heavy price for the stuff ups.

I am no fan of Tony Abbott, but a change of Govt is overdue.
Posted by Yabby, Monday, 2 September 2013 8:19:31 PM
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The New York Times - "News Corp.'s Tight Grip on Australia's Papers Shapes Its politics".

http://mobile.nytimes.com/2013/09/02/business/media/news-corporations-tight-grip-and-outsize-influence-in-australia.html?ref=business&
Posted by Poirot, Monday, 2 September 2013 9:16:15 PM
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Your hot button link to Newmatilda doesn't work, Alan. I got chucked off that web site after only three posts for being a racist. Ironically, while I routinely attacked as a racist for making negative generalisations about groups of people that I don't like, it amuses me to see that you do the same thing to readers of "The Australian."

Are you a paid PR man for the Labor party, Alan? C'mon, don't be shy. Tell us your self interest in making a career out of making excuses for Labor at every opportunity.

And could you tell your mates on NewMatilda that they are a gutless bunch who are frightened of hearing any opposing view to their sacred orthodoxy? The last thing that they want to consider is any heretical rational argument that suggests that their holy belief in human equality could be wanting.
Posted by LEGO, Monday, 2 September 2013 10:18:26 PM
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Poirot don't you find it just a little amusing that one paper likes to think than another paper, & by inference themselves, has a large effect on public opinion.

Sounds like wishful thinking to me.

I really can't remember the last time I read a newspaper. It was back when Kavanagh & Burton were with the Courier Mail.

I did buy a Gold Coast Bulletin a few months back. I'd run out of paper to wrap the rubbish, & it was the thickest paper on the stand.
Posted by Hasbeen, Monday, 2 September 2013 11:51:58 PM
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Alan, regarding my statement to which you responded:

>> in most cases they effectively only get to choose between two parties which both pander like all buggery to corporate power <<

I reckon Labor is better than the Coalition, but not by much. In the greater scheme of things the difference is insignificant.

So Abbott asserts the Coalition’s right to accept big donations from tobacco companies, even when the stated aims of those donations are to influence government decisions in relation to those companies (Thanks for the link). That is certainly philosophically corrupt!

But Labor does the same, from all manner of companies if not from tobacco companies. It doesn’t need to be stated that big donations are given in order to sway government decisions and policy.

Rudd increased the already record high immigration rate in 07 as soon as he won office, despite no mention of doing any such thing prior to this. This is a biggie in the wishes of the big corporations! As I keep asserting; the immigration rate and hence the rate of increase in the demand for everything is a huge factor that can’t be dismissed or played down. It’s what the big boys want, in order to increase domestic markets as well as their labour supply.

In short, Labor is just about as bad as the Coalition.

The thing that puts them slightly in my favour is that they have introduced the carbon tax and other measures, which really are small imposts on big business that amount to nothing more than first steps in the right direction, and have been hounded by that sector for their efforts.

So I do appreciate that Labor desires to do much more to counter the bias of big business than the Coalition does. That aspiration does amount to a significant difference between the two. However, in the real world, given the real power of the business lobby, there is alas scant little difference between Labor and the Coalition.

And Labor’s positions on high immigration and the need for a carbon tax, etc really are highly contradictory!
Posted by Ludwig, Tuesday, 3 September 2013 7:14:56 AM
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what a joke, always blame someone when the people don't agree with you.

Poor journalism, as usual.

Powerful newspapers and business. What is new?

What is new, in 2013, is that a majority of Australians may have had enough of the ALP for many reasons
Posted by Chris Lewis, Tuesday, 3 September 2013 7:33:56 AM
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Greetings all,

Thanks again for these thoughts.

@Yabby, re: “No matter what Murdoch thinks, people are not silly.”

Agree with this, Yabby. There's no issue at all with what Mr Murdoch or his people think. No problem with their opinions, or their bias, or their politics, or using their publications to promote their preferred political party.

All these are perfectly acceptable in a free country.

Problems only arise when they deliberately fabricate ‘information’ which they know is false, in order to make you and other readers believe things that are not true. That is the issue.

The problem is that about half of what they write on economics is true – and the other half is false. But they don’t tell you which half is which. There are no consumer labels:

"WARNING! Article written by Gemma Jones, found by the Australian Press Council to be a serial fabricator."

Hence all readers of Murdoch publications know a lot of things that are not true and don’t know a lot of other things they should know which are true.

From afar, it’s kind of amusing to observe. Especially when the things some Australians believe are pretty dopey. But can you see how it's a bit of a problem for democracy?

Did you read the article, Yabby?

@LEGO: No. Some of my best friends are readers of The Australian.

@Ludwig, thanks for that considered response again.

Not sure who you are referring to regarding big corporations donating to Labor. Have you checked the register, Ludwig? Is there anything there amiss, do you think?

Agree with your other observations on big business.

I’m endeavouring to follow your argument regarding the high immigration rate. But I’m not completely sure why you think the rate in Australia is excessive. Are the problems economic, social, racial, environmental, or other?

You seemed to suggest earlier that there were economic disadvantages. But this appears not so - based on Australia’s economic fortunes.

Are you aware I now live in the South of France, Ludwig? So it may take a strong argument to dissuade me against migration!

Cheers,

Alan A
Posted by Alan Austin, Tuesday, 3 September 2013 8:53:42 AM
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*The problem is that about half of what they write on economics is true – and the other half is false*

So Alan, because they don't agree with your opinion of economics, it must be false. Fact is that economists don't agree about economics, let alone various journalists. I judge things by what I see happening around me, right here in Aus, as seen by those people who make the economy happen, not those reporting spin, as most politicians do. How many people actually even read the opinion articles in the daily press? Only a small % of the public. Just about everyone switches on their tvs and politicians are in our face every day, putting out their spin. Sadly the labour party is largely made up of ex union officials and similar, not people who know much about business or the economy. No wonder this last Govt has been such a disaster.
Posted by Yabby, Tuesday, 3 September 2013 12:22:24 PM
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Ha Alan it is now being suggested somewhat more widely tbat tbe loss with Kevvy will
be greater tban the loss would have been with Julia.
Since Julia was once your favourite that will no doubt please you.
And of course that was all because of the Murdoch media too ... wasn't it?
Cheers Alan.
Posted by imajulianutter, Tuesday, 3 September 2013 2:10:35 PM
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Alan’s articles and comments follow the same pattern – present a large number of statistics selected or massaged to demonstrate Labor’s supposed superior fiscal management, and shift the goalposts as each of his claims is challenged or disproved.

For example, showing debt levels in billions of national currency is utterly meaningless, as it reflects neither the size of the economy nor the exchange rate. Australia’s $404 billion gross debt is a mere $233 billion UK pounds but a staggering 7,665,000 billion Vietnamese Dong. These absolute values, by themselves, are useless for the purpose of comparing debt levels.

He claims trade with China made no difference Australia’s relatively good economic performance during the GFC, because other countries also trade with China. But this ignores the fact that China is relatively much more important to Australia’s economy than almost any other developed country. He mentions the Euro area, New Zealand, Russia and Japan. None of these comes close to having China account for 33% of it exports, as Australia does.

The data Henry Ergas quotes are STRUCTURAL deficits and surpluses, not the headline data in the link Alan refers to. Structural balances are economists’ preferred measure of the budget balance because they even out fluctuations due to the business cycle.

These are not the kind of errors someone proficient in analysing statistics is likely to make. One has to wonder whether Alan does not know that he is using data in a misleading and inappropriate way, in which case he is not competent to discuss economic statistics; or he is deliberately manipulating them to present Labor in the best possible light. In either case, his claims to correct others’ biases stretch credibility when his own use of statistics is so often flawed.
Posted by Rhian, Tuesday, 3 September 2013 2:15:42 PM
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Alan,

You are lying when you say:

"they deliberately fabricate ‘information’ which they know is false"

Unlike the turgid rags such as the New Matilda and Independent Australia who write what they feel like, Newscorp checks all its thousands of facts and gets very few wrong. Its opinions are based on the focus of the time, and when labor is a rolling train wreck, it deservedly gets a lashing.

Newscorp has on the balance supported Labor and Labour in the UK far more than it has supported the conservative side, and only now that Labor wants to white wash its failures and Newscorp wants to expose them that Newscorp have suddenly become the evil empire.

The left whingers are not complaining about bias, they are complaining that the bias is against them.
Posted by Shadow Minister, Tuesday, 3 September 2013 2:21:40 PM
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Greetings,

@Yabby, re: “So Alan, because they don't agree with your opinion of economics, it must be false.”

Yes and no, Yabby. Opinions are not the problem. My own opinions on economics change diametrically several times in the course of a single bottle.

The problems relate solely to facts and figures. Yes, Murdoch employees fabricate routinely. The Leveson Inquiry in Britain concluded this. The Australian Press Council has established this many times. And it is the finding of research in the USA.

http://www.rollingstone.com/politics/blogs/national-affairs/study-watching-fox-news-actually-makes-you-less-informed-20120524

Have you read the article, Yabby?

@Rhian: Hello. Good to hear from you.

Re: “showing debt levels in billions of national currency is utterly meaningless, as it reflects neither the size of the economy nor the exchange rate.“

Correct. That’s entirely my point. This was offered in response to EQ who said “The figures below are staggering” and then posted an array of gross debt numbers in millions.

Yes, gross figures are staggeringly huge. But we must consider net debt, plus the assets acquired with those borrowings. And then look at comparable nations.

Doing this – in any currency – shows Australia’s debt position as among the world's most benign. It’s by far the most strategic in that it helped rocket Australia to the top of the world.

No nation has had such sustained growth, high median wealth, high income, low interest rates, low inflation, strong employment participation, low debt, increasing productivity, low taxes, excellent economic freedom, fair pensions and benefits, retirement security, triple A credit ratings and high standard of living.

No nation ever.

Re: “He claims trade with China made no difference Australia’s relatively good economic performance during the GFC, because other countries also trade with China.”

Well, the CIA has Australia’s exports to China at 29.5%, Taiwan’s at 27,1% and South Korea’s at 24.4%.

If trade with China was critical, then Australia would do very well, Taiwan would do moderately well and South Korea would do less well. In fact, Australia did brilliantly, Taiwan fared disastrously and South Korea did okay.

There must be some explanation. What could it possibly be?

Cheers,

Alan
Posted by Alan Austin, Tuesday, 3 September 2013 10:47:50 PM
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<< Have you checked the register, Ludwig? Is there anything there amiss, do you think? >>

Yes Alan: http://periodicdisclosures.aec.gov.au/SummaryDonor.aspx

There are plenty of big donors to the major parties, and a few to the minor parties.

And yes there is plenty wrong with this.

From Wikipedia ( http://en.wikipedia.org/wiki/Political_donations_in_Australia ):

< The Australian Shareholders Association has called for political donating to end, arguing that the donations are a gift and a form of bribery. >

< Former Qantas chief, John Menadue, said; "Corporate donations are a major threat to our political and democratic system, whether it be state governments fawning before property developers, the Prime Minister providing ethanol subsidies to a party donor, or the immigration minister using his visa clientele to tap into ethnic money." >

Labor is just as critically influenced by the donations regime as the Coalition.

I'll address immigration tomorrow.
Posted by Ludwig, Tuesday, 3 September 2013 11:01:14 PM
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<< I’m not completely sure why you think the [immigration] rate in Australia is excessive. Are the problems economic, social, racial, environmental, or other? >>

Alan I have expressed my major concerns in our correspondence on your three most recent article threads. But to outline them again:

1. We are forever struggling to build ‘much-needed’ infrastructure and improve services. No matter how much effort goes into this over the years, the need remains. We are not catching up! All we are doing is chasing the tail of the very rapidly increasing demand that is created by rapid population growth. If were to head towards a stable population, we would be able to divert a great deal of this effort from duplicating I&S for evermore people into improving it for the existing population.

2. All the economic analysis that we are forever hearing seems to totally miss the most basic economic premise – that supply and demand should be balanced, and that it is just completely crackers to forever work on only the supply side, if the demand side is continuously increasing with no end in sight! Of course we should be increasing supply AND striving to stabilise demand!

3. There is something fundamentally wrong with the way we measure economic prosperity if we can say that the economy is healthy and has been for years, while we struggle to maintain half-decent I&S! Our supposed wonderful economy is NOT translating into wonderful improvements for the average citizen! What it is doing is providing more of the same for ever more people!

continued
Posted by Ludwig, Wednesday, 4 September 2013 8:16:03 AM
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4. We need an ever-greater rate of mineral exploitation, agricultural produce and all the other resources, just to stand still in terms of average per-capita provisions for as long as we have a rapidly increasing domestic demand for all of this stuff.

5. How on earth can we possibly achieve a balanced budget with rapid immigration? There will always be enormous pressures on government to spend big on I&S for the new residents and to deal with existing I&S that gets overburdened by ever-more people utilising it. There will always be a great deal of pressure to borrow more and go further into debt.

6. The environment continues to be degraded by continuous population growth in all sorts of ways.

7. The carbon tax / ETS, is supposed to reduce our greenhouse gas emissions. But even if it is quite successful in lowering the average per-person output, the rapidly increasing number of people in this country would considerably lessen this gain, or cancel it out, or most likely completely overwhelm it and make sure that our national emissions keep rising at a significant rate. Hence I label Rudd’s immigration and climate change policies as highly contradictory.

Alan, it’s got nothing to do with the race, religion, nationality or ethnicity of immigrants. But it certainly does have a great deal to do with economic, social and environmental concerns.

The never-ending facilitation of high immigration by both major parties has everything to do with the donations regime and other aspects of the unholy alliance between powerful vested interests and out national decision-makers.

I seem to recall a recent study, which amazingly enough received a fair bit of media coverage – which concluded that there are no net gains from high immigration.

Indeed, this was all looked at exhaustively with Australia’s Population Carrying Capacity Inquiry in 1994, headed by Barry Jones, in which the CSIRO and the vast majority of submissions were in favour of stabilising our population at the lowest easily achievable level.
Posted by Ludwig, Wednesday, 4 September 2013 8:19:29 AM
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Alan, re your article I wish to add I was appalled to see the headlines (front pages) of the newspapers on display for sale at Woolworths supermarket. Not surprised by the negativity but it was all one-sided. Anti Rudd & pro Abbott. Then I realised they were all Murdoch papers, not a single Fairfax paper in sight. I asked the employee on the counter & she said 'we're always being asked for the Herald (SMH) but we don't stock it.
So Murdoch has bought Woolworths Australia-wide to reinforce his bias against Labor. The rest of us merely get one vote on Saturday. Money talks! This is NOT journalism it is corruption & manipulation of the highest order. Woolworths should be ashamed. Your article was spot on.
Posted by Sevilla, Wednesday, 4 September 2013 9:03:38 AM
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Alan, you remain confused. Murdoch has made money from tabloid journalism, which is common in Europe. He's done the same with Fox TV. That does not mean that all his papers have a page 3 girl. Some of his journalists, including some of his Australian journalists, do in fact publish informed comment. That is quite a different market to the redneck market which Fox appeals to.

Your next mistake is to claim that the Australian economy is so healthy. It is in fact quite unbalanced, with a continuing current account deficit, meaning we borrow more and more each month to bankroll our lifestyle, unlike healthy economies. Our economy depends on iron ore and digging it up as fast as we can, at frightening rates. 1.5 million tonnes per DAY! Meantime farming is stuffed and on the ropes, manufacturing continues to shut up shop and city Australia relies on building and trading ever more expensive houses with each other, which the Economist has long noted is completely unsustainable. The ASX is meantime propped up by the ever increasing value of bank shares, which prop up that housing bubble market.
Posted by Yabby, Wednesday, 4 September 2013 10:34:13 AM
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Alan

Your original comments quoted four exporters you claimed had significant exports to China. Using your source of the CIA world fact book, and EU data (as the factbook does not give EU estimates), this is China’s share of their exports:

New Zealand: 15%
Russia: 15.5%
Japan: 21.3%
EU*: 8.5%

*Source: http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113366.pdf
Note the EU data greatly overstate China’s importance, as they include only trade with non-EU countries; most EU countries’ exports are to other EU countries.

Brazil, which you have also often quoted as an economy comparable to Australia, sends 17% of its exports to China.

None of these comes close to Australia’s estimated 29.5% of exports to China.

So now you shift the goalposts again, introducing Taiwan and South Korea as comparators. Taiwan did indeed suffer a contraction in GDP when the GFC hit, of 1.8%, but its economy rebounded with 10.8% growth in 2010, hardly a “disaster”. In the five years from 2007 to 2012, Taiwan’s economic growth has averaged 3.4% a year, and South Korea 3.0% a year. Both are better than Australia’s 2.5% a year. (IMF annual average data).

Your use of debt data in national currencies was clearly selected to imply Australia’s debt was comparatively small. The data are meaningless, as you concede. And do you seriously think that ‘No-one in any of these countries thinks their debt is “staggering”’? Have you not followed the anguished debates on the negative effects of high and rising debt in Japan and the USA?

Do you accept that you are wrong to allege that Henry Ergas’s statements about structural deficits were “untrue”?
Posted by Rhian, Wednesday, 4 September 2013 12:08:59 PM
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Good morning all,

@Ludwig, thanks for your comments on donors. Agree mostly.

Thanks also for the immigration input. Will continue to read and ponder this. You have certainly raised pertinent questions.

Re: “We are forever struggling to build ‘much-needed’ infrastructure and improve services. No matter how much effort goes into this over the years, the need remains.”

Yes and no, Ludwig. Infrastructure and services provide jobs, apprenticeships, incomes, profits and add to the national estate. All good?

Re: “If we were to head towards a stable population, we would be able to divert a great deal of this effort from duplicating I&S for evermore people into improving it for the existing population.”

No problem with this, Ludwig. But the world is a long way from population stability. Meanwhile, Australia can accept migrants and appears to be doing so beneficially.

Re: “We need an ever-greater rate of mineral exploitation, agricultural produce and all the other resources, just to stand still in terms of average per-capita provisions ...”

Yes, understand zero-growth, Ludwig, and am generally supportive. But the doomsday prophecies of the 60s have not been realised.

Re: “The carbon tax/ETS, is supposed to reduce our greenhouse gas emissions. But even if it is successful in lowering the average per-person output, the increasing number of people in this country would considerably lessen this gain, or cancel it out ...”

Carbon emissions is a global issue. Yes, lower population will lower emissions. But Australia taking more migrants won’t change the total global population, will it?

Happy to discuss further, Ludwig.

@Yabby, re: “Some of his [Murdoch’s] journalists, including some of his Australian journalists, do in fact publish informed comment.”

Correct. Herein lies the problem. Much of Professor Ergas’ work is informed and instructive. But much is distorted, manipulative and false.

The problem is telling which is which.

Re: “the Australian economy is … quite unbalanced, with a continuing current account deficit, meaning we borrow more and more each month to bankroll our lifestyle, unlike healthy economies.”

Hmmm. Depends.

Which nations do you regard as having “healthy economies”, Yabby?

More soon …

Cheers,

Alan
Posted by Alan Austin, Wednesday, 4 September 2013 2:44:41 PM
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Alan,

Caught you lying again, The Leveson enquiry did not conclude that Newscorp employees routinely fabricate facts and figures.

However, it is plain that you do.
Posted by Shadow Minister, Wednesday, 4 September 2013 3:22:40 PM
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Greetings,

@Rhian, re trade with China. Some challenges here.

To assert exports to China rescued Australia we need more than simultaneity, don't we?

Did nations with second, third and fourth highest levels of trade with China fare second, third and fourth best through the GFC? Is there any such correlation?

What's so magical about China, Rhian? Or iron ore?

Would vast exports of other commodities in strong demand to another nation work just as well? Mexico and Canada export 78% and 74.5% respectively of all exports to the USA.

Both suffered badly through the GFC.

Re: “So now you shift the goalposts again, introducing Taiwan and South Korea as comparators. Taiwan did indeed suffer a contraction in GDP when the GFC hit, of 1.8%, but its economy rebounded with 10.8% growth in 2010, hardly a ‘disaster’.”

Yes and no. We must consider both the experience during the GFC’s onset – 2008 to 2010 – and the later phase – 2011 to now. Clearly some did well at first, but fared poorly later. Others, the reverse. Some fared badly both ends. Only one developed nation did well throughout.

South Korea is in the second category. Taiwan the third.

Re: “Your use of debt data in national currencies was clearly selected to imply Australia’s debt was comparatively small.”

Correct. As was using billions rather than millions.

Re: “The data are meaningless, as you concede.”

Correct. As was EQ’s data. That was the point.

Re: “Have you not followed the anguished debates on the negative effects of high and rising debt in Japan and the USA?”

Aware of the discussions, Rhian. But Japan has decided net debt will expand each year until 2018 to 154.8% of GDP [IMF projections]. The USA will expand net debt next year to 89.67%, then reduce it marginally to 86.57% by 2018.

Puts Australia’s 12.66% now, projected at 5.61% in 2018, in perspective, doesn’t it, Rhian?

Re: “Do you accept you are wrong to allege that Henry Ergas’s statements about structural deficits were ‘untrue’?”

Not at all. All criticisms were validated. Nothing since has disturbed that.

Cheers,

Alan
Posted by Alan Austin, Wednesday, 4 September 2013 4:07:06 PM
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Alan, when it comes to globally competitive economies, countries like Switzerland and Singapore runs rings around us, despite having no natural resources. Luckily for the Swiss, they also rejected joining the EU dinosaur, when they voted. In the latest global competitive index, we rate about 134 when it comes to labour market regulation. No wonder we can't compete globally and are bankrolled by international investors, to pay our bills.
Posted by Yabby, Wednesday, 4 September 2013 5:34:14 PM
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Only "some" of your friends read "The Australian"? I presume that the rest of them read 'The Green Left Weekly"?

Honestly, Alan, you should be more particular when choosing friends. Those still inhabiting the cloistered halls of academia are in a time warp.
Posted by LEGO, Wednesday, 4 September 2013 6:22:54 PM
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Alan
Unlike you, I hold no single factor responsible for Australia’s economic growth since 2007. China, commodities, lack of exposure to the toxic derivatives behind the US financial crisis, a relatively well-regulated financial system, a strong starting fiscal position and, yes, economic stimulus, all contributed.

So a country with strong exposure to China but also large exposure to US derivatives market would not have escaped recession, but that does not mean that China was unimportant. To expect China alone (or anything else) to completely explain relative economic growth, as you propose, is facile. No economic story is ever that simple. There is obviously a strong correlation, though, as your own data demonstrate.

China’s importance to Australia is not only in iron ore, but also coal, gas, and agriculture. It is not only in exports, but also the increase in mining investment in recent years. Australian exports to China rose from $23.8 billion to $73 billion between 2007 and 2012 – that’s 207%, or 25% a year. Investment in the mining sector rose from $26.1b to $94.5b, (261%, or 29% a year). These two factors alone accounted for more than 30% of nominal GDP growth over this period, before one even considers spillover effects in the construction, fabrication, manufacturing and service industries. If Canada or Mexico had enjoyed similar growth in their major export market, I’d expect them to escape recession too.

Australia did not do well throughout the past 5 years. Its per capita GDP contracted in 2009, coincidentally by exactly the same amount (0.16%) as Korea. In three of the other four years, Korea’s per capita growth exceeded Australia’s

Re debt, I accept that net debt relative to GDP is a better measure of fiscal position than the dollar value of gross debt. But EQ’s data are not meaningless – they show time series growth in a consistent metric that allows comparisons over time in a measure comprehensible to their audience. Yours don’t.

Re Henry Ergas – do you actually understand that the structural deficits he referred to are not the budget data you linked to?
Posted by Rhian, Wednesday, 4 September 2013 6:38:55 PM
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Greetings again,

@Yabby, re: “Alan, when it comes to globally competitive economies, countries like Switzerland and Singapore run rings around us.”

Your original assertion, Yabby, was “Your next mistake is to claim that the Australian economy is so healthy. It is in fact quite unbalanced, with continuing current account deficit, meaning we borrow more and more each month, unlike healthy economies.”

Borrow more?

The IMF shows gross debt to GDP for Australia, Switzerland and Singapore are 27.56%, 48.33% and 108.16% respectively.

Net debt percentages are 12.66%, 22.82% and undisclosed.

Australia borrows far less. No?

On some variables Singapore and Switzerland lead Australia, as do Norway and China.

But on all outcomes considered together, Australia is not only the best-managed economy now but the best-managed the world has ever seen.

@Rhian, re: “China, commodities, lack of exposure to the toxic derivatives, a relatively well-regulated financial system, a strong starting fiscal position and, yes, economic stimulus, all contributed.”

No, the evidence against is compelling.

Lack of exposure to toxic derivatives: no evidence either way.

Sound financial system: made no difference whatsoever.

Strong fiscal position: evidence suggests the better the fiscal position, the worse the outcome. With one exception.

Trade with China: didn’t hurt, but didn’t help anyone else.

Economic stimulus: overwhelming evidence from country experience, plus sound theory.

Re: “Australia did not do well throughout the past 5 years. Its per capita GDP contracted in 2009 ...”

Correct. No developed country did well. Hence terms like “healthy” or “robust” are avoided in favour of “well-managed.”

Every developed economy went backwards, Rhian. But Australia least of all.

Re: “EQ’s data are not meaningless – they show time series growth in a consistent metric that allows comparisons over time.”

But they don’t show growth in net debt, or net assets, or overall economic progress, do they? Pretty useless without these.

Re: “do you actually understand that the structural deficits he [Henry Ergas] referred to are not the budget data you linked to?”

Yes. We have corresponded for more than a year. Henry has agreed to send SBD spreadsheets. No appearance, your worship.

Cheers,

Alan
Posted by Alan Austin, Wednesday, 4 September 2013 9:02:07 PM
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Oh nonsense. The big picture is quite straight forward. Australia rode on the sheep's back until the sheep collapsed from all the weight. Keating could see it, pointing out that we were about to become a banana republic, so started deregulating our economy, in order to force us to join the real world. Next came Costello, who continued deregulation, paid off our Federal Govt debts and made sure that we lived within our means. Along came China, which meant that our coal and iron ore mountains were suddenly worth something, so mining investment, along with prudent bank regulation by Costello, got us through the GFC, unlike the US and Europe, who were in the middle of it, as their banks were part of it, not ours. Now we are back to a Govt who wants to go back to unions 60s style, which is why we were uncompetitive in the first place. No wonder that business has lost confidence. So building houses for migrants is what our economy in the cities is based on, apart from income generated by farming and mining, which remains the backbone of our economy. Singapore and Switzerland run current account surpluses and have done so for years.
Posted by Yabby, Wednesday, 4 September 2013 9:34:00 PM
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Alan

Re the importance of the banking system and lack of exposure to toxic debt, try:
http://epress.anu.edu.au/agenda/016/03/mobile_devices/ch09.html

or this:
“while the exposure to toxic investments of US and European financial services companies at the beginning of the financial crisis was up to 15%, the exposure of Australian banks was less than 1%. That was due to good regulation and structural differences”
http://knowledge.asb.unsw.edu.au/article.cfm?articleid=1105

For the importance of China, check out the latest budget papers, the RBA website, the Australian parliamentary library, or just about any credible commentator on Australia’s economy.

If you had asked Ergas for his data, and he has refused to provide it, why did you not mention this in your article, instead referring to a different data set that failed to illustrate your point? Or, refer to published structural balance estimates. We have discussed these previously.
Posted by Rhian, Wednesday, 4 September 2013 9:41:03 PM
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Hello again.

@Yabby,

No, not nonsense at all.

Re: “Along came China, which meant that our coal and iron ore mountains were suddenly worth something, so mining investment … got us through the GFC”

Your problem here is Australia is not alone in selling to China.

If this was significant, Yabby, then surely at least one of the other big exporters to China or big exporters of iron ore might have found some protection during the GFC.

They just didn’t. Simple as that.

Re: “Singapore and Switzerland run current account surpluses and have done so for years.”

Correct. But that didn’t save them from the GFC. Switzerland copped three quarters of negative or zero GDP growth in 2008-09. Singapore copped four negative quarters then and another four since.

Please read the article, Yabby.

@Rhian, re the banks:

Agree strong banks are a good thing. But other nations with equally secure banks suffered severe recession — Canada, Japan, Luxembourg, New Zealand and Norway. All experienced four, five or six quarters of negative GDP growth.

So that’s not the explanation.

Rhian, in your second link, who’s advancing the argument? A banker?

Re: “For the importance of China, check out the latest budget papers, the RBA website, the Australian parliamentary library, or just about any credible commentator on Australia’s economy.”

Yes. Have access to these. 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.

Re: “If you had asked Ergas for his data, and he has refused to provide it, why did you not mention this in your article, instead referring to a different data set that failed to illustrate your point?”

He hasn’t refused. Says he doesn’t have it yet.

Henry and I don’t disagree about surplus/deficits, structural or nominal. Only about what to say publicly about when structural problems arose. We both know problems arose during the Howard years, as confirmed by the May Treasury paper.

Henry only reports this as a problem caused by Labor. Just plain false.

Cheers,

Alan
Posted by Alan Austin, Thursday, 5 September 2013 3:52:57 AM
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http://www.rba.gov.au/speeches/2013/sp-ag-100413.html

The graphs in that speech explain it for you, Alan. Brazil came nowhere near that investment by mining, in terms of GDP.
Posted by Yabby, Thursday, 5 September 2013 6:06:49 AM
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How much is Labor paying you to be their apologist and PR man, Alan?
Posted by LEGO, Thursday, 5 September 2013 6:44:45 AM
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Now that Alan has been caught telling porkies, his credibility is shot.

Murdoch's voice is one among thousands, it is just one of the most trusted and listened to ones based on years of accurate, articulate and incisive reporting. That a few individuals at one of his many subsidiaries overseas acted unethically in obtaining information does not translate to Australia. Alan and his contemporaries in Getup etc have over egged the cake so many times that most Australians have simply stopped listening.

Alan, if you want to motivate for an "ethical" press you need to try to be ethical yourself.
Posted by Shadow Minister, Thursday, 5 September 2013 10:26:25 AM
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im..enjoying
not enjoining..the passions..of both sides

if only we heard more to the real topic..
ruperts ABILITY..to spin..sin is in?

anyhow the numbers will reveal./.that words so..affectivly conceal

never the less im learning so much

never the less..post opinions if you got em
judgment day is on..sa-turn-day../..sat-an'day../sit-in-day../..saturday
Posted by one under god, Thursday, 5 September 2013 10:34:07 AM
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Yes, only a fool/s could believe that a media baron caused the majority of Aust's to vote one way.
Posted by Chris Lewis, Thursday, 5 September 2013 1:02:31 PM
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Chris,

I wonder why Uncle Rupert has gone to all the trouble of daubing his front pages with anti-Rudd/Labor rhetoric.

What a silly man if it's had no effect at all.

: )
Posted by Poirot, Thursday, 5 September 2013 1:35:35 PM
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Quite simple, Poirot. It did not change the US elections, Obama still won, but it made him lots of money! Rupert sells anything from page 3 girls to religious programmes, to make a quid
Posted by Yabby, Thursday, 5 September 2013 1:52:10 PM
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Yabby,

Awww, c'mon....

Yes Rupert makes money, but he was giving it his best shot to get Romney up.

That it didn't work is beside the point.

Murdoch was using his position and clout the way he knows best.
Posted by Poirot, Thursday, 5 September 2013 1:58:37 PM
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Good morning all,

Intriguing discussion. Thank you.

@Yabby, re: “The graphs in that speech explain it for you, Alan.”

Yes, the graphs are informative. Thanks. But they support rather than disprove the assertions in this article. No?

And present problems for you, Yabby. Correct?

For example, paragraph 2: “Business investment in Australia is higher now as a share of GDP than at any other time over the past 60 years (Graph 1).”

Yet I’m sure I read somewhere “Just ask the business community what a disaster Labor has been.”

Re: “Brazil came nowhere near that investment by mining, in terms of GDP”

Correct. And this is relevant how? Pretty sure I haven’t mentioned Brazil here at all.

Yabby, you still have the problem of why selling to China saved Australia but didn’t save any other big exporters to China in 2008-09. Or big exporters of high-demand, high-priced minerals.

@Shadow Minister, re: “That a few individuals at one of his [Murdoch’s] many subsidiaries overseas acted unethically in obtaining information does not translate to Australia.”

So how did you go with the quiz question, SM?

How many people, including senior Murdoch executives and police officers, have been arrested and formally charged as a result of the illegal phone-hacking scandal in Britain. [Just in Britain. Just the phone-hacking, not other criminal activities elsewhere]:

(a) a few individuals
(b) 34 arrested, 6 charged
(c) 64 arrested, 13 charged
(d) 104 arrested, 31 charged

Clue: It’s not (a) or (b).

Are you familiar with the Australian Press Council, SM?

@all, regarding the power and influence of Rupert Murdoch, has anyone examined the research in the USA?

According to the academic study reported in Rolling Stone, linked above, reading Murdoch publications not only makes readers less well-informed than readers of other journals, but less well-informed than people who don’t read any newspapers at all.

Intriguing.

And is anyone following the fortunes of the group trying to get a paid advertisement critical of Mr Murdoch’s coverage run on TV in Australia today?

http://www.smh.com.au/entertainment/tv-and-radio/antimurdoch-ad-banned-from-television-20130903-2t37c.html

Do you really have freedom of speech?

Ah, you crazy Aussies!

Cheers,

Alan
Posted by Alan Austin, Thursday, 5 September 2013 3:45:20 PM
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Poirot, if you ever read the Perth Sunday Times, you will notice that Murdoch gives it his best shot to get up the State Liberal Govt. It sells papers! Pushing emotional buttons sells far more papers than complicated data analysis. That is why Rupert became rich.

Alan, the graph says it all. Mining investment grew in a decade, from about 1% to 8% of GDP, straight through the GFC. It continued to grow, despite Mr Rudd, who once nearly derailed it, only to have things patched up by Gillard. You mentioned other countries exporting iron ore. There are only really Australia and Brazil, which matter. Brazil has 10 times Australia's population, yet iron ore exports are similar. Per person GDP, that makes a huge difference. Had miners not invested as they did, our economy would have gone through the floor. Miners are limited as to where they can invest, places like Africa and other corrupt countries, are not for the faint hearted. Not so with manufacturing, where there are many options. Labour has made sure that Australia is not the place to invest there.
Posted by Yabby, Thursday, 5 September 2013 6:08:14 PM
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Alan
I do not say trade with China alone averted recession, I say trade with China AND a 100-year high record in the terms of trade AND good luck and good management in the financial sector AND an inherited strong fiscal position AND fiscal stimulus saved us from recession. It is you who insist than only one of these factors, the last, was overwhelmingly predominant.

Your last post contradicts your article. Your post says “Henry and I don’t disagree about surplus/deficits, structural or nominal.” Your article says

[quote begins]

Henry Ergas in June:
‘… the Howard government ran structural budget surpluses every year averaging 1.4 per cent of GDP; while every year it has been in office, Labor has run structural deficits averaging 2.8 per cent of GDP.’

And:
‘… literally all the structural deficits were incurred on Labor's watch.’

Both untrue. Accurate data shows the average budget surplus for the eleven years of the Howard Government was 0.79%. The average budget deficit during the five years under Labor has been -2.38%.”

A Treasury paper in May showed clearly that Australia's structural deficit problem began in the Howard years:

‘The estimates suggest that the structural budget balance deteriorated from the mid-2000s, with the point estimate of the structural budget balance falling into deficit just prior to the GFC.’

[quote ends]

The link you provide to “prove” the first of these statements “untrue” shows estimates of the underlying budget balance, NOT the structural deficit.

If the point estimate of the shift to structural deficits really occurred just prior to the GFC, as the Treasury paper you quote says, then

a) Ergas is right to say there were surpluses under the Coalition and deficits under Labor, and
b) The shift to structural deficit cannot be justified as a response to the GFC, because it happened before the onset of the GFC
Posted by Rhian, Thursday, 5 September 2013 8:54:33 PM
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Greetings,

@Yabby, thanks for your persistence here. Still seems you have trade with China coinciding with the GFC. But that’s all. You need more to demonstrate causality.

This analysis still seems safest:

http://onlineopinion.com.au/view.asp?article=15380

@Rhian, re: “I say trade with China AND a 100-year high record in the terms of trade AND good management in the financial sector AND an inherited strong fiscal position AND fiscal stimulus saved us from recession. It is you who insist that only one of these factors, the last, was overwhelmingly predominant.”

Correct. Refer here:

http://onlineopinion.com.au/view.asp?article=15357

Virtually all nations with zero debt or money in the bank were hit the hardest by the GFC. So ‘strong fiscal position’ was no cushion.

Similarly, sound banks made no difference; trade with China and trade in minerals worked nowhere else.

The only correlation we find is with stimulus spending.

Here’s another approach: If your scenario is right, Rhian, then the country second to Australia in “trade with China AND terms of trade AND a sound financial sector AND strong fiscal position AND stimulus” would have done second best. Right?

Seems logical. Which country was that? Brazil? Canada? South Korea? Taiwan? Other?

Nominate whichever you think closest. All fared disastrously.

Now consider the “overwhelming stimulus” theory. Which country was second to Australia in fast, hefty stimulus at the outset – and on that factor alone?

According to the IMF, Poland.

What was Poland’s result through 2008-09? The only other economy in the OECD to cop just one negative quarter.

Seems strong prima facie evidence.

No?

Re: Henry Ergas, yes, his figures appear false.

To my first query, he wrote (June 6):

“My numbers on the structural surplus and deficit come from the PBO publication – averaging using the data in their charts.”

When I asked where in the publication, he again said he would get the data:

“… my numbers are correct to a decimal place, according to my discussions with PBO .... In any case, once I get the PBO file I'll send you the exact data.”

Have asked twice since, including while preparing this article. Nothing.

Cheers,

Alan
Posted by Alan Austin, Friday, 6 September 2013 1:27:10 AM
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Alan, you’ve generated some interesting multifaceted discussions here. That’s great. It’s just what I like to see on this forum – an article writer come back and fully discuss all aspects of the subject.

Thanks for the continuing dialogue with me.

I wrote:

>> We are forever struggling to build ‘much-needed’ infrastructure and improve services. No matter how much effort goes into this over the years, the need remains. <<

You replied:

<< Yes and no, Ludwig. Infrastructure and services provide jobs, apprenticeships, incomes, profits and add to the national estate. All good? >>

Not all good. Not if it is isn’t leading to a net gain for the whole community.

If we didn’t have high immigration and were therefore able to put our efforts more into improving infrastructure and services for the existing population and less into duplicating them all for ever-more people, it WOULD be all good!

We’d still have jobs, apprenticeships, incomes, profits and REAL improvements to add to the national estate, yes?

And we’d be heading towards a balanced economy, an overall surplus, a healthy environment, a steadily improving quality of life and a sustainable society, all at the same time!

I wrote:

>> If we were to head towards a stable population, we would be able to divert a great deal of this effort from duplicating I&S for evermore people into improving it for the existing population. <<

You replied:

<< No problem with this, Ludwig. >>

Excellent!

<< But the world is a long way from population stability. Meanwhile, Australia can accept migrants and appears to be doing so beneficially. >>

We would still have a significant immigration program if we reduced it to net zero, which is what I have always advocated.

Currently we may appear to be accepting a large migrant intake beneficially for our nation’s economy. But if we look more closely and consider all the things that I have raised, we will see it all very differently… and see that current appearances could well be a very long way from reality.
Posted by Ludwig, Friday, 6 September 2013 10:46:59 AM
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I often wonder what Alan thinks that he is achieving. He continually posts articles in the left whinge fringe blogs such New Matilda and the Independent Australian, that are only read by Left whingers who are unlikely to have ever voted for anyone other than the greens or Labor.

The majority of voters especially swing voters have never heard of these turgid blogs, and the moment he posts his trite articles full of manufactured or cherry picked information on OLO, he does not get his usual sycophantic response, but people calling him out on his distortions.

Alan is suffering from a delusion of relevance.

In two days Labor will be swept from power, and the real audits of the pink batts, BER, NBN can begin and unearth the steaming piles of dung that Labor has tried so hard to hide.
Posted by Shadow Minister, Friday, 6 September 2013 1:54:38 PM
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Alan, your previous analysis was wrong, as I pointed out. It hasn't suddenly corrected itself. No country had the level of mining investment which we had. Mining investment together with no debts(Costello), together with a well regulated banking system (Costello) got us through the GFC. Brazil is not a valid comparison, as I have previously mentioned and for reasoned which I mentioned.
Posted by Yabby, Friday, 6 September 2013 1:57:13 PM
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Alan
Chart 3 from the paper you linked to on budget balances supports Ergas’ position, not yours. So does the work of the PBO Ergas appears to have drawn on. If his methodology takes the mid-point of the PBO’s upper and lower range of the structural balance, it looks to me like it gives the result you describe as “untrue”:

http://www.aph.gov.au/~/media/05%20About%20Parliament/54%20Parliamentary%20Depts/548%20Parliamentary%20Budget%20Office/Parliamentary%20Budget%20Office%20Stuctural%20Budget%20Balance.ashx
(page 2 figure 1)

You said:

“Here’s another approach: If your scenario is right, Rhian, then the country second to Australia in “trade with China AND terms of trade AND a sound financial sector AND strong fiscal position AND stimulus” would have done second best. Right? “

Wrong.

Every economy is different. An economy with none of these thing going for it could have fared far better than Australia if it has some other source of growth; any country with all of them could fare worse if some other factor detracted from growth. These things were significant for Australia, not necessarily anywhere else.

China's growth is not uniform. Hong Kong exports mainly services to China, Japan mainly manufactures, Australia mainly commodities. Unless demand and prices for manufactures, services and commodities are rising equally – which of course, never happens – then China’s growth will not have the same effect on all its trading partners, even if they are equally reliant on China for exports.

But – trade with China is clearly a factor. The world's fastest growing economies in the past five years (GDP growth of 10%+ a year) have all recorded extraordinary growth in exports to China. These are

Qatar, - 13.1% a year GDP growth, 65% a year growth in Chinese exports.
East Timor 11.5% a year GDP growth, 69% a year growth in Chinese exports
Turkmenistan - 11.1% GDP growth, 177% a year Chinese export growth

(data from IMF and CEIC)
Posted by Rhian, Friday, 6 September 2013 8:51:40 PM
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Hello again,

@Yabby, re: “No country had the level of mining investment which we had. Mining investment together with no debts, together with a well regulated banking system got us through the GFC.”

Afraid all the evidence is completely against this, Yabby.

Having no debts was absolutely no help. Evidence is overwhelming.

IMF’s database shows nine countries in net surplus in 2007 — apart from a few oil-rich Islamic republics and poor African states. These were Australia, Bulgaria, Chile, Denmark, Estonia, Finland, Kazakhstan, Norway and Sweden.

If low debt was a cushion, then all these nations should have survived the GFC. They didn’t. All fared disastrously.

I agree Australia had strong mining investments. But other countries had other strong investments.

If your theory was valid, then whichever countries come second, third and fourth to Australia on your criteria should have also done relatively well through the GFC, if not quite as well as Australia.

There's no such correlation.

@Rhian, re: “Chart 3 from the paper you linked to on budget balances supports Ergas’ position, not yours.”

Refer the text below chart 3, Rhian: “The estimates suggest that the structural budget balance deteriorated from the mid-2000s, with the point estimate of the structural budget balance falling into deficit just prior to the GFC.”

So clearly structural problems did not originate with Labor, as Professor Ergas would have us believe.

Re: “Every economy is different. An economy with none of these things going for it could have fared far better than Australia if it has some other source of growth; any country with all of them could fare worse if some other factor detracted from growth.”

Correct. That is my point also. There is nothing magical about trading with China, or selling iron ore. The same effects should have worked with any export sold anywhere.

But research shows it didn’t happen in any comparable economy. Plenty of other OECD countries had strong sources of growth. But only two avoided recession.

They were Australia and Poland – which according to the IMF implemented the largest early stimulus interventions.

Coincidence, Rhian?

Cheers,

AA
Posted by Alan Austin, Friday, 6 September 2013 10:34:51 PM
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Alan

There is a world of difference between the diminishing structural surpluses we saw in the later years of Howard, and the burgeoning deficits we saw under Labor. There is no reason why Howard’s diminishing surpluses should cause Labor’s chronic deficits. Bear in mind we are talking about a structural budget balance here; the business cycle or fiscal momentum had nothing to do with it. It was entirely the result of government policies.

There is indeed nothing magical about trade with China or selling iron ore (and coal and LNG and gold….). But they can have strong economic impacts. The data show that the world’s strongest economies in the past five years are ALL resource economies, most with strong links to China.

They also show that no developed country came close to Australia in its terms of trade boost. Since 2007, Australia’s terms of trade have risen by 32%, the 12th fastest growth of 198 countries analysed by the UN. All of the other leading countries are developing resource exporters (Mali and Burkina Faso had the largest terms of trade increases). The nearest of the developed economies is Norway, with 17% growth in its terms of trade - about half of the stimulus we enjoyed.

http://data.un.org/Data.aspx?q=terms+of+trade&d=WDI&f=Indicator_Code%3aTT.PRI.MRCH.XD.WD
Posted by Rhian, Monday, 9 September 2013 6:51:18 PM
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Hi Rhian.

Re: “a world of difference between the diminishing structural surpluses we saw in the later years of Howard, and the burgeoning deficits we saw under Labor.”

Correct.

Re: “There's no reason why Howard’s diminishing surpluses should cause Labor’s chronic deficits.”

Correct also. There’s no causality. The former was to contrive electoral support during the final terms of a teetering government. The latter was an appropriate response to the worst recession since the 1930s.

Re: “Bear in mind we are talking about a structural budget balance here; the business cycle or fiscal momentum had nothing to do with it.”

Agree.

Re: “The data show that the world’s strongest economies in the past five years are ALL resource economies, most with strong links to China.”

Not sure, Rhian. Perhaps if we gauge ‘strongest economy’ simply by GDP growth. Another category might be the eight nations with triple A credit ratings with all three agencies: Australia, Singapore, Norway, Sweden, Switzerland, Germany, Luxembourg and Canada.

Only one has strong resource exports to China.

Furthermore, some countries whose exports are predominantly resources had zero or negative GDP growth, including Serbia, Brunei and Jamaica.

You earlier identified Qatar, East Timor and Turkmenistan as exporters to China with strong growth – between 11.1% and 13.1%pa.

Not sure Qatar is instructive here, Rhian. Only about 5% goes to China. East Timor? Do you have the percentage? Turkmenistan is a good example, however.

But other small economies with no China trade have also had strong growth, around 9% or above, including Afghanistan, Azerbaijan, Ghana and Panama.

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.

The evidence still seems to support the 'overwhelming 2008-10 stimulus' theory.

What’s your explanation, Rhian, for Poland – with the second-strongest stimulus response – being the only other OECD economy with just one negative quarter in 2008?

Thanks. Cheers,

Alan
Posted by Alan Austin, Monday, 9 September 2013 10:57:10 PM
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Alan
We’re discusisng a STRUCTRAL deficit lasting more than a decade, according to forward estimates. A temporary, cyclical, deficit is an appropriate response to a recession. A persistent structural deficit is not.

Your article attacks the proposition that the China factor helped Australia escape recession. The overwhelming weight of evidence, and authoritative commentaries, disagree with you. You are shifting the goalposts again by introducing credit ratings. That is a different issue.

China accounted for 5% of Qatar’s GDP in 2012. Qatar is export reliant (exports are 70% of GDP) and Qatar’s exports to China have grown rapidly since the GFC (1200% between 2006 and 2012). So Chinese exports represent stimulus to Qatar’s economy of about 4 percentage points of GDP – about the same size as Rudd’s fiscal stimulus in Australia.

Of course not all commodity exporters enjoyed the same export and terms of trade boost that Australia did. The effects depend on what they export and where they export too. Why on earth do you expect these to be uniform across commodity exporters?

And of course not every economy with strong economic growth has strong links to China. I have never said that, nor has anyone else.

You continually try to misrepresent others’ arguments by trying to turn a particular country’s experience into a universal formula. That’s why your frequent references to Poland are so silly. You are trying to reduce a complex multifaceted story – what caused different economies to respond to the GFC differently – to a single, shared, explanatory variable.

I have never argued that Chinese connections are either necessary or sufficient to determine which countries escaped recession and which didn’t. Clearly there are lots of other factors at work.

But for many countries, growth in Chinese prices and demand WAS clearly a decisive factor. Australia was one of those countries. The data I have laid out – on Australia’s export growth, terms of trade growth, and mining investment growth – prove conclusively that the Chinese/resource factor was very significant in helping Australia to escape recession and supporting its relatively strong economic growth since the GFC.
Posted by Rhian, Tuesday, 10 September 2013 12:21:44 PM
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Rhian,

I think the surge in the stock market and the bullish sentiment coming from the business community shows that the economy is well rid of the Labor shackles.
Posted by Shadow Minister, Tuesday, 10 September 2013 12:30:38 PM
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Hi Rhian,

Re: “A temporary, cyclical, deficit is an appropriate response to a recession. A persistent structural deficit is not.”

Correct.

Henry Ergas is only wrong in asserting Labor’s failings led to the structural deficit. The Parliamentary Budget Office points also to taxation blunders during the Howard years, including freezing the indexation of petrol excise and cutting tobacco excise receipts.

Some add cutting income taxes to the rich.

Re: “Your article attacks the proposition that the China factor helped Australia escape recession.”

It helped, Rhian. Have always said that. But there’s no evidence it was critical in restoring growth and jobs after the 2008 Q4 crash.

The analysis of Stiglitz, Krugman, the IMF and others – that the initial shock stimulus in 2008–09 was vital – still seems most plausible.

Re: “The overwhelming weight of evidence, and authoritative commentaries, disagree with you.”

Not at all. Mainstream media in Australia asserts trade with China was critical. But where is their theoretical framework and empirical evidence? It’s an assertion. You are a rare analyst, Rhian, in that you’ve actually checked other nations for evidence.

Who else has done this?

Re, “The effects depend on what they export and where they export to. Why on earth do you expect these to be uniform across commodity exporters?”

No expectation of uniformity, Rhian. Simply an expectation of correlation – if the theory is valid that this saved Australia.

There is no observable correlation. Some nations with strong exports to China did well. Others fared poorly.

Re: “You are trying to reduce a complex multifaceted story … to a single, shared, explanatory variable.”

Not at all. Just recognising that the weight of empirical evidence actually does validate the theoretical model of Stiglitz, Krugman, Treasury and Finance.

Re: “The data I have laid out – on Australia’s export growth, terms of trade growth, and mining investment growth – prove conclusively that the Chinese/resource factor was very significant in helping Australia to escape recession ...”

Pretty sure I understand your case, Rhian. But the overall evidence still seems far stronger for the early hefty stimulus argument.

Cheers,

Alan
Posted by Alan Austin, Tuesday, 10 September 2013 5:15:41 PM
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Where have Stiglitz, Krugman or Treasury said China was not significant in Australia’s economic performance during/after the GFC?

Of course Labor is responsible for its structural deficit. The whole point of a structural budget balance is that it abstracts from the economic cycle. One can argue Howard should have maintained larger surpluses, but you cannot hold him responsible for Labor’s deficits.

You say there’s no empirical evidence that China helped to sustain growth once the worst of the GFC is over. That is nonsense. Between December 2008 and June 2013:

- Quarterly exports to China rose from $8.3 billion to $23 billion
- Quarterly business investment in the mining sector rose from $10.1b to $24.1b

This paper shows that Chinese demand saved Australia from recession:
http://epress.anu.edu.au/wp-content/uploads/2011/08/ch035.pdf

Try running a regression on the IMF and CEIC data on export growth to China and GDP growth in the past 5 years. There is a significant positive correlation.

The parts of Australia most exposed to the China resources boom have performed far better than the national average. By far the most mining-reliant State is WA. In the past five years WA has experienced:
- the highest wage levels
- the fastest wages growth,
- the fastest economic growth (so it has overtaken NSW and the ACT to have Australia’s highest per capita Gross State Product),
- the largest export growth,
- the largest business investment growth,
- the lowest unemployment rate,
- the highest growth in retail sales, and
- the second fastest employment growth (after the NT).

WA contributed $47b of Australia’s $66b growth in exports between 2007-08 and 2012-13 (71%). Of that $66b national growth, $51b (77%) was to China; and of this, $37b (72%) came from WA. WA contributed $37b (72%) of the growth in Australia’s exports to China between 2007-08 and 2012-13. WA. In 2012-13 WA’s total exports were $116 billion, or 47% of Australia’s total exports of $247 billion – more than NSW, Qld and Vic combined.

If China and resources are unimportant, how do you explain WA’s extraordinary economic performance compared to the rest of Australia?
Posted by Rhian, Tuesday, 10 September 2013 8:10:09 PM
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Hi again Rhian,

No-one says “trade with China was not significant in Australia’s economic performance during/after the GFC.”

Definitely a positive. It aided Australia’s growth from 2001 onwards. But it wasn’t critical in getting Australia back into growth and stemming the rise in the jobless – alone in the OECD with Poland – after the 2008 negative Q4.

Stiglitz says this:

“Kevin Rudd, who was prime minister when the crisis struck, put in place one of the best-designed Keynesian stimulus packages of any country in the world. He realized that it was important to act early, with money that would be spent quickly … Rudd’s stimulus worked: Australia had the shortest and shallowest of recessions of the advanced industrial countries.”

Re: “One can argue Howard should have maintained larger surpluses, but you cannot hold him responsible for Labor’s deficits.”

Howard should have left net cash in the bank between 45% and 60% of GDP – instead of the miserable 7.29% [IMF data]. Then Australia would never have been in structural or cyclical deficit.

Re: “You say there’s no empirical evidence that China helped to sustain growth once the worst of the GFC is over.”

No, we don’t. It helped sustain continual growth from before 2001 to the present. But it was not the vital factor in saving Australia from deep recession in 2008.

Remember, Rhian, Australia was not the sole beneficiary of China’s largesse. Other exporters to China include Hong Kong (54.1%), Taiwan (27.1%), Japan (18%) and South Korea (24.4%) – all of which suffered between two and five negative quarters when the GFC hit.

Not sure Creina Day’s paper proves much, Rhian. How is it possible to argue with a straight face that the Keynesian stimulus was so fantastic in China that it even saved its trading partners – yet the direct Keynesian stimulus in Australia didn’t?

Happy to unpack the flaws in that research further, if you wish, Rhian.

It confirms the point on which you and I agree – that China trade is positive. But doesn’t show it was more significant than Australia’s direct stimulus.

Cheers,

AA
Posted by Alan Austin, Wednesday, 11 September 2013 9:16:01 PM
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Hi Alan

Glad to see you finally admit trade with China was significant in Australia’s recent economic performance. You have consistently denied this in recent articles and posts.

Day’s paper says nothing about the Australian stimulus package. Its only purpose is to examine the effect of China’s demand, which it concludes was sufficient to prevent Australia falling into recession. I doubt Day maintains it is the only thing that helped us avoid recession. I certainly don’t.

Whether Howards should have left office with a higher net structural surplus is debatable, but unless you can argue that this caused Labor’s deficits, which of course you can’t, then it is irrelevant to our discussion
Posted by Rhian, Thursday, 12 September 2013 11:35:17 AM
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Alan,

You really are out of touch with reality. Your comment "Howard should have left net cash in the bank between 45% and 60% of GDP – instead of the miserable 7.29% [IMF data]." 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.

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

Secondly, Australia was never in danger of a deep recession. With zero stimulus the recession would still have been far slighter than anything experienced in the EU, and with a fraction of the stimulus the economy would still have avoided recession, and the huge debt we have now. One of the reasons that Labor was thrashed at the election was that the stimulus that was spent was spent badly giving far less stimulus per $ than expected, delivering almost no value in infrastructure, and continuing long after the need for stimulus had disappeared.

Labor's legacy is inter generational debt, a bloated bureaucracy, and a collection of costly, ill considered and partially completed monuments to ideology.
Posted by Shadow Minister, Thursday, 12 September 2013 1:42:34 PM
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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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Correction:
Commonwealth direct stimulus spending peaked 2009-10, not 2007-08
Posted by Rhian, Tuesday, 17 September 2013 1:34:22 PM
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Hi again Rhian,

Thanks for this response, and for your diligence and persistence here.

Sorry for the delay getting back to you this time, Rhian. I’m hoping to replicate Creina Day’s calculations when I get the chance. Because it’s an intriguing approach. Not just for Australia, but for the other nations China imports from as well.

"Did it work anywhere else" is a pertinent question.

This may be some time away. So some brief questions immediately arising:

You note that “Prices fell sharply in the March quarter (2009), hence the drop in nominal exports was an increase in real terms.”

So what would have been the results of Day’s method had prices not dropped? Same result?

Re: “Your ‘Keynesian intervention’ did not add 4.6% to GDP in a single quarter. In fact, the Commonwealth’s stimulus package direct spending peaked in 2009-10.”

Correct.

This seems to be the schedule: $10.4 billion in October 2008 and another $4.7 billion to December 2008’s nation building package. A further $41.5 billion allocated to infrastructure and jobs in February 2009 and, finally, $22.5 billion in the 2009 budget.

So by the end of 2010 Australia had spent more than 10% of its 2007 GDP – $79.1 billion all up.

Does that sound right, Rhian?

If so, what would you estimate to have been the contribution of that stimulus to GDP growth in the 1st quarter, 2nd quarter and 3rd quarter of 2009?

How does that compare with the 1.2% added by exports to China in the March quarter, and with the 0.7% added in the June quarter?

Regarding, “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.”

What would you suggest are more realistic numbers?

Finally, is there some irony, do you think, Rhian, in asserting that strong direct Keynesian stimulus had little or no impact in Australia; what saved the economy from recession was exports to China – enabled by China’s strong direct Keynesian stimulus?

Thanks, Rhian.

Cheers,

Alan
Posted by Alan Austin, Thursday, 19 September 2013 4:34:20 PM
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Hi Alan

Re Day’s estimates
If prices hadn’t dropped, then the value of exports to China would have increased by much more, but assuming the volume of exports didn’t change, Day’s calculation would not be affected. Because she is looking at “real” growth, only the volumes count. If the volumes had dropped, of course, the story would be different – but they didn’t.

Re stimulus

The effect of the stimulus packages on GDP is not straightforward, even on a straight growth accounting method (adding expenditure but not taking account of multipliers, crowding out etc).

Firstly, a large proportion of the payments to households were saved not spent, so they made no direct contribution to GDP. Even Andrew Leigh, (an economist and Labor MP) estimates that less than half of households spent the money they got. Rebuilding savings might be a fine thing, but it does not stimulate the economy.

Secondly, the direct spending, particularly the capital elements, took time to take effect. A lot of it was not delivered on schedule, and the investment project may have begun in 2009 but can take a couple of years or more to complete. So the stimulus was spread beyond 2008 and 2009, when it was most needed. And, Governments are masters are announcing spending they were going to do anyway.

We can get direct estimates of the contribution of Commonwealth Government spending to growth from the ABS. The data are percentage point contributions to real, seasonally adjusted GDP growth:

Commonwealth consumption spending actually fell in real terms in the March quarter 2009, detracting 0.2 percentage points from GDP growth. Investment spending was flat. Both consumption and investment fell in the June quarter.

http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5206.0Jun%202013?OpenDocument (Table 2, series A2298900T, A2303994W, A2304000J)
Posted by Rhian, Thursday, 19 September 2013 7:23:09 PM
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Re Employment
It’s had to give a better estimate as no-one else does the data collection. For a rough estimate I’d take an average growth rate between when the sample size was cut and when it was restored. That’s an annualised growth rate of 1.7% in the 18 months to December 2009 on seasonally adjusted data – below long-term trend of 2.9%, but positive

Re Keynsian “irony”
Not at all. Even the most hardened monetarist would accept that, if a government spends a lot of money during a short period, it will boost GDP for that period. The differences with Keynsians revolve around multipliers, crowding out effects, exchange rate effects, etc all of which unfold over a number of quarters
Posted by Rhian, Thursday, 19 September 2013 7:24:29 PM
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