Under Embargo

Ever heard of the Forex Factory? How about World Leaders News? Or Tweet Meme? Philippine Times? Quedit? The News List? Odd Bird Collective?

These are just a few of the media outlets that considered it worthwhile reporting on comments from Julia Gillard that she was concerned that Australia has a dose of the economic clap (or Dutch Disease in the common parlance). Not one major Australian news site carried the story (at the time of writing).

A few other outlets that you may have of heard of also ran strong headlines. BusinessWeek, Forbes and Bloomberg:

Prime Minister Julia Gillard highlighted risks posed by the nation’s ties to a global commodity boom, with a patchwork economy emerging from export gains accompanied by subdued domestic spending.

“I’m very conscious that a strong Australian dollar has benefits and it has burdens,” Gillard said in an interview yesterday in Canberra, citing stresses posed by currency gains for the manufacturing and tourism industries.

Gillard’s comments reflect a challenge faced by policy makers from Brazil to China, where strengthening exchange rates risk undermining exports unconnected to the climb in global commodity prices. While emerging markets have taken steps to stem currency gains, such as through limits on capital inflows, Australia has refrained from such measures and Gillard said she favors letting the market set the so-called Aussie.

“The domestic economy is probably weaker than expected and that reflects the fine balancing act for policy makers,” said Tom Vosa, director of economic research at National Australia Bank Ltd. in London. “There is a risk of a Dutch disease effect,” he added, referring to the Netherlands’s experience of a surge in growth in its energy industries that drove up the currency and hurt manufacturing.

… Australia’s economic growth accelerated to a quarterly pace of 0.7 percent in the final three months of last year, a government report showed two days ago. The nation is benefitting from its strongest terms of trade, a measure of income from exports, since the early 1950s, according to the central bank.

Outside of mining, the economy is doing less well. Australia’s services industry contracted in February, a survey showed yesterday. The performance of services index was 48.7 from 45.5 in January, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney. A figure below 50 indicates contraction.

Yes indeedy, as reported here yesterday.

This blogger doubts that the PM raised this important issue voluntarily. I can’t find the original interview so can’t confirm it.  But she has no incentive to do so, given it was Gillard herself that signed away $100 billion on the RSPT compromise that severly set back any hope of addressing Dutch Disease effectively.

But at least the PM has an excuse. Given this opportunity to debate the issue, why is the entire Australian media is ignoring it?

Comments

  1. Was it on Al Jazeera?
    If we all ignore it we can keep pretending it doesn’t exist.

    • Saw her interviewed on Bloomberg very recently (Thursday or Friday), I just flicked past it because it is usually not worth a listen.

  2. Rubbish. There is no dutch disease. Just turn to page 7 of the national accounts and look at State Final Demand figures.

    Sure, WA had a high growth rate in 2010 (3.6%) but ACT’s was higher (5.3%), Victoria was not that far behind (3.5%) and none of the other states or territories did worse than 2%.

    • BTW, those figures are taken from the trend series. The seasonally adjusted series don’t help proponents of the ‘dutch disease’ either.

  3. Hi Sidelined,

    Perhaps you are Ross Gittins in drag?

    Who ever said Dutch Disease need follow neat state boundaries?

    You’ve set up a straw man, ascribed to me, then attacked me for it.

    Pooooooor argument.

  4. Ross Gittins in drag? You’ll have to explain that one for me, I don’t get it.

    Anyway, my post was not an attack on you, it was an attack on the idea that Australia is currently gripped by ‘Dutch Disease.’ Re-read what I said.

    But let me knock down some more strawmen. Again, looking at the National Accounts, this time ‘gross valued added by industry.’ In the year to Dec 2010 manufacturing increased by 1.7%, construction 8.3%, retail 1.2%, accommodation and food services 1.9%, transport 1.3%, and so on. What did mining do? It fell 0.3%!

    Here’s another stawman, in the year to Nov 2010 (the latest available data) total employment by industry grew by 403,000 persons. Of that, 32,000 was in mining. Sure that was a 19% increase for THAT industry, but 92% of aggregate employment growth occurred in the non-mining sector of the economy.

    Put another, total employment grew 3.7% in the year, but if you take out mining it grew 3.4%. Sure its lower, but hardly cause for alarm, don’t you think?

  5. Fair enough. Gittins! got me angry this morning so sorry if I came across a bit grumpy.

    I know the economy is going fine across a variety of industries. It’s not the problem. Dutch Disease is usually seen in the rear-vision mirror, when the commodities fall and you no longer have the export mix to support the same levels of spending – that’s when the broader economy hurts.

    If you see the resources boom as permanent then you don’t have Dutch Disease.

  6. If you don’t want Gittins to get you angry, don’t read his articles! I stopped reading him years ago, though to be fair, he does sometimes write decent stuff.

    Re: Dutch Disease, I take your point. Nobody knows when the mining boom will end, and I agree that it will end. But when the boom ends the dollar will fall and the economy will restructure itself. Sure it will be painful for some, but if market mechanisms are allowed to operate freely, the adjustment period will be short.