Access economics says recession is over

[Jovial Monk]

Chris Richardson was all over ABC radio this morning saying that the recession was about over, with unemployment still to increase a bit (is is a lagging indicator) and put it down to the recovery in the Chinese economy. Interest rates will take off once the economy recovers.

I hope so, not quite as optimistic as Chris. And an emphasis on productivity, thanks to the new IR laws, might see wage increases tied to productivity gains and so not be inflationary. I am not that optimistic yet, the US economy might be bottoming from its sickening plunge but is it recovering or plateauing?

We still have a major problem of all those huge Costello tax cuts for the rich which were paid for by the mining boom. Mining might recover but won't boom like 2001-7 for many years, so how are we to pay for those numerous tax cuts? Can taxes be increased, can that be sold politically? A hard task, selling tax increases! Even during the mining boom Howard/Costello cut funding to the states, to public hospitals, to education and Universities and spent fuck all on real infrastructure--I don't count the Rural Socialists' pork barrel aka Regional Partnerships which was mostly rorted.

We can save a lot cutting middleclass welfare, e.g. the private health insurance changes and there are billions of subsidies annually to the superannuation industry which really doesn't need it with compulsory super FFS! But income tax revenue is now too low.

I think the tax increases could be sold as a total revamp of tax scales with lower & middle income earners benefiting and only the top scales going up (or the highest scale threshold being lowered so more pay that high rate.) I can imagine the screaming "Labor raising tax again! Can't trust the *****s" etc but hey, the highest earners are not Labor voters anyway

But Costello's tax cuts are not sustainable in the absence of a permanent red-hot boom. The cuts were a complete waste of money that should have been spent on education, health & productive infrastructure and/or built into a $400Bn sovereign fund. Imagine what that could do!

[Jovial Monk]

Costello was a lazy (and lousy) Treasurer, who fiddled with the Budget but only at the margins and consequently all his budgets were structurally in deficit with the huge tax revenues from the mining boom making them look good with cash surpluses. Once the GFC hit those structural deficits became cash deficits really quickly. Of the total $315Bn budget deficits only $60Bn is from the various stimulus packages, so $255Bn are the structural deficits made real cash deficits.

Without the stimulus packages the deficit would likely have been higher (more business failures, more unemployment=less tax revenue, more dole payments etc.

[Leftofcentresalterego]

I'd like to hope so but I'm still cautious.

BTW, did anyone read Paul Krugmans article "Budget deficits saved the world"? I agree that without the stimulus packages implemented by governments around the world, the shit would have really hit the fan.

A potential problem in the US particularly is the possible amount of de-leveraging and rise in private sector desire to save. The level of private debt reached in the US at the time of the crisis has no precedent in modern history. 300% of GDP as opposed to around 245% (the next highest) when the great depression struck. With so much demand having been driven by private debt expansion

[Jovial Monk]

So more bankruptcies, money going to pay off loans.

But Dubya was a great Prez, right!

[Jovial Monk]

Other economists seem to be saying the end of the recession is in sight. Hope so.

If the recession is about over, boy will the Rudd govt be popular! Should be worth two more terms by which time Rudd would have retired and Julia be PM. Can't wait.

[skippy]

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http://news.smh.com.au/breaking-news-wo ... -dv2p.html

Sales of existing homes in the United States rose for the third consecutive month in June, suggesting that the troubled housing market may be hitting bottom, private data showed Thursday.

The National Association of Realtors (NAR) said existing home sales rose to an annualized rate of 4.89 million units in June, up 3.6 percent from May.

And this:

http://business.smh.com.au/business/wes ... -duvv.html

WESTPAC has recanted.

Until yesterday the bank's forecasting arm was among Australia's most pessimistic, predicting three successive quarters of negative economic growth this year - a recession by any definition.

It has now revised away all but one of those negative quarters, expecting just a single contraction in the three months to September, surrounded and overshadowed by positive growth throughout the rest of the year.

"Exports are turning things around, but also confidence," Westpac's chief economist, Bill Evans, said. "Our exports surged a surprising 2.7 per cent in the March quarter. We are expecting an extra 1 per cent in the June quarter - enough to turn our GDP forecast from negative to positive

This is courtesy of the jovial monk.

[Jovial Monk]

Thx skippy.

[Jovial Monk]

And another sign of optimism:

http://www.watoday.com.au/breaking-news ... -e0uu.html

Applications by business for credit rose sharply in the second quarter as firms became more confident about the outlook for the local economy, a survey shows.

The Veda Advantage business credit demand index rose 22 per cent in the June quarter, from the March quarter.

Veda Advantage general manager Russell Evans said the result was a sign business credit demand is increasing, albeit slowly, as business starts to regain confidence.

"Our credit bureau data indicates some healthy signs, suggesting Australian businesses are starting to regain confidence and are now considering taking on a little more debt," he said on Wednesday in a statement.

[Jovial Monk]

http://www.news.com.au/business/story/0 ... 62,00.html

A SHARP rise in approvals for the construction of new buildings signals the Australian economy may be starting to recover after a year-long downturn, economists said.

Building approvals rose 9.3 per cent to 11,086 units in June, seasonally adjusted, from an upwardly revised 10,144 units in May, the Australian Bureau of Statistics said.

Still early days but the number of 'green shoots' is encouraging.

The Ruddster not only got the stimulus happening here BLOODY QUICK he encouraged other heads of government to spend.

The stimulus is not over yet either--a civil engineer on PB mentioned how busy they were getting the Adelaide desal, rail electrification etc happening. In Mitcham they seem to be replacing the existing rail line with a new one with concrete sleepers--this is the line the Overlander and freight train to Melboure run over and badly needs much work, so good to see that work happening! Electrifying the rail line will really reduce GHG emissions because electrical engines are at least twice as efficient as internal combustion ones.

[Leftofcentresalterego]

And people are staring to wonder where this idea that government must constantly shrink it's spending - even in downturns - ever got traction from in the first place. Actually, it really took off in the 70's with stagflation and all manner of other unpleasantness. I still find it extrordinary how government spending could get all the blame for something precipitated by a massive oil shock. You find the likes of Milton Friedman briefly acknowledging here and there that the world's supply of transportation energy became suddenly constrained - and he then goes on to completely ignore something so serious as having any causal relationship whatsoever.

Anyway, the wheels appear to have fallen off Turnbulls' debt truck. The hysteria generated by the fearmongering about the deficit encumbering everyone's children and grandchildren with debt appears to be fading as even right wing economists - even that hideous fucking bride-of-Jabba-the-Hutt, Julie Novak - admit that without it, things would have been much worse.

Put your hand up if you can honestly claim that you are still paying for the cumulation of the permanent deficits run for 30 years to 1970.

I'm still not crazy about the pledge to return the budget to surplus just for the sake of running a surplus. I am continually searching but can so far find no convincing evidence that the economy functions exactly the same way as it did before Keating took the wise step of floating the dollar - even though that appears to be the commonly held veiw. And it's even not rare to hear comments that give the impression that the commenter believes that the economy still functions exactly the same way as it did before Keynes sat on the panel that helped draw up the Bretton woods agreement at the end of WW2.

When I come across someone who can clearly and convincingly explain why WW1, then the Bretton Woods agreement, then Nixon's dismantling of it, then Keating floating the $AUSD - why none of these huge changes has ever altered the fundamental functioning of the economy so that all the old rules actually still apply, then I might change my mind. Until then, I'll continue my research