The Australian reports the latest fortnightly Newspoll is unchanged at 55-45, from primary votes of 32% for Labor (steady), 46% for the Coalition (down two) and 10% for the Greens (down one). Gillard is up two on approval to 30% and down two on disapproval to 60%, while Abbott is up one and down one to 36% and 53%. Abbott’s lead as preferred prime minister is up slightly, from 40-37 to 40-35.
Also out today:
• The weekly Essential Research records no change on last week on voting intention, with the Coalition leading 55-45 on two-party preferred from primary vote of 34% for Labor, 48% for the Coalition and 9% for the Greens. The poll also finds 51% thinking Australia made the wrong decision going to war against Iraq against 23% for the right decision; support for same sex marriage at 54% and opposition at 33%; and 68% supporting the Gonski report recommendations against 13% opposed, but 43% opposed to the government’s specific plan against 40% in support.
• The Morgan multi-mode poll has Labor up half a point to 32.5%, the Coalition down 2.5% to 44% (their weakest result since this series began eight weeks ago) and the Greens steady on 10.5%. That pans out to 54.5-45.5 on respondent-allocated preferences (down from 55.5-44.5), which Morgan prefers, and 54-46 on previous election preferences (down from 56-44), which I and every other pollster prefer. The sample this time around was 3270.
Diogs and Duck
I think the $AU will gradually fall to levels that reflect its true value in time i.e. around 90 cents US.
Because of the very high dollar and weakening commodity prices, our economy is expected to grow slower than forecast – therefore inflation should remain contained (which will enable the Reserve to lower the cash rate).
A slowing economy (with contained inflation) + a lower cash rate = a fall in the $AU.
A fall in the $AU means greater value for coys listed on the ASX for international investors:- which obviously = a higher ASX200. 😀
[1127
morpheus
….Even the ABC commentator agreed that based on the current economic situation, we SHOULD be getting a surplus because if the future markets and mining revenue falls then there is no better time then now.]
There is no reason we should be experiencing a surplus now. Quite the contrary.
The record is that for more than 40 years the Australian economy has registered net external income deficits. During most of these years, the deficits manifested in the public accounts. For about 10 years during the pre-GFC bubble period, when household debt soared, the deficits registered in household accounts, allowing the public accounts to run in the black. But this simply disguised the enormous increase in aggregate debt in the economy. The GFC revealed how over-indebted households have become. They are now debt-saturated and, as a result, our national income deficits are once again registering elsewhere in the economy – that is, either with business or the public sector.
A further implication of these imbalances is that we cannot balance the budget and maintain full employment at the same time unless we can first eliminate the external income deficit.
This is the same problem that all deficit economies have had to deal with in the post-GFC environment. There is no immediate way to do this. To a large extent, the income gains from the resource boom will not register as income in this economy because the projects are not owned domestically – they are owned abroad and their income also accrues abroad. Moreover, continuing financial repression in the dominant economies means the AUD is persistently over-valued, even though the terms of trade have been falling, and, in turn, driving down nominal national income.
The fall in income is manifesting in weak profits and investment, and, lately, in gradual weakening in the labour market. The implication for the budget is that weak business conditions mean business will not be increasing their demand for credit, and, in turn, deficits will be more concentrated in the public sector.
This all reflects the chronic imbalance in the economy, itself resulting from many decades of failed investment policies – policies that have turned the property market and super systems into tax shelters; policies that have favoured consumption over savings and investment; policies that have resulted in chronic under-investment in infrastructure.
The high exchange rate makes this an extremely high cost economy, which is also affecting business sales, profits, investment, production and employment. As a result, hours worked and numbers in work have started to decline, essentially reflecting the beginning of declines in real wages.
This also highlights the budgetary problems we face. If measures are taken to bring the budget into balance, unemployment will certainly increase. And yet, the deficit is now starting to grow faster than the economy, which means the deficit MUST be cut at some time in the forecastable future.
This is not a new position for this economy. We have had to adapt to post-boom conditions before, most recently in the 1980’s. The problems this time are that household balance sheets are completely tapped out, the international economy is chronically crisis-struck, we have a legacy of 40 years of very poor tax and investment policies and our exchange rate is now being set by our competitors.
The deficit is a sign that adaptation is necessary. The only question is how will this adaptation occur. Will there be a recession and everything that goes with it, especially stress in employment, property and banking? Or will we achieve a depreciation and an overhaul of the tax and investment framework?
Who knows? But one thing is absolutely certain. We have not eluded the GFC. We have merely been avoiding it and all the adjustments it will impose.
briefly 1202
So when will Labor stop spending money that we aren’t earning? I have the same question for Abbott.
Ive been looking for a red headed monkey to use, no luck yet. But when I do I will use it in place of the name Gillard, as some use it for Abbott.
Should be equally acceptable.
:devil: TP
rummel
So where do you suggest Labor stops spending (far less than Rodent/Monkey as a percentage of GDP when they were last in government mind you) money?
Wednesday, April 24, 2013 at 10:37 pm | Permalink
TONY ABBOTT: We’ve already said that there are certain commitments that this government has made that we won’t go ahead with. We won’t go ahead with the so-called Schoolkids Bonus because that’s a cash splash with borrowed money with nothing to do with education. We won’t be proceeding with the superannuation low income offset because it’s funded by the mining tax, which is raising no money. We will, by natural attrition, reduce the size of the Commonwealth public sector payroll, because that’s 20,000 more now than it was in 2007. That’s about $4 billion over the forward estimates. We won’t have $6.5 billion worth of border protection blowouts because we will change policy to stop the boats. So, I think there’s
http://www.abc.net.au/7.30/content/2013/s3744835.htm
————————————————————-seems abbott has no one in mind to help
only increase your taxes by putting the thresdhold down
taking your school bonus your pensions and the like
he is only obsessed with boats
anhg one who votes lnp is voting aginst them selves
and c ps 20k how that would take years to lower naturally with people leaving
don’t believe it,,,, your job would not be safe
The Liberal Party sidekicks have shown complete and utter disrespect for Julia and the office of PM – in front of a large State and national audience.
We calling Abbott, for what he TRULY is anyway, is very lenient indeed.
Did you see that ugly looking thing will Leigh on 7.30 tonight? Look his twin
😆
rummel, there is no easy answer to this question. Labor has been a low taxing and low spending Government, but this hardly matters any more. Any attempt to balance the budget will drive up unemployment. Instead of asking which cuts to make, we should ask how many jobs will be lost.
The solution lies in tax reform, investment policy-reform, depreciation and measures to support demand.
Centre
[I think the $AU will gradually fall to levels that reflect its true value in time i.e. around 90 cents US.
]
Do these things ever have a “true value”?
I can see that lower interest rates would pull down the value of the dollar with lower international investment but don’t these investors have to put their money somewhere? Europe, the US, Japan seem to be getting nowhere so where will the money flow to? China? India?
rummel, for mine, the LNP have set up a Greek approach to the public sector – one in which the wealthy are not really expected to make any contribution to the State and yet may make claims on it. Were this to become widespread and copied by other income strata, the State would soon be bankrupted. The Howard/Costello re-write of the system was highly destructive. We are soon going to see just how misguided they were.
We should depreciate. There are several measures the RBA could adopt.
briefly
surely we should not be spending money on any new policy.
Dio the $A will fall once people have confidence to park their funds somewhere else but only after relative risk assessments level out. The Japanese did it to us in the 90’s when they very quickly closed out their ¥/$A bonds and sent our currency into a spiral.
Labor talking points good, Liberal talking points evil.
Yeah, generally.
Diogs
[but don’t these investors have to put their money somewhere?]
They do. Big investors and institutions will put their money where they see the best value for their investment.
Where the $AU falls, Aust Coys become cheaper to buy.
[Do these things ever have a “true value”?]
No more than the true value of residential property or the good things at Brooky on Friday night 😎
rummel, there is no new spending in real terms, only a re-arrangement of the list. The question is how to boost growth, national income and net external income. Do these things and the budget problem will be easily solved because this is not a high-public-spending economy. Conversely, if these things are not fixed, there will be a crisis at some time, or a recession, or both.
rummel, one thing is also obvious – the LNP policies on business tax, the carbon tax and PPL will make their job much more difficult.
If we’re having budgetary problems, surely tax reform is the way to go. Plug loopholes that are causing so much leakage. Reform the tax laws regarding trusts, negative gearing, capital gains tax. Reform super tax so we just compensate self-funded retirees for not taking the pension. Fix the mining tax. Make it harder for the wealthy to hide their income and assets from the tax man (tax person?). And until things pick up, surely a small increase in company tax would be appropriate – after all, it’s only paid by companies that are making profits. So let the rate be 32% for the time being. It’s still much lower than it was. No one’s going to up stakes for Botswana, even if they’ll bleat endlessly about the injustice of it. Wind back all of the ‘middle class welfare’ that’s been introduced since the turn of the century. Much of the ‘waste and mismanagement’ was introduced by John Howard to buy elections by spending the surplus from the mining boom before the GFC. Labor hasn’t been game to do more than just cut back around the edges. But who knows, maybe we can get the budget back to surplus sooner than anyone thinks. Dare the Opposition to come up with real alternatives.
the PPL policy is just nutty….the less support you need, the more will receive….it is the complete opposite of how such measures are usually designed…nutty
The monkey emoticon really does look like Tony Abbott. Just sayin’.
[briefly
Posted Thursday, April 25, 2013 at 12:20 am | PERMALINK
the PPL policy is just nutty….the less support you need, the more will receive….it is the complete opposite of how such measures are usually designed…nutty]
Why cant the government just pass legislation thats makes all employers pay paid prenatal leave at the rate the employee is getting paid at the time of taking leave…. just like annual leave?
steve, I generally agree with you, though think the personal income tax system should be made more progressive (steeper) but that that company taxes should be reduced. We need to completely re-order the investment framework in this economy and reform of business tax should be a part of it.
company tax is already around 6% of GDP – quite high by OECD comparisons…
rummel@1222…the won’t do it because it amounts to further regulation of the labour market. I am against doing it right now because real wages are too high already, the labor market is weakening in trend terms and it will kill jobs.
briefly
What can the RBA do to depreciate the dollar other than cut interest rates? Sell off the dollar in exchange for other currency?
I can never work out if that kind of thing is in the RBAs remit? Who are the RBA responsible to and what are their guidelines?
Bludgers
I don’t think the
PPL policy will ever get off the ground.
He said on 7.30 that it will only be implemented when big business will be compensated for the extra 1.5% increase in coy tax.
There will never be a NDIS under Abbott. Oh he will put his hand on his heart and declare that he is a Dr Yes on the issue – but we will never be able to afford it!
[Diogenes
Posted Thursday, April 25, 2013 at 12:27 am | PERMALINK
briefly
What can the RBA do to depreciate the dollar other than cut interest rates? Sell off the dollar in exchange for other currency?]
Just run the printing press over night for a few weeks…..
I should add I’m not criticizing the RBA at all.
PPL is actually Bible-based: “For he that hath, to him shall be given: and he that hath not, from him shall be taken even that which he hath” (Mark 4:25). That verse seems to be the basis of much Liberal policy. After all, John Howard ran a high tax, highly redistributive regime, but the purpose of the redistribution seemed to be to reward those who were in the Liberal base or who could be persuaded to aspire to become part of it.
Rummel
Isn’t there so little paper money compated to computer money that printing it makes no difference.
The RBA has in the past entered the market to support the $A however they are very limited in what they can achieve and any effect is likely to be short-term.
1231
This is Australia. There is no paper money. We have polymer banknotes!
1232
Keeping a currency low is much easier than keeping it high. “Money printing” and lower interest rates are easy to implement, especially compared to the keep the currency up measures like buying foreign currency (beyond the first little bit).
briefly @ 1223 – I agree in principle, but I think if we reintroduced higher tax rates for those on, say, 5 or 10 times the average income, it would not be effective because anyone who earns more than about $200K channels their income through some incorporated entity. If we could find some way to stop people setting up fake companies and have the income they actually receive attributed to them then I would agree,
Diogs it isn’t necessary for the RBA to depreciate the dollar other than cut interest rates.
They could print money, which will definitely depreciate the dollar – but will became quite inflationary as it works its way through the economy.
Briefly I agree in raising revenue with a progressive income tax system in exchange for a lower coy tax rate.
Good for the economy!
Things the RBA could do….
When foreign central banks buy the AUD to add to their reserves, the RBA could issue new currency, displacing foreign demand
As foreigners buy AUD-denominated Government debt, the RBA could buy reserves of the corresponding country, that is, sell the AUD to match foreign buying of our currency and add foreign assets to its reserves
Announce a “rolling cap” on the exchange rate – essentially forecasting a rate in the same way as they forecast an overnight cash rate, but with a wider band and that could be measured on rolling-average basis
This would mean that buying the AUD would not be a one-way bet for the market and would temper buying pressure.
Essentially, foreign central banks are adding free reserves to the global monetary system and some of these are being used to buy the AUD. The RBA could soak up some of these excess reserves buy swapping them for AUD. This would negate some of the effects of portfolio capital inflows.
Maybe interest rates could be reduced too, though I am not in favour of very-low-interest rate policies. They distort prices and investment flows.
There is one person alone who knows their economics backwards sideways and frontal on this blog.
That is briefly.
Those that read regularly and want to know what is really happening in the Australian economy only need to read briefly’s post on economic matters.
I applaud you briefly. You are an extremely rare commodity. PB readers should be grateful they are getting some truth amongst the tripe.
New thread.