The blame is coming thick and fast now for business who is to blame for not investing, apparently, via the AFR:
Speaking just hours ahead of the release of gross domestic product figures for the fourth quarter, Mr [John] Fraser said his department continues to see the economy as fundamentally strong “but finely balanced”.
“The broad contours of the economy remain on track, with ongoing strength in mining exports following the mining boom, high levels of dwelling investment activity in the near term and ongoing growth in household consumption.
“Business investment has been the missing link….although we have seen an improvement in non-mining investment in the non-mining states.”
Fraser, who sits on the Reserve Bank board, warned this would have consequences for Australian businesses and households, particularly if they weren’t prepared for higher borrowing costs.
“At the moment we’re seeing a pretty clear message out of the US that interest rates are heading north.”
“People need to be mindful that the low interest rate environment in the world won’t go on forever,” Mr Fraser said.
“Business people, people, and countries need to be mindful of that.”
Mr Fraser cautioned that there is a critical question around the sustainability of current debt.
“For the government [this] is clear cut. The more we have to spend on debt servicing the less we spend on other things, which is why we need to focus on fiscal consolidation.”
What drivel. The Federal Budget is stimulating its butt off. Moreover, that is still not enough to soak up the output gap that has sidelined business investment. The output gap is basically a measure of slack in the economy and right now ours is the largest in the OECD:
For perspective, the US still has little business investment growth and it is three years ahead of us in its recovery (and we have not even delevered our private sector yet). Why would business invest if there is too much capacity?
So, how do you close the output gap? Via competition and productivity reform that drives income, demand and tradables growth. You explicitly do not cut corporate taxes to denude income from households, nor run high immigration that slices the commodity income endowment into smaller and smaller shares for everyone.
Stop whining, John, and give Do-nothing Malcolm the right advice.
