Day 2 in Darwin – hot – but back to business. Thanks for all the nice remarks. The IMF once again demonstrated why their entire public funding should be withdrawn by the contributing governments, who could spend it more usefully introducing direct job creation schemes. Once again they have downgraded their growth forecasts as if the situation has changed from when they last told us what they thought would happen. Nothing has changed except the IMF have worked out their previous forecasts were wrong. But then they could never have been right given the policy agendas that the IMF and its repressive partners (such as the EC and the ECB) are pushing on nations that deserve better. More generally, the failure of the IMF to produce reliable estimates is linked to the overall misunderstanding of the relative roles of fiscal and monetary policy that exists among commentators and economists. The neo-liberal dislike of fiscal policy skews the debate towards thinking that monetary policy will save the day. Unfortunately, an understanding of how monetary works and the current problem would not lead one to that conclusion. Only a significant renewed fiscal policy stimulus will arrest the decline towards recession. The IMF has one thing correct – the world economy is backsliding. But then we knew that a long time ago while they were still trumpetting the virtues of fiscal austerity and solid growth prospects.

Yesterday, the Australian Bureau of Statistics published the August 2012 data for – International Trade in Goods and Services, Australia – which provided further evidence that the so-called once-in-a-hundred years mining boom that was meant to bring employment security and strong growth for years to come is waning – and quickly. Today’s retail sales figures are also in this vein. The Treasurer continued his bluster that they had to go for a surplus. And a prominent (former) banker came out and claimed the surpluses should be bigger – even though the economy is going backwards and non-government spending is incapable of supporting strong growth. He thinks were are on the path to Athens. He thought we could easily become Greece. When you think about it the transition from Australia to Greece is within the limits of human idiocy.

Recently my research centre set up a new office in Melbourne, Victoria (a southern Australian state). We do a lot of work in Melbourne and so it was a cost-saving measure to establish a permanent capacity there. It coincides with some other big changes that I will make public on Monday next. The experience has generally been favourable – we have installed very reliable IT systems and have off-street parking, which is somewhat redundant given our proximity to the CBD and the University of Melbourne, where I am involved in some large projects. But try getting power connected – and when it finally is connected – try keeping that connection. Welcome to the world of privatised power. Read on to learn about how efficient it all is. And as you read reflect on the fact that the neo-liberals sold this farce on the back of arguments that the nation couldn’t afford state-owned power supplies and that the new privatised world would be like a journey to Shangri La! It just hasn’t turned out that way.

There was an article in this morning’s Melbourne Age (September 26, 2012) by former Australian Federal Finance Minister Lindsay Tanner, which talked about the structural decline of social democratic parties around the world. Recently I was in the Netherlands for the Dutch national election and the Labor Party could not gain office and is likely to go into coalition with the Conservatives (what?) – the common bond – their support for the Euro and fiscal austerity. What set of circumstances would see what should be polar opposite political forces in coalition? And then there are the LDP and the Tories in the UK. And the debate in the US is not about a deficit versus a surplus but how quickly to get into surplus. The same goes in Australia. The policy debate is marked by claims from both major parties that they will generate bigger budget surpluses quicker than their opponents. The social democratic political tradition is fading because the parties have become indistinguishable from the conservatives in economic policy. They are all neo-liberals now and that is an ugly option for those with a progressive bent who have traditionally supported the social democratic parties.

The scaremongering about inflation and higher interest rates continues to flood out of the mainstream economics community. The conversation has become a little more sophisticated since the claims in the early stages of the crisis that the fiscal and monetary policy innovations introduced by governments would be inflationary. Now we are hearing stories about longer lags – channelling Milton Friedman who also fell foul of the evidence more often than not. So inflation is just around the corner rather than coming tomorrow. As in the past, the mainstream macroeconomics has a serious credibility problem. It is no wonder it keeps making erroneous predictions. It begins with an erroneous construction of reality. It is all downhill for them after that.

I am now back on Terra Firma and have been greeted with beautiful Spring weather. Among the headlines I read when I returned to my office today were those predicting that the Greek economy will have shrunk by 25 per cent by 2013 and the Troika are demanding more cuts. What I learned from being in the lands of austerity over the last few weeks is that there is no coherent plan to salvage economic growth. Rather, the same economic policies that caused the crisis remain dominant. In saying that, I discount the trends in monetary policy including quantitative easing, which are crisis-specific, because they really don’t make much difference. What is apparent is that one of the pillars of social stability is now under threat. I refer to the deteriorating position of the middle class in the advanced nations. The latest data from the US supports the view that the inequality in income distributions continues to worsen. There is a hollowing out of the middle class continuing at a pace. This rising inequality demonstrates we haven’t learned much and are continuing to repeat the errors in policy that created the crisis and is preventing nations from leaving it behind.