Albanese defends social activism by businesses

Opposition leader Anthony Albanese will take the side of big business in the argument over corporate activism, when he addresses a Business Council of Australia forum today.The issue has blown up afte...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

Robo-debt class action could deliver justice for tens of thousands of Australians instead of mere hundreds

The announcement by Gordon Legal of a class action to compensate victims of the government’s so-called robo-debt scheme is welcome, perhaps even groundbreaking.Standing alongside class action li...

Terry Carney, Emeritus Professor of Law, University of Sydney - avatar Terry Carney, Emeritus Professor of Law, University of Sydney

Media polarisation dangerous for democracy and for science: Sinodinos

Arthur Sinodinos: “One of the dangerous trends has been that the media itself has become a battleground".AAP/Mick TsikasArthur Sinodinos, former minister and Australia’s ambassador-designa...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

Politics with Michelle Grattan: Arthur Sinodinos with some reflections and advice

Arthur Sinodinos will soon leave the Senate, and early next year take up the position of Australian ambassador in Washington. A former staffer and one-time public servant as well as a former minister...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

XXX Neon Sign review: embodied performance about working in a Brisbane porno shop

Adelaide composer Dan Thorpe wrote and performed this piece of 'composed theatre'.Jason Tavener/BIFEM 2019Review: XXX Neon Sign, composed by Dan Thorpe, Rumpus TheatreMore than perhaps any other instr...

Melanie Walters, PhD candidate in music, University of Adelaide - avatar Melanie Walters, PhD candidate in music, University of Adelaide

Apple Arcade and Google Stadia aim to offer frictionless game streaming, if your NBN plan can handle it

Google's Stadia will be available through the Google Chrome web browser, on smartphones, smart televisions, tablets, and through Chromecast.dronepicr/Wikimedia Commons, CC BYTwo of the biggest tech co...

Steven Conway, Senior Lecturer - Games and Interactivity, Swinburne University of Technology - avatar Steven Conway, Senior Lecturer - Games and Interactivity, Swinburne University of Technology

NSW Premier Gladys Berejiklian avoids a spill but remains in troubled waters

Gladys Berejiklian has seen off a spill motion, but NSW politics remains a hotbed of discontent.AAP/James Gourley“How good is Gladys Berejiklian?” Prime Minister Scott Morrison asked a ju...

Andy Marks, Assistant Vice-Chancellor, Strategy and Policy, Western Sydney University - avatar Andy Marks, Assistant Vice-Chancellor, Strategy and Policy, Western Sydney University

The rise of 'eco-anxiety': climate change affects our mental health, too

People who have been affected by extreme weather events might experience mental health issues.From shutterstock.comThis story is part of Covering Climate Now, a global collaboration of more than 250 n...

Fiona Charlson, Conjoint NHMRC Early Career Fellow, The University of Queensland - avatar Fiona Charlson, Conjoint NHMRC Early Career Fellow, The University of Queensland

Climate change deniers are dangerous - they don't deserve a place on our site

Giving climate change deniers a voice on our site contributes to a stalled public discourse.At The Conversation we’ve recently vowed to improve our climate change coverage, and part of that mean...

Misha Ketchell, Editor & Executive Director, The Conversation - avatar Misha Ketchell, Editor & Executive Director, The Conversation

'An insult' – politicians sing the praises of the cashless welfare card, but those forced to use it disagree

The grey cashless debit card cannot be used at any alcohol or gambling outlet, nor used to withdraw cash.www.shutterstock.com“This is a bit controversial, we know that,” deputy prime minis...

Eve Vincent, Senior Lecturer, Macquarie University - avatar Eve Vincent, Senior Lecturer, Macquarie University

As pressure on Iran mounts, there is little room for quiet diplomacy to free detained Australians

Former Foreign Minister Julie Bishop has offered to help free three detained Australians in Iran, but the attacks on Saudi oil facilities have made the situation vastly more complicated.Stringer/EPAAu...

Tony Walker, Adjunct Professor, School of Communications, La Trobe University - avatar Tony Walker, Adjunct Professor, School of Communications, La Trobe University

The gloves are off: 'predatory' climate deniers are a threat to our children

A child jumps from a rock outcrop into a lagoon in the low-lying Pacific island of Tuvalu.AAP/Mick TsikasIn this age of rapidly melting glaciers, terrifying megafires and ever more puissant hurricanes...

Tim Flannery, Professorial fellow, Melbourne Sustainable Society Institute, University of Melbourne - avatar Tim Flannery, Professorial fellow, Melbourne Sustainable Society Institute, University of Melbourne

Civilization: The Way We Live Now – powerful, troubling photographs of a crowded planet and uncertain future

Cyril Porchet, Swiss born 1984, Untitled 2014 from the series Crowd, inkjet print 139.0 x 169.0 x 3.5 cm.© Cyril PorchetIn 1955, an enormous photographic exhibition, The Family of Man, challenged...

Sasha Grishin, Adjunct Professor of Art History, Australian National University - avatar Sasha Grishin, Adjunct Professor of Art History, Australian National University

Keeping the city cool isn't just about tree cover – it calls for a commons-based climate response

Where’s the shade? Trees are not an immediate or whole answer to keeping cool.Cameron Tonkinwise, Author providedThis story is part of Covering Climate Now, a global collaboration of more than 2...

Abby Mellick Lopes, Senior Lecturer in Design, Western Sydney University - avatar Abby Mellick Lopes, Senior Lecturer in Design, Western Sydney University

It’s four years since then Prime Minister Tony Abbott warned Australia had been heading to “a Greek-style economic future”.

He was referring to what he said had been happening under the previous Labor government.

When Labor left office in 2013 the federal government’s budget deficit had been 3% of gross domestic product. The Greek government’s had been 7%.

The Australian government’s debt to GDP ratio was 20%. The Greek government’s was 177%.

Australia was never on the path to becoming an economic basket case like Greece, but right now we are on the road to becoming like another European nation.

It also starts with “G”.

Becoming economically like Germany isn’t as scary. But it is genuinely troubling nevertheless.

Germany is not in good shape

Germany’s GDP growth in the June quarter was minus 0.1%. That means economic activity shrank.

Its central bank, the Bundesbank, doesn’t see things getting better any time soon, saying growth “is probably set to remain lacklustre in the third quarter of 2019”.

Interest rates have fallen so low that investors are now paying the German government to take their money. The nominal interest rate on 2-year German government debt is -0.90%, and on extremely long-term 30-year bonds is -0.15%.

Read more: The 'yield curve' is one of the most accurate predictors of a future recession – and it's flashing warning signs

That’s right: even for 30 years into the future, investors think its safer to lose money by parking funds with the German government than to try to make money by using them in other investments.

Put another way, markets think the German economy will be in trouble for decades, meaning short-term German interest rates will have to remain ultra-low for decades.

The German penchant for balanced budgets became (there’s really no other way to put it) fanatical in the wake on the financial crisis of 2008.

Like centre-right governments around the world – Britain was a leading example – a dark fiscal austerity took hold, at precisely the wrong time.

Read more: What is an inverted yield curve? Why is it panicking markets, and why is there talk of recession?

2009 was a time of chronically weak private demand that required both lower interest rates and, as monetary policy was running out of steam, continuing budget deficits.

Instead Germany cut government spending, pushing the budget back into surplus from 2014.

It didn’t get everything wrong.

As I wrote at the time, Germany was largely right to insist that Greece get its out-of-control spending and government debt under control.

But Germany’s approach to its own economy hurt it and other European economies such as Italy and Spain.

We’re turning German…

With apologies to British 1980s band The Vapors, we’re at risk of “Turning Germanese”.

Like Germany, our interest rates are getting close to zero. OK, Germany has negative nominal 30-year interest rates, but we’ve got negative real 10-year bond interest rates, and zero 30-year bond rates.

Both of our major political parties are gripped by balanced-budget fetishism, appearing to want to balance the budget regardless of the economic context.

Read more: Mine are bigger than yours. Labor's surpluses are the Coalition's worst nightmare

Again, here we are not quite as fanatical as Germany, but Labor seems determined to “out-surplus” the Coalition to prove its economic management credentials. And the government has made delivering a surplus the centrepiece of its economic agenda.

And, like in Germany, our economic growth is slowing. We don’t yet have negative GDP growth like in Germany, but we do have negative per capita GDP growth.

…but there’s time to pull back

RBA Governor Philip Lowe in a staged photo op with Treasurer Josh Frydenberg, July 11, 2019. David Geraghty/AAP

Poor old Reserve Bank governor Philip Lowe has been pleading over and again for more aggressive government spending, particularly on infrastructure, to help complement what he is doing on interest rates.

A couple of cheesy photo ops with Treasurer Josh Frydenberg aside, there’s no evidence of him gaining any traction in Canberra.

Structurally balanced budgets are important, and thinking government debt doesn’t matter is deeply misguided.

But this is the situation we face:

  • private demand is chronically weak

  • our physical infrastructure has not kept pace with population growth and modern needs

  • our social infrastructure (including all levels of education) is not up to standard

  • interest rate cuts are running out of puff

  • the government can borrow in its own currency, long-term, for close to nothing

Any government that won’t borrow and spend up big and smart in these circumstances is making a huge mistake – one for which we and our children will pay dearly.

If we’re not careful the old Abbott narrative of “we’re about to become Greece” will become true, except about another country whose shoes we would rather not be in.

Read more: Vital Signs: Amid talk of recessions, our progress on wages and unemployment is almost non-existent

Authors: The Conversation

Read more http://theconversation.com/vital-signs-economically-australia-is-at-risk-of-becoming-germany-and-not-in-a-good-way-122217