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Rudd’s recession and the fools on the hill.

April 22nd, 2009 · Greg Atkinson · 14 Comments

Now I know some people will think I am harsh using the term “Rudd’s recession” but when you claim to be able to solve many of the world’s problems, you also have to take some heat when your mystic powers cannot fix everything. Mind you not everything is going against Kevin Rudd as it seems parts of Antarctica are not melting after all and in fact some of the icy bits down south are getting bigger! So Kev07 might have made a dogs breakfast of the economy, but he just might have just saved the planet!

At least now the Government and Reserve Bank of Australia seem to be able to utter that dreaded word…recession.  Finally after months of looking at data that had recession stamped all over it the economic managers of this nation (the fools on the hill) have finally worked out that cash handouts for plasma T.V’s and rebates for pink bats, just doesn’t make up for three of your top trading partners being in an economic downturn.

Sadly if you believed Rudd, Swan and the RBA late last year when they kept saying Australia could avoid recession then I am sorry to inform you that you were misled. But I do not blame people for being misled, because they expect officials in important positions to know what they are talking about. So back in late October 2008 when Deputy Reserve Bank Governor Ric Battellino stated that Australia was on track to avoid a recession, and his views were publicly supported by the Prime Minister, then many people would have felt reassured. (see: Rudd says Australia can avoid recession) However their reassurances last year about the Australian economy were a bit like Noah telling those not coming on his boat not to panic, it was just storm and all would be well in a few days.

How could anyone not under the control of aliens think that Australia was going to avoid a recession after the Lehman Brothers failure and the collapse in commodity prices? Don’t these people watch Bloomberg? Why were the Australian public being told Australia could avoid a recession when it was pretty clear that the economy would enter a recession?

Worse still, why did the RBA fail to meet in January and cut rates then rather then have their summer break even as the world economic situation went from bad to worse? Were the Australian public misled because of honest mistakes or miscalculations (bordering on incompetence) or were the Australian public being subjected to a calculated campaign of misinformation to prepare them for Rudd’s wide reaching social agenda? Why are these tough questions not being asked by the mass media and why is the public suddenly so gullible?

But do not expect the media to focus much on past events because they are too busy singing Rudd’s praises in order to get a seat on the VIP jet. You know the one with gourmet hot meals served to your satisfaction or you get to yell at the staff. And while we are on the subject, isn’t it curious how Belinda Neal was given a dressing down by Rudd and sent to anger management sessions for yelling at restaurant staff, but the Prime Minister is allowed to merely say sorry after harassing a member of the Defence Forces on his “my CO2 footprint is bigger than yours” VIP jet.

I guess Kev reckons since he has walked along the Kokoda track for a television show that he is now an ex-serviceman, and therefore it is quite okay to bark out instructions like a drill sergeant. Maybe he should try that little yelling routine (without his bodyguards) at a pub out in the suburbs sometime?

Anyway as readers of this blog will know, I have been critical of the economic management of the Rudd Government for some time and back in December (see: Be prepared for the recession we might have avoided) I made it pretty clear once again, that I thought the Government and the RBA were behind the curve in dealing with this economic crisis. A few people wrote to me and said I was being unfair to Rudd (but I never yelled at him and made him cry!) and that I would have to eat my words in 2009 when Australia avoided a recession. Well it gives me no joy as an Australian and as an investor to see the Australian economy in recession, but I also feel I need to do my bit to try wake people up, because if they don’t things will just get worse.

Yes the situation can get a lot worse because Rudd is getting himself into a corner. He has made plenty of big statements indicating that the Government will do all it can to lessen the impact of the global recession, so what will happen if the Australian economy starts to get hit harder than many other countries? What will happen if Rudd’s billions do not deliver the sort of results expected? What will the Government do if the Treasury’s economic stimulus package calculations were as good as the ones they did for the alcopops tax, and as a result we find they have made a complete mess of their number crunching?

I am guessing the Government would launch another stimulus package; put Australia into more debt and hope that by the time they have spent a few hundred billion dollars that President Obama will have saved the day. But this would be a mistake; because even if the world economy starts to recover there is no guarantee the Australian economy will bounce back quickly as it will take some time for commodities volumes and prices to recover.

Australia may have been one of the last of the OECD nations to go into recession (or admit it was in a recession), but it could also be one of the last to come out the other side. I am not saying this will be the case, but it is certainly a possibility. The next few months will be critical and I just hope that this years Federal Budget will be better than the one handed down last year!


14 responses so far ↓

  • 1 mad macks // Apr 25, 2009 at 4:04 pm

    greg , i like your website alot. you give a perspective different to our major news posts. regarding the increase in government debt, why cant our government(all three levels) reduce spending if tax revenue has collapsed? no mainstream media will seem to ask or analyse this simple question. if i have less income i have to do with less.
    what exactly is borrowing from future earnings(tax) to pay for recurrent expenditure today going to actually achieve for our current circumstance?
    regards ,michael

  • 2 Greg Atkinson // Apr 25, 2009 at 9:19 pm

    Hi mad macks, thanks for the feedback. Our governments are trying to prop up the economy and basically buy votes… honestly that is the truth in a nutshell. Now I have no problem in governments helping the economy in times of trouble but I do have a problem when it means we give governments more money and I really get worried when our nation is plunged into debt to fund what are basically politically motivated spending programs.

    For example do we need to spend billions of our money to get a broadband network rolled out or should the government just get out of the way and let the private sector take on the risk and get the job done? Why on earth in times like these would any government be trying to find ways of spending more money! It seems pretty crazy to me. But of course throwing money into the economy is popular even if it is often not very effective.

    What we should all be worried about is how our national debt will be repaid and if taxpayers money is being spent wisely. Are we getting value for our money or are we going to be hit with higher taxes or less services somewhere in the future because the people in power spent our money to basically get re-elected?

    As you say, if there is less revenue then surely the government should be spending less….I agree. But if governments need to spend more they should clearly tell us how this will help the people over the long term and also detail how the money will be repaid. Money should not be simply thrown at problems to help short term statistics or assist political leaders maintain their popularity ratings.

  • 3 Ned S // Apr 25, 2009 at 9:31 pm

    My take – Mr Rudd is a very shrewd man – Called a mutifaceted politician in kind circles. But also way too arrogant for it to occur to him just how little he does know and how badly he does need help.

    Because even though he might be really clever, He isn’t going to dream up the perfect new world order on a Christmas weekend off in which he mulls over some thoughts of as how much he liked Mr Whitlam as a boy and those days were really good – But things still could have changed a little bit since – Maybe? Hmmm …

    Heck, it needed a phone call from Mr Bush – Belzeebub himself!!! – to make Kev’s eyes pop open and say “What’cha mean? … There really MAY be a problem???” (I would have LOVED to have heard that phone call – Smile!)

    When any mug (of which I’m one of the most “muggish”) – But can at least read some news reports and think a bit sometimes perhaps? – had been running from banks for four weeks minimum.

    And Stevens was no smarter – Which is a real shame. Because we really should be able to expect a bit better of Stevens. Rudd; no big deal – He wasn’t employed for his global financial acumen – But much more simply because poor silly Mr Howard had failed his really stupid “I can keep interest rates low forever” braggard test!

    Hey, Obama has Volcker on the sidelines – But is even letting him make a few “I just could be needed out there eventually to make my play sometime Boss – Whatcha reckon? Hey?” type noises. Wonder how Ian MacFarlaine is filling in his idle moments just now …

    I’d prefer Volcker personally, but he’s taken and beggers can’t be choosers as they say.

  • 4 Greg Atkinson // Apr 26, 2009 at 6:54 pm

    Ned S – I think Kevin Rudd seems to have found out the hard way that running the country is not a walk in the park. Waltzing around on the VIP jet, holding grand summits and getting you head on television might be good for poll numbers, but they don’t fix problems. He is clearly a pretty clever chap but he is out of his depth when it comes to the economy and so is most of his cabinet. Mind you after a few years in office his team would start getting up to speed, but the economic crisis hit them early and now they are falling into the trap of trying to spend and bluff their way out of trouble.

    I think they made a number of serious blunders last year but I hope they get their act together this year. I worry however that they are using this economic crisis as a cover for implementing social reforms that they did not articulate when they were running for election…and worse still we will end up paying for them!

  • 5 Ned S // Apr 27, 2009 at 6:48 pm

    You put it all so much more kindly than me Greg.

    I don’t tolerate incompetance in people in senior and powerful positions very well I guess. Or bluff (that is sort of just a bit close to dishonesty for my taste.) Which is why I’ve got the knife into Rudd at the moment. So much hot air with so little substence. And I’d be saying exactly the same thing about Turnbull if he was in the hot seat. Because he hasn’t come out with any very impressive mumblings that I’ve noticed either.

    For that precise reason, I’ve actually got to try and go a bit easy on America when I write stuff. Heck, I expected a REAL lot of America. The leader of the world – Fine; But the higher up the pecking order you are the more responsibly you have to act and the more genuinely accountable you have to be. But again, just so much hot air with so little substence. And even out and out incompetance.

    Plus a whole heap of arrogance – Which doesn’t upset me too much in itself. If the arrogant party is truly competant I can live with a bit of arrogance. But I’m real critical of arrogance when it has no basic competance behind it.

    I’ve got to be a bit carfeul how I deal with the American issue at the moment. Because it is easy to be written of as Anti-American. When I’m not. I just expected way, way more from America than what the world got, given American’s self assumed Master of the Universe role and my expectations of the levels of competance and responsibilty and accountabilty that necessarily go along with that.

    For reasons like that, your comment about Rudd and Co not having had time to get up to speed worries me a bit – Because I doubt Little Johny Howard and his merry men would be doing much better?

    Which is part of the reason I’ve begun to question our current form of democracy so much as a way of choosing our leaders. Seems to me that you’ll always just get the bunch of bodies who are most skilled at making themselves popular at any particular time. And popular does not make it good for mine. I’m looking for competant – If it happens to be unpopular, then so be it.

  • 6 Greg Atkinson // Apr 27, 2009 at 8:55 pm

    Ned S – sadly I think that often the people that get into senior positions are not the most capable, but the shrewder operators who know how to deal with politics be it in public life or the corporate sector. Rudd is what I would call a classic consultant type manager just like Sol was at Telstra. They roll out grand plans, programmes and make all sort of promises while making sure they pin the blame on the former team to cover their backs. This happens so often it can make you head spin, but by the time things turn to custard the masters of the disaster are long gone.

    This article might interest you: Sol’s Magical Mystery Tour of Telstra I think you can apply this to how Rudd and Co got going after they were elected.

    Swan for all his bumbling, certainly looks more comfortable in his role now so I would suggest that if Rudd and his team had a couple of years in office before this mess unfolded they would have probably handled things better. Having said maybe George Bush is a classic where a government actually seems to get worse over time!

    I think Americans sort of got caught in their own cycle of hype, you know about them being the hardest and smartest workers in the world etc. and as a nation they simply got over confident. I think so far they have had a shocker of a 21st century.

    Finally I think our system of government does need an overhaul and it just shows what a club it is when both parties today said they were okay with the proposed increase in their electoral allowance. On one hand they are telling us to brace for hard times, while on the other hand they are happy to take some more of our money. Both sides of politics should hang their heads in shame.

  • 7 Senator13 // Apr 28, 2009 at 7:11 pm

    Maybe the people should hang their heads in shame for putting them there in the first place.

    It could help if people made more informed choices when voting. I do not think that the general voting public are really that informed or interested for that matter about who runs the place. Every single member and senator elected is voted in by us – the people.

    You have to think about that… We did put them there… Just look at NSW. Who in their right mind would have voted NSW Labor back in… It is a scary thought but they did get back in. There is an old saying that the electorate always gets the government they deserve.

    Maybe optional voting is the way to go? Maybe then only the people who know what is going on actually will vote and it will be more informed?

  • 8 Greg Atkinson // Apr 28, 2009 at 9:56 pm

    Senator 13, apathy is without doubt the reason we are governed as poorly as we are. I wish I knew how to overcome this problem. I have often thought about optional voting but I guess there would be plenty of downside to that system as well..I mean the U.S. public still vote in dubious characters. Personally I think the only way forward is to make the race for public office a lot more competitive some way. But that is easy to say, but how to make this happen?

  • 9 Ned S // Apr 28, 2009 at 10:26 pm

    Senator13 – I’m really grasping for answers here.

    I’d like to find that elusive “better system than democracy” if we could.

    But in the absence of that happening I’m a real strong supporter of the concept of optional voting. (And without recording what party a person voted for last time and just using it as the default for next time of course.)

    But your last statement triggered a thought – Maybe it would help if people were made/kept better informed – Nah, would never work – The whole concept of “politics” works quite specifically against that – Never yet known a government anywhere that really wants its people knowing what is going on – Even if they actually do themselves.

    But either way it makes me believe that one of the most enduring and valuable gifts a society can give it’s children is education – Real balanced well rounded education including a really good understanding of what money is and how it works. (I don’t have the latter – It is a fundamental weakness – I will work on it.)

    Plus I’d do maybe 3 month exchange programs with the developing nations for our kids and theirs in their late teens. (Not Canada or the US or Japan or the UK – Our kids know what things are like in a developed nation.) And not the Congo or Bangladesh or Syria – Hey, I like I our kids, I don’t want them being emotionally scarred for life or maybe growing up thinking the ONLY way to make the world a better place IS to become Mother Theresa or a Mujahadeen freedom fighter. But with maybe quite clean living and respectable Chinese and Russian and Indian and Argentinian middle class families (I don’t quite warm to Brazil just yet as a place send our kids???)

    With the spin offs being that a) our kids get to see how “the other half” live [that would be a TRUE education for them] and b) the possibility for future understandings and yeh trade [trade is good] being put in place at those early stages when people are still a bit more idealistic and open than a lot of us become as we get progressively get more engrained with our specific cultural/national values over time/as we age.

    It would cost us – Travel costs for our kids and theirs both ways because we can’t expect people in those countries (or even the countries themselves) to pay for international passports, visas and flights. But I reckon the money spent would be a wise longer term investment all round.

    PS: Thanks for your kind comment re the other blog.

  • 10 Ned S // Apr 29, 2009 at 8:18 am

    Senator13 – I very well may have a bit unkind to Brazil in my last post (I was thinking specifically of Venuzuala) – And Argentina nationalizing its pension funds didn’t warm the cockles of my heart in hindsight either.

    But I guess the basic point is that I’d like to give our kids the opportunity to see how the middle class lives in a developing country that just could be one of the next movers and shakers in the world, where we know they’ll be pretty safe and also not exposed to too many ideas that could be maybe just a bit too radical for our collective national taste – Plenty of time for them to have some real radical experiences when are older if they are that way inclined.

    And on that score, I’m pretty sure Russia, China and India would all fine. As to South America – I’m just not too sure personally – Brazil may be OK and Argentina not so OK given what I’d be hoping to achieve by sending our kids for a lengthy visit. More info required there is all I can really say.

  • 11 Senator13 // Apr 29, 2009 at 7:24 pm

    Ned S – yeah, I would agree education plays a very important role – both formal education and informal/general life experiences. They are all valuable. I especially like your point about teaching about money and how it works. This probably needs to start in the home and then schools can build on that… There are a lot of people that can not understand a bank statement. So just little things like that can all help. Even reading newspapers and staying informed in general…

    Greg – I don’t know how to solve it or what system is best. But I think we should stay well away from the American system for elections. The whole primary election and general election and the entire Electoral College system is pretty confusing. I kind of like the Westminster system but you are right, a little more competition and maybe even fewer seats could really improve things. Also, and I am probably in the minority, I think they (ministers) should be paid a lot more then what they do. You have people in charge of a 1 trillion dollar economy and nation of 20 million people and they get paid just a fraction of any one of the CEO’s in the ASX200. Their public servants in charge of their departments are getting paid more then they do. That is a little strange and backwards to me.

  • 12 Ned S // Apr 30, 2009 at 4:10 pm

    Senator13 – I just had cause to take a quick look at the following Blog. It was only very quick as I simply don’t have what it takes to handle too much exposure to such stuff all in one hit:

    http://www.news.com.au/comments/0,23600,25389903-2,00.html

    The fact that probably all of these people are Australian voters concerns me fairly deeply.

    Re education (and especially financial education); I’d be real interested just how many Oz parents under the age of 30 could give the right answer in five seconds or less, without a calculator, to the question: “What is 3.5% of $300?”

    And what percent of our Primary School teachers would pass the same test. Call me the suspicious type maybe? But I really would like to know.

    Depending on the results, relying on our kids to pick up such skills at home might be a bit of a big ask. And I’m not at all sure they’ve been getting them at school.

    I’ve spent a lot of my time since the late 1990’s outside the country. But being back here pretty much fulltime since mid 2007, I’ve noticed what I can only describe as an appalling decline in overall competency levels across many service based areas – Government, Superannuation, Banks – It isn’t just that they can’t do basic maths, but they simply don’t know the answers to what would seem to be fairly basic questions. Even though they either genuinely think they do or are just taking their best guess because that avoids the effort/hassle of finding out and/or they don’t want to appear silly.

    I mentioned it to a friend in a government department a while back – I said When I talk to your lot I reckon I’m only likely to get a reliable answer about 33% of the time. His response was that he thought I’d probably just been a bit unlucky … He reckoned he would have expected it to be more around the 66% mark.

    We are going to munched in a competitive world if we don’t start putting some processes in place to begin lifting our game big time. Don’t know how much time we really have – The minerals thing is carrying us. But I’d like to get a bit more under our belts.

    I fully support paying our leaders more – At least if they are good ones. (And notice I specifically don’t say “politicians”, because I’m not sure I want to be led by politicians anymore.)

    I don’t know what school teachers get paid – I’m still a bit out of touch on a few things back here. But if it isn’t enough to be attracting highly competent people into teaching, then we need to have a real big rethink on that as well I reckon.

    As to teaching our kids a bit of basic economics – I reckon that should be mandatory part of their high school education. Plus things like how to read a bank statement as you point out.

  • 13 Senator13 // May 7, 2009 at 5:56 pm

    Some good points Ned.

    It is a little scary reading some of the comments on that blog… It is even scarier to think that they actually vote. I too must admit that I did not manage to read all of the comments but it is pretty clear that a lot of people just want a free handout and do not really want to take responsibility. I guess we should be glad that they were actually reading the news…

    Teaching children money management skills is very important. Maybe if a few of the individuals on that blog were educated in some of the basics they would not be in the predicaments that they are now experiencing. A lot of the stories seemed to be a simple case of over extending and poor cash flow management.

    The world is getting more competitive every day. We have a number of nations with extremely large populations really starting to press forward. In order to keep up, Australia must remain flexible and innovative. I for one would like us to be known for more then just digging holes in the ground. Resources will always play significant role for Australia given our vast land but I really think that we can expand into a lot of other areas to carry us into the future.

  • 14 Ned S // May 7, 2009 at 8:54 pm

    Senator13 – Was talking to my accountant maybe two days ago? He sees potential positives in the GFC – One of them being that it just could bring our people a bit more back to basics. Perhaps – Because they won’t like it! And government that works of debt driven consumerism isn’t keen either. Plus popularly elected governments don’t get re-elected on giving out lots of bad news up front – More slowly, slowly please – Give the mob a chance to adjust I think. Mr Rudd is doing OK on that score for mine right now at least.

    I’m real glad for Oz’s sake we have the minerals thing up our sleeve. It buys us some time. But we really should get moving. It is almost a case of having been just a bit too blessed for our own good for a bit too long almost – As perverse as that sounds.

    But either way, a nation of 1.3 billion hardworking, fiscally conservative, forward thinking Chinese who are very determined to improve on their pretty lousy standards of living, are not likely to be easily denied mid to long term is my guess. Yeh, we need some smart pragmatic people in Canberra soon.

    And as part of that I’d like to see the Aussie masses educated in “reality” and “practicality” as opposed to wishful thinking.

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