Wry & Dry

GDP: Much ado about? G-7's spot of bother. Zero Rs R Us.

Wry & Dry was looking for a quiet week.  The Italian referendum was defeated, but the economic world didn't come to an end (not yet).  The loonies in Canberra had fled to their various electorates for pre-Christmas massaging of voters.  And sport, of sorts (one day cricket), was back on the front pages.

And then, whooshka!  It was announced that Australia's GDP had fallen by 0.5% in the September quarter.  Good grief, the sky is falling!

Image result for image the sky is falling

Err, no.  It's called the business cycle.  Australians have been so used to not having a negative GDP quarter that we think the sun always shines.  The fact is that sometimes it rains.  But if we get two successive quarters of negative growth then the fit will hit the Shan [1].  Readers will recall that the last time this happened was in 1991, with the Keating 'recession we had to have'. 

But, regardless of economic honesty, the media had a field day with this week's news.  As did the Opposition, gleefully crying "No jobs.  No growth."

W&D's colleague, Fleur Graves, explains the investment consequence of the negative growth (virtually nil) in the accompanying Investment Matters. 

The 'wake-up call' of negative growth, as PM Turnbull calls it,  has probably come too late.  The alarm clock for sensible action started belling-away in 2008.  Since the GFC Australia's economy has been disastrously managed.  And it will take a number of years to turn the economy around. 

The GFC-response as the start of the rot was confirmed yesterday by a damning Treasury-commissioned independent review of the then governments' response.  Essentially, the extravagant fiscal stimulus rolled out by that pair of economic loonies PM Rudd and Treasurer Swan ultimately damaged the country's competitiveness.  The report says that Australia survived the GFC because of the combination of lower interest rates, a major exchange rate depreciation and strong export demand from China.  And not because of the $53 billion dollars spent on cash handouts, school halls and pink batts.

But wait, there's more.  We then had the ongoing unwillingness to undertake supply-side reform and repair the budget, under Rudd/Gillard & Swan and Abbott & Hockey.  W&D thought that the monumental incompetence of Wayne Swan (who has the temerity still to keep a seat in parliament, one he first occupied 23 years ago) would be unchallengable in the annals of global economic ineptitude.  And then along came Joe Hockey.  Oh, dear (see the consumer confidence chart - below - for we-the-taxpayers' response to his 2014 budget).  W&D is not sure at which role it was that Uncle Joe reached his peak level of competence, but suspects it was as a local MP.

Only now is Turnbull getting round to doing stuff.  But he has a great knack of messing up good policy with bad politics.  This week's will-we, won't-we have a carbon-tax debacle is just another sign that Turnbull and his cabinet still have their training wheels on. 

But it's not all bad news: consumer confidence in Australia surged by 2.8% to 118.6, according to ANZ-Roy Morgan.  This puts consumer confidence well above its long-term average of 112.8.

consumer confidence

And the share-market continued its FOMO (Fear Of Missing Out) rally.  This is getting faintly ridiculous.

But someone who is not missing out is (Sir) Mick Jagger.  The Rolling Stones front-person has become a father.  Again.   For the eight time.  At the age of 73.  His girl-friend is the 29-year old ballerina, Melanie Hamrick.  Nice work, if you can get it.

M&M's baby boy is two months younger than one of Mick's great-grand children.  Good grief.

Speaking of top-level activity... it was a week of Prime Ministerial resignations:  Italy's (who will leave as a loser) and New Zealand's (big winner); and weirdness: Japan's has invited Tsar Vlad to Japan (he accepted) and to share a traditional Japanese onsen [2] (no news yet on an acceptance, although Tsar Vlad will probably want to take the opportunity to show off his muscles...) in hot springs in his home town of Nagato, in southern Japan.  The negotiations will be about the 'four northern islands'.   

This is the remaining territorial dispute from the Second world War.  In the 19th century Russia recognised Japanese sovereignty over the four islands, and in 1875 it ceded them to Japan. But a few days before Japan’s surrender in the Second World War in 1945, the Soviet Union, which had not been fighting Japan, abruptly declared war. Soviet troops swiftly occupied the islands, setting off a 70-year dispute.  Japan demands the four islands back.  The Soviet Union offered to hand over the two smallest of them, Habomai and Shikotan, if Japan gave up its claim to the others.  But Japan refused to do so. 

W&D will watch with interest to see if the bathtub diplomacy will work.   The mind boggles, but perhaps readers might soon see The Trumpster and Tsar Vlad in a traditional Russian banya [3].   And followed up by a mutual use of a banny venik [4].    

Speaking of self-inflicted pain, readers may not have seen the latest unhappy face in the Yoo-Ess-Ay.  W&D couldn't resist this:

Bill 

Elsewhere, W&D comments on Zero Rs R Us, i.e. the education free educational system in Australia. And readers can learn more about the new guard at the G-7

And, of course, Miscellany, to soothe your troubled mind. 

[1]  'The fit hit the Shan'.  The Shan was the son of the Shah of Iran, who suffered from seizures.  And at these times things would get messy.  And if you believe that...

[2]  An onsen is a traditional Japanese bath-house.  Communal (but single-sex) bathing is common in Japan.  The water is hot.  The bathing is not to wash, but to relax and to chat with other bathers.  Bathers wash themselves thoroughly before getting into what can be a swimming-pool-sized bath.  In younger days when living and working in Japan, W&D very much enjoyed use of onsen in Japan.  Especially on open air onsen when it was snowing.

[2]  A banya is a sauna: a small room or building designed as a place to experience dry or wet heat sessions, broadly defined.

[4] A banny venik is a birch whisk, normally dipped in hot water for a few seconds and then used to strike the body with light strokes, and only after the body is warm.  A banya and a banny venik go together, as it were.