Ozonomics

[NeoRicen]

I don't expect many people to be able to respond to this thread given the relatively obscure topic of Australian Government/Elections. The US elections are much more high profile and people from alot of other countries can comment quite safely, not true for Australian politics.

However I'd like to get people's opinions on the book Ozonomics by Andrew Charlton. (good profile here)

It's a pretty new book (just over a week old) so I doubt many (if any) people here have read it, I just finished it. Basically it argues that the economic boom Australia is experiencing now has almost nothing to do with the Howard Government, contrary to their claims over last 11 years of election campaigns.

It also goes into detail debunking specific claims by the government about things such as interest rates etc.

It makes a VERY compelling argument for it's case. Has alot of evidence to back it up (data from Bureau of Statistics and Reserve Banks). The only reason I could see it being wrong is that he flat out made up figures or is a complete idiot regarding the economy which I'd say is unlikely, he is young, but he's an economist and seems pretty brilliant given what he's achieved so far (from the profile link from earlier):

At 28, Andrew Charlton has the CV of someone much older. The Sydney-born economist, who is a research fellow at the prestigious London School of Economics, has worked for CARE Australia, the Reserve Bank, the OECD, the United Nations and Boston Consulting Group. Oh, and he's also written two books.

He also points out the massive economic reforms were actually undertaken under Hawke/Keating rather than Howard/Costello who merely "tinkered" with the economy.

For those who don't know much about what I'm talking about you could in general perhaps discuss the Third Way compared to other economic policies as the author is a strong advocate of it (to me the criticism on that wiki page sounds like a load of BS).

I've done a Google Search on 'Ozonomics' but have been unable to find any negative critcism (or positive for that matter) as I can't find much at all (besides that profile from earlier).

So please discuss, and if you can't, perhaps comment on Economics in general.

PS: I just found this article buy the author if anyone's interested.
http://www.smh.com.au/news/opinion/fiction-of-good-economic-managers/2007/07/15/1184438146596.html

 

[PixyMisa]

Hawke and Keating did indeed start Australia on the path to economic form.

Howard and Costello continued this, and managed not to screw it up, giving us over a decade of continuous economic growth.

It's hard to create and implement policies which will improve the economy; it's very easy to make things worse.

I read the article, by the way. About the only thing it says is that there's a lag between policy and the economy, which is kind of obvious. The rest is just handwaving. I hope the book has more detail.

 

[NeoRicen]

The book does indeed go into much more detail, I should also point out the book does give the government credit where credit is due, they didn't screw it up.

However under Howard Australia's foreign debt has increased from $180 to $522 Billion, despite Howard in his 1996 campaign attacking Keating for that $180b figure. Debt in general has increased alot too, the amount of our income Australians spend these days on interest has also increased despite the lower interest rates, so contrary to what Howard has said it's harder living under his low interest rates that under those of Keating/Hawke. Also in Howards campaign he attack Labor for having 10% Interest rates under Whitlam, 17% under Hawke and 12% under Keating (at the start of his term, they went down from there). What he failed to mention was between Whitlam and Hawke under Fraser (when Howard was treasurer) Interest rates reached 13%, higher than both Keating and Whitlam.

I'm looking for someone to correct me on the facts, while I'm ecstatic it turns out Howard's economic credentials are actually BS as well (previously I gave him credit for that but hated his social policies), I'm more than willing to be corrected, I base my political standing on facts not ideology.

 

[PixyMisa]

However under Howard Australia's foreign debt has increased from $180 to $522 Billion, despite Howard in his 1996 campaign attacking Keating for that $180b figure.

While the national public debt has decreased to zero. Two different indicators of the soundness of Howard's economic policy, pointing in different directions. To which to we attribute greater significance?

Debt in general has increased alot too, the amount of our income Australians spend these days on interest has also increased despite the lower interest rates, so contrary to what Howard has said it's harder living under his low interest rates that under those of Keating/Hawke.

To put it another way: Housing prices have gone through the roof, increasing wealth among homeowners significantly. Also, income has gone up, so there isn't a direct relation between the two statements. What's more, private spending is a personal decision, something famously unamenable to government policy. To assert that low interest rates are bad because they allow people to spend more is odd, to say the least.

Also in Howards campaign he attack Labor for having 10% Interest rates under Whitlam, 17% under Hawke and 12% under Keating (at the start of his term, they went down from there). What he failed to mention was between Whitlam and Hawke under Fraser (when Howard was treasurer) Interest rates reached 13%, higher than both Keating and Whitlam.

Yes. That is a valid data point. Or at least it might be, once you relate it to the policies involved and all the other economic trends over the entire period.

The economies of nations aren't simple, and no single number is going to give you an answer on the quality of a government's economic policy - unless you run into extremes, like 90% unemployment or 5000% inflation.

If you raise the issue of private-sector debt (for example) without examining the size of the private sector and the purposes of the debt (was it consumption or investment?), the number is not meaningful.

 

[NeoRicen]

While the national public debt has decreased to zero. Two different indicators of the soundness of Howard's economic policy, pointing in different directions. To which to we attribute greater significance?

My point wasn't that one was good or bad but to point out Howard's hypocrisy. In his campaign he specifically bemoaned the foreign debt under Keating and what that meant. It was just a demonstration of one of many things Howard has done to create the myth he's an economic superhero.

To put it another way: Housing prices have gone through the roof, increasing wealth among homeowners significantly. Also, income has gone up, so there isn't a direct relation between the two statements. What's more, private spending is a personal decision, something famously unamenable to government policy. To assert that low interest rates are bad because they allow people to spend more is odd, to say the least.

I wasn't saying low interest rates were bad, I was just saying in terms of interest paid by people it's much higher now (in terms of % of income) than under Labor. What I'm pointing out is that Howard can claim he's the low interest guy all he wants but the fact remains Australians are paying more interest now, for whatever reason. The point is that this shows that Howard's arguments about interest rates are irrelevant to the impact on Australians by showing that even though he has low interest rates, Australians are under more stress from interest.

Yes. That is a valid data point. Or at least it might be, once you relate it to the policies involved and all the other economic trends over the entire period.

The economies of nations aren't simple, and no single number is going to give you an answer on the quality of a government's economic policy - unless you run into extremes, like 90% unemployment or 5000% inflation.

I wasn't making any claims about what those interest rates meant or how they affected people and what policies led to them, I was again just pointing out the flaws in Howard's rhetoric as he's the one going on about high interest rates regardless of all other factors. So pointing out that flaw means he can't argue that he's the low interest rate guy, which feeds the illusion he's an economic superhero. Howard is the one using those single numbers as an argument for his running of the economy (even though they were high under him as treasure so by his standards he sucks at running the economy, which is false, so Howard in the end is a liar, or at least highly misleading).

 

[PixyMisa]

My point wasn't that one was good or bad but to point out Howard's hypocrisy.

Okay, yes. Politicians do have express harsher opinions of government policy when they are in opposition than when they are in power, and when it's the same politician in both cases, that could well be described as hypocrisy.

In his campaign he specifically bemoaned the foreign debt under Keating and what that meant. It was just a demonstration of one of many things Howard has done to create the myth he's an economic superhero.

Well, no. No it's not. It's a criticism of what Howard has said and done, but it's not a factor in this supposed myth.

I wasn't saying low interest rates were bad, I was just saying in terms of interest paid by people it's much higher now (in terms of % of income) than under Labor.

Cite figures, please. And inflation-adjusted incomes too, so we can examine this properly.

What I'm pointing out is that Howard can claim he's the low interest guy all he wants but the fact remains Australians are paying more interest now, for whatever reason. The point is that this shows that Howard's arguments about interest rates are irrelevant to the impact on Australians by showing that even though he has low interest rates, Australians are under more stress from interest.

Or to put it another way, no matter what Howard does, you'll find a way to spin it to make it look bad.

I wasn't making any claims about what those interest rates meant or how they affected people and what policies led to them

Yes you were.

I was again just pointing out the flaws in Howard's rhetoric as he's the one going on about high interest rates regardless of all other factors. So pointing out that flaw means he can't argue that he's the low interest rate guy, which feeds the illusion he's an economic superhero. Howard is the one using those single numbers as an argument for his running of the economy (even though they were high under him as treasure so by his standards he sucks at running the economy, which is false, so Howard in the end is a liar, or at least highly misleading).

He is the "low interest rate guy", in the sense that interest rates have remained low throughout his terms as Prime Minister. That's a fact. If that means that people decide to borrow more, that's their own decision. I haven't borrowed more.

It's not John Howard who's twisting the truth here.

 

[PixyMisa]

Here's the thing:

Howard has maintained low interest rates. That's a policy outcome.
Private interest payments have increased. That's a private sector outcome.

Howard has eliminated federal public debt. That's a policy outcome.
Private foreign debt has increased. That's a private sector outcome.

What you're saying is that Howard hasn't done enough to rein in the private sector. Honestly, I don't think that's the government's job. Keating did it and produced a recession. You want another one?

 

[NeoRicen]

Cite figures, please. And inflation-adjusted incomes too, so we can examine this properly.

I'll give you the figures from the book (read from a graph so dates may be off 1 year or so), which cites the Reserve Bank which I'm not in the mood to go mining through right now.

In '77 the % of disposable income spent on Interest payments for household debts (the figures howard cited in his election campaign were homeloan rates)was just under 4%. They peaked in 89/90 at around 6% (recession), fell back to 4% around 94/95, going back up to just under 6% in 96/97 before going back down to just over 4% in 98/99, they then rise steadily to 2006 where they are at 9% and rising.

By the way the figures are % of Disposable income so inflation adjusted incomes are irrelevant because we're dealing with % not $.

Yes you were.

No I wasn't, what I said was:

Also in Howards campaign he attack Labor for having 10% Interest rates under Whitlam, 17% under Hawke and 12% under Keating (at the start of his term, they went down from there). What he failed to mention was between Whitlam and Hawke under Fraser (when Howard was treasurer) Interest rates reached 13%, higher than both Keating and Whitlam.

All I did was point out that Howard attacked Labor for high Interest rates and left out the fact that under Fraser rates were higher than both Keating and Whitlam.

You seem to forget I also said earlier:

even though they were high under him as treasure so by his standards he sucks at running the economy, which is false, so Howard in the end is a liar, or at least highly misleading

I never said Howard's poor economic management produced Interest rates that were higher than Keating/Whitlam, I was merely saying Howard's use of these figures as an indicator of economic progress was false, this can be demonstrated by the fact that even he had rates that high (the % of disposable income spent on interest was low then too).

Or to put it another way, no matter what Howard does, you'll find a way to spin it to make it look bad.

No, I'm just saying, regardless of interest rates interest payments as a % of disposable income have gone up under Howard, that's fact.

He is the "low interest rate guy", in the sense that interest rates have remained low throughout his terms as Prime Minister. That's a fact. If that means that people decide to borrow more, that's their own decision. I haven't borrowed more.

I re-read what I said and can't remember the specific point I was trying to make but it didn't come out well. It would have matched my point more if I said "he can't argue that he's the low interest guy", minus the rates. This relates to what I was saying

Also from an earlier post of yours:

What's more, private spending is a personal decision, something famously unamenable to government policy

The thing is Howard has actively encouraged the kind of activity that has produced this debt through grants and tax incentives.

I need to be perfectly clear, I am NOT saying Howard is a poor economic manager, I'm saying that Labor isn't bad either (at least post-Fraser) and that many of the things Howard says at election time to boost his economic credibility is wrong because he has to pick the little details that are different under him because otherwise he'd have to concede Labor's economic management is largely responsible for the boom. I do give credit where credit is due, Howard has helped it along but he hasn't done much but he hasn't had to do much (compared to the massive reforms of Hawke/Keating). The Liberals probably are good economic managers but they aren't superheroes that are solely responsible for the economic progress we're experiencing, and perpetuating this myth is an election strategy at most, and a good one that that.

 

[gtc]

I personally wouldn't use pre-1980s figures on interest repayments or the like because credit was artificially restricted prior to that time as were mortgage interest rates.

I haven't read the book (I may get a chance some time) but it would be wrong to argue that reforms only started under Hawke/Keating. The Fraser/Howard did start some reforms but the pace was slow until Hawke took office.

To me, Howard has been successful because he didn't reverse the Hawke/Keating reforms and didn't spend all the tax revenues from the resource boom. He also managed to introduce the GST, something Keating couldn't achieve.