Is lying a viable economic plan?

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Is lying a viable economic plan? We had better hope so because that’s the one we’ve got; from the bureaucracy to the government, the RBA and the media. All of them are lying through their teeth as they bend over into the brace position.

The RBA is presently lying as fast and as frequently as it can. Every one of its communications are now dedicated to the lie that everything is awesome; whether it is speeches, forecasting or risk assessments. The reason for this is the opposite, that everything is pretty awful and, moreover, that the RBA played a large hand in making it so. After misjudging the durability of the mining boom by three decades or so and over doing their tightening, they deliberately blew a renewed housing bubble to fill the growth gap. As that comes off they have nothing left to drive growth except consumption and so they lie about our prospects to keep you buying stuff.

Treasury is lying too, for much the same reason. It was obscenely enthusiastic about “selling ’em dirt” during the boom and when it failed its Macro Group signed off on the bubble strategy. As well, Treasury must protect the AAA rating so that our banks can still borrow cheaply in increasingly hostile global markets to keep the housing and consumption bubble running. Its Budget outlook has thus been a work of lies for five years as it over-estimates growth as well as the terms of trade and underestimates capex draw downs as well as unemployment to pretend we’re returning to surplus across the cycle.

Now Tony Turnbull is lying. He came to power with wondrous words about treating us like intelligent adults and reform but with each passing day that is disappearing into the fearful maw of RBA and Treasury lies. PM Turnbull lies about reform criteria needing to provide an immediate growth boost when we all know it is all about long term dividends. Hence the pledge about the fixing the Budget in the medium term is also a lie. To fix that you need to act now. The Treasurer of the Property Council lies about tax cuts and savings in his Budget that we all know he can’t afford without reform. Minister Frydencoal lies about Australia’s marvelous commodities revenue outlook. Colonel Cormann shuts down debates wherever he can to cover the lies.

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The ABS has been lying too. It’s been pumping out absurdly bullish data that has the most ardent Australian bulls turning against them. Yesterday Goldman Sachs estimated the job gains were half those that the ABS has recorded.

The media lies for a living, these days in a particular way. Both halves of the media duopoly are hooked on real estate advertising so they lie constantly about our prospects lest they ‘talk down the market’.

Don’t get me wrong, this is not one big conspiracy. Nor is it even deliberate or malevolent in most cases even if some individuals are arbitraging the reputation of Australia’s key economic institutions for personal gain.

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But it does beg the question how sustainable is it as an economic plan? There are two risks. The first is that the market wakes up to the lies, as happened to WA recently when Moody’s downgraded its Budget because the ratings agency ceased to believe its forecasts. The second risk is that the lies rupture the political economy completely. They are breeding a searing anger in the polity as the happy faces of their leaders jar with their own falling standards of living. That has already overthrown successive governments and torn down two prime ministers in between as polls crash. This is making the adjustment that the lies are designed to conceal all the worse and could prove disastrous at some point.

Some business cycles are killed by inflation and others by deflation. In the death throes of one the world’s great economic expansions, Australia has a severe case of lieflation.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.