Money Is Cheap

Jul 30, 2012

The “serious people” in the political world, the media and a lot of “think tanks” (where, apparently, people do very serious thinking) keep telling you, day after day, that a very important goal right now — today, immediately — is to have a balanced government budget. Never mind the need for major investments that are needed in a whole host of things like infrastructure and social services. Balance. It. Now. Except they are wrong — and they are leading us down a quite foolish path.

I know this is a bit wonky but it’s actually quite easy to understand. Money for public spending is actually quite cheap right now to get. Nobel-Prize winning economist Paul Krugman points this out, speaking mostly about the US economy but the point is relevant worldwide, that government borrowing costs are lower than they’ve been in recent memory. Why?:

The main answer is that this is what happens when you have a “deleveraging shock,” in which everyone is trying to pay down debt at the same time. Household borrowing has plunged; businesses are sitting on cash because there’s no reason to expand capacity when the sales aren’t there; and the result is that investors are all dressed up with nowhere to go, or rather no place to put their money. So they’re buying government debt, even at very low returns, for lack of alternatives. Moreover, by making money available so cheaply, they are in effect begging governments to issue more debt.

And governments should be granting their wish, not obsessing over short-term deficits.

No one is happy with the conditions that are making money so cheap to borrow — the Global Financial Crisis has brought down a world of hurt on to the heads of tens of millions of workers, while the bankers have skated by.

But, if there is a silver lining here that governments should seize, it’s that the terrible mess opens up a window of time to spend money to make some serious, long-term investments that will make the economy better for real people. Of course, some day, you do pay back debts — just like one does in paying for a child’s education, or a home or another investment that makes sense. But, right now, at a time when money is so cheap it’s almost being handed to governments for free, we should not be wringing our hands over government deficits.

By the way, Australia’s deficit, as a percentage of gross domestic product (which is how you want to look at it — think of it: it’s like your personal income…you always wants to balance how much you borrow with your ability to earn enough to pay the debt back) is 0.7 percent — a tiny amount. By comparison, China’s annual deficit is running at 2.3 percent of GDP, Japan 8.1, Canada 3.3 and on and on. The only two countries with serious big surpluses are Saudi Arabia and Norway — thanks to oil revenues pouring in.

Anyway, spend the money.


@jonathantasini

The Economy – Heading in the Right/Wrong Direction

Mar 26, 2012

Q. Overall, from what you have read and heard, do you think the Australian economy is heading in the right direction or the wrong direction?

 

17 May 10

(Post 2010 budget)

9 May 11

(Post 2011 budget)

4 Jul 11

26 Mar 12

Vote Labor

Vote Liberal/ National

Vote Greens

The right direction

51%

45%

37%

36%

65%

19%

47%

The wrong direction

25%

29%

43%

41%

15%

64%

23%

Don’t know

24%

25%

20%

22%

21%

17%

30%

36% of respondents think that Australia’s economy is heading in the right direction – 41% think it is heading in the wrong direction. Opinions have changed little since this question was asked in July last year – “right direction” has dropped 1% and “wrong direction” dropped 2%.

65% of Labor voters, 19% of Liberal/National voters and 47% of Greens voters think the economy is heading in the right direction.

Comments »

Party Best at Handling Economy

Mar 26, 2012

Q. Which party do you think would be best at handling the Australian economy in the interests of you and people like you?

 

4 Jul 11

26 Mar 12

Vote Labor

Vote Lib/Nat

Vote Greens

The Labor Party

26%

29%

76%

1%

39%

The Liberal Party

43%

41%

2%

89%

7%

No difference

23%

20%

14%

7%

45%

Don’t know

8%

10%

7%

4%

9%

 

41% (down 2% since July last year) think the Liberal Party would be best at handling the Australian economy in their interests and 29% (up 3%) nominated the Labor Party. 20% think there is no difference.

There were significant differences by income – those earning under $600pw split 38% Labor/30% Liberal while those earning over $1,600pw favoured the Liberal Party 49% to 23% Labor.

Comments »

The Economy

Mar 26, 2012

Q. Over the next 12 months do you think economic conditions in Australia will get better, get worse or stay much the same?  

 

 

1 Dec

08

15 Jun 09

5 Oct

09

28 Jun

10

18 Oct

10

4 April

11

4 Jul

11

3 Oct

11

26 Mar 12

Vote Labor

Vote Lib/Nat

Vote Greens

Total better

21%

43%

66%

33%

40%

27%

22%

16%

25%

42%

17%

26%

Total worse

61%

37%

15%

31%

30%

37%

49%

58%

46%

29%

60%

37%

Get a lot better

2%

5%

8%

5%

6%

4%

3%

2%

3%

5%

2%

1%

Get a little better

19%

38%

58%

28%

34%

23%

19%

14%

22%

37%

15%

25%

Get a little worse

45%

28%

11%

23%

20%

27%

31%

41%

31%

25%

36%

34%

Get a lot worse

16%

9%

4%

8%

10%

10%

18%

17%

15%

4%

24%

3%

Stay much the same

13%

17%

15%

30%

24%

27%

25%

22%

21%

24%

19%

26%

No opinion

5%

3%

4%

7%

6%

8%

4%

4%

7%

4%

4%

12%

Confidence in the economic outlook has strengthened with the percentage of respondents believing conditions to be getting better increasing 9 points to 25%, from 16% in October last year.  Those believing that economic conditions will get worse over the next 12 months has fallen 12 points from 58% to 46%.

Labor voters are optimistic overall – 42% better/29% worse.  Coalition voters are the most pessimistic, with 60% believing that thing will get worse over the next 12 months and only 17% better.

There was little difference across income groups.

Comments »

Personal financial situation

Mar 26, 2012

Q, Over the next 12 months do you think your personal financial situation will get better, get worse or stay much the same? 

 

28 Jun

10

18 Oct

10

4 April

11

4 Jul

11

3 Oct

11

26 Mar 12

Vote

Labor

Vote

Lib/Nat

Vote

Greens

Total better

29%

33%

32%

28%

24%

28%

34%

25%

36%

Total worse

31%

29%

31%

36%

41%

37%

29%

42%

34%

Get a lot better

5%

6%

7%

5%

4%

5%

5%

4%

14%

Get a little better

24%

27%

25%

23%

20%

23%

29%

21%

22%

Get a little worse

21%

21%

22%

23%

27%

27%

22%

30%

27%

Get a lot worse

10%

8%

9%

13%

14%

10%

7%

12%

7%

Stay much the same

37%

32%

32%

32%

32%

29%

32%

31%

25%

No opinion

4%

5%

5%

3%

3%

5%

5%

2%

5%

28% (up 4% since October last year) of respondents believe that their personal financial situation will get better in the next 12 months and 37% worse (down 4%). 29% (down 3%) expect it to stay much the same. However, these results are very similar to those of July 2011.

Greens voters (36% better) and Labor voters (34%) are the most likely to believe that their personal financial situation will get better over the next 12 months, whereas Coalition voters are the most likely to believe that theirs will get worse (42%).

People on lower incomes were more pessimistic about their personal financial outlook – those earning under $600 per week split 22% better/49% worse – compared to those earning more than $1,600pw who split 36%better/30% worse.

Comments »

The Economy

Apr 4, 2011

Q. Over the next 12 months do you think economic conditions in Australia will get better, get worse or stay much the same?

1 Dec 08 15 Jun 09 5 Oct 09 18 Jan 10 29 Mar 10 28 Jun 10 18 Oct 10 4 April 11 Vote Labor Vote Lib/Nat Vote Greens
Total better 21% 43% 66% 53% 54% 33% 40% 27% 38% 25% 23%
Total worse 61% 37% 15% 19% 19% 31% 30% 37% 26% 48% 33%
Get a lot better 2% 5% 8% 9% 9% 5% 6% 4% 7% 3% 3%
Get a little better 19% 38% 58% 44% 45% 28% 34% 23% 31% 22% 20%
Get a little worse 45% 28% 11% 14% 13% 23% 20% 27% 22% 33% 27%
Get a lot worse 16% 9% 4% 5% 6% 8% 10% 10% 4% 15% 6%
Stay much the same 13% 17% 15% 24% 22% 30% 24% 27% 32% 23% 35%
No opinion 5% 3% 4% 4% 6% 7% 6% 8% 4% 5% 8%

Optimism about Australia’s economic outlook has declined substantially in the last 6 months. 27% think economic conditions in Australia will get better over the next 12 months and 37% think they will get worse – a net decline of 20% since this question was last asked in October. This is the most negative result recorded since December 2008.

Younger people are more optimistic than older people – of those aged under 35, 34% think conditions will get better and 27% worse.

38% of Labor voters think conditions will get better and 26% worse while 25% of Coalition voters think conditions will get better and 48% worse.

Comments »

Personal financial situation

Apr 4, 2011

Q. Over the next 12 months do you think your personal financial situation will get better, get worse or stay much the same?

29 Mar 10 28 Jun 10 18 Oct 10 4 April 11 Vote Labor Vote Lib/Nat Vote Greens
Total better 40% 29% 33% 32% 37% 29% 40%
Total worse 23% 31% 29% 31% 28% 35% 21%
Get a lot better 8% 5% 6% 7% 7% 7% 7%
Get a little better 32% 24% 27% 25% 30% 22% 33%
Get a little worse 17% 21% 21% 22% 21% 24% 16%
Get a lot worse 6% 10% 8% 9% 7% 11% 5%
Stay much the same 33% 37% 32% 32% 32% 33% 34%
No opinion 4% 4% 5% 5% 3% 3% 6%

32% think their own personal financial situation will get better over the next 12 months and 31% worse – 32% think they will stay much the same.

This is a little less optimistic than the October result – a decrease from net +4% to +1%.

Among full-time workers, 40% think their situation will get better and 27% worse while those who are not working are more pessimistic – 25% better/32% worse/36% much the same.

For those aged 55+, 15% expect their financial situation to get better and 39% worse while for those aged under 35, 48% expect it to get better and 24% worse.

Comments »