Wednesday, November 21, 2012

Drum Post: The Industrial War that Isn’t

My Drum post looks at talk about how the IR legislation is now too pro-union.

It’s an old issue. One that crops up every 2-3 months whenever any data is released that can somehow be shoehorned into conforming to the narrative. Mostly it involves things like suggesting strikes by state public service workers not covered by the Fair Work Act are signs that the Fair Work Act isn’t working.

Last week we had business groups suggesting Labor’s IR policies are too pro-business. John Howard even chipped in to say as much (yeah I know, I’ll give you a moment to let you pick your jaw up from off the floor). It is worth remembering that back in 2007 these type of business groups were among those funding adverts under the “National Business Action Fund”. You remember – those calm, fact-based adverts such as:

So let’s not pretend that these groups are some middle of the sphere, no bias-detected groups who only care about the economy of Australia. They’re unions for businesses and as such they advocate their policies as do labour unions. Oddly however, The Oz and the AFR seem to report the two types of unions differently. I would almost think it has something to do with their readership. But that would be wrong given newspapers just report facts and betray no bias at all.

The entire reason IR is considered a big issue is because of productivity. The problem is most commentary on productivity is bollocks. And we gets things like was reported today:

Companies do more with less: survey

Now before we go further I’ll just let you know that the survey being reported was done by Robert Half, a recruitment services company. OK. let’s continue:

Many companies are improving productivity by making greater demands on workers without providing additional resources, a survey has found.

A third of the 300 who participated said hiring additional temporary staff had improved productivity.

"In the current financial climate, driving existing employees to be more productive is a cost-effective solution," Robert Half Australia director Andrew Brushfield said on Tuesday.

Well that’s nice. But hiring new staff won’t improve productivity, unless those new staff are more productive than the current staff. Nor will getting your staff to work longer improve productivity – unless they are more productive in those extra hours than they are in normal hours.

Output is not productivity. The only way increased hours could lead to increased productivity is if you don’t count those extra hours when you are working out your level of productivity (something which Matt Cowgill reminded me is what John Quiggin thinks might have occurred during the 1990s and thus led to Australia’s increase productivity levels) .

Anyhoo here’s the picture of why people are concerned about productivity:

I’ve used a rolling 5 year average because the annual rate jumps up and down a fair bit and this gives a much smoother picture – without distorting the issue.

Now something happened around 2002 that sent productivity downwards. One reason (in my opinion) is that the mining boom led to more unproductive mines being worked which due to the increase in minerals prices were now profitable.

You only need to look at the “multi-factor productivity” (which looks at both labour and capital productivity together) in the mining sector to see why I might think this:


If the mining boom helped spark our GDP growth it also certainly helped drive our decline in productivity growth.

Anyhoo the talk last week about IR rather oddly ignored the latest Wages Price Index data that was also released last week. I wrote about that here so you can go there to find all the graphs. But I’ll show a couple graphs that I didn’t have room for in my Drum piece.

Firstly in my Drum piece I quoted Terry McCrann saying:

The June-quarter numbers showed private sector wages rose a tick under 4 per cent over the year.

While previously that number would not have sparked concern, it now does. The reason is low productivity. If productivity is around 1 per cent, 4 per cent wages growth threatens the 3 per cent inflation ceiling.

Now that’s a good point, but it was odd that McCrann didn’t point out that for the last 5 years of the Howard Govt productivity was running at around 1% and yet wages growth was above what it is now, which suggests that when he is saying “previously that number would not have sparked concern” he is referring to a time he seems somewhat disinclined to actually state.

I thought it worth looking at the spread between the WPI annual growth and the 5 years productivity growth, to see if wages growth now are running higher above productivity growth than they were previously. I decided to also look at the 3 year average productivity growth just to ensure the current level isn’t getting too much benefit from levels seen under the Howard Govt:


So you can see once the mining boom took hold the spread of wages growth over productivity growth increased sharply (this is accentuated with the 3 year average).

You can see why when you look at both the WPI and Productivity on the same graph. From 2002- 2005 wages growth increased, while productivity growth decreased:


After 2005 productivity growth continued to decrease but wages growth stayed flat. So by 2006-2007 (depending on which average you use) the gap was greater that 3 percentage points – Terry McCrann’s danger zone.

But what has happened since then? Well as you can see the gap has decreased and is now around 2.5 percentage points on the 3 year average, and around 2.7 percentage points on the more laggy 5 year average.

Not counting the GFC – which killed wages growth, the spread between wages growth and the 3 year average is now smaller than any time since 2004.

Hardly a sign of IR legislation that isn’t working.

One other aspect is Real Unit Labour Costs. These have been rising of late and have been used to demonstrate that the IR picture is horrible. in my Drum piece I noted the abnormally low GDP deflator number of late that have caused the RULC to increase.

For example here are the past 5 quarterly growth in RULC starting from the June 2011 quarter: –0.2%; 0.1%; 0.3%; 1.4%; 0.2%. Clearly the 1.4% is a massive outlier and one that will affect the annual growth in RULC for another two quarters.

But one other aspect about the recent increase in the RULC is that it really is just a correction post-GFC. As you can see from above, the GFC wreaked havoc with wages growth. It also led to a big decline in RULC. Heck in the June 2009 quarter nominal unit labour costs fell 2.3%, the biggest fall since 1985. But the impact on real unit costs had hit even before then.

In the September 2008 quarter the year on year growth was minus 4.0%. There hadn’t been a quarter showing a year on year RULC growth decline of over 3% for 20 years. So it was certainly out of the ordinary. As you can see however if you look at RULC from the past decade, the current level is only just above the trend that was being exhibited between 2002-2008:


Now yes, we don’t want to see it continuing to rise. But the belief that real unit labour costs can infinitely decline is absurd, and is especially so when coming from the CEO of companies who certainly don’t show ever increasing profit rates year on year.

Wednesday, November 14, 2012

Wages Breakout Lets Us Down Once Again

It is really starting to get annoying. Today the ABS once again produced data that failed to show any sign of a wages breakout. How long must we go before we turf out these current union hacks and bring back some 1970s style leaders who will deliver the destruction of the economy so long promised us by conservative commentators since around mid-2007?

Today the ABS revealed that the Wages Price Index rose by 0.9% in trend terms over the previous quarter, and in seasonally adjusted terms rose only 0.71%.

Both the Public and Private Sector WPI rose by 0.9% in trend terms, in seasonally adjusted terms, the Private sector WPI rose 0.8% and the Public Sector by 0.7%.


It’s clearly dire times for us who are trying to find evidence of the Fair Work Act leading to wages spiralling out of control, especially in that clearly, wasteful public sector:


Oh look, bugger the quarterly numbers – they clearly must be just exaggerating an anomaly. Surely the annual figures will reveal the spike in wages:


Bloody data. Adam Creighton was right – it’s bringing down this country. How the hell am I supposed to argue things if facts keep making stuff up?

Ahh well. I guess in three months time we’ll finally see the true picture. 

OK, let’s look at the various Industries. Somewhat surprisingly the mining sector had very small wages growth in the September Quarter:


But it probably should not be too great a surprise as Ryan Buckland on Twitter informed me, September is usually the quarter that sees the smallest rise in the mining sector wages – and has been since 2009:


But a look at the quarterly increases in the Mining sector since 2005 shows that things are pretty flat;


In annual terms however there has been an increase – coming off the rises of the proceeding two quarters. Over the past 12 months only the Wholesale Sales sector has had a bigger increase in wages. But again nothing we haven’t seen before – such as back in 2008 when Work Choices was the IR legislation of concern:


Of course its the Wharfies who are really running rampant. And we can see evidence of that when we look at the increase in wages in the industry they come under – the Transport, Postal and Warehousing industry:


Which leads to this rather shocking annual rise:


Ahh well. Maybe next time. See you all in three months, as we go wages break hunting (be wery wery quiet).

Saturday, November 10, 2012

Les Miserables: Keeps looking damn good

So the latest trailer is out for Les Miserables.

The first one had me hooked – I was feeling pretty confident that they weren’t going to stuff it up. This second version is almost a summary of the film. Whereas the first only featured Anne Hathaway singing “I Dreamed a Dream”, this one shows most of the lead actors getting a chance to show their stuff (pretty much the only ones we don’t hear are Sasha Barron Cohen and Helena Bonham Carter – though we do get to see them).

And OK. I’m in. I am fully invested in this. If this sucks as a film, then I’m likely to be seen on TV being dragged out of some cinema by the authorities on Boxing Day screaming “You bastards!! You ruined it!!! Damn you!! Damn you all to hell!!!”

Because this trailer has me completely in. All the actors look the goods. Russell Crowe doesn’t sound like Philip Quast but I’m still confident he’ll be fine, and the line we hear him sing from “One Day More” is not a great one to show off any singing – his real test will come with “Stars” and “Javert’s Suicide” (sorry if that title is a spoiler for anyone!).

Lock in Anne Hathaway for a Best Supporting Oscar. Just lock her in. There is no way she will lose. She acts, she cut her hair, she sings and she’ll make every person in the theatre bawl their eyes out. She gets the gold statue.

Amanda Seyfried looks rather like Cosette – which is pretty much means she comes off as perfectly nice and perfect. The role is a tough thing given everyone really loves Eponine, and in that role I’m happy to see Samantha Barks, because if she flubbed “On My Own”, things would get rather sad (and not in a good way). Given she sang the role for the 25th Anniversary Concert, we know she can hold the tune, and when she tells Marius that the girl’s name is Cosette and then looks down and knows all is lost, well, I’m with her.

And I pretty happy with Hugh Jackman as the bloke to carry this film: Jean Valjean spent 19 years in prison so he’s can’t be Mister Nice but you have to like him, and you have to think he could be the type of guy who could spend 19 years in jail and come out not be full of hate. He also needs to do a fair bit of singing. We don’t see much of that in the trailer, and I’m interested to see how “natural” he goes. While I love the idea of the live singing as opposed to miming a standard Broadway cast score, I think there is a danger in going “too natural”. At the end of the day (to quote a song) it’s still a musical.

But anyway. Well done to the trailer makers because you got me. I’m there Boxing Day:

Friday, November 9, 2012

Time to end Post-Truth Politics

The win by President Obama was a win for facts. For reality. For truth, if you will. Does this mean Obama only told the truth on the way back to the White House? Hell no. He’s a politician. But unlike Mitt Romney, his entire campaign wasn’t based on a foundation of lies. Actually – it was worse than that – Mitt’s was founded on an alternate reality.  He argued against a health care system that was based on one he had introduced as Governor of Massachusetts. He argued that he and his running mate Paul Ryan were fiscal conservatives all the while running with a tax policy that didn’t add up. He was for abortion, against it, for it, against it; he said he would create 12 million jobs in 4 years and based this assertion on reports that said he might create 7 million jobs over 10 years and an extra 3.6 million jobs over the next 8 years and 2 million jobs from “cracking down on China” which no one would suggest would occur. He lied about Obama and the auto bailout – probably the final lie really – the one that broke the back of the voters carrying 12 months plus of bullshit. He and the GOP lied and lied and lied.

In these lies Mitt was unfortunately assisted by the right-wing elements of the media in the USA – namely Fox News, talk-back hosts like Rush Limbaugh and blogs like the Drudge Report.

Everything Obama did was “a conspiracy”. I fully envision in the next few months “Hurricane Sandy Truthers’ coming out to show how Obama actually did things to ensure the Hurricane hit the east coast when it did, and that he probably did an under the table deal with New Jersey Governor Chris Christie to get him to thank Obama for his efforts. You know it’s true.

Anytime Obama said anything that if twisted could be shown to be a “he clearly hates America” “gaffe” then we’d see it. From “You didn’t build that” (oh my God did the right wing think that would cost Obama the election) right up till last weekend when Obama quietened a crowd that was booing mention of Romney’s name by saying “no, no. Don’t boo. Vote. Vote. Voting is the best revenge.” 

And of course the right wingers and Mitt played ignorance on ever having heard a line like “Living well is the best revenge”, and thinking it was a play on that; instead Obama hated America:


But in the end Mitt was just telling those who were already firmly lodged in his fundament that what they were smelling was roses and honey. And it wasn’t.

We see this factless and reality lost politics here in Australia as well. Our debt will have us like Greece and Spain; the carbon price will kill the economy; Julia Gillard is just a gender card playing victim who was a corrupt lawyer; welfare is bad except when the Govt decides to take some away; climate change is a global conspiracy; we’re on the cusp of a wages breakout; the unions are back in charge; the mining tax will send mining off to Sierra Leone; the newspolls are rigged; the newspolls are the only polls that matter; gay marriage will destroy our society; low interest rates are bad; low interest rates are good; if we don’t have a surplus that means Labor never wants to pay off the debt.

Look there are more – and Labor throws out a few of them as well – mostly related to asylum seekers.

But this type of debate led by fools who use data when it suits and then promptly ignore it – or suggest it no longer really matters – helps no one. It leads to a debate where it boils down to “ideology”. Today in The Australian, Adam Creighton, apparently with a straight face, wrote:

CALLS for more "evidence-based policy" in Australia are routine. For former prime minister Kevin Rudd, under whose watch little reform occurred, it was "at the heart of being a reformist government".

But more "ideology-based policy" is what this country needs. Evidence is useless without underlying principles to guide what to do with it. Statistics are often crafted from poor data and reported tendentiously.

Yep, apparently we suffer from too much data. But don’t worry Creighton knows how to fix things:

How can we improve productivity in Australia? Shrink government and thereby expand the fraction of the labour force producing goods and services that people are willing to pay for.

Does he offer any proof that this is correct? Proof? What are you a hippie? If you don’t know that this is true then clearly your ideology is wrong and really it’s time for you to piss off and let the intelligent people run the country. Don’t worry about the fact that such an assertion is bollocks – it won’t do anything for productivity because if you expand the labour force producing goods, you only improve productivity if that increased labour force produces goods more efficiently than does the current market sector of the economy. Shrinking the government won’t do anything to improve the productivity of the mining sector.

He continues:

At the federal level, abolish patently absurd departments -- and their attendant expenditures -- such as "innovation", "climate change", "agriculture", and "families". At the state level, contract out the management and operation of hospitals and schools and deliver subsidies direct to the people consuming these services.

At the local level, sack diversity officers and community outreach programs in favour of fixing potholes and approving new developments.

How wonderful life is when you don’t need to support your assertions with evidence. You get to kill off everything in society you don’t like. I really should have adopted this strategy earlier.

Creighton ends with this doozy:

Not only does "evidence-based policy" thwart sensible reform with a barrage of data, the very process of producing statistics and "evidence" encourages governments to meddle with the economy. No one would pay to know Australia's gross domestic product or supposed aggregate productivity, for instance. Australia would be far freer and more prosperous if government produced fewer statistics.

Yep. There you go – finally the solution to our productivity. Less data! And why? Does he have evidence to support this? (You know for those deluded types who still think evidence maters). Why nope. He just asserts:

Australian businesses do not even measure their productivity in the way the Australian Bureau of Statistics does. They are more interested in profit, a far more reliable indicator of success.

To the extent any principle guides modern economic policy it is a crude utilitarianism that mandates fleecing the many to curry political favour with the few.

What a seriously fucked up vision of the world this bloke has (see I was using ideology there, not evidence). He asserts his ideology is right because it’s his ideology. So what does he do if he meets someone who disagrees with him? Well clearly evidence is not what we need, we just need whoever is strongest to prevail. Because that’s what happens when you trumpet ideology over evidence. If you want to see the germ of every totalitarian regime in history it starts with people asserting ideology over facts.

But it’s not surprising that Creighton would argue such things given back in April he wrote:

It doesn't matter which party is in power. As Winston Churchill said, democracy may be the best form of government among known alternatives, but it is probably not sustainable.

Democracies subsidise bad decisions. Voters, especially ones who pay no tax, care little for the preferences of future generations. The benefits of considered, sensible votes and the costs of careless ones mainly accrue to other people.

Yeah, that cursed democracy.

It is the view that flows underneath most of the right wing’s commentary post the Obama win. Take this nausea inducing excrement from RMIT lecturer of Economics Steve Kates on why Obama won:

The confluence of the mendicants, the envious, the abortion lobby, what I will call the cohort of damaged women, and the social sciences know-nothings has proven a formidable combination. They are a new constituency amalgamation that will affect the politics of the United States for the foreseeable future.

Damaged women? Yep, you see women are now all pretty slutty really – they conform to the Playboy view of the world, but unfortunately it has left them hurt:

But who has come out of this genuinely hurt by the changed attitude to women. Both men and women are worse for it, but if you ask me, it is women who have been psychologically damaged far more than the men. And I suspect Miss 29 has not avoided the deep and fearsome pains of commitment-free sexual relations either.

These are the attitudes that Obama was tapping into. Watching the Middle East burn and the American economy trashed by debt and deficits are irrelevant to such women whose anger is beyond all understanding, particularly for men of my and Romney’s generation.

I sure as shit wouldn’t want to have to make a list of things that are beyond Kates’s understanding.

He ends:

We are in dangerous times. Obama and Gillard are two of a kind. Empty of ability, proven failures at everything they have tried to achieve, but nevertheless able to command majorities in the legislative systems of our two nations. But the American election is the one that will matter most and whose outcome will resonate far into the future in ways that are incalculable. Re-electing Obama has endangered our way of life and may even make it unsustainable.

It’s almost impossible where to begin with such a paragraph. Perhaps it is best not to at all. It’s perhaps best just to quietly walk past and hope Kates doesn’t catch our gaze.

But Kates is not alone. Many of his Quadrant mates are on board the unhinged express. Try this on for size from Christopher Carr:

At this early stage, a few random thoughts will have to do. It seems that there are two Americas, which inhabit parallel universes. In addition to the obvious demographic divisions, there is an information division. Unless voters were tuned to the Fox News Network or followed conservative blogs, they would scarcely have heard of the scandal concerning the White House’s repeated denial of requests for backup during the terrorist attack at Benghazi. The mainstream media did a brilliant job covering for Obama.

Mitt Romney played Mr Nice Guy. President Obama played the demagogue.

Wait. Fox News? The same Fox News that used graphs repeatedly to mislead and outright lie? The same Fox News that frequently refers to “we” when talking about the Republican Party?

And if you still have any strength left, go read Peter Smith parrot every blog written on the National Review where he blames the loss on Obama being mean to Mitt and painting him as an evil capitalist (and ignoring that that was exactly what his fellow Republicans did during the Primaries).

There’s only so much delusion you can handle. And it helps no one – not even the other side – because what usually happens is when the contest of ideas becomes a contest of ideology then stupidity rises.

On this aspect Rachel Maddow of MSNBC conveys it all perfectly, and I have no more to add:

Thursday, November 8, 2012

Australia’s Unemployment Rate steady at 5.4%

Today the ABS released its monthly Labour Force figures.

The headline figures were for the seasonally adjusted unemployment rate to remain steady at 5.4%, and the trend rate to rise from 5.3% to 5.4%

If we want to break it down to a few more decimal places (in which doing so also reduces the confidence with which the ABS is sure they’re accurate – but what the hell), then the seasonally adjusted rate fell from 5.4377156% to 5.3645712% or a fall of 0.07314 percentage points. So it was very close to being a fall to 5.3% and it is why the ABS actually says the rate fell by 0.1 percentage point even though there was no change in the actual rate when rounded to 1 decimal point.

OK let’s look at the graphs:


Pretty flat with a slight uptick. Looking closer over the past 12 months we see this more clearly:


The main reason unemployment fell (or remained steady) was because employment actually grew by 10,700 jobs (around 0.1%) and participation fell by about the same.

As you can see the past 2 years has been very patchy compeered to the good growth in later 2009 and 2010 as we came out of the GFC:


While growth in employment numbers is good, number of hours worked fell, which is not good:


If we look at this in trend terms you can see that as with total employment numbers, the past 2 years has been weak compared to 2009-2010 – let alone that nice pre-GFC period of 2006-mid 2008.


But the picture isn’t as bad as it looked to be a couple months ago. The below chart shows the changes in trend hours worked over the past 3 months. Back in August things looked to be going downwards, and this month now shows even better growth (or less decline to be exact) last month than was believed to have occurred last month.


But it all points to less hours being worked per person than we worked during the GFC. In fact it’s currently at record lows (though that is because there is more part-time work than there ever was in previously worse recessions such as in the 1990 and 1982 etc)


In some good news, full-time employment did increase this month – though it’s still weak


This increase in work led to a decrease the unemployment rate for those looking for full-time work


Once again the growth in employment is coming from women, not from men:


Now to my always favourite metric of the employment to population ratio we see a decline of 0.1 in trend terms and a steadiness at 61.7% in seasonally adjusted terms.


Which when compared to other recessions, shows the impact of our changing demographics and ageing population. Despite Australia not suffering from a recession at all, let alone one as severe as the 1981-82 recession, the impact on the labour force is now almost the same.


I seriously doubt we’ll ever return to the pre-GFC highs. We have lost too many older workers who are not being replaced”


Now onto the states, and we asks ourselves where would we like to not be living right now:


Yep, Queensland was the only state to have a decline in employment in seasonally adjusted terms. Well done Campbell Newman a real bang up job you’re doing there.

But maybe October was a glitch. Let’;s look at the past 12 months:


Queensland: The new Rust Belt State

How does this all play out in unemployment rate terms?


Not pretty. But such are the “benefits” of austerity.


On Twitter a few people asked me what is QLD’s unemployment rate compared to the rest of Australia – ie not including QLD.

A look at the unemployment rate shows that QLD has increased to the point where only Tasmania is above it. WA is down at 4.6%, NSW is on 5.2% (ie below the national average) and Victoria in on 5.4 (right on the average) and SA is on 5.6% (just above the national average).


To look at the rest of Australia I excluded the ACT and NT because the ABS doesn’t give their unemployment rate out in seasonally adjusted terms – only in Trend. Given their small populations I doubt it would change much anyway, and given the ACT’s unemployment trend rate is 4.1% and the NT’s is 4.5% it would actually make thing look worse for Queensland than they do.


Without Queensland the unemployment rate would be 5.24%. Back in Jun the Rest of Oz rate was 5.21% and QLD was 5.32%. Since then the Rest of Aus rate has increased by .03 percentage points, whereas QLD’s has increased 0.84 percentage points.

Or as Possum would say, “They’ve been Newmanned”.

Wednesday, November 7, 2012

2012 US Election: Obama and maths win

Today in a resounding win for maths, Barack Obama beat Mitt Romney.

Before we get to the politics, the win was a win for the pollsters, and for those who created models based on their aggregated data. The big winner has been The NY Times’ Nate Silver, but in reality pretty much all forecasters were predicting and Obama win.

For example on the Huffington Post here was the predicted map:


Of the 4 “tossup states”, Obama was ahead in Colorado and Virginia; Romney was ahead in North Carolina. Florida was split 48%-48% And here’s how it ended up:

2012 Result

Obama won Colorado and Virginia as expected and Mitt won North Carolina as expected. And in the end Obama won Florida just to get the cherry on top.

All Obama lost from 2008 was Indiana and North Carolina which voted Republican even when Clinton was running in 1992 and 1996, let alone when George W won in 2000 and 2004. So it wasn’t a case of Romney making inroads, but more just getting back what the GOP used to take for granted.

With still around 25% of California’s vote to count, Obama leads by over 2 million votes. He has 50.1% of the vote, and because he’s winning California by around 57% he’ll likely end up with around 50.2%ish to Romney’s 48.3%ish.

The final Real Clear Politics average of the polls had Obama up 48.8% to 48.1%, Nate Silver had Obama projected to win 50.8% of the vote to Mitt’s 48.3%. So RCP under-estimated Obama’s share, and Silver slightly over-estimated it. Mind you Silver’s projection was for Obama to only win 313 electoral college votes, so he wasn’t exactly over-egging Obama’s chances.

It was a big loss for right wing pundits who were right till the very end (even past the end in Karl Rove’s case) suggesting the vibe and feel on the ground was at great variance to what the polls were suggesting. The Wall Street Journal’s Peggy Noonan was a classic example. Yesterday she wrote:

Everyone’s guessing. I spent Sunday morning in Washington with journalists and political hands, one of whom said she feels it’s Obama, the rest of whom said they don’t know. I think it’s Romney. I think he’s stealing in “like a thief with good tools,” in Walker Percy’s old words. While everyone is looking at the polls and the storm, Romney’s slipping into the presidency. He’s quietly rising, and he’s been rising for a while.

Now I don’t mind someone sticking her neck out and making a prediction, but a bit of substantial evidence wouldn’t go astray (especially when the Mitt’s rising” bit went against what the polls were showing). Instead Noonan served up this:

Who knows what to make of the weighting of the polls and the assumptions as to who will vote? Who knows the depth and breadth of each party’s turnout efforts? Among the wisest words spoken this cycle were by John Dickerson of CBS News and Slate, who said, in a conversation the night before the last presidential debate, that he thought maybe the American people were quietly cooking something up, something we don’t know about.

I think they are and I think it’s this: a Romney win.Twitpic - Share photos and videos on Twitter

Let this be a good example of to stop listening to people who say the polls are wrong because people running the polls obviously can’t be bothered trying to do their job right. The right wing seemed to live under the assumption that the polls were all purposefully being stupid – as though these companies wanted to be wrong.

When the supporters of a political party start telling you all the polls are wrong and that the vibe is with their side, know that they are picking up straws and clutching them like mad.

Yes a poll can be “wrong” but when you start collating lots of them, for them to be wrong you need to start assuming a lot of things don’t gel with reality. It’s why in Australia you don’t need to worry about individual poll movement – but instead be smart and look at Possum’s Pollytrend.

You can talk all you like about “the vibe” and how great the feel is out there “on the ground”. But if, come a day before the next election, the ALP is still running at 48% on the pollytrend, they won’t win.

Let the trend be your friend (and also let it make you look like you know what you’re talking about).

In the USA, a couple electoral maps (via the NY Times)  show the problem for the GOP in winning the Presidency.

First the vote by county (red is Republican)

2012 County vote

As you can see – lots of land mass is red. It looks like  America should be Republican

But now look at the margins of victory per county:

2012 Margin

Where Obama won big was in the big cities; where Mitt won big was in places that didn’t matter because they were never in play – such as Utah.

In Colorado for example Obama won big in and around Denver and Boulder. In Florida he won the Miami-Dade Country with 62% of the vote – that county had around 829,000 voters, next door in Broward County he won with 67%. It has around 719,000 voters. Together those 2 counties account for nearly 20% of the entire state’s vote.

In Ohio it’s the same story:


Obama won big in Cleveland, Columbus and Toledo. Romney won in Cincinnati but not by enough to make up for those losses – and that county in Cincinnati that he won (Clermont County) had only 94,000 voters. In the Cleveland county that Obama won big (Cuyahoga County) there are 610,000 voters, and Obama won with 69% of the vote (or by 236,000 votes). 

It’s also worth noting that even if Mitt won both Ohio and Florida, he still would’ve lost the election. When you’re in that kind of a scenario, you can’t say the election was close.

To change this map, the GOP has to come up with someone who can win in the cities – which means maybe not running a campaign that (to paraphrase Obama in 2008) is concerned about scared people who cling to their guns and religion.

The worry for those who would like to see a sensible Republican Party is that the Tea Party movement is not real big on logic. I can see them blaming this result on the fact that Mitt was too moderate (as was John McCain in 2008 in their view), and that Chris Christie betrayed them by embracing Obama after the Hurricane, and that they really needed someone like Rick Santorum or Paul Ryan.

Now that might get them a big result in Kentucky, but sure as heck won’t win them back Pennsylvania or Ohio.

One small hope for sanity is that the Tea Party got pretty well slapped this time round. Todd Akin – he of the “legitimate rape comment” – lost his Senate race in Missouri gaining only 40% of the vote. This was a state that Romney won with 54%.

Similarly Richard Mourdock – he of the pregnancy from rape is “something God intended to happen” comment – lost his Senate race in Indiana with only 44.4% of the vote. Again this is a state Romney won with 54.3%.

Similarly the candidate for head nutter of the Congress, Michel Bachmann, won her seat with only 50.6% of the vote. Her district has actually been rezoned since the last election and was supposed to be more Republican. This was a woman who actually tried to run for President with Tea Party support, and she only sneaked in.

Unfortunately there will be those in the Republican Party who instead of facing reality will follow Donald Trump’s lead:

The Donald

Including this woman (via @greenat16)

Just a few things wrong


Four years ago Obama’s victory speech was damn impressive. It drew heavily on Martin Luther King Jr.

Tonight’s speech was in some ways more impressive. It seemed more his own. One less concerned with remarking on the history of the moment but rather looking ahead – in fact looking “forward” (who knew “moving forward” could be a winning slogan!).

The best part of the speech invoked the usual American exceptionalism that is in all such speeches but nicely – and touchingly – brought it together with his policy for health care:

I am hopeful tonight because I've seen the spirit at work in America. I've seen it in the family business whose owners would rather cut their own pay than lay off their neighbors, and in the workers who would rather cut back their hours than see a friend lose a job.

I've seen it in the soldiers who reenlist after losing a limb and in those SEALs who charged up the stairs into darkness and danger because they knew there was a buddy behind them watching their back.

I've seen it on the shores of New Jersey and New York, where leaders from every party and level of government have swept aside their differences to help a community rebuild from the wreckage of a terrible storm.

And I saw just the other day, in Mentor, Ohio, where a father told the story of his 8-year-old daughter, whose long battle with leukemia nearly cost their family everything had it not been for health care reform passing just a few months before the insurance company was about to stop paying for her care.

I had an opportunity to not just talk to the father, but meet this incredible daughter of his. And when he spoke to the crowd listening to that father's story, every parent in that room had tears in their eyes, because we knew that little girl could be our own.

And I know that every American wants her future to be just as bright. That's who we are. That's the country I'm so proud to lead as your president.

And with that, here we go – four more years:

Tuesday, November 6, 2012

The Reserve Banks keeps the cash rate at 3.25%

Today’s announcement by the RBA to keep the cash rate unchanged was a bit of a shock for most predictors. Certainly the foreign exchange market didn’t see it coming, with the dollar jumping around 0.60 cents against the US dollar within minutes of the announcement being made:

AUDUSD Chart (Australian Dollar - US Dollar Forex Chart)

Of course just because economists get a prediction wrong doesn’t mean it should be that much of a shock. But it certainly suggests a more bullish outlook from the RBA than was expected.

Of course rates are still waaaay down low:


The cash rate remains over 2 percentage points below the 20 year average, and 1.38 percentage points below the 5 year average which now covers pretty much all of the Rudd/Gillard Government.

But to discover why the RBA made no change let’s have a look at the difference between the Governor’s statements from today and last month – and I’ll highlight the differences

First Global conditions:

Global growth is forecast to be a little below average for a time. Risks to the outlook are still seen to be on the downside, largely as a result of the situation in Europe, where economic activity is still contracting. Risks elsewhere seem more balanced. The United States is recording moderate growth, while recent data from China suggest growth there has stabilised. Around Asia generally, growth has been dampened by the more moderate Chinese expansion and the weakness in Europe.

The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside. Economic activity in Europe is contracting, while growth in the United States remains modest. Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago. Around Asia generally, growth is being dampened by the more moderate Chinese expansion and the weakness in Europe.

The only real difference is the suggestion that US growth has gone from “modest” to “moderate” and China’s growth has moved from “slowed” to “stabilised”

Since October, the USA 3rd quarter GDP figure have come out showing a 2% growth in the past 12 months:


Which I guess is “moderate’

And China’s GDP growth came in at 7.4% for the same quarter, and does shows sings of “stabilizing”:


Now to commodity prices:

Key commodity prices for Australia remain significantly lower than earlier in the year, though trends have been more mixed over the past couple of months, with some prices recovering some ground while others declined further. The terms of trade have declined by about 13 per cent since the peak last year, but are likely to remain historically high.

Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks. The terms of trade have declined by over 10 per cent since the peak last year and will probably decline further, though they are likely to remain historically high.

Here the news is all bad. In October prices seemed to have regained some ground, today however the RBA was saying the “mixed”. In October the terms of trade had declined by “over 10 per cent”, now a more specific figure is cited – that of “13 per cent”.  But iron ore prices have increased since October. They’re now around $120 – up from around $100 in September.

Financial markets? Nothing at all has changed:

Financial markets have responded positively over the past few months to signs of progress in addressing Europe's financial problems, but expectations for further progress remain high. Long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis. Borrowing conditions for large corporations are similarly attractive. Share markets have generally risen over recent months.

Financial markets have responded positively over the past few months to signs of progress in addressing Europe's financial problems, but expectations for further progress remain high. Low appetite for risk has seen long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Nonetheless, capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis. Share markets have generally risen over recent months.

Note as well that “Capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis.” (Just in case there are still a few people around trying to sell you the whole “the Govt’s debt is crowding out investors” theory.)

Now to domestic conditions.

Once again there has been next to no change in the labour market or in general growth since October. The RBA changed around the paragraphs a bit, but the wordage is the same:

In Australia, most indicators available for this meeting suggest that growth has been running close to trend over the past year, led by very large increases in capital spending in the resources sector. Looking ahead, the peak in resource investment is likely to occur next year, at a lower level than expected six months ago. As this peak approaches, the Board will be monitoring the strength of other components of demand.

Some of the consumption strength in the first half of 2012 was temporary, but there have been some signs of ongoing growth, though a return to very strong growth in consumption is unlikely. While investment in dwellings has been subdued for some time, over recent months there have been some indications of a prospective improvement. Non-residential building investment has remained weak. Public spending is forecast to be subdued.

In Australia, most indicators available for this meeting suggest that growth has been running close to trend, led by very large increases in capital spending in the resources sector. Consumption growth was quite firm in the first half of 2012, though some of that strength was temporary. Investment in dwellings has remained subdued, though there have been some tentative signs of improvement, while non-residential building investment has also remained weak. Looking ahead, the peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected. As this peak approaches it will be important that the forecast strengthening in some other components of demand starts to occur.

Now we get to the big difference – inflation.

Recent outcomes on inflation were slightly higher than expected
, though they still show inflation consistent with the medium-term target, with underlying measures around 2½ per cent over the year to September, and headline CPI inflation a little lower than that. The introduction of the carbon price affected consumer prices in the September quarter, and there could be some further small effects over the next couple of quarters. With the labour market having generally softened somewhat in recent months, and unemployment edging higher, conditions should work to contain pressure on labour costs in sectors other than those directly affected by the current strength in resources. This and some continuing improvement in productivity performance will be needed to keep inflation low, since the effects on prices of the earlier exchange rate appreciation are now waning. The Bank's assessment remains that inflation will be consistent with the target over the next one to two years.

Labour market data have shown moderate employment growth and the rate of unemployment has thus far remained low. The Bank's assessment, though, is that the labour market has generally softened somewhat in recent months.

Inflation has been low, with underlying measures near 2 per cent over the year to June, and headline CPI inflation lower than that. The introduction of the carbon price is affecting consumer prices in the current quarter, and this will continue over the next couple of quarters. Moderate labour market conditions should work to contain pressure on labour costs in sectors other than those directly affected by the current strength in resources. This and some continuing improvement in productivity performance will be needed to keep inflation low as the effects of the earlier exchange rate appreciation wane. The Bank's assessment remains, at this point, that inflation will be consistent with the target over the next one to two years.

In October the underlying measures were “near 2 per cent”; in November it was “around 2 1/2 per cent”. That difference was the key reason why the RBA held off dropping rates- they don’t want to be seen dropping rates while inflation possibly might be increasing unless the other signs in the economy (both here and abroad) are all negative. .

It agrees with what I suggested when the last CPI numbers came out, where I wrote:

The only aspect I think that might get the RBA to pause and not cut rates on Cup Day is that given the past 6 months has seen a combined 1.5% increase in the weighted median and a 1.3% rise in the trimmed mean the RBA might think that annualizes out to around the 3.0% – ie a the top on the band and thus decide it is best to wait and see what the December quarter holds before cutting the rates.

Not that this makes me a genius – I still predicted a cut in rates!

Now on to the conclusion, and a look at where the RBA sees monetary policy at the moment:

Over the past year, monetary policy has become more accommodative. Interest rates for borrowers have declined to be clearly below their medium-term averages and savers are facing increased incentives to look for assets with higher returns. While the impact of these changes takes some time to work through the economy, there are signs of easier conditions starting to have some of the expected effects. Business demand for external funding has increased this year, the housing market has strengthened and share prices have risen in line with markets overseas. The exchange rate, though, remains higher than might have been expected, given the observed decline in export prices and the weaker global outlook.


Interest rates for borrowers have for some months been a little below their medium-term averages. There are tentative signs of this starting to have some of the expected effects, though the impact of monetary policy changes takes some time to work through the economy. However, credit growth has softened of late and the exchange rate has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook.

They have changed from thinking rates are “a little below” to “clearly below” medium-term averages. With regards to home loans they are right, but with respect to small businesses, the rates remain slightly above average:


On this point it is worth noting that the spread of the cash rate to the small business overdraft rate actually increased in the past month:


It also mentioned housing prices which brings us to the House Price Index data released today by the ABS, that showed a 0.3% annual growth across the capital cities.


So not exactly a housing price boom, but I guess it has “strengthened” (given anything positive is stronger than negative).

Now to the end:

Further effects of actions already taken to ease monetary policy can be expected over time. The Board will continue to monitor those effects, together with information about the various other factors affecting the outlook for growth and inflation. At today's meeting, with prices data slightly higher than expected and recent information on the world economy slightly more positive, the Board judged that the stance of monetary policy was appropriate for the time being.

At today's meeting, the Board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target. The Board therefore decided that it was appropriate for the stance of monetary policy to be a little more accommodative.

The big differences – the higher than expected inflation data and the “slightly more positive” world economy (seriously, they must have been turning up the rose coloured glasses to “blinding” to think the world economy is more positive on the basis of China and the USA GDP growth.

And there the cash rate rests. Until December – at which point the market still expects there is a slightly better than even chance the RBA will drop rates to 3%.

Thursday, November 1, 2012

On the QT: Combet has them at the jump

OK, Question Time today, as ever was pretty dull, but yesterday and today Combet has been having a bit of fun with Tony Abbott’s predictions about the impact of the carbon price. Today Combet rather tortiously made mention of predictions made about the impact on sporting event to get onto talk of the Spring racing carnival, wherein he ran his eye over the Liberal Party form guide  (the good stuff starts at the 2:04 min mark)

Now here’s the best things about it :


Turnbull knows how to laugh at himself (and perhaps also at the current Liberal Party Leadership) – and even Kevin Andrews begrudgingly cracks a smile.

Scott Morrison is less impressed, but still chuffed that he’s getting a mention:


But Julie Bishop? We are not amused:


Export Prices go down the slippery dip

The ABS today released the quarterly International Trade Price Indexes, and if you were hoping for signs that the boom in mining prices was still going, I suggest you avert your eyes:


In the past quarter there was a drop of 6.4% for a 13.4% drop over the past 12 months:



Let’s get specific; how about coal?



And all metal ores and minerals together?


When it comes to thinking about managing the budget ask yourself which do you think would be trickier.



or this:


or in terms of changes from the previous year, 1996-2012  it looks like this:


If predictability is your go, you best not want to take over the Treasury in around December 2007, because things started going a bit upsie downsie.