Thursday, 5 May 2016

Around the Traps 6/5/16

It is time for Around the Traps again

Aussie,Aussie,Aussie,Oy,Oy,Oy
Northern America
Europe
Asia
Wonk
General
Climate
Andrew Gelman ( mainly stats)
Genial Dave Giles ( econometrics)
Dianne Coyle ( Quirky + Book Reviews)
Vox wonk

Wednesday, 4 May 2016

The Government hoist on its own petard

A bit further comment on the budget.

I am comfortable with the assumptions in the document.I can see no rubbery figures.Projections are not forecasts remember. I see reading STEVE from BRISBANE the peroxide princess has her knickers in a knot about nominal GDP forecasts being too high.
I would have two things to say there. Welcome to the club believing nominal GDP is possibly the most important variable in the document. Here we should give RICARDIAN AMBIVALENCE his due. He was the first to recognise this. ( Usually nominal and real GDO rise together but the TOT changes has made this redundant.) The second is She is assuming a drop in the terms of trade. this may occur but it is more likely they will at worst stay at present levels.The rises in Nominal GDP are totally consistent, as you might expect, with the TOT forecasts.

What the government hasn't done is more fiscal consolidation where their document says it is possible. Given their forecasts in nominal GDP I would have thought the public sector could add less to GDP than this document is forecasting ( which is roughly half the long term trend. )

You cannot argue the economy is in great shape and then say only minor fiscal consolidation is required.

You could argue that if you were unsure and the CPI figures gave you more reason for caution but the government is not arguing that.

The  political problems emanating out of the budget are the increase in prescription drugs and the obvious attack on bulk billing and they are of course related.

Add in the issue of young people being unable to get into the housing market which the government is exacerbating then we have an interesting election campaign coming up.


Tuesday, 3 May 2016

The budget

This is a budget for cognitive dissonance.

The coalition says the problem is about spending. however they have increased spending since gaining office. They still have not gotten spending down to the levels they were when they won the election.
The deficit is nowhere near the levels they inherited of 1.9% after three years.
Morrison was as dear in the headlights last night when interviewed by the Smiling Assassin Leigh Sales. She brought up these very points and in essence he had no answer apart to implicitly blame Abbott and Hockey for his predicament.

I tend to think the deflation we saw from the CPI release has caused large amounts of worried sweat to come out on all econocrats. The RBA has cut rates and this budget has eased policy  very minutely. It adds a tad more to GDP then was envisaged on a no change of policy basis. It is almost half of what the long term average has been  BUT it is nowhere near the 0.7 percentage points Swan hacked off GDP in the last budget he had responsibility for.

See Greg Jericho , Stephen Grenville , Trent Sainsbury , Ross Gittins. John Daley and Danielle Wood. Saul Eslake

Sunday, 1 May 2016

The A-League A great end to a great season.

We had the A-League grand final yesterday at a packed Adelaide oval.
Sadly the mighty Wanderers lost but in a final there can be only one winner and one loser.

It was a great match with some wunder goals.

This season saw a lift in standards for the players and just as importantly perhaps more so for the coaches.

If they get the Marquee players sorted out there is only one way for the A-League to go and that is up.

Thursday, 28 April 2016

Around the Traps 29/4/16

It is time for Around the Traps again.

Aussie,Aussie,Aussie,Oy,Oy,Oy
Northern America
Europe
Asia
Wonk
General
Climate
Andrew Gelman ( mainly stats)
Genial Dave Giles ( econometrics)
Dianne Coyle ( quirky + book reviews)
Vox wonk





Wednesday, 27 April 2016

What does the CPI tells us?

The March CPI was released yesterday.It fell which is very unusual. We had deflation not inflation.
Deflation is usually occurs for one of two reasons.
1) Innovation makes lots of goods and services cheaper and you have strong economic growth.
2) The economy is weak and so is demand for goods and services.

most people would think 2) is more appropriate now than 1). however it would be at odds with the labour market for example. Thus policy makers are in a dilemma.
Some indicators show the economy needs to be jump started whilst others show the opposite. The RBA will be in a quandary next Tuesday.

Steve from Brisbane again remembers Sinclair Davidson infamous prediction of stagflation occurring in Australia..

I would make two observations on this. Davidson's informal model   when making this prediction was hopeless even allowing for the fact most people have stagflation being inflation and unemployment being if not then very close to double digits. We were not within cooee of that.

Davidson had no idea of how stagflation occurred in the 1970s. At that time we had a large supply side shock ( very high oil prices) and a highly regulated labour market. Neither of those two circumstances were in evidence when Davidson made his ludicrous prediction.
If only he was a economist!



Monday, 25 April 2016

The US election and the Fed.


Carola Binder has a typically very good article on the Presidential candidates and Fed accountability.

It is well worth a read!