Last night, Australian time, US Treasury Secretary Jack Lew gave a speech where he openly welcomed the fact that the US economic growth momentum was "gaining traction". It was an optimistic outlook for the US which is only now genuinely emerging from the Great Recession of 2007-2009 which was brought on by a collapse in banking, insurance and the housing market.
In looking at the challenges ahead Lew noted, in comments oozing decency and empathy, that for the many people who were unemployed and those whose wages have stagnated, "this hardly feels like a recovery".
"The ultimate test for all of us will be how inclusive tomorrow's economy becomes and how widely our economic gains flow," he said. "The crisis we face today is the need to make sure the economy is expanding fast enough to support a growing middle class."
At about the same time Lew was discussing these issues of a stronger economy and fairness and equity, Australian Treasurer Joe Hockey delivered a speech which could not have been more at odds with Jack Lew's themes. Indeed, Mr Hockey's speech could have been penned by the US Tea Party fringe given its assault on equity and the contempt he showed for the less well off in society.
This morning's headline from the Australian Financial Review, no less, sums it up. "Joe Hockey slams welfare state".
When Prime Minister Tony Abbott meets with US President Barack Obama and senior officials from the US administration, the economy is likely to be front and centre of their discussions.
With this being the case, Mr Abbott has a wonderful chance to show off just how wonderful Australian economic conditions have been, how adroitly economic policy has been implemented in the last few years and how that is showing up in an economic expansion and fiscal settings that people in the US could only dream about.
Recent data confirm the Australian economy into its 23rd year of unbroken economic growth. This is in stark contrast to the US which endured recessions in 2001 and of course in the period from 2007 to 2009. "Australian's have forgotten how to spell 'recession'", Mr Abbott could quip, such is our economic success. The fiscal stimulus measures taken in during the global economic crisis, Mr Abbott could highlight, were a critical factor stopping Australia diving into a nasty recession with hundreds of thousands of jobs saved, new jobs created and financial stability maintained during these troubled times.
The Australian is at it again. It is running another fact-less story with the express intent of undermining a key policy of the previous Labor government and what is disconcerting this time, is that it is pushing the line of the tobacco industry.
Today there is a Page One story by Christian Kerr which makes the sensational claim that "Labor's nanny state push to kill off the country's addiction to cigarettes with plain packaging has backfired, with new sales figures showing tobacco consumption growing during the first full year of the new laws".
The "exclusive" story based on "new data obtained by The Australian" claims that "tobacco sales volumes increased by 59 million 'sticks' ... last year". The source of this shock finding is "industry monitor" InfoView which is "backed up by retailers, consumer marketers and the industry". Only Philip Morris and the Australasian Associates of Convenience Stores are cited.
Fortunately, the story is wrong.
The increase in the minimum wage has sparked the usual hand-wringing about Australia being a high wage country. Those demoaning the modest 3 per cent increase in the minimum wage and wage levels more generally, suggest wage rates should be lower.
Here is a look at some minimum wage levels in other countries. I for one would never want Australia to aspire for lower wages and view the high income levels in Australia as a sign of our massive prosperity and now 23 years without a recession.
Here we go - average hourly wages rates, US$.
South Korea US$4.63
So Australian wages are high, which is a great thing. We should hope wages here stay high as it is a sign of our economic strength and prosperity.
Source: World Bank
The March quarter national accounts confirmed the economy accelerating to an above trend growth pace in the first quarter of 2014. GDP rising 3.5 per cent is a sign of the robustness of the economy in the past six months in particular (annualised GDP in last two quarters was 4.0 per cent) and it is clear that, in normal circumstances, the RBA would be looking to normalise (hike) interest rates from the current record low 2.5 per cent.
Things are not normal.
Almost half of the 3.5 per cent GDP growth in the past year has been due to China buying the raw materials that are rolling off conveyor belts 24 hours a day, 7 days a week.
The European Central Bank contemplating negative interest rates as one of its policy tools to kick start the moribund Eurozone economies.
I've had a number of questions about the concept of negative interest rates and thought it best if I reproduce an article I wrote for Business Spectator in 2012 on the topic.
The full story is below.
This article first appeared on The Guardian website on 28 May 2014: https://www.theguardian.com/commentisfree/2014/may/28/will-abbotts-economic-negativity-become-a-self-fulfilling-prophesy
Will Abbott's economic negativity become a self-fulfilling prophecy?
Some two weeks after the budget and more than eight months after being sworn in to office, the Abbott government continues to trash talk the economy, seemingly unaware of the damage it is inflicting on consumer sentiment and business conditions.
While unrelenting negativity on the economy and budget was an election-winning strategy from opposition, it is a self-defeating tactic for a government. People want the government to govern, not to tell them how bad things are, even if they are and certainly when they are not.
Tomorrow morning, RPData will release its house price data for May which will show a substantial fall of about 1.9 per cent in house prices in the month. This fall is based on the already published data in the five main Australian cities - the data from other cities may add or subtract a tenth or two from this result.
As noted here previously and elsewhere, it is not clear whether this price fall is just a seasonal blip, some noise in the data or some other influence and that the general uptrend in prices of the past two years is being sustained.
Be that as it may, get set for some alarmist news reports on house prices falling sharply. Nothing sells like bad news and a near 2 per cent monthly drop in house prices ("a record fall!") will likely get the attention of the media.
Let's get a little perspective on the Capex data, which has been welcomed by a range of people saying it is "not so bad when you look at the details".
Well, I am looking at the details and note the following.
Capex (business investment) has fallen 8.5 per cent over the last two quarters – this is the largest six-month fall since Australia was climbing out of its last recession in 1993. Sounds pretty grim to me, acknowledging that it is from a high base.
Between June 2012 and March 2014, Capex has fallen a meaty 10.1 per cent.
Here is a little scenario to consider when it comes to HECS debt and the idea flagged by Education Minister Christopher Pyne that when a person dies, the accumulated HECS debt would be repaid to the government from that person's estate.
Think of someone who goes to university, studies hard and when they turn 21, have a degree and a $30,000 HECS debt.
If, for example, the person lives to 81, when they die and if they have never had paid employment that required them to cover their HECS debt, they will leave a massive debt which will need to be paid from their estate.
Here is some basic and non-controversial maths.