Simon Orme: Woe In Oz
Simon Orme writes from Sydney ...
Sydney is in the middle of a very bad hang over. The economic slowdown continues. Job losses are hitting the professions, the tech sector and thus the affluent suburbs. There is a mood of listlessness, anxiety and dissatisfaction. Some Kiwis here have spotted the signs and bailed already - off to the Northern Hemisphere.
The big end of town is preparing for an ALP government in Canberra. Even the banks have acquired social consciences, while PR firms have been buying up ALP apparatchiks from State governments.
Last year was exceptionally good. The year 2000 celebration, the Y2K con, GST and of course the Olympics, kept everyone busy and stirred the economy along very nicely. This year the country started with a hangover in the form of a contraction in the final quarter of 2000 and things just seemed to have gone down hill ever since.
The first sign something was wrong was the jump in the road toll over the Christmas break. People were having cheaper, car based holidays rather than going overseas or flying to their destinations.
In addition to the post Olympic credit card bill, the Oz economy was whacked by the GST.
This happened because the GST was expected to be expansionary. The compensating lolly in the form of tax-breaks was supposed to exceed the revenue from the new GST - a fiscal stimulus in other words. So the Australian Reserve Bank got nervous about inflation and put its foot on the brakes - raising the price of credit.
As it turned out, the GST had the effect of draining cash out of the economy - especially from the small and medium business sector - and was thus contractionary.
So far, this year has been about trying hard to bring back the good times. Only things seem to keep getting worse, not better.
In the face of drubbings in two State elections, the Government made a series of expensive backdowns on the GST and GST related matters. But in each case, it has emerged badly.
- The very onerous requirement to submit quarterly business activity statements was watered down
- Petrol excises were reduced
- Taxes on draft beer were excluded from the GST.
In addition, the Government announced other major spending initiatives, including in defence, rural infrastructure, research and development, and soft loans to kick-start the house building industry.
The Reserve Bank has been doing its bit by reducing rates at a frantic pace. This was against the background of a stinging attack from the PM who stated that last year's tightening was an error of judgment on the part of the Bank's Governor.
Together with concerns on the revenue side, the markets have grown concerned the fiscal largesse is putting the budget balance under excessive pressure. The Sydney Morning Herald reported the additional spending since the end of last year is equivalent to the size of the spending cuts the Government put in place near the start of the long 1990s boom years.
The fiscal position probably increases pressure on the already weak currency. The temporary fall below the symbolic $US50 cent mark, and weak recovery, add to the present gloom.
If all this weren't bad enough, the Government was shot in the back by a memo written by a Liberal party leader to the Prime Minister that was later leaked. Among other observations, the memo described the Government as "out of touch", "not listening to the people" and "tricky".
The following week, the ALP managed to hijack the centenary of the first federal Parliament celebration in Melbourne. Howard lacked energy and the "vision thing", allowing the three former ALP Prime Ministers to grab the spotlight.
Paul Keating positively overflowed with the vision thing. In this, Australia decolonises at last to become an independent republic, reconciled with its indigenous peoples and no longer tugging its forelocks to imperial powers, whether they be British or American.
The solution is obvious: Keating should be brought back - along with Clinton for the US. Both are superior to their successors.
This week the Government's woes continued, this time due to continuing reverberations from Australia's biggest corporate meltdown - of insurance giant HIH. Losses from the meltdown are thought to exceed A$4 billion and are likely to be depressing economic activity and sentiment further. Probably for this reason, the Federal and State governments have reluctantly been forced into a bail out - a further drain on the already tight Federal budget due to be handed down next week.
The political damage is occurring because the meltdown looks 'tricky'. HIH was an unusually generous Coalition funder and the perception is HIH influenced the Government's adoption of a "light handed" insurance industry regulatory regime - the pre-condition for the meltdown.
Howard this week quashed rumours of a post Budget early election and vowed the Government would see out its full term (around the end of October).
Maybe something will turn up for Howard before then. Otherwise, he's toast and the ALP will be running Canberra as well as all the States bar South Australia and the Northern Territory.
Howard seems to be looking for help from Washington. Australia, together with Poland, are the only two countries supportive of the Bush administration's missile shield folly.
The Australian media take on the NZ Government's defence announcement earlier in the month is NZ is a defence 'bludger' that has " turned its back on the ANZAC spirit".
The media did not make a link between the defence decision and the TransTasman deal earlier in the year under which New Zealanders lost their automatic citizenship rights in Australia. That would be like suggesting the 1962 Cuban missile crisis had something to do with the US withdrawal of its missiles in Turkey a little while after.
A lot of Kiwis here have since got Australian Citizenship application forms - even if actually filling it out and sending it back is problematic for those of us who do not have any spiritual affinity with eucaplyptus trees.
Copyright: Simon Orme 2001