Remembering a friend today

Today is my light blog day (Wednesday) and it will be even lighter as a result of commitments I had today. Earlier, I attended a funeral for a great person – Tuấn Nguyễn Văn – who died last week in his home of Auckland. He is known to many Modern Monetary Theory (MMT) people for his relentless pursuit of politicians who continually do not tell the people the truth about the policy options, and, instead, impose material costs on the least-able to defend themselves against unemployment, low pay, precarious work, cuts in public services, degraded infrastructure and more. He was a really nice person and I am so glad I was able to meet him personally earlier in the year. So I decided not to write anything more than that today by way of blog post writing and took the time attending his funeral to reflect a bit on lost souls who were valued and precious. Some appropriate music follows.

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RBA governor adopts a political role to his discredit

Last week, the Reserve Bank of Australia governor, Philip Lowe, confirmed that the claim that the central bank is independent of the political process is a pretense. The Governor was adopting a political role and made several statements that cannot be analytically supported nor supported by the evidence available over many decades. He is insistent on disabusing the public debate of any positive discussion about Modern Monetary Theory (MMT), which, of course, I find interesting in itself. More and more people are starting to understanding the basics of MMT and are realising that that understanding opens up a whole new policy debate, that is largely shut down by the mainstream fictions about the capacities of the currency-issuing government and the consequences of different policy choices. People are realising that with more than 2.4 million Australian workers currently without enough work (more than a million officially unemployed) that the Australian government is lagging behind in its fiscal response. They are further realising that the government is behaving conservatively because it still thinks it can get back to surplus before long and so doesn’t want to ‘borrow’ too much (whatever that means). An MMT understanding tells us that the government can create as many jobs as are necessary to achieve full employment and the central bank can just facilitate the fiscal spending without the need for government to borrow at all. They are asking questions daily now: why isn’t the RBA helping in this way. The denial from the RBA politicians (the Governor, for example) are pathetic to say the least.

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Wages growth in Australia at record lows

Last week was a very busy data release week and so I am still catching up. Last Wednesday (August 12, 2020), the Australian Bureau of Statistics (ABS) released the latest- Wage Price Index, Australia – (June-quarter 2020). The ABS reported that the June-quarter result was “the lowest annual growth in the 22-year history of the WPI”. Private sector grow was just 0.1 per cent and public sector growth was 0.6 per cent. The overall WPI growth was just 0.2 per cent. With annual inflation in the June-quarter recorded at -0.3 per cent, real wages grew. But the inflation result was distorted the federal government decision to offer free child care in the early period of the pandemic (now rescinded). The reality is better reflected in the core inflation rate (excluding volatile items) of 0.4 per cent. Taking that measure, real wages fell overall in Australia in the June quarter. Further, over the longer period, real wages growth is still running well behind the growth in GDP per hour (productivity), which has allowed profits to secure a substantially increased share of national income.

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The Weekend Quiz – August 15-16, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Australian labour market improvement moderates before the Stage 4 Victorian storm is about to hit

The Australian economy continued to recover somewhat as the government eased the strict lockdown on businesses. However, the pace of improvement moderated significantly. The latest data from the Australian Bureau of Statistics – Labour Force, Australia, July 2020 – released today (August 13, 2020) shows that employment rose by 0.9 per cent, well down on the rate of improvement last month. The participation rate also rose as job opportunities increased, and the labour force change outstripped the employment increase, which meant that unemployment rose by a further 15,700 thousand. More than a million Australian workers are now unemployed, which does not include the 235 thousand that have dropped out of the labour force since March 2020. That means the official unemployment rate of 7.5 per cent continues to underestimate the actual impact given that the labour force is still 235.2 thousand lower than it was in March 2020. Adding those ‘hidden unemployed’ workers back to the underutilisation rate suggests that 21.3 per cent of the available labour supply is not working in one way or another (unemployment, hidden unemployment, and underemployment). Any government that oversees that sort of disaster has failed in their basic responsibilities to society. It must increase its fiscal stimulus and target it towards large-scale job creation. The problem now is that with the Stage 4 lockdowns in Victoria now in place as it deals with the second virus wave, it is almost certain that the August figures will reveal a deterioration. My overall assessment is: (a) The current situation can best still be described as catastrophic; (b) The Australian labour market needs massive fiscal policy intervention targetted at direct job creation; (c) The prior need for a fiscal stimulus of around 2 per cent has changed to a fiscal stimulus requirement of several times that; (d) There is clear room for some serious fiscal policy expansion at present and the Federal government’s attempts to date have been seriously under-whelming; and (e) Any government that oversees that sort of disaster has failed in their basic responsibilities to society.

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Australia’s job recovery stalling and soon to head south again

I am back into my Wednesday pattern after experimenting or the last 10 weeks with the MMTed Q&A series. Soon there will more video content coming as skills are refined. So today I just report my notes as I analyse the latest Australian Tax Office payroll data – Weekly Payroll Jobs and Wages in Australia, Week ending 25 July 2020 – released yesterday (August 11, 2020) by the Australian Bureau of Statistics. Regular readers will know that I have routinely analysed this dataset ever since it first became available in March this year. It uniqueness is that it provides the most recent data upon which an assessment of where the labour market is heading. The monthly labour force data is about two weeks old by the time this data comes out. And the most recent release gives some insights into what the impact of the renewed and severe lockdowns in Victoria (the second largest State economy) has been. The data shows that the jobs recovery has stalled and emphasises the need for more federal fiscal support – but that support does not appear to be forthcoming.

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Tracing the roots of progressive views on the duty to work – Part 2

This is the second part in my historical excursion tracing where progressive forces adopted the idea that it was fair and reasonable for individuals who sought income support from the state to contribute to the collective well-being through work if they could. As I noted in Part 1, the series could have easily been sub-titled: How the middle-class Left abandoned the class fundamentals, became obsessed with individualism, and steadily descended into political obscurity, so much so, that the parties they now dominate, are largely unelectable! Somewhere along the way in history, elements of the Left have departed from the collective vision that bound social classes with different interests and education levels into a ‘working class’ force. As identity politics has become a preoccupation of what were traditional working class parties, even the concept of the working class has been subjugated into a ‘social’ class (lowly educated with racist predilections if we consider the Brexit debate, for example) rather than an economic class. And that is why the Left is split and the traditional social democratic parties have become increasingly unable to win elections even though the conservative alternative have been terrible. And part of that new divide is over work – the lack of it, the duty to do it, the vast variations in quality, and all the rest. In Part 2, we see how the duty of work concept permeated progressive elements in the West and allowed the different social classes (in the C. Wright Mills meaning) on the progressive side to bind into a coherent political force. That coherence is now gone and the lower-income workers are in revolt.

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US labour market rebound moderating – policy support is lacking

On August 7, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – July 2020 – which shows that while employment continued to grow, the rebound has moderated. The problem facing the US is that the lack of economic support from the Federal government means that the huge pool of unemployment will take years to reduce and the damage will accumulate. How far the recovery can go depends on two factors, both of which are biased negatively: (a) How many firms have gone broke in the lockdown? (b) Whether the US states will have to reverse their lockdown easing in the face of a rapid escalation of the virus in some of the more populace states. But I do not see appropriate policy responses in place at present. From abroad, it looks like the US government is stepping back when it should be engaging in supporting all incomes and introducing large-scale job creation programs.

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The Weekend Quiz – August 8-9, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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