Comic books … really?

In a week in which losing the plot became commonplace in Canberra, take this extraordinary quote from David Gruen, one of the Executive Directors at the Treasury:

The idea that in the face of the largest investment boom we’ve ever seen that you would ignore exports and focus on demand and claim that’s a recession belongs in comic books, not serious newspapers.

Hmmm.  Let’s look at the facts, David.

  • The definition of recession is arbitrary, as Sinc’s post this week has shown.  Using the rate of unemployment, which many people would relate to, unemployment in Western Australian has risen from 3.5 per cent in June last year to 5.2 per cent in April this year.  On the basis of these figures, the state is already in recession, with the rate of unemployment having risen by more than 1.5 percentage points in less than 12 months.
  • State final demand in WA fell by nearly 4 per cent in the March quarter.  We are talking a serious offset in terms of net exports to shift this figure into positive territory.
  • State final demand in WA rose by 0.5 per cent in the December 2012 quarter.  Net exports would have added to this figure.
  • On the basis of an educated guess about movements in state output, WA is not in a recession yet, although this latest figure does suggest that a significant economic slowdown is afoot.

So comic books?  I think not.  Just some serious analysis by newspapers rather than the fairytales coming out of Treasury.

On another point:  did you read about Martin Parkinson now confirming that the overly optimistic outlook for the TOT were locked in six weeks before the budget – you know, TOT to fall by 3/4 per cent in 2013-14 and 1.5 per cent in 2014-15 (yes, hilarious) – and he now feels that  these projections are too rosy?

Two points:

  • Where does this leave Parkinson’s feisty defence that a PEFO released immediately after the budget would have contained the same (incorrect) forecasts of the budget?  (Yes, I am still having a major chuckle about the last PEFO.  Who needs comedy shows, or should that be comic books?)
  • Surely Treasury have developed systems that allow the projections/forecasts to be revised right up to a few days out from budget day?  In the old days prior to modern technology, there was some excuse for out-of-date forecasts being used in budget.  Not now.
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13 Responses to Comic books … really?

  1. lem

    The reason so many people are peed off with the treasury goons, is that they tell everyone what is really happening 3 months after people have lived it (I’m talking the retrenchments, the company downsizings, etc) and then seem surprised. To add insult to injury, they then predict things will get better, while ordinary people can see it heading south. And don’t start me on the ABS lies about unemployment figures….

  2. Standard Labor Party tactics. Argue that black is white, look for a set of measurements that ‘prove’ this, and then get the MSM to cover for you. Which they do willingly.

  3. Des Deskperson

    An ‘Executive Director’ is a Deputy Secretary, SES Band 3. According its org chart, Treasury has six ‘Executive Directors’; According to APSC stats, the department has an overall total of 8 SES Band 3s.

    That’s incredibly top-heavy for an agency with a total of 1285 staff. Human Services has 35.407 employees and only 9 Band 3s!!

    Their usual explanation/excuse is that they need lots of smart people at the top!!!

  4. johno

    Correct me if I’m wrong, but all this talk of the mining boom coming to an end is quite confused. From what I can see, the CONSTRUCTION of new mines is coming to an end, but those new mines are operating and their output is being sold. Total output from mines has increased over the past decade or so and is likely to stay at these levels for quite some time. Sure, Chinese GROWTH may be slowing, but China is still importing lots of our minerals.

    The high price for iron ore and coal came about through a big increase in Chinese demand which was the trigger for the construction boom. Now that supply has caught up with demand, prices will fall. This is the normal operation of markets and any sensible miner would understand how markets work. Not proceeding with new mines given China’s slowdown and the expansion that has already happen seems very sensible. That the Liar has made Australia less competitive is a separate issue.

    The slowdown in mine construction will lead to higher unemploymnet in WA. This is what normally happens in the construction industry. Most of these workers will find new jobs, despite the Liar’s attempts to strangle the labour market.

    Bottom line. Settle down ,get governemnt out of the way and let markets sort this out.

  5. Pete

    Gruen compromised any intellectual integrity he had when he joined the RSPT/MRRT bandwagon by assuming that the Pilbara’s iron ore reserves were infinite and could thus be taxed accordingly. That he could have accepted this without any even primitive understanding of price volatility, the effects of new production elsewhere and the effect on producer margins absolutely beggars belief. Either he was wilfully ignorant or he chose to ride the Henry bandwagon for personal gain. Either way the idea of objective advice went out the door.

    There needs to be a Royal Commission into this bunch of opportunists

  6. Elizabeth (Lizzie) B.

    Why can we all see things that Treasury can’t?
    Is there something in their tea?
    Sleeping sickness?
    Too many long lunches with Labor luvvies?
    They should see a Doc and get a diagnosis.
    Dr. Doomlord is available, I believe.

  7. Token

    Don’t these guy know that Denial is only the first stage on a very long and tough emotion journey.

    These guys need to get some serious councilling and move onto something productive like basket wieving.

  8. Driftforge

    Eh.. doesn’t Steve Kates always go on about how demand is an irrelevancy, which is basically what David Gruen is saying?

  9. What do we call David Gruen now? Moonbat Boy?

  10. Pedro

    And there was this

    “Dr Parkinson said he would never describe an economy as being in recession ”by counting quarters of negative growth”.”

    So is he preparing to admit that Henry, Rudd and Swan did not save us from a recession in 2008?

    “Their usual explanation/excuse is that they need lots of smart people at the top!!!”

    Well I think that’s unarguable. The question is whether they actually do.

  11. Eh.. doesn’t Steve Kates always go on about how demand is an irrelevancy, which is basically what David Gruen is saying?

    Where does he say demand is irrelevant in determining economic growth or lack thereof? Supply side economics dictates that demand is not the primary driver of an economy, not that is irrelevant.

  12. Tofu hater

    The state of the WA employment rate and economy is in a much worse position then those figures indicate.

    There has been a swift move away from any additional capex expenditure due to a number of factors like a poor short term Iron ore price (Fortescue had place a lot of their ambitious targets on hold) a falling gold, nickel and coper prices, higher labour costs (thanks unions and Gillard) and shaky concerns about China (well until their next 5 year plan gets into fruition).

    Woodside’s decision not to go ahead with Browse highlights the current situation at play. Just read Newcrest’s decision today reflects the mining industry in general as alot of small player will be going (especially around West Perth) and their has been a huge lack of interest and investor appetite in growing locally, with preference towards Africa and Central Asia.

    Being in the industry there is many of people I know whose terms of employment are on we weekly or monthly basis and many expect to be cut, some of those in safer positions are made to take holidays but are fearful of being cut. Contractors are always the first to go contractor many are already gone and others are living on their savings so it does not reflect the true state of play as they would yet show up on the unemployment rates. Many are hoping for a positive investment environment and for that to happen Gillard/ALP has to go and mineral prices need to recover and investment costs (especially labour) MUST fall.

    It’s like the manufacturing industry like Simplot today. Unions and Labour are pricing us out and it becomes notable when the tide comes out and the premium made on higher mineral prices evaporates. If Gas prices fall (there is huge Gas projects from Central Asia and Russia yet to come online) there will be little left in Australia we can compete in except iron ore and Coal (possibly some Gas, Copper, Nickel and Gold projects).

  13. Paul

    Yeah, right… like Treasury has any credibility left after the past few years.

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