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The Forum > Article Comments > The abstract economy: 'You've never had it so good ...' > Comments

The abstract economy: 'You've never had it so good ...' : Comments

By Mark Bahnisch, published 7/8/2007

Voters have become more and more sceptical of big ticket promises and economic jargon over the course of the Howard era.

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Mark is right - there's a disjunction between the media hoopla about the strength of the macro-economic indicators and people's real-life experience of the economy.

Part of this reflects the shallow nature of media reporting of the indicators that the government trumpets as evidence of its superior management abilities.

Case in point is the quarterly CPI numbers. You don't have to dig too far below the surface to find that headline inflation has been held down by China's influence on traded goods prices.

Inflation in the non-traded sector (things that are not readily exported or imported) has been going up much faster. This is a problem, as it includes lots of important stuff for the average person like health, housing, education, insurance and haircuts. (You don't buy a Plasma TV everyday).

Likewise, the media trumpets the lack of growth in average weekly earnings as a positive. But it just as easily be seen as a negative if you're the person putting in lots of unpaid overtime.

The profit share of the economy is at a record high. And while the CIS Austrian school mob will be saying that's good news in a shareholder economy, the fact is most people derive the lion's share of their income from their human capital, not financial assets.

If he were to win another election and maintain his Senate majority, it is clear that Howard's next big ideological frontline would be Medicare and the dismantling of what's left of free health care (unless it is in a marginal seat).

Rudd would do well to urge people to go and see Michael Moore's explosive new movie 'Sicko' on the rank injustices of the dog-eat-dog American healthcare system. That's what would lie ahead under a fifth term Howard government.
Posted by Mr Denmore, Tuesday, 7 August 2007 1:27:10 PM
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demos,
Is there anything you are not cynical about?
Go have a nice cuppa and think about what you have said.
I think that those who generalise are themselves lazy
and don't take the time to look at other perspectives.
What do you think?
Posted by Goddess, Tuesday, 7 August 2007 2:57:14 PM
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The author makes some telling points. No economy has ever performed so uniformly well that everyone evidently benefits. By focussing on areas of genuine stress (such as housing costs) and pushing a few populist buttons (such as petrol prices) it’s possible to accentuate the negative even in an economic performance that, considered objectively, is a pretty good one.

Mr Denmore’s post is rather a case in point.

I haven’t seen the media anywhere trumpet the lack of growth in average earnings as a positive. Partly, this is because it would be factually incorrect – most measures of earnings growth are quite robust at present. Furthermore, the standard line from most economic commentators is that growth in average earnings a little ahead of inflation is most desirable – much faster than this, and earnings growth just ends up as inflation; any slower, and workers’ real spending power decreases. The “goldilocks” ideal lies somewhere between these two, with real wage growth supported by productivity growth, and that’s the line most mainstream economic commentators take.

Similarly, Mr Denmore’s spin on inflation is excessively negative. It’s true that inflation in the non-tradables sector is consistently higher than in the tradables sector, and competition (especially, but not only, from China) is the main reason.

But that’s a good thing for Australian consumers.

The tradables sector includes not only luxuries like plasma TVs but also daily necessities including food, clothes, household goods, petrol, etc.

And the non-tradables sector is mainly services, which includes not only necessities but also luxuries like lawn cutting, domestic holidays, restaurant meals, sports and recreation, etc.

Furthermore, the essential services - education and health - are provided subsidised or free of charge to many Australians. The prices included in the Consumer Price Index are only those paid by consumers, and therefore comprise mainly private education and private health care.

This is why these items represent only a small proportion of the Consumer Price Index, even though they are indeed important services for many households.

See ABS publication here for details on CPI classifications:

http://www.abs.gov.au/AUSSTATS/free.nsf/log?openagent&64610_2005.pdf&6461.0&Publication&F66CB9C7C6C24B94CA257028007F8647&&2005&23.06.2005&Latest
Posted by Rhian, Tuesday, 7 August 2007 2:59:12 PM
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"I haven’t seen the media anywhere trumpet the lack of growth in average earnings as a positive. Partly, this is because it would be factually incorrect –"

Rhian if you look at http://www.aph.gov.au/library/pubs/mesi/mesi21.htm

You will see a .5% drop in average weekly ordinary time earnings for the last 4 quarters. This is the same measure Joe Hockey used to justify a 1.6% increase.

So it is indeed factually correct. :)
Posted by ruawake, Tuesday, 7 August 2007 4:07:03 PM
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Do the political advisors of Mr Howard and Mr Rudd read the items in this forum?
If they do they ought to know that I am a "self-funded" retiree (I claim no merit for being self funded, merely an accident of the lines of employment that I went in for, I could just as easily be a pensioner if I had followed other whims) and truly I have never had it so good!
But having it good is not what will sway my vote, and I am a swing voter. Howard or Rudd, who cares who navigates in the great swells of the global economy?
I will vote for a party and a leader who offers not to rock the boat too much, but who will align the country to contribute to the alleviation of the problems of inequity, overpopulation, starving, unviable nation States, and global warming - as the evidence develops.
Posted by Fencepost, Tuesday, 7 August 2007 7:33:58 PM
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ruawake
The chart shows continuous growth in price wages.

Yes, there was a dip in "real" (after infation) wages in mid-2006 as the "banana effect" pushed inflation ahead of wage growth, but that was a temporary effect, and more recent data show real wage growth.

In the year to February 2007 (the latest data available), average weekly ordinary time earnings rose by 3.5%, average weekly earnings of all employees rose by 4.9%, and the CPI rose by 2.1%. This is what the data you refer to also show.

And, I don't recall anyone "trumpeting" the temporary drop in real wages as a good thing.
Posted by Rhian, Tuesday, 7 August 2007 7:52:12 PM
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