February 14 links: Productivity pow wow

Markets:

Greece 2 Year 5 Year 10 Year
Portugal 2 Year 5 Year 10 Year
Ireland 2 Year 5 Year 10 Year
Spain 2 Year 5 Year 10 Year
Italy 2 Year 5 Year 10 Year
Belgium 2 Year 5 Year 10 Year
France 2 Year 5 Year 10 Year
Germany 2 Year 5 Year 10 Year

United States

Europe
Asia
  • China kicks the can. Alphaville
  • Wen hints at stimulus. BW
  • Beijing orders city to undevelop.

Local:

  • NSW job cuts to be nasty. SMH
  • More job losses. The Age Hard hats all round
  • Holden agrees big pay rises. The Cupboard
  • High cost, low productivity nation. AFR It’s all the guvmint, don’t you know!
  • Reforms are key. AFR Lower wages blah, blah, blah. How about a lower dollar, tax reform to promote innovation. What about infrastructure and competition?
  • Hike you scab, said investors to NAB. AFR
  • China accelerates shale gas. AFR
  • Refi boosting mortgage numbers. The Age No shit

Comments

  1. The AFR article about productivity really shows the bizzarro attitude of Australias corporate leaders.

    According to them weak productivity has been caused by “the failure to cut red tape, continue fight against protectionism, invest in skills & education and continue the high immigration policy”.

    The point about skills and education is fair enough. The point about protectionism and migration is frankly bizzarre.

    By far the biggest reason for the slow down in productivity has been the lack of tax reform, coupled with infrastructure bottlenecks and cuts in R&D – but these are never mentioned.

    The only thing the corporate leaders mention are things which impact their bottom line immediately (and may have no impact on productivity anyway) – ie. cheap imports and cheap labour.

  2. I was under the impression that our recent (noughties) fall in productivity was largely attributable to the mining sector: more new, relatively unskilled employees and more CAPEX with a long lead-time before it starts to generate revenues.

    I’d be interested to see productivity figures (including the imfamous MFP) by industry sector over the last few decades.

  3. “Bullard the idiot.” Tim Duy

    Re the output gap Bullard may actually have something and it is worth considering

    Tim Duy makes the usual mistake of ignoring the external account and how it effects the economy. For Duy the external account does not exist. Taking 2007 as his baseline he extrapolates that, at growth rates current leading up to 2007, to calculate what potential GDP is.

    Now 2007 GDP is fuelled by debt. Now some theorists will argue, as would Duy, that this is just a money number. It isn’t.
    The debt fueling, in our economies as they are structured, results in large imports. The effect of not taking this into account is that we end up including in GDP a large proportion of the economy that has accelerated growth from cheap imports. The US CAD was 5.8% of GDP.
    The US economy is dominated by consumer spending. Consumer spending is obviously calculated at full retail prices. So there is a large proportion of the economy generated by debt fuelled consumer spending.

    Now, let’s suppose it was a balanced economy, many of those engaged in this ‘retail’ chain would have been involved in production. However the net value (cost) of the production would have been much less than the value of the imported product.

    One way or another if the US was to rebalance its economy towards having a balanced external account it would seems as if GDP would decline. This is definitely the case in the short term. So, again from this viewpoint it stands to reason that the current potential GDP is much less than the 2007 extrapolated figure.

    Sorry if my thoughts seems a bit convoluted. I get lost in thought because it’s unfamiliar territory. 🙂

    Prince you gave me a gentle serve for calling Duy an idiot. In this article he calls Bullard an idiot. Just let me give him the titles he deserves?

    The other conclusion of this discussion would be the stupidity of using GDP as ANY sort of conclusive indicator of the health of an economy.

    • Yep…they have to be joking. Why should people earning $40,000, working hard for it, and trying to raise families, pay taxes to subsidise this lot!

      The same occurred to me over the Alcoa crew. I don’t have details and am open to correction but my memory tells me these Alcoa blokes were always on strike for outlandish pay (compared to the average worker not the average lawyer or banker!)

      This is why the A$ has to be reset to a realistic value that reflects the trade flows of the nation. Then everyone competes on a level playing field. I’ll say again it is NOT mining exports that are causing the dollar rise. It is capital flows and speculative money.
      It has always been thus.

      Last time protection of manufacturing was tried exactly the same thing happened. Manufacturing workers got big pay rises, the execs drove Benzes and the farmers were all going to the wall big time under the weight of the A$.

    • The boss of Rio Tinto himself said that he and the other miners got rid of Rudd. I think I read it in The Australian (cupboard).

  4. I didn’t know there was ever any doubt that it was ALP machinations. Rudd was loathed! As Con Sciacca said…he is the best actor!

  5. “High cost, low productivity nation. AFR It’s all the guvmint, don’t you know”

    I don’t subscribe to AFR so it is difficult to judge the article. I’ll tell you this much though. If you work in privatre enterprise you know that government is a big part of our problems and it gets worse all the time! Government now thinks the nation is here to serve it!!!
    Let there be no doubt about that.

  6. P.S. Sweeper I do agree with the thrust of your post.
    I’m no expert on productivity measurement but I have the impression that it is another economic measure that really doesn’t do what it is supposed to do.