Can the discussion surrounding the Australian economy get any more bizarre? Will economists continue to make vague observations? Will our politicians spend most of 2009 making nonsensical statements aimed to please the plebs? If you answered yes to all three questions then you are well prepared for the year ahead.
The whole debate about if Australia would enter a recession or not was over in December 2008 as I wrote in Be prepared for the recession we might have avoided and yet I wonder why it is still the topic of so much debate. Rudd, Swan and the Reserve Bank of Australia (RBA) blew any chance of Australia avoiding recession last year by focusing on the “War against inflation” for too long at a time when they should have been focused on supporting the economy.
Most economists quoted in the media seem to think the RBA and even the government have been ahead of the curve when it comes to dealing with the global economic crisis. Rubbish! If you are cutting interest rates and rushing through economic stimulus plans in response to a deterioration in the global economy then you are behind the curve.
Yes other countries have been caught out by global slowdown as well and are also rushing through stimulus plans, but that is no excuse for the RBA, the Treasury or the Rudd Government to be caught napping. Some pilots lose both engines and get their plane back on the ground safely whereas a less skilful pilot might crash. I fear our team in the cockpit are about to give the Australian economic airframe a crash test.
We depend as a nation to a large extent on commodities exports and the prices for these had rolled over by the third quarter last year, so we knew the storm was coming well before 2009. But what did our economic managers do last year? Not much. In fact the RBA did not even bother to meet in January 2009 so that shows you how well they were reading the economic tea leaves. And let’s not forget Rudd and Swan actually spent early 2008 talking our economy down…well down lads. (Remember that nasty inflation genie?)
Dealing with a recession in 2009 will be bad enough but we will also be subjected to a lot of useless debates about how bad it will be and how long it will last etc. Statistics will be massaged, executive salaries will be frowned upon, politicians will point fingers at each other in order to deflect blame and time will be wasted. Australia may have avoided a recession if blunders were not made last year, but that is all history now. None of that matters anymore; we will not get out of this mess now until things improve in the U.S, Japan and China…end of story.
But of course there is a plan to help Australia ride out the this global economic storm…Rudd’s $42 billion plan, or as it should probably be called Rudd’s “Plan 9 from Outer Space” since it makes as much sense as the movie. We could be getting ready to take on the world after this recession and be investing in high tech industries, rolling out a national broadband network and setting up centres of medical research excellence but no, we get home insulation, railway boom gates and freshly painted schools.
As for the infrastructure projects to be executed by the state governments, they are likely to be having an impact sometime in 2010 and beyond…just in time to fuel inflation. First we will get whacked by a recession and then we will be hit by high inflation just when we dare to dream things might be getting better. Won’t that be fun?
Anyway if, you are not following me regarding the Plan 9 from Outer Space analogy (or even if you are) then treat yourself to these highlights from the movie:
So prepare yourself for plenty of spin from both side of politics and many “Plan 9” moments this year. Sometimes you will wonder if what you hear or read makes any sense and the chances are often it will not. Let’s just hope we all emerge from this mess smiling in 2010 sometime.