Malcolm Turnbull clocked up his first 100 days as PM on 23rd December last, and like most of his predecessors he has enjoyed a happy honeymoon, complements of the Australian voters. With Christmas gone and 2016, an election year, about to blow in what can we expect from Malcolm the New Man?
On the first “working” day after the la la period, Turnbull got an unwanted late Chrissy gift, the embarrassing resignation of two of the good ol’ boys. First to go was Jamie Briggs, Minister for Cities, the Built Environment and Late Night Carousing at taxpayers’ expense. To top the day off, the man who can’t remember what he said, the bloke now sitting in Peter Slipper’s old seat, Mal Brough, who is under police investigation for his part in the ‘Slipper Affair’, yes the same Peter Slipper who used to sit in the seat now occupied by none other than Mal Brough, its one big happy family!
Not a good look Malcolm!
Turnbull needs to move quickly to reverse the unpopular policies of Abbott, and so far he has done a little of that. More importantly the Turnbull Government needs to be perceived as ‘fresh and clean’, and not some lifeboat for Abbott loyalists and cronies, whilst all the time moving in a new direction. That is what the Australian public expects

Well Paul, I said I would reserve my judgement of Turnbull until later
this year. So far he has been not as forthright as I had hoped.
He is to me not positive and not negative, just zero.
If he starts changing Tony Abbott's policies then that will be a negative.
Too many people such as yourself have unreasonable idea of what is to
be the financial future for the Australian government no matter who
wins the election. Of the three politicians in Canberra who understood
only one remains, Martin Ferguson and Joe Hockey are gone.
The third Barnaby Joyce has been muzzled.
However it looks like Senator Bill Heffernan is now awake and being
supported by the defense hierarchy in a related matter, ie Australia's
risky fuel position.

Our future economy is in a fragile risky state and talk of growth growth growth
is wishful thinking.

Dear Paul,

The PM did state that he would be part of a
team when he won the Prime Ministership.
This means that he can't move too fast
and make changes too quickly.

I'm sure changes will be made prior to the next
election - big changes. But he hasn't been in
long enough to even warm the seat - yet. He
can't afford to aggravate too many people
within his party - just yet.

As for Mal Brough? I get the feeling that this
man will get what's coming to him . The law will
take care of him. As will his voters. I don't
think that the PM needs to do anything. And I
think the PM knows it.

What policies will be introduced prior to the
next election will show us whether the PM is
serious about being different from Mr Abbott.

I suspect he won't disappoint us. He seems to be a man
who desperately wants Australia to make a difference
globally - he wants change and I have no doubt that
he will do everything in his power to make sure it happens.

But he's not a stupid man - and is realistic -
he needs the support of those within his party to be
able to succeed.

Bazz,

What will it take for you to understand that Australia is financially sovereign?

Barnaby Joyce's concerns are not valid; we have unlimited credit.

Unlimited credit !
Hmmm seems to me that might be the cause of our debt problem.
Of course we can always just click on a few billion here and there.
Look at the plastic we would save.

Aiden said;
Barnaby Joyce's concerns are not valid; we have unlimited credit.

Oh I see, they won't want their money back ! Great !

That was not what I was referring to when I said he was muzzled.

"With Christmas gone and 2016, an election year, about to blow in what speculative gossip and scandal-mongering can we expect from the headline-hunting Greens?"

There, I fixed that for you.

The honeymoon for the tiresome Greens should be over if the ABC does what the walking, talking, hairpiece Ray Martin says and gives the Greens some equal scrutiny. That will be novel for the Greens and the ABC.

The honeymoon is not over for Turnull. He still keeps Abbotts policies of stopping the boats, getting rid of the idiotic breathing tax and will leave it to the public to decide if they want to pervert the defintion of marriage. Amazing how the luvvies from the abc let him get away with it. It is all about sides not policies for many.

Bazz,

Although some Australians have a debt problem, Australia as a nation does not.

Whether our creditors want their money back is immateriial, as we don't have to reduce our debt when we pay them back.

Barnaby puts his fot in his mouth so often I'm not surprised they want to muzzle him. Unfortunately the rebuttals of his arguments haven't got a lot of media attention so a large proportion of the population still believe them.

The aged conservatives on the forum hold a faint hope that Abbott is not gone, but he has just morphed into a new leader in the shape of Malcolm Turnbull, as demonstrated by the comments of forumites such as runner, nothing could be further from the truth. Turnbull is playing a very smart game, as he slowly but surely wrestles power from the hard right faction of the Liberal Party, and installs his own like minded supporters into positions of authority. The first method of control is rather visible, dump those you don't want, the Hockey types, and promote those you do, Turnbull did a fair amount of that within the Cabinet. Then the less obvious is to install candidates of your choosing into winnable seats, Zimmerman in North Sydney, that move is high on the Turnbull agenda, out with the old, in with the new, watch the new blood in some blue ribbon seats come next election. Turnbull also bought a fair amount of support, by promoting some Abbott "loyalists" like Morrison, and leaving Bishop as deputy.
The Nationals are a problem. e thorn in Turnbulls side. Soon the crusty old Truss should be gone, only to be replaced by the parliaments resident loony tune himself, Barnaby Joyce. A smart move by Turnbull was to cut the legs from under Macfarlane as he tried to run to the National, and therefore giving them a bigger say in things.
I don't expect a great deal of policy change from Turnbull in the run up to the election, no need to rock the boat too much now, but after woulds that could be a different story.

The antics of the remains of Abbott’s henchmen continue to add up with Dutton making a goose of himself. The sooner the Abbott front men have gone the better, they are making the Liberal’s look like a mob of amateurs. Briggs disgracing the liberal party, they are in turmoil, shows the depth of misogyny in the far right side of the Liberal party. Dutton needs eliminating, sack the idiot. Surely there are some competent women in the party that can do better.

"Whether our creditors want their money back is immateriial, as we don't have to reduce our debt when we pay them back."

We run a current account deficit of around 6%, so similar to many a banana republic. The way we pay for it is that we simply sell more and more of Australia to foreign interests. So in decades to come, we'll be working for our Chinese bosses, etc. Hardly smart thinking, but it won't be my problem by then.

Yabby, a current account deficit of 6% of GDP is not at all like a banana republic. 'Tis more like the USA.

Anyway, current account deficits and government budget deficits are very different things, and the former is far more likely to cause the latter than vice versa. The main cause of a current account deficit is a trade deficit, and the main cause of that is our dollar being overvalued. Ultimately that problem is self correcting (as we've seen this year) though a more competent RBA board would've prevented the dollar getting so high a few years ago IMO.

Aiden, the US current account deficit is around 2.3%. 6% is banana republic stuff, if maintained over the longer term, which we have. The US has one distinct advantage, their's is the default currency, so they borrow in US Dollars, which makes the US dollar other peoples problem, as China and Japan found out the hard way.

We do not have that liberty, our current accounts have to be repaid in foreign currency, not Australian Dollars. So at some point we either borrow more from overseas at ever increasing interest rates, or we sell off a bit more of Australia, which is what we are doing. The real problem here is that we still live in dreamland in alot of ways. Million Dollar public service salaries, double time and a half, holiday leave loading, long service leave and all the other bells and whistles which our molly coddled workers insist on, make us uncompetitive in most things. So farming and mining have had to carry us for decades and still do.

Yabby,
Although the US current account deficit has fallen, they maintained it at high levels much longer than we have. Banana republics do not have the means to do so.

The Australian government does not borrow in foreign currencies. Australian businesses sometimes do so, Should we worry about what commercial decisions businesses take? If so, why? And if it's a problem, wouldn't the best solution be to make it easier to borrow in Australian dollars?

"So at some point we either borrow more from overseas at ever increasing interest rates, or we sell off a bit more of Australia,"
...Or we export more and import less, which is the likely result of our dollar falling.

And where do you get the idea that interest rates are "ever increasing"? Haven't you noticed how many countries have had them at zero lately?

Who cares if our good pay and conditions make us uncompetitive for low value activities? We should be concentrating on the high value activities anyway. And if we fail in that, the market will adjust the value of our dollar to a level where we do become competitive. But considering our current level of foreign investment, it's clear the market has much more confidence in our future than you do.

*And if we fail in that, the market will adjust the value of our dollar to a level where we do become competitive.*

It certainly will, but short term we have been rescued by farming and mining, so our current account has been much better, at -3.3% with record coal, iron ore etc. Once those collapsing prices register, it is back to banana republic for us, which Keating noted years ago and we only just escaped at that time.

Lower interest rates only apply to first world countries with a healthy current account, where investors have confidence. A devaluing Aus $ would mean increased inflation, which would undermine that confidence. So interest rates would have to rise, to allow for a falling currency. The RBA could do nothing about it, as they have to hand over US$ to pay our debts. Or they can keep using money they have, from when we sell off more of Australia, as is happening now.

Yabby, your argument is based on a false assumption: that the Australian government borrows in US$.

The reality is very different: as I said before, THE AUSTRALIAN GOVERNMENT DOES NOT BORROW IN FOREIGN CURRENCIES. That's been general policy for the last three decades (since our dollar was floated) and absolute policy for the last two.

Keating floated the dollar so that we'd avoid becoming a banana republic, It was a total success; we don't have to worry about that outcome any more. We are a first world country, and the fact that we have a floating currency means the markets will correct any current account problems we have. BTW it's often the first world countries that have the highest current account deficits.

Our dollar falling does of course mean those companies that have borrowed foreign currencies will need to pay more. But that's their problem; the RBA is not liable for their debts.

Aiden, if only life were so simple! Feel free to dream. The Australian Govt can borrow as it pleases, the market will charge it interest rates to cover the hedge costs of a falling A Dollar, if there is a risk of it falling. The risk grows with a growing current account. In the end, countries have to pay their bills. Note that Greece nearly became a banana republic, saved only by the EU. Argentina was not so lucky. When currencies go down, costs of imports go up, the standard of living goes down accordingly. If everyone claims higher wages to compensate, inflation goes up and interest rates go up even more. Go see what they pay in Brazil or South Africa as bank interest. As you know, Keating had to enforce interest rates of up to 18% to solve things, hardly a great time for those buying a house.

Yabby, you seem to be under the impression that nothing changed when our dollar was floated. But everything changed! We no longer try to keep the dollar up when the market expects it to fall; instead we let it fall.

Instead of raising interest rates to cover the hedge costs of a falling A Dollar, we now do nothing. Consequently Australian businesses borrow less from overseas and more locally, which drags it down so the expectation it will fall further goes away.

I don't know whether or not the government is technically still able to borrow in foreign currencies, but the point is it doesn't.

Greece's problems stem from it surrendering its financial sovereignty to the ECB. Now not only is the market unable to correct its trade imbalances, but it has limited credit, and the ECB are denying it the credit it needs to function efficiently.

Argentina's problems are quite different: rather than sticking with the sensible policy of having a freely floating currency, it tied its currency to the US dollar. This eventually led to hyperinflation when it was unable to keep up, and their economy is still overreliant on the US dollar.

"When currencies go down, costs of imports go up, the standard of living goes down accordingly"
This much is true, though it's not as bad as it may seem, as the decline in the standard of living is much less than the decline in the value of the currency, and the effect could be cancelled out by rises in the standard of living from other sources. It's certainly preferable to the much bigger decline in the standard of living that stems from cutting wages.

Keating's high interest rates were the result of his trying to stop a boom that was causing high inflation. But it was bad policy; the more sensible course of action would've been to temporarily lift the top rate of income tax.

*We no longer try to keep the dollar up when the market expects it to fall; instead we let it fall.*

Well of course! As Britain found out the hard way, they could not beat the hedge funds and the market. The point is however, that regular large current account deficits lead to drops in the value of the currency which lead to rise in the relative borrowing costs in that currency. Our large companies hedge their currency exposure and so do our banks, they pass that on to the customer. Which is why interest rates have been higher in Australia in the past and will rise again, as our current account deficit increases. There is no magic fairy to carry risk, the market prices it in, the end user pays. If inflation starts to move due to wage demands, interest rates will shoot up and home borrowers of all these expensive homes will be crying big time, as they are crucified.

Anything to do with foreign currency, is done for the Govt by the RBA, which is technically a separate entity.

Greece had a choice. Go back to the Drachma, let it collapse, pay huge interest, or accept EU rules. They voted to accept EU rules. Perhaps sitting at the beach drinking coffee, was not enough to pay their accounts and reality has now hit home. They can only blame themselves, nobody else.

Fact is that some wages are quite ridiculous, when compared to our trading partners, brought on by unions whose mentality is still in the 60s. The labour market finally needs freeing up. I don't blame any company for going off shore.

Yabby,

I suggest you have a look at a chart of our current account and interest rate figures; there is not the relationship between them that you seem to think there is.

Hedging foreign currency loans reduces the effect of currency movements that you're so worried about. The reason why interest rates have been higher in Australia in the past and will rise again is that the RBA set them higher because of concerns about inflation.

Your fears about wage demands are unfounded; currently they're very low despite our dollar having fallen substantially this year.

The RBA technically being a separate entity doesn't change my point: it does not borrow in foreign currencies.

Greece did have a choice, and despite a referendum showing the people were prepared to stand up to Europe, their politicians betrayed them by capitulating to unreasonable European demands that will further weaken the Greek economy. Enforced austerity removes the opportunity to make money, so sitting on the beach drinking coffee was the only option many Greeks have! They should've returned to the Drachma; the fact that Greece was running a trade surplus shows it would not have collapsed.

Our wages are high mainly because our productivity is high. When other countries reach our level of productivity, they're likely to match our wage levels.

Aiden, you need to understand interest rates in comparative terms, as interest rates in other parts of the world matter, when determining ours. Our interest rates have nearly always beeen comparatively high, except recently, when the mining boom improved our poor current account figures, which gave the world a bit of confidence in Australia's future. It did not last too long, as we'll see when our current account figures start to climb again.

The people of Greece voted not to return to the Drachma, but to stay in the EU. Their choice. Greece runs a current account deficit of around-2.33%, but as Greeks don't bother to pay tax, their Govt is basically bankrupt. So some hospitals cannot even afford medicines and things go downhill for Greeks, drinking coffee is not going to fix it.

If Australians were so productive at work, it would not cost twice as much to kill and process a cow in Australia, as it does elsewhere. So farmers carry everyone, by being forced to accept much less for their cattle than farmers elsewhere in the world, or by putting them on a ship as fast as possible and processing them offshore, where costs are more reasonable. Our mollycoddled union system has passed its use by date

Yabby, where the objective is to influence short term currency movements, the comparative interest rate is what counts. But when the objective is to influence the amount of private sector borrowing, there is no reason for the RBA to keep our rates higher than any other country or group of countries.

Current account figures do not drive interest rates. If anything, the causation's the other way round, but the correlation is weak.

The people of Greece did not vote on whether to stay within the EU. They did not threaten to quit the EU, and the EU did not threaten to expel them.

What the people of Greece voted on is whether to accept the EU's bailout deal. They knew that a NO vote might mean they'd have to reintroduce the Drachma. They still voted NO. Yet the government ended up accepting a deal that was not substantially different to what was on offer before.

Of course drinking coffee's not going to fix the Greek economy. Fixing it requires investment. But the Greek government is being denied credit so they can't invest, and that also depresses local demand so the private sector has less opportunity to invest profitably.

Greece's current account deficit is mainly due to the cost of interest on their loans. If they returned to the Drachma it wouldn't collapse, but their creditors would take longer to get their Euros back.

It's true that our greater productivity does not extend to every single activity. Some things we just have t accept as costs of doing business here. But economies of scale mean we're still more efficient overall.

*there is no reason for the RBA to keep our rates higher than any other country or group of countries* That is up to the RBA and it's charter to decide. They may for instance, want to avoid a housing bubble, which would not be in the long term interest of our economy.

*Current account figures do not drive interest rates.* Nobody said that they do. They are however, an important component in foreign lenders judging the health and risk of lending to to a country and the higher the risk, the more they will charge, as they are not going to risk the devaluation of a currency at their expense. So people in healthy, wealthy, low risk economies, such as Germany, Switerland, Singapore or Norway, will be able to borrow money at cheaper rates than those like South Africa, Australia, Brazil, etc.

The Greek people never voted for parties whose stated agenda was to leave the EU and return to the Drachma. They had the choice but rejected it. Greece can only blame itself for the mess it is in, nobody else.

If we were so efficient here, our companies would not need to leave the country and go elsewhere. Few countries still hold on to such backward union regulations as we have. So we land up importing even more and complaining about jobs. Ah well, we shall learn the hard way.

Yabby,
Wanting to avoid a housing bubble would be a reason for the RBA to increase interest rates, but not a reason for them to keep our interest rates higher than any particular country or group of countries.

Current account figures bear very little relationship to currency movement expectations, and currency movement expectations are only a minor component of the cost of government bonds.

The Greek people don't want to leave the EU, but their attitude to the Euro is more ambiguous: they want to stay in it, but not at any cost. They have themselves to blame for getting into the mess they're in, but other Eurozone members, particularly Germany, are preventing them from getting out of the mess while remaining in the Eurozone.

It was the overvalued Australian dollar (driven by unnecessarily high comparative interest rates) which prompted so many companies to go elsewhere. But companies move country all the time. Our problem isn't their departure; it's the lack of replacements. And that's partly because interest rates set for eastern Australia are too high for SA, and the Federal government is failing to adequately compensate SA for that. Although admittedly there's also the Federal takeover of industrial relations, setting uniform wages in all states when historically they've been lower in SA.

*Current account figures bear very little relationship to currency movement expectations*

Well no, they would be a very important part of evaluating the future of a currency. A country which needs to borrow ever more to stay afloat financially, is clearly not doing so well as a country which is getting richer. When our banks borrow overseas, which is where in the past alot of their funding has come from, they borrow in US $ or Euro. They have to pay the going rate of interest plus hedging and that hedging cost is a market judgement. -6% GDP, as Australia has often faced in the past, tells us that there is a problem. You are free to deny all this of course, but that will not change the facts.

If Greece wants to stay in the EU, then they should stop blaming Germany and everyone else and start fixing the many things that are wrong in Greece. Like paying their taxes.

*Our problem isn't their departure; it's the lack of replacements.*
Well yes, it is the lack of entrepreneurs who crunch the numbers and can see no reason to risk investing in Australia. I don't blame them. I too would rather invest in a place where workforce demands are more reasonable. All those expected bells and whistles are IMO a joke.

Yabby,

The country does not need to borrow just to stay afloat financially. We would stay afloat even if we completely stopped borrowing from overseas. But there's a lot of foreign investment in Australia because the investors expect it to be profitable.

When our banks borrow overseas, they have to pay the going rate. Where they hedge, they have to pay the going rate INCLUDING hedging. And the going rate including hedging is effectively determined by the RBA cash rate, as that's by far the biggest influence on how much the market charges to hedge. The markets are very competitive now; we'll never return to the days where businesses could cheaply borrow yen and hedge for much less than the cost of borrowing locally.

For long term currency movements, the trade balance is far more important than the current account balance. But it's not just the actual figures: markets anticipate future movements.

Who are you to say what Greece must do if it wants to stay in the EU? After all, you're so ignorant of their situation that you think they haven't started fixing the problems! In reality they've done a lot to address the problems that caused the crisis.

Germany is GENUINELY to blame for insisting on conditions that weaken the Greek economy and prevent its recovery. Can't you see that Greece can't get the economic benefits from enlarging its workforce by raising its retirement age if there aren't even enough jobs for the existing workforce to do?

There are lots of ways to make Australia a better place to do business in. Worsening working conditions is probably the second worst, after scrapping environmental regulations.

*The country does not need to borrow just to stay afloat financially.*

We can do as we do right now. Just sell off a bit more of Australia, to cover our bills. The current account matters at it includes everything and we do in fact have to pay interest on past borrowings. Trade figures only give us limited information regards trade, not our total financial position.

*And the going rate including hedging is effectively determined by the RBA cash rate, as that's by far the biggest influence on how much the market charges to hedge.* Well no. Markets do not need to lend to Australia. Overseas investors perceptions can differ. Amazing how you think you can predict the future.

*Who are you to say what Greece must do if it wants to stay in the EU?* I never did say it was for me to say. It is for the EU to say, Greece can accept or reject. Forget blaming Germany, it is time they blamed themselves and fixed their own problems. I speak to people who go to Greece, they tell me why they would not invest there. None of those things can be blamed on Germany, all Greek created problems.

*Worsening working conditions is probably the second worst,* Believe whatever you will. No doubt those entrepreneurs will flock to South Australia, if you are correct. Freeing up our labour market would be the fastest way to create jobs IMO, but people will learn the hard way. Living in denial is a common human foible, be that here or in Greece