All dip and no Ike-berg

Treating him like Churchill rather than a sometimes malleable copyist as Treasurer and an easybeat as prime minister, The Weekend Australian is today running an exclusive interview with Paul Keating to mark the fiftieth anniversary of his election to Parliament. Predictably, he declares that “monetary policy has run its race” and that an Australian version of US-style QE would have no stimulatory benefits. Interest rates have been declared bereft of further pep by the RBA; how to grow economies is the conundrum being pondered – hubristically – by central banks the world over. Keating’s advice to the Morrison government is a return to Keynes and massive spending on infrastructure:

“We are moving into a new world of big government after 30 or 40 years of smaller government because, with world growth shrinking and monetary policy being incapable of providing the stimulus, the building of infrastructure both by governments and by private industry, perhaps acting in concert, is the way ­forward.”

This would also be a return of sorts to Keating’s own One Nation – the unfortunately named 1992 spending package cobbled together by his office to stymie John Hewson’s Fightback! and turn around five consecutive quarters of contraction on his watch. Now he calls the same thing an “Eisenhower-type turn” in honour of the federally funded US Interstate Highway System whose construction began in the mid-1950s.

Worth mentioning here (interviewer Troy Bramston forgot) is that Keating is now a senior adviser to one of the Chinese Communist Party’s policy banks – the China Development Bank – which, in addition to being the dedicated domestic infrastructure lender for that country, is also China’s largest foreign investment and financing cooperation bank.

Leaving aside two things: that this was a conventional Keating interview (obsequious) and that he has no interest in the kind of supply-side solutions proposed by Peter Costello, the other remarkable thing was Keating’s redefinition of economics itself. Some deference derived from etymology is customarily afforded to everyman by the dismal science (οἰκονόμος: “household management” and all that).

“The case for fiscal expansion is simply staring you in the face. The accounts of a nation are not like a household account — they don’t have to run in surplus because a nation can tax and can grow.”

It would be truer to say the state doesn’t have to run in surplus because it cannot be evicted or imprisoned. A household may not be able to compulsorily extract money from others – unless its members turn to crime; that’s true. But its wealth can grow via saving, prudent spending, wise investment, delayed gratification, longer (or smarter) working hours, accessible markets for requisites and minimal impositions from exterior authority. Maybe the Greeks were on to something. Second, one reason consumer spending is cratering is that the level of household debt to income in Australia is at a record high (190 percent). Keating is therefore proposing not that the government do something different to households but that it makes the same mistakes.

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35 Responses to All dip and no Ike-berg

  1. stackja says:

    Socialism always expects a different outcome.

  2. Crossie says:

    Is there anyone among former politicians who isn’t on the Chinese payroll?

  3. Tel says:

    Socialism always expects a different outcome.

    Not quite right … Socialism always promises a different outcome.

    They are interested in power, not outcomes.

  4. Lee says:

    Worth mentioning here (interviewer Troy Bramston forgot) is that Keating is now a senior adviser to one of the Chinese Communist Party’s policy banks …

    Funny (but completely unsurprising) how the leftist media always ignores vested interests of those on their side of politics, while always demanding that those of conservatives or on the right be fully disclosed.

  5. Chris M says:

    The creepy poofta bankrupted so many Australians, lets try it again. Another triumph of boomer leadership.

  6. One Nation as a policy package was so bad, it is what lead to Keating losing in the election cycle after Hewson was politically put to sleep.

    Keynesian policy lost him an election after he won as PM after being Treasurer during a terrible recession.

    For more humble humans, this would be a teaching moment.

    He is a cur and cannot be taught.

  7. Tim Neilson says:

    The accounts of a nation are not like a household account — they don’t have to run in surplus because a nation can tax and can grow.”

    But, historically, how successful are attempts at doing both at the same time?

  8. Alex Davidson says:

    It never ceases to amaze me the way demagogues like Keating continue to be treated with respect when they utter absolute nonsense, completely at variance with reality. Is he becoming senile? “After 30 or 40 years of smaller government” … give me a break! Virtually every statistic I’ve ever come across shows beyond any doubt that we have been living through 30 or 40 years of the biggest government ever! Worse still, that big government has been dedicated to frittering away its ill-gotten gains on handouts, gravy trains, and useless make-work schemes, together with mountains of restrictions upon our freedoms – not the basic infrastructure that was promised as one of the main justifications for taxation in the first place.

    To suggest that it’s finally time to ‘invest’ in infrastructure is a sick joke, especially when it’s presented in terms of requiring even more plunder to fund it.

    A person of sound mind would look at the result of 30 or 40 years of the biggest government ever and conclude that creeping socialism hasn’t worked – that the road to freedom and prosperity is a dramatic reduction in the size of government, a dramatic reduction in red tape, and removal of the perverse incentives created by all the handouts and make-work-schemes.

  9. mem says:

    In contrast take a look at Norway’s sovereign fund:
    An update on the fund’s website showed the Government Pension Fund Global’s value reaching 10 trillion Norwegian crowns for the first time at 8.57pm GMT (7.57pm AEDT) – more than $A293,000 for every man, woman and child in Norway.

    Commonly known as the oil fund and managed by a unit of the central bank, it invests close to 70 per cent of funds in global equities and some 28 per cent in a portfolio of fixed-income assets. Unlisted real estate holdings make up the rest. https://www.heraldsun.com.au/news/breaking-news/norway-fund-hits-record-10-trillion-crowns/news-story/92431b6b5a560580fc648ca4db0691b9

  10. a happy little debunker says:

    If only there was some way government policy could encourage others to spend their own money and thus grow the economy – rather than the government policy of taking their money and spending it for them?

  11. Pyrmonter says:

    The rehabilitation of Keating has been remarkable. When he was thrown out in 1996, he’d have been close to the most unpopular PM to date (Whitlam might, might have exceeded him). Yet by the 2015 he was endorsing Mike Baird – an endorsement that scion of the NSW political establishment gleefuly accepted.

    As for his discovery of what amounts to no more than Modern Monetary Theory, it’s as credible as the Budgets that accompanied successive inflationary ‘Accords’ throughout the 80s. He needs to find some new staff.

    (An aside: these deserves greater coverage. And scorn. https://economics.adelaide.edu.au/events/list/2020/01/the-deficit-myth-modern-monetary-theory-and-the-birth-of-the-peoples-economy)

  12. herodotus says:

    It’s good to see regular contributions by C.L. who is one of the best writers and thinkers in the country.
    His talents are so much better employed here than in the rather scrappy and numbers-infected open threads.

  13. Biota says:

    Infrastructure is a dead weight unless it facilitates production. Just a monument. If there were accompanying lifting of the suffocating regulatory burden on the start and operation of enterprise it could prove useful.

  14. bosnich says:

    This was the smart arse who declared that trade apprentices were no longer needed thus destroying the ambitions of a generation of working class children.
    .. and now,35 years or so later, we are being told that there is a shortage of tradies.

  15. Roger says:

    Is there anyone among former politicians who isn’t on the Chinese payroll?

    Bob Hawke.

  16. Roger says:

    …and now,35 years or so later, we are being told that there is a shortage of tradies.

    Not to worry; we have a visa for that.

  17. Squirrel says:

    Blowing the surplus, in anticipation of a yet-to-happen crisis does not seem particularly wise, but the point about monetary policy having run its race rings true.

    Asset price speculators and assorted other debt junkies can never have enough cheap, easy money sloshing around in the economy, so they will be hoping that the RBA desperadoes ignore this comment from their former lord and master, but we’ve already had far too much good money thrown after bad.

  18. Robbo says:

    Labor Party numpties like Keating just can’t get over their delight when in Government to spending the taxpayers money like drunken sailors. Keynes is their God and the rest of us are left to pay the inevitable price of the collective stupidity of Labor MPs. Why we have to put up withe reporting by the media of the ravings of Keating astonishes me.

  19. calli says:

    It’s good to see regular contributions by C.L. who is one of the best writers and thinkers in the country.

    Yes, Hero. I look down the Recent Posts list and can tell immediately that it’s C.L. Hooked on the humour, then on to the serious, thoughtful content.

    Refreshing and brain exercising.

  20. max says:

    John Maynard Keynes was a crackpot. So are his followers. All of them.

    this include Paul Keating as well.

  21. Pyrmonter says:

    @ Roger

    Well, Hawke’s dead, obviously.

    Though he kept pretty odious company: http://www.burmalibrary.org/reg.burma/archives/199502/msg00077.html

  22. jupes says:

    Excellent article by C.L. and excellent post by Alex Davidson.

  23. John Bayley says:

    Well it’s obvious that to save the economy, we need at least another 2 NBNs, 3 Snowy River ‘pump water downhill so you can get 70% of the input on the way downhill again’ and a new home insulation program!
    All run by the government of course.
    After all, last time around they only managed to burn down only a few houses. If only they could burn down an entire city the size of Sydney, imagine the stimulus this would create!
    Especially now that it’s ‘never been cheaper to borrow’, thanks to the gurus at the RBA.
    In the bright, new future of negative interest rates, governments will in fact be able to earn money on their borrowings.
    Clearly, debts to infinity are the only way forward.
    And we’ve always been at war with Eurasia.
    Comrades.
    PS: Keating has never had a clue, and he’s not got better with age.

  24. Roger says:

    @ Roger

    Well, Hawke’s dead, obviously.

    😉

  25. Neil says:

    Unemployment at 5.3% is lower than anytime under Hawke/keating from 1983-1996. Unemployment was at 11 % when Keating became PM. Keating did stimulus spending by running large deficit budgets and it had no effect on the unemployment rate. Within 12 months of winning govt Howard got the budget back into surplus by cutting govt spending and unemployment fell from 8% to 4%

  26. Keating! did stimulus spending by running large deficit budgets and it had no effect on the unemployment rate.

    Worse. It almost created a second recession after a recovery.

    This is what pushed Howard onto victory.

  27. Howard Hill says:

    “We are moving into a bigger house after 30 or 40 years of living in a smaller house because, with electricity supplies shrinking and windmills incapable of providing the energy needed to keep the lights on, it was felt that a bigger credit card and more lights would act in concert, to pave the way ­forward.”

    Makes perfect sense to me. Nothing is beyond solving with more of other peoples money.

    These bastards need to be starved and then stoned to death!

  28. RobK says:

    Big government thinks an ego can stimulate the economy.

  29. Amused says:

    It’ll be a joyous day when we taxpayers of this country are no longer obligated to pay this odious turd a massive pension.

  30. Peter Maynard says:

    ““The case for fiscal expansion is simply staring you in the face. The accounts of a nation are not like a household account — they don’t have to run in surplus because a nation can tax and can grow.”

    Keating conveniently overlooks one vital factor. When a nation increases taxes it ultimately ceases to grow – it becomes stagnant then contracts when carried to the levels that big government socialists want. Or at least its economy does. Bit of a flaw in Keating’s argument I should have thought.
    When I was working in the field of economic development the relationships we learned to respect (though these days most working in that field do not) were that economic growth is ultimately driven by productivity, productivity is driven by innovation, innovation is driven by the reward incentive and the reward incentive is curtailed or either driven by or constrained by regulation and taxation.
    If you tax excessively to create bigger government all those bureaucrats have to do something and history shows that what they principally do is regulate. Which cuts economic growth off at the roots, substituting paper shuffling, compliance and crony capitalism for actual innovation. It ain’t rocket science once viewed this way.

  31. struth says:

    The media has a lot to answer for.
    These clowns and traitors in our parliament given a voice and raised on pedestals by clowns and traitors in the MSM.
    Even when they are dead and buried, they dig them up.

  32. Dr Fred Lenin says:

    Look at that mafia bastard drug enabler Grassby ? The scum of the earth and the Canberra commos use OPM to erect a statue of the mongrel crim . Te alp attacts the best , the multi millionaire Hawke ,Obied the paedos people who suddenly get rich like Krud ,and Giliard ,etc etc . Great bunch of chancers .

  33. J.H. says:

    Keating is in awe of China. I’m pretty sure he is attracted to it as a moth is to a flame. A siren’s call to the corruptible.

  34. RobK says:

    I’m pretty sure he is attracted to it as a moth is to a flame.
    Maurice Strong led the way of the dragon. Elite idiots.

  35. Atoms for Peace says:

    I just want to bid on his clocks when he pops his clogs.
    Missed out on Bob’s fishing rods. Be a sport Paul.

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