One of the more curious ironies about being an Australian is that although we pride ourselves on being misfits and larrikans, we are also rigidly conformist and prepared to lop off the head of anyone that gets too big for their boots.
This irony derives, I believe, from the dominant value system of our culture. Judeo-Christian I hear a few of you ask? Anglo-Saxon materialism, some others mutter? Some struggle between pre and post-colonial identities, a few chip in? Nope, nup and nada.
The dominant Australian identity or value system – whatever you want to call it – is “the battler” versus “the bludger”. The battler has a positive outlook and works hard towards those lofty goals. The bludger is a pessimist layabout looking for a handout.
And nowhere do you get a more ham-fisted and basic rehashing of this identity than in our daily economic commentary. A couple of recent examples will serve the point.
The master gatekeeper of this value-system is Ross Gittins. In the last two days we have two prime examples. The first was Saturday:
SOMETHING strange is happening to the Australian psyche at present. A lot of people are feeling down about the economy. They’re convinced it’s pretty weak, and any bit of bad news gets a lot of attention.
But most of the objective evidence we get about the state of the economy says it is, under the circumstances, surprisingly strong. Consider the national accounts we got this week.
They show the economy – real gross domestic product – grew by 1 per cent in the September quarter, more than most economists were expecting. And not only that, the Bureau of Statistics went back over recent history, revising up the figures.
Originally we were told the economy grew by a rapid 1.2 per cent in the June quarter, but now we’re told it grew by an even faster 1.4 per cent. Originally we were told the economy contracted by 1.2 per cent in the March quarter because of the Queensland floods and cyclone, but now we’re told the contraction was only 0.7 per cent.…Those figures hardly fit with all the gloominess. So how fast is the economy travelling, on the latest numbers? We’re told it grew by 2.5 per cent over the year to September, but that figure includes the once-off contraction in the March quarter, which is now ancient history.
So the best assessment is that at present the economy is growing at about its ”trend” (long-term average) rate of 3.25 per cent a year. If so, everything’s about normal.
As we know, it is the recourse of the inflexible mind that whenever data does not match some pre-conceived notion of where he’s at, the recourse is to cherry pick data components to make an alternative case. Here is a chart of Australian GDP over the long term:
For the past six years we’ve averaged 2.5% or so. But that includes the GFC Gittins will no doubt respond. And yes, it does, just as it should if you’re a nation that inhabits Planet Earth.
I’ll happily concede that this rate of growth is pretty good in such a difficult world. Certainly the best of the Angloshere. But, by the same token, it sure is NOT the glory days of 3.5%, the average since 1960. And hence, one one has to ask, why is Gittins, and others like him, so determined to misrepresent the data?
In Gittins case, he has a clear bias towards the ruling Labor Party so we can expect some positive spin. But it’s more. Look at the framing of his analysis. Gittins goal is not clarification of the growth position of the Australian economy, it’s about scoring points against the “gloomsters”, for which you can read “pessimistic layabout”.
More evidence of this view of Gittins‘ drivel can found in his follow up commentary this morning:
Just as a stopped clock is right twice a day, so the financial markets’ belief that Europe’s sovereign debt problems are the primary factor influencing the Reserve Bank’s decisions about interest rates, having been wrong for most of the year, has finally proved on the money.
Give me a break. Here is a chart of the bludging interest rate markets from three weeks ago:
The blue line is late October pricing for interest rates ahead. In other words, it was pricing the two cuts we’ve just seen. Then, as the prospects for Europe got worse, so did it’s pricing for future cuts. Is this a stopped clock? Obviously not. So why invent the idea that it is? First, Gittins didn’t forecast ay of it, so there’s the obfuscation of his failure for starters. But most of all, it appears to be more of the that same optimistic drivel that caused that failure in the first place. Take this, for example:
It doesn’t take many brain cells to get the wind up over Europe and assume the worst. It takes more brain power to quietly assess the probability of a complete disaster. And more again to assess the strength of any troubles in Europe by the time the ripples reach the Antipodes via China.
By now, the shape of the solution to Europe’s problem is reasonably clear. The 17 member countries of the euro area (or, if they insist, almost all the members of the European Union) need to sign up to a new fiscal compact, which imposes limits on the size of their budget deficits and levels of public debt relative to gross domestic product, with automatic penalties for countries that breach these limits.
The pact would also impose timetables for countries presently well in excess of those limits to comply with them, again with penalties for breaches.
Once these strictures had been ratified – thus plugging the obvious hole in the euro currency union, as well as guaranteeing the errant borrowers would mend their ways – the European Central Bank would be willing to start buying up the bonds of member countries, thus forcing down their yields.
That sure is optimistic. In fact, unable to rely on disaggregated data mining, Gittins seems to have resorted to just making stuff up. Mario Draghi made it entirely clear last week that no QE is coming (if you want the analysis of a grown up, try DE today). Back to Gittins:
So to assume Europe is headed inevitably for an implosion – as many punters seem to – strikes me as nothing more than unthinking pessimism. Our more experienced observers put the probability of a complete disaster no higher than about one chance in three.
Note again the absurd framing of the issues. It’s not about clarifying the prospects for Europe and Australian interest rates, it’s about scoring points against those pesky gloomsters, read bludgers. I might add that a few months ago, Gittins was arguing we’d be unaffected by Europe. Now, there’s only a 33% chance of the Apocalypse. How reassuring.
That’s enough (I could line up chart after chart). But, it makes me too gloomy to go on. I don’t know why Ross Gittins feels the need to recast economic reality and sensible assessment of risk as gloomsterism. My guess is that he prefers, or is stuck within, a commentary modus operandi that has worked for thirty years by simply reflecting the dominant cultural mincer.
The ultimate irony of this is that it is “gloomy” Australians that are now rebuilding the economy through savings following the optimism-driven debt accumulation of the past several decades.
Gittins is badly dated.
