An idiotic idea so bizarrely stupid it defies sense

From this morning’s Oz a story I have just gotten round to now:

The Reserve Bank governor is calling for 3 per cent wages growth across the public sector, apparently to help the rest of us. Ratcheting up public sector pay would damage the economy far more than help it, undermini­ng economic growth, productivity, increasing inequality and further eroding respect for government.

Adam Creighton calls it “a bad idea”, but that is only because he is polite. It is actually an idiotic idea that is so bizarrely stupid that it demands that he explain how it could possibly provide any positive assistance to the economy whatsoever.

How does someone with so little understanding of how an economy works get to make such decisions? But you have to get to the last line of the story to find out why he wants the least productive people in the economy to absorb even more of our productive capabilities:

The Reserve Bank wants higher­ wage growth to boost inflation, which has hovered below its 2-3 per cent target for almost five years. Meeting an arbitrary inflation target is hardly justification to damage the economy and increase inequality further.

He wants the most securely employed people in the country, with the lowest contribution to output, to receive large increases in wages so that the inflation rate can rise even further. It really is infuriating.

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76 Responses to An idiotic idea so bizarrely stupid it defies sense

  1. Davey Boy

    Didn’t you know, we are living in Clown World, where this sort of idea makes sense.

  2. Scott Osmond

    So, another day ending in y? I learnt all I needed to know about this wanker when he promoted a couple of women when his daughter took him to task over the breakfast table. Fire him.

  3. MPH

    Absolute lunacy. The only way to survive this period of history without being financially wiped out is to do the exact opposite of what common sense would say.

  4. Candy

    It’s bizarre. Maybe he has family and friends in the public service who have convinced him public servants are doing it tough or something.

  5. Up The Workers!

    Better still, knock 50% off Public Serpent salaries and 90% of Bank Executive salaries and put all pollies on the average weekly wage.

    Why?

    Sheer bloody vengeance, of course!

  6. max

    Public servants greedy bums — nothing new here

  7. Ellen

    Surely 181 economists (in the RBA) can’t be wrong? Is this 97% of economists agree ….? Presumably they use models?

  8. Neil

    They get 15.4% Super as well. Higher than most people

  9. NuThink

    I got into an animated discussion with a person who was very anti Abbott for not keeping Holden alive. I said that as the workers are getting way above average wage that to pay them what is demanded by the unions comes out of the pockets of profitable businesses.
    He responded that the more you pay the workers in the car industry the more money in circulation then everyone benefits.
    My response was then if you want the economy to improve pay the workers $200 an hour, or if you want the economy to go gangbusters pay $1,000 an hour (or more) and see the economy really fly. That is where the light bulb flashed on in his head. What a brilliant idea. Why had he not thought of it? I added then that the economies of the Weimar republic and Zimbabwe and Venezuela are good examples of successful economies with lots of money in circulation, especially Zimbabwe with trillions and trillions.

    Last I heard he was rushing off to his union mates with his brilliant idea on making Australia the richest country in the world.

    PS Disclaimer. I am neither an economist nor a financial guru so I hope giving that financial advice was not illegal.

    But I cut my teeth in the financial world very young.
    In my youth in the 1950’s a friend and I hit on a surefire way to make money.

    When I went home and explained it to my mum she was dismissive of the plan – as she was not tertiary educated.

    I would sell my friend one of my possessions – a toy in this case.
    He would sell it back to me at a profit.
    Then I would sell it back to him at a profit.
    He would then sell it back to me again at a profit.
    Then I would sell it back to him at a profit and so on until we were both wealthy.

    And my trading skills were further advanced when I tried to pay for lollies at the corner store but when he saw the colour of my money he would not accept it. Monopoly money comes in many colours, I just used the wrong one. I had not at that time seen the FollyWood movie “The Color of Money” for which Paul Newman won an Oscar.

  10. Neil

    I got into an animated discussion with a person who was very anti Abbott for not keeping Holden alive.

    In 2006 we made 25% of cars locally. Not great but not bad. By 2013 we made only 10% of cars locally. You cannot have a local industry with only 10% of the market. Auto industry died because for whatever reason people stopped buying locally made cars. Blame the consumer not the govt. And people forget that Gillard was PM when Ford announced they were leaving

  11. Michael

    Why not take the theory even further? If the government sets GST at 50%, goods and service increase in price and inflation rockets up. Problem solved! We live in an irrational world.

  12. Auto industry died because for whatever reason people stopped buying locally made cars.

    There were probably a number of reasons why the local car industry failed after so many years of success, but it’s not due to unpopularity. Australian cars had become world class cars in every respect and were sold around the world.

    But the unions had a major influence in the industry’s demise. When you realised what the most unskilled workers were being paid and the hours they worked, you’d be gobsmacked. So private industry did what it does when they can no longer sustain a business, they closed down and moved on. Did the unions care?

  13. Entropy

    There were probably a number of reasons why the local car industry failed after so many years of success, but it’s not due to unpopularity.

    Of course it was. Nobody except fleets were buying commodores and falcons, and even then it was for political reasons.
    And of course, that dried up as HR virtue signallers took over Government fleet buying decisions and suddenly it was all Prius.

  14. John Stankevicius

    The workplace is the place of warfare which is used to divide Australia. The public service charities and not for profits. The pay and redundancies are so big it is attracting people ahead of private industry.
    The skill and work load is low.
    Then there is the pettiness of the employees. A cake franchisee was telling me how they spent 20 minutes going through every donut in the display because the two of them were buying for 4 of them – end result $10.00 spend. Just one example of the spending power of the ps.

  15. Iampeter

    An idiotic idea so bizarrely stupid it defies sense

    Tariffs?
    Nah, you don’t have any problem with idiot ideas so bizarrely stupid that they defy sense.

  16. Mother Lode

    Did the RBA say where the money to fund this increase was to come from? Whether from taking it from other people (net effect on spending zero), or increasing debt (which would still have to taken from the net productive to pay back – plus interest).

    When you look at the serried ranks (and they are very rank) of mediocrities that stain the parliamentary benches you can see that nothing will be changing until some catastrophe sends them scurrying and some vertebrates take their place.

  17. DaveR

    Another in the long line of foolish comments from the increasingly erratic RBA governor. Time for him to go.

  18. roger

    If he wants to boost inflation by putting more money into the economy, my advice would be to increase Newstart Allowance by 3%.
    (The myth that it will encourage dole-bludgers may have been true in the past, but today Centrelink puts Newstart recipients through a lot of hoops to get the dole. Geniune dole-bludgers go on Disability Allowance these days.)

  19. Entropy

    If there is one thing asset holders like, it is government’s ability to increase the value of assets through printing money, quantitative easing, creating inflation operating just borrowing more to pay more to public servants, consultants and grant chasers.

  20. Bad Samaritan

    One more time…..

    Let’s say I’ve found a way to produce perfect counterfeit cash. I’ve also acquired a list of serial numbers of genuine fifties and have printed my perfect imitations with these numbers too.

    I now tell my best mate that I’ve inherited a lot of money and am keeping it secret. I then give him $10,000 of my counterfeit dough after telling him to keep this quiet so that I can give him a further $10,000 every month, and that if he blabs it’ll mean that everyone will want my dough. So; keep quiet or miss out in future. What I haven’t told him is that I’ve done exactly the same with 99 other best mates.

    OK, so now in my town of 20,000 people (= 6,000 households) there’s an extra million bucks each month sloshing around that was not earned for work done. And this every month….

    Assuming it all remains a secret since everyone has very strong motivation for keeping it so, how do Cats reckon this would pan out? Would the town economy be “stimulated”? Would inflation go mad? Would there be asset-price-inflation?

    Also, I can imagine a fair amount being “exported” as the 100 recipients go on out-of-town trips etc, and buy stuff from elsewhere (either in person or on line). But what effect would this new unearned wealth on things like cafes, cinemas, hairdressers, car dealers etc etc in town? Anyone want to risk an answer?

  21. Percy Popinjay

    calling for 3 per cent wages growth across the public sector

    Earth to numpties – those useless parasites’ wages have been growing almost at that rate as it is (around 2.4% according to the ABS). The highest rate of wage growth in the last available figures was 3% for health care and social assistance – all largely funded by taxpayers.

    Rates of wage growth also vary across agencies – you can bet no one who turns up to the ALPBC and hoovers taxpayers’ money (especially various finger manglers) has recieved a wage increase less than 3% over the last few years, for example.

    Lowe is an appallingly ignorant incompetent imbecile.

  22. thefrollickingmole

    He should just give the money in a lump sum to one person who wins the “Inflation lottery”.
    Only condition is they have to squander it inside a year.
    Call it “Hookers and blow” based stimulus.

  23. mh

    Tariffs?
    Nah, you don’t have any problem with idiot ideas so bizarrely stupid that they defy sense.

    The trollbot is very active since CPAC. Bad for the blog because it bores us shitless, but also a good sign that someone feels the need to derail threads.

  24. teamv

    They already get wage increases which are double the inflation figure due to high wage levels and increments.

  25. the sting

    We would have to increase taxes to pay public servants a wage rise , that sounds like idiocy . Wasn’t it you Steve that made the comment ages ago ” that public servants do not pay tax ,they are paid out of consolidated revenue and all they do is hand some of it back ” ? They are meant to be our servants not our bosses .

  26. old bloke

    Neil
    #3131265, posted on August 14, 2019 at 6:00 am

    And people forget that Gillard was PM when Ford announced they were leaving

    And Mitsubishi too if I remember correctly.

  27. Terry

    “because for whatever reason people stopped buying locally made cars”

    …because they were more expensive and shitter than the imported alternatives.

    The money required for research and innovation was syphoned off to union deals and artificially cosy working conditions (ie not commensurate with the productivity returned).

    To cover the deficiencies (slow the bleeding), they asked for (demanded) subsidies. However, the subsidy “request” came with no plan to reform, just a commitment to keep those snouts firmly in a subsidy trough that required perpetual re-filling by taxpayers, courtesy of the taxation raised from profitable businesses.

    What could possibly go wrong?

  28. Kurt

    How can you get wage inflation with massive immigration? Stop immigration for 2 years and watch what happens. Business might even start training Australians and employing older workers. I mean, isn’t the whole idea of a massive migration policy to drive down wage growth and inflation?

  29. Gerard

    If his ideas are so stupid, how can we trust him on rates

  30. Louis Hissink

    The logic behind it is the Marxist fallacy of labour value. Perhaps idiotic but quite predictable. How else could those on the public teat justify their jobs ?

  31. Dr Fred Lenin

    He is probably copying the wankers overseas ,never had an original thought in his life . Kurt is correct .I can see the idea behind his suggestion ,much more sensibke than throwing taxpayers money at non productive public employees ,many of whom are mearly duplicating the work done by state governmennts the feds are ot really required .

  32. Lilliana

    Kurt

    #3131399, posted on August 14, 2019 at 9:22 am

    Shame on you for suggesting something sensible.
    The simple concept of supply and demand is beyond those in charge. If this is the best our “elite” can come up with then we are doomed.

  33. Roger

    He wants the most securely employed people in the country, with the lowest contribution to output, to receive large increases in wages so that the inflation rate can rise even further.

    Leaving those who won’t get a wage rise worse off.

    Btw, Dr. Lowe’s – for a doctor he is – doctoral supervisor was Paul Krugman.

  34. Of course it was. Nobody except fleets were buying commodores and falcons, and even then it was for political reasons.

    I aid there were many reasons, cost was one but 4WD utes and wagons also took over in a big way, and Ford/Holden had no local answers to these. In my townships, there are still numerous very old and newish Ford/Holden utes running about as they are often far more practical than a 4WD ute.

    First off, most Ford/Holden utes were 1 tonners, where the 4WD utes are lucky if they are 1/2 ton. Secondly, loading stuff into the 4WD utes is much harder than a Ford/Holden ute which has a lower sill level. Thirdly, Ford/Holden utes tended to be more comfortable to drive around in. And finally, they were cheaper.

    But again, it was the unions that destroyed the industry, ostensibly preventing any change.

  35. Eyrie

    “Auto industry died because for whatever reason people stopped buying locally made cars”
    People decided to stop buying shit cars. They were shit till the end.
    We had two Commodores in the 1990’s. They were shit on reflection. Bought a Honda Accord in 2000. Great car. Handles well, i.e. steers and stops properly, has as much internal room, tows trailers better due to better suspension and actually has very comfortable seats that don’t cause backaches and burns 30% less fuel. Not a surprise that people stopped buying local PoS’s. The locals also lost to the 4WD market because they didn’t tow worth a damn also as the rear suspensions were far too soft.

  36. Nathan

    I am happy to give a 3% pay increase on the proviso it is paid the the 60% of public servants left after a proper and thorough clean out of their current numbers.

  37. Des Deskperson

    For the record, here are the salary increases agreed in the latest Enterprise Agreement in the Department of Human Services, which employed almost a quarter of the APS: m f

    ‘Immediately following commencement of this Agreement, the salaries of eligible employees will be increased by 3%.
    B4.2 The salaries of eligible employees will increase by 2% of the first anniversary of the commencement of this Agreement.
    B4.3 The salaries of eligible employees will increase by 1% on the 18 month anniversary of the commencement of this Agreement.”

    So a 5% increase over 18 months, bringing an EL1 – middle middle management – to $113,471 pa. Seems fair to me.

  38. The Beer Whisperer

    A lot of public servants are highly productive within the role they perform. The real problem though is that empire building with access to taxpayer funds results in make-work schemes which do not nearly satisfy any cost-benefit analysis. This is particularly so in the federal public service where much is a mere duplication of of what is effectively provided at the state level. Worse, federal public servants at the senior level at least suffer from extreme delusions of grandeur and act much like French aristocrats. More worse, their wages are opaque, and will certainly demand at least or more of whatever the peasants get.

    Sheer lunacy.

  39. Bad Samaritan

    Hmmm. I’m guessing that no-one has a clue about the effects of the RBA proposal since none have risked replying to my scenario at 8.37am.

    Facts are that govt “borrowings” or even the budget in toto is maybe a fraud since we have no way of knowing if there ever is any money borrowed, or what amount is taken in in taxation etc. The govt presents the numbers and we accept them, then “prints” the cash….which it says it borrowed or collected….and we have no real way to know what gives.

    So when I present this possibility at 8.37am and ask how we would know that free money is in play if we are mislead….with nothing behind it, no-one can even hazard a reply? What gives?

    BTW: We’ve seen trillions in US QE. Where’s the galloping inflation?

  40. Terry

    Question: Why is it that we allow public servants to vote (themselves pay rises) at all?

  41. The Beer Whisperer

    “Auto industry died because for whatever reason people stopped buying locally made cars”
    People decided to stop buying shit cars. They were shit till the end.

    They did improve greatly with deregulation, however cars are far easier to compare with the internet, so small shortcomings are amplified. And comparisons invariably have Australian made cars at or close to the bottom. I’ve always wanted to buy an Aussie car, but they always come out inferior.

    The market has decided, and we are collectively better for it.

  42. Pyrmonter

    @ Steve

    You and Adam C agree it is a bad idea. So do I. But I find it very surprising that our (arguably) most senior economic technocrat is saying something of this sort: he is a man who has been progressed through one of the remaining rigorous bureaucracies, an institution once given to fairly sound, market based policy views. What do you think are the bases for his views (he seems an unlikely convert to Post Keynesian thought) and how has this sort of thinking become established in that institution?

  43. Tim Neilson

    So a 5% increase over 18 months, bringing an EL1 – middle middle management – to $113,471 pa. Seems fair to me.

    I’ll defer to your assessment of what an EL1 is worth, Des, but those numbers corroborate what’s been said by others on this thread – if 3% per year pay rises for the public service were the answer we’d already be going gangbusters.

  44. RobertS

    About Lowe:
    – hired by RBA straight out of High School.
    – completed doctorate at MIT with Paul Krugman as his advisor.
    WTF do you expect?

  45. mh

    Maybe the independent reserve bank has a whole different agenda that it does not want to talk about.

    That could be why we hear these statements from the RBA that make absolutely no sense; their actions have a different outcome in mind than the one stated.

  46. struth

    The cost of making cars in Australia was too expensive.
    The subsidies went only a small way toward giving back what the government had already taken from these car manufacturers, who were selling world wide, including into the United States, the Middle East etc.
    From somebody who has run my own business let me assure you that the government subsidy for the car industry in no way, when every expense is considered (the tax on the fuel and registration of the truck supplying your business, passed on, or the electricity costs added on to the cost of parts made elsewhere, passed on, or your own electricity costs, accreditations and compliance, rates etc etc etc) covered the expense of doing business here instead of a less taxed country in the first place.
    The government gives with one hand, but it’s a much smaller hand than the one it takes with.
    Always.
    Who knows how our car industry would have gone in a less taxed Australia.

  47. Dr Fred Lenin

    Dont worry ,we can keep borrowing from hard working Chinese Savers at negative interest rates ?
    Yeah right !I can just ]see Chinese Savers doing that , in your dreams. Comrades !

  48. Terry

    “Who knows how our car industry would have gone in a less taxed Australia.”

    How ANY industry would go in a less taxed (and less regulated) Australia – very well.

    No one is saying that government is not THE problem.

    We need to convince them, somehow, to stop “helping” us to death.

    Cheap electricity and materials combined with less “bureaucratic drag” would have been enough to salvage an industry around manufacturing cars (at least for quite some time), even with employment conditions offering “overs” compared with international competitors. However, it was never going to survive a perfect storm of all of these factors being “overs”.

    Subsidies were the equivalent of handing out buckets after you’ve just drilled holes in the bottom of the boat.

  49. Cynic of Ayr

    So, lemme get this straight.
    This idiot, who believes himself to have a brilliant mind, and a Government who employs him on an exorbitant salary believes likewise, thinks it’s a good idea to:
    Raise Public Servant’s wages/salaries – but no one else;
    Use the slight increase in tax income to partially pay for the rise in wages/salaries;
    Use some of the present tax income from those not in the Public Service to make up the shortfall;
    Said wages/salary increase will increase the superannuation liability of said Public Service.
    FFS, if this moron wants an increase in his already humongous salary, why not just ask for one, instead of dragging every other Public Servant into it.
    Every day, another “intellectual” proves beyond doubt that he is not an intellectual at all.

  50. Howard Hill

    Right on, struth. Taxes, certification, regulation and bureaucracy are suffocating business in Australia and not just manufacturing, we’re fcuked!

  51. Des Deskperson

    ‘I’ll defer to your assessment of what an EL1 is worth, Des,’

    Tim, I was being slightly sarcastic.

    There would be EL1s in Human Services – mostly in the regions – who have managerial and supervisory responsibilities that deserve the level of remuneration.

    There are also likely to be others getting the same money to perform routine clerical tasks. I can certify that this is happening in other agencies with similar pay scales.

    Not surprisingly, these people are mostly found in HR or ‘corporate’.

  52. Tel

    So a “pretend independent” branch of government has come up with the deep wisdom that all government needs a pay rise. Clearly Lowe has a strong grasp on what Keynesian Economics is really all about … pity he knows nothing about how an economy operates.

    Peter Schiff’s prediction of Stagflation is almost perfect … except that he predicted it would happen in the USA but instead it is happening here in Australia.

  53. Tel

    Every day, another “intellectual” proves beyond doubt that he is not an intellectual at all.

    Don’t be so sure about, Keynes proved it himself: you can go a very long way in life simply telling people what they want to hear. For a simple strategy, it’s amazingly effective.

  54. Bad Samaritan

    Louis (9.36am) The Labour Theory of Value makes a lot of sense. Almost every poster on this thread refers to it by asserting that public servants’ labour is too expensive vs what they produce. In fact the valuelessness of most of their labour is precisely why we don’t need 99% of the clerically-active ones. Who doesn’t accept that?

    Free money is supposed to cause inflation because there was nothing produced to back it up. The 100 items which were produced by 50 productive workers will be in the shops, while they (the workers)now have X dollars each to spend. However when govt money is borrowed from say overseas and given to someone “for free” to spend, then the 100 produced items will now have the productive workers’ earnings plus the borrowed money chasing them. Theoretically this will be more demand but not more supply = price increase.

    So, why hasn’t this happened? Why hasn’t private credit (cards, loans, interest-free installments etc) lead to significant inflation as expected future earnings (for work not yet done) chase today’s production?

    I’m interested in this since it seems to indicate that increasing the money supply does not increase prices (much). Can’t we get away from Public Servant hate even though most of them are parasitic arsehats?

  55. Terry

    “Can’t we get away from Public Servant hate”

    We can reduce the “hate” by reducing the “Public Servants”.

    “Bureaucrat” is probably the more descriptive term anyway.

    One presumes for “Public Servant” to be an accurate description, they would need to “serve the public” in some way, rather than receive largesse for output of less than zero (considering the impost of their unproductive meddling).

    If there was a ‘Laffer Curve’ for optimum “Public Servants”, we are well to the right of that “optimum”.

  56. John Bayley

    I’m interested in this since it seems to indicate that increasing the money supply does not increase prices (much).

    That of course depends on whether you believe the CPI figures as presented by the government bureaucracy in charge of calculating them.
    There has been an ongoing discussion in the USA about the ‘alternative CPI’ calculated by Shadow Stats, where the statistician (John Williams) uses methodology from the 1980s & 1990s:

    http://www.shadowstats.com/alternate_data/inflation-charts

    Unsurprisingly, his figures are much higher than the official ones.

    Apart from that, it was well known to classical economists that inflation of money supply (the only true measure of ‘inflation’) can express itself in various ways. The recent past has been notable in that sense, because much of the ‘QE’ and other inflationary measures undertaken by the central banks have been reflected in asset prices. The US stockmarket, for example, shows a remarkable correlation with the Fed’s balance sheet.

    Needless to say, the mythical ‘perfect level’ of 2% CPI inflation, which will – according to the CB morons – deliver ‘goldilocks’ economy forever, is absolute rot, supported by neither theoretical nor empirical evidence. It is also quite certain that they will eventually get their ‘desired’ level of CPI inflation in spades – all that will take is for the public’s faith in the central planners to erode.

  57. mh

    A WSJ editorial that is behind a paywall. If someone wants to post the rest

    The 99% Get a Bigger Raise
    Editorial
    The Wall Street Journal
    July 30, 2019

    Worker wages are growing much faster than previously reported.

    The Bureau of Economic Analysis (BEA) on Tuesday published its annual revisions to personal income data, and the surprise was the huge jump in disposable income and employee compensation.

    The revisions show that employee compensation rose 4.5% in 2017 and 5% in 2018—some $4.4 billion and $87.1 billion more than previously reported. The trend has continued into 2019, with compensation increasing $378 billion or 3.4% in the first six months alone. Wages and salaries were revised upward to 5.3% from 3.6% in May year over year. And in June wages and salaries grew at an annual rate of 5.5%, which is a rocking 4.1% after adjusting for inflation.

    In sum, Americans are earning more and relying less on government.

    Recall how liberals blamed “secular stagnation” as the reason worker incomes weren’t growing faster during the latter years of Barack Obama’s Presidency. Yet employee compensation has increased by $150 billion more in the first six months of 2019 than all of 2016. Compensation increased 42% more during the first two years of the Trump Presidency than in 2015 and 2016. This refutes the claim by liberals that the economy has merely continued on the same trajectory since 2017 as it was before.

    Deregulation has unleashed repressed animal spirits, especially in energy. Tax reform has also spurred business investment in new facilities and equipment, which over time should translate into higher worker productivity and wages.

    While Democrats and even some conservatives complain that workers haven’t benefited from tax reform, the evidence suggests otherwise…

  58. mh

    The RBA governor wants a public service trickle down economy.

    F.M.D.

  59. Pyrmonter

    @ John Bayley

    I’ve I’ve understood that correctly, the point of the ‘alternative’ CPI is to hold all of what people consume constant: so, frozen in 1990, it still has you consuming pagers, interstate coach trips, hyper-colour T-shirts and afternoon newspapers, but no smartphones, internet services or discount airlines. Comparing living standards over time is tricky – prices change, and there are no products – but simply assuming that the 1990 or 1980 consumption bundle continues to be consumed is nonsense on stilts.

  60. Pyrmonter

    ‘If’ not ‘I’ve’ and ‘new’ not ‘no’

  61. Squirrel

    Over recent years, there has been substantial growth in the salaries of upper level officials at federal and state level and yet the quality of administration and policy making is no better than in earlier days, and there are many examples of it being worse.

    Perhaps these people are now so hopelessly out of touch with the financial realities faced by the generality of Australians that they are increasingly clueless about what is happening outside the very comfortable bubbles in which they, and those close to them, live.

    An across-the-board cut of 30% for the upper levels, with the savings put towards reducing debt and taxes, would do far more for the economy. Those who didn’t like it could try their luck in the private sector.

  62. John Bayley

    @ Pyrmonter:

    You raise a valid point, but I suppose it just illustrates how utterly stupid the whole concept of ‘CPI’ actually is.

    For starters, it is clear that the ‘cost of living’ affects all of us very differently. Compare a Sydney-based young family with kids to a retiree living in Charleville, for example.
    Applying this as an aggregate is about as silly as claiming that if you hold one hand in the freezer and the other in a pot of boiling water, on average you will be quite comfortable.

    Furthermore, the various ‘hedonic’ adjustments (a.k.a. ‘black box magic’), the decisions as to what is included and what is not, and at what weightings, plus concepts like the ‘owners’ equivalent rent’ make the statistical foundations of the CPI index as a measure of ‘inflation’ fit in the same category as the temperature ‘adjustments’ the BoM likes to make to the data collected 80 years ago.

    So yes, I would say John Williams’ version of CPI is about as solid & believable as that of the BLS – aptly translated by many in the USA as the ‘Bureau of Lies and Scams’.

  63. bollux

    The Reserve Bank, and the interests of Australians, are not the same thing. I am surprised nobody is saying it. They actively undermine us.

  64. Pyrmonter

    @ John Bayley

    The point of CPI – or other inflation measures – is to try to measure the change in the value of what can be bought with a unit of currency. It’s not perfect, but then holding the consumption bundle constant as if the economy wasn’t a turbulent, dynamic system with constantly changing relative prices is worse.

  65. Entropy

    An across-the-board cut of 30% for the upper levels, with the savings put towards reducing debt and taxes, would do far more for the economy. Those who didn’t like it could try their luck in the private sector.

    Actually disagree. Across the board cuts would mean those SES in line agencies who actually have content knowledge and real interest in their portfolio (and consequently have lower salaries because they do not engage in “mobility”) get salaries probably lower than admin level managers. Just standardise salary rates at a more reasonable level based on responsibility, with no mates’ rates for political reward.

  66. Bad Samaritan

    OK, so everyone is still floundering….which means I’ll have to help. All Keynesians….and classicalists…listen up!

    More money in circulation (or in digital existence) is alleged to drive prices higher: more money is inflation. This is supposed to be because more monetarily-expressed demand is chasing a supply which not rising as quickly as the amount of money out there chasing it. The example of giving all Public Employees 3% more pay should be adding a huge amount of purchasing power demand…with no new supply of anything. Isn’t this what this thread is about?

    What is being missed is the role of importing stuff at non-market prices; the role of China and many others in selling stuff below true cost. This is achieved by super-subsidizing all the way through the production process (and currency manipulation of course). Thus, an increase in demand due to the RBA (or Kevni long ago) handing out free money does not translate into a commensurate rise in domestic demand for domestic production. Does not = increasing GDP.

    Sure, some of the 3% will go into a few….very few…locally produced things, but how many more coffees and North Queensland bananas, and haircuts and cinema visits will result from it, compared to the amount spent on bigger imported TVs and new imported cars? Or holidays in Thailand, and on the rivers of Europe?

    Now….let’s get back to reality. The only way to “help” the Oz economy long-term is to direct the spending power into the hands of those who will spend / demand stuff in Oz, that is from Oz. Anyone care to join in here, or will I have to school you all further on how to do this?

    BTW: The free money which doesn’t create domestic demand, has to later be repaid with interest (as it’s often borrowed) which further reduces it’s “benefit” to the local economy.

  67. Pyrmonter

    @ Bad

    That’s pseudo-Keynesian Koolaid from the 60s (or earlier).

  68. Perth Trader

    Bad Samaritan….maybe , just maybe the extra money going into circulation is , in part being eaten up in govt costs to business and households . I know all my greatest cost increases have been eaten up by the 3 levels of govt. and utilities.

  69. Louis Hissink

    Bad Sam,
    Actually the purpose of life is to stay alive. Literally. In a society based on the division of labour and markets, staying alive becomes more complex and ideally participants all produce and exchange.

    There are some, however, who are lazy etc. and instead of producing something, they instead rob and pillage the producers by applying violence. The more diplomatic among them will use rhetorically based fear, usually of not going to heaven, to extort products from the producers. But robbers and priests don’t produce anything others want to buy, but robbers and priests still need to live, or stay alive, and so they enforce plunder by implied or explicit violence. Over time the robbers and priests become the ruling elite and their bureaucracies.

    The logical outcome of this mode of social cooperation should be easy to work out. The ruling elite and civil servants don’t actually produce anything others want, and when the elites and their servants become the majority of a social order, then collapse is not far away.

  70. Entropy:

    If there is one thing asset holders like, it is government’s ability to increase the value of assets through printing money, quantitative easing, creating inflation operating just borrowing more to pay more to public servants, consultants and grant chasers.

    But Entropy!
    We are assured that QE isn’t the same as printing extra dollars because… just because.

  71. Percy Popinjay:

    Earth to numpties – those useless parasites’ wages have been growing almost at that rate as it is (around 2.4% according to the ABS). The highest rate of wage growth in the last available figures was 3% for health care and social assistance – all largely funded by taxpayers.

    A parasite will continue to devour the host until both die.
    That’s the future for us.
    Unless we take a damn big dose of Combantrin to flush these parasites out.
    But we won’t – the medicine tastes bad.

  72. GoWest

    All part of the on going economy theft by our public servant revenuers. Ask retirees about the manufactured CPI increases!

  73. Frank Walker from National Tiles

    Auto industry died because for whatever reason people stopped buying locally made cars. Blame the consumer not the govt.

    Clown world never ends.

  74. Peter, formerly known as Memoryvault

    test 1

  75. Peter, formerly known as Memoryvault

    test 2



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