The talk at present is that while we are hoping for a V we might have to accept a W. Its all about shape. The shape of the future. The shape of the recovery! In Post-Lehman World Will Mean W-Shaped Recoveries we read that Japan’s former economic and fiscal policy minister, Hiroko Ota said that “The worst is over but I can’t say the economy is heading for a recovery at all”, Japan’s recovery may be W-shaped instead of V-shaped. There are some very real reasons why W might rule over V. They all relate to the lack of understanding of the characteristics of a fiat monetary system and the opportunities that such a system presents the sovereign government. Unfortunately, the ignorance (or wilful neglect) among policy makers may force millions of people to endure unnecessary hardship.

Its winter here in Newcastle! Today my shark-o’clock morning surf expedition was freezing! Full wetty and still cold! But for northern hemisphere readers pleased be warned that freezing means a water temperature of 19 degrees celsius and air temperature of 14 celsius. Anyway, the sudden sensation of cold reminded me of my mortal origins. One thing led to another and I was soon thinking of animal spirits! This is what JM Keynes said drives the business cycle up and down. And today (and yesterday) we have been reminded of the role that sentiment might play in economic life. The news is probably good and suggests that this downturn might be more moderate for Australia than the global experience would have indicated. But it might also be bad. Ahh, economics!

I saw this story in the Melbourne Age today World’s best airport named. I knew it wouldn’t be Sydney or Melbourne where I am often in and out of much to my displeasure. So I scanned the list. Sure enough a whole lot of airports some of which I regularly fly and know to be excellent in terms of ease of use, charges and available facilities. Anyway, I had intended to write a blog today about trends in world foreign exchange markets (see digression below) but the airport rankings attracted my interest because I am also thinking about infrastructure provision at present.

I saw this in The Australian (on-line) front-page today – “POLL: Do unions have too much power?” So the campaigns are emerging: deficits, debt and union power. Seems like we are back in the 1970s when the conservatives last ran the union power campaign. The topic is apposite given the Government’s reaction last week to union requests to eliminate some of the nasty elements that remain from Work Choices. I laughed when I saw the poll – who are they trying to kid. Anyway, the current Government is playing hard cop with the union movement exploiting the lack of capacity of the latter to fight back.

In today’s Melbourne Age there was a headline that attracted my attention – Hurling invective at CEOs over salaries is a bit rich. The writer from the conservative Institute of Public Affairs was reacting to a speech made by the President of the ACTU this week who proposed a salary cap on executives. The writer, Chris Berg claimed this was just whipping up some “traditional class conflict”. He asked: “who seriously believes that the level of CEO pay in Australia had anything to do with the subprime crisis that set off this whole mess?” Well, I for one think that the growth in executive pay was linked to the crisis. Here is the point.

I have been doing work on international trends in unemployment today and spent some time on the UK economy. Of-course, Britain is in the news at present because its polity is melting down rapidly. We have been laughing a bit I am sure about the so-called rorts scandal, especially the story about the ducks not liking their island anyway. I laughed anyway. I also applauded the skilled research that tracked the island down on Google Earth. Anyway, the rorts scandal is a sideshow in a much bigger problem that is unfolding in Britain at present. Its labour market is in free fall!

The euphoria over a 0.4 quarterly growth figure which translate into annualised GDP growth being at least 2.5 per cent less than would be required to keep the unemployment rate from rising should be attenuated by the fact that National Accounts data is very slow to come out. The picture it paints which conditions our current expectations and debates is old – at least 3 months old by definition. And it is sobering when amidst all the self-congratulation and applause for our strong export performance that newer data has come out today which suggests that GDP growth is probably now negative although we won’t find that out for three more months. Meanwhile the debt and deficits argument continues in the public debate. Here is an update.

Today the ABS released the March quarter National Accounts data which showed that the Australian economy is actually resisting the global slowdown although barely. The results allowed all and sundry to pronounce that Australia had escaped recession, despite there being no acceptable definition of what actually constitutes a recession. For now then we do not have a recession based on the national accounts benchmark – two consecutive quarters of negative GDP growth. But I hardly think this is the end of it. And if we take a labour market definition of recession which researchers such as me think is a better approach because unemployment is a personal experience that allow us to feel the movements in the cycle – then we are already in recession. That is what this blog is about – R we or R we not!

Well the conservatives are scrapping between themselves, which is just as well because it might derail their drivel campaign about the trillion (whatever!) dollar debt wave that we are about to drown under. Me, I will surf it out with my longboard and enjoy the experience! Anyway, seems Mike wants to end our little engagement which is fine because tomorrow I will be talking about “R we or R we not”. National Accounts are out at 11.30. So this blog summarises where I think we are at. Remember that it started with the blog – Neoliberals invade The Greens! and the space theme continued with Mike conjuring up the Mitchell Strikes Back and today The return of Mitchell. Whatever, it is more clear than ever that the conservative macroeconomics has The Greens in its grip – sadly.

I was going to write about retail sales and company profits data today but the short story is that retail sales continue to defy the predictions (stimulus packages work). I ran a regression model today to generate a (reasonable) forecasting model of retail sales behaviour up to the point the stimulus packages were announced (November 2008) and then projected out to April 2009 and compared the dynamic trend with the actual data. Every data point since November 2008 is above the trend (which is why the ABS has abandoned its trend series for the time being). But it does tell you that the Australian economy is withstanding the world downturn. We will know more on Wednesday, when the national accounts (GDP) data comes out. Anyway, there has been more engagement with the “other side” or should I say “another side” today and I guess I should respond to that. And so the saga continues for another day.