Lat night’s ABC 7.30 Report had a segment titled Australian economy resilient in tough times. It was so bad I was prompted to write to the ABC complaining of their neo-liberal bias. All the commentators were the usual coterie of investment bankers and private consultants all of who have particular vested interests which are not disclosed when they are held out by the ABC as so-called experts! Not one independent researcher was included in the segment. In another world, this might have been the way the show evolved.
There is an interesting labour market case of national interest at present relating the the overpayment of Special Air Service (SAS) troops who have been serving in Afghanistan and who have faced debt recovery action for such overpayments of allowances of up to $50,000. The case has led to calls for the Federal Defence Minister to be sacked for daring to ask our soldiers to pay back the cash. Another labour market group has for years been subject to so-called “debt-recovery” actions from the Federal government and the sums are nothing like $50,000. Yet the press has been largely silent on the plight of this latter group even though I would argue they are among our most disadvantaged citizens. The juxtaposition highlights the inconsistency of the public debate and the selective treatment of individuals by our Federal government who should be treating us equally according to our rights as Australian citizens.
In response to criticism that the Federal government has failed to do anything significant for the unemployed or those about to become unemployed they have announced they will provide an extra $300 million funding for Job Network providers to help the retrenched workers get jobs. This initiative confirms my worst fears that this is a government that has failed to learn the lessons of the past.
As a follow up to my blog on underemployment this afternoon, I was interviewed on national ABC radio programme PM this evening. You can read the transcript here PM Transcript. You can also listen to the podcast (courtesy of the ABC) from the CofFEE podcast site. The discussion also had Ian Harper from the Fair Pay Commission on. You will not be surprised to hear that I totally disagree with him on minimum wage setting.
Today the Australian Bureau of Statistics released its underemployment data for September 2008 and it shows a major deterioration in the quality of employment since September 2007. The data shows that there are now 687,700 part-time workers (about 23 per cent of part-time workers) who want to work more hours but are unable to find them. The gender breakdown is 447,100 women and 240,600 men. There are some alarming trends in this data.
This is the second blog in the series that I am writing to help explain why we should not fear deficits. In this blog we clear up some of the myths that surround the so-called “financing” of budget deficits. In particular, I address the myth that deficits are inflationary and/or increase the borrowing requirements of government. The important conclusion is that the Federal government is not financially constrained and can spend as much as it chooses up to the limit of what is offered for sale. There is not inevitability that this spending will be inflationary and it does not necessarily require any increase in government debt.
A lot of people E-mail and ask me to explain why we should not be worried about deficits and why they do not have to be financed by debt (even if the government does typically increase its debt when it goes into deficit). So in the coming weeks I will write some blogs to explain these tricky things. First, I will explain how deficits occur and how they impact on the economy. In particular, we have to disabuse ourselves of the notion that when governments deficit spend they automatically have to borrow which then places pressure on the money markets (which have limited funds available for lending) and the rising interest rates squeeze private investment spending which is productive. This chain of argument is nonsensical and is easily dismissed. So this is Deficits 101. Next time I will detail the reason why the central bank issues bonds (government debt).
The US Bureau of Labor Statistics released underemployment data for the US overnight. The results are disturbing and follow the same trend that is now common in Anglo countries – these economies, even in good times are increasingly generating marginal employment with low pay and job security, and, most importantly, deficient hours of work relative to the preferences of the workforce. But underemployment presents an added danger as we enter this current downturn.
A good way to understand the origins of the current economic crisis in Australia is to examine the historical behaviour of key macroeconomic aggregates. The previous Federal Government claimed they were responsibly managing the fiscal and monetary parameters and creating a resilient competitive economy. This was a spurious claim they were in fact setting Australia up for crisis. The reality is that the previous government created an economy which was always going to crash badly.