Tuesday 31 March 2020

Did Australia rocket out of the Depression?

Jim Rose made this false claim yesterday. He got mad when challenged on this point.
I wrote about this topic when I first started this blog here.
Please note  from the link what occurred.

Firstly Australia had negative growth before the Crash and then of course after it happened. There was a  miserly recovery in 1931 which was cut off straight away by the utterly stupid budget of 1931,
Secondly we get a recovery after that but only a tepid one. Some rocket!

Compare those rates to the USA. They had growth rates of 10.8, 8.9, 13.9 and 5.1 ( this is affected by the equally stupid budget of 1936).
so the weakest growth in the USA is the strongest we have here!

What about employment I hear you say. Well just remember employment is affected by various factors. real wage rates, exchange rate changes, etc.

The  major reason why growth spikes up in 1933 is the massive devaluation.  ( David Gruen is interesting on this topic). Unemployment was already high at over 8% before the Depression. It fell from  almost 30 %  at its height to 20 odd % by 1933 thanks to that massive devaluation. Remember manufacturing was way more important in those days.  The devaluation did as both Keynes and Hawtrey wanted and allowed inflation to rise and hence real wages fell.  ( few people realise that Keynes first priority was a large devaluation, public works spending came second.)

Now US unemployment if measured correctly as ironically Germany did in the 30s fell to just under 10%. Again much more impressive than Australia. If only Roosevelt had have curt real wages then possibly the USA like Germany would have been at full employment by 1936

Here in Australia unemployment fell to 8% at best which is the mark of a recession. It fell to under 4% after the war started showing just how bad fiscal policy was post Depression. Please not however 1931 was the only highly restrictive budget and it was somewhat obviated by the States who could not just stop infrastructure spending.

Finally let us visit New Zealand for a second. I cannot get many stats for this country but this article  shows male employment for the country.  Again notice the only time we see employment rocketing is after 1936 when there was a clear change of policy.

Alas Jim has been talking porkies on both Australia and New Zealand. during the depression. so sad however I still like him.

not quite an update:

If expansionary austerity works then it would work all the time right. We found out some time ago it did not. for example see HERE and HERE for example.

Every country that adopted austerity after the GFC gained themselves a depression. Estonia and Ireland come to mind. Greece was promised by the Troika it would lead to recovery. It lead Greece to face conditions worse than the great depression!

As has been stated numerous times Ireland has adopted austerity three times. It worked only once. Why did it work you ask? Because they reduced interest rates, the exchange rate fell markedly and its biggest market,  the  UK, was experiencing the 'Lawson' boom.

If you believe in austerity then you are simply like the 1950s communists. You put ideology over facts. 

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