Jess Irvine destroys a bit more of democracy

Jess Irvine’s obfuscation of Australia’s dying political economy has crashed to new depths as she probed what’s gone wrong with Australian democracy yesterday:

The envy of the world, as it enters its 27th year of continuous economic growth, the Australian economy in November earned a place on the cover of The Economist magazine for the first time, in an edition titled “Aussie rules: What the world can learn from Australia”. The special feature extolled Australia’s economic success while expressing only mild perplexion at the revolving door of prime ministers Down Under.

But Aussies are not buying it.

Just 5 per cent of Australians feel they have personally gained a lot from our record-busting economic run, according to a Community Pulse survey in April by the Committee for Economic Development of Australia (CEDA).

In contrast, 74 per cent believe large corporations have “gained a lot”.

Amid the scandals unearthed by the banking royal commission, Australians also made international headlines last month when they erupted with fury over the placement of corporate advertising emblazoned across the Sydney Opera House.

The head of CEDA, Melinda Cilento, says Australia is suffering a “democratic disconnect”.

“No matter how impressive we feel our track record of growth has been, very few people feel that they personally have gained much. ”

When you step back and look at the aggregate, we have done really well.

Yet this is unfounded, says Cilento. While there remain areas of entrenched disadvantage, particularly in Indigenous communities, most Australians have benefited from the fruits of economic growth, including low unemployment, rising incomes, tax relief and rising asset prices.

“When you step back and look at the aggregate, we have done really well. We have this brand of economic development – which is a type of democracy – where we make sure that we sustain growth but we have a really strong social compact that sustains our values.”

Stop right there. This series is a good idea and Jess has done a credible job within her accepted limitations. But if you’re going to interview the usual suspects with the same old ideas that got us to our current impasse why would you expect a different answer. Her article is designed to fail.

Why? Apparently Jess suffers from the same mysterious blindness that every other Domainfax journo does. Neither she, nor her chosen sources, can see that strong headline GDP no longer “trickles down”. According to the ABS, the real average compensation per employee fell another 0.4% in the year to June 2018 to be 4.2% lower since March 2012:

The below chart tracks quarterly real per capita HDI:

As you can see, quarterly real per capita HDI has fallen by 0.8% since June 2012!

Below is the same chart presented on a 4QMA basis:

Here, real per capita HDI fell by 0.3% in the year to June 2018 and has fallen by 0.2% since June 2012.

To add further insult to injury, the growth in real per capita HDI so far this decade remains anaemic at just 0.60% per annum, which is lower than the 1960s (2.34%), 1970s (1.86%), 1980s (0.90%), 1990s (1.30%), and 2000s (3.18%):

The truth is households have gone nowhere for a decade. This is unprecedented in modern history and coming on the end of a boom is a slap in the face to a polity with high expectations.

Why has it happened? Partly it has been the fall in the terms of trade as the China boom went bust which is a national pay cut shared by all. Secondly, the policy response has been terrible. At every turn it has treated a structural adjustment with cyclical remedies such as mass immigration which has pushed it all down household’s throats via historically weak wages while capital got off scot-free. Is it any wonder there is a perception of corporate success and personal failure? It’s true! The results are a political disaster.

There are lots of other problems but this is the heart of it. Australian economic policy has swung away from the good of the many to the good of the few. Yet Jess Irvine and her mates in capital – property capital in particular represented in her Domainfax employer – constantly obscure these simple statistical facts. This is spitting in the face of the daily lived experience of falling living standards afflicting ordinary Aussies. The disconnect is as predictable as it is substantial.

It’s not overly complex, Jess.

It is you.

Comments

    • Well well well, ScoMo is now saying the complete opposite of Christopher Pyne and Lucy Turnbull.

      Lucy’s lie “most population growth is not due to immigration”.

      ScoMo:

      “Here in Sydney migrants accounted for around 70 per cent of population growth last year,” he said.

      Pyne yesterday afternoon said AUS will import another 25 million people into SYD and MEL.

      ScoMo yesterday night said:

      ‘Enough, enough, enough’: Scott Morrison says he will cut Australia’s migration intake

    • Jason,

      I doubt that anyone believes anything coming from Scott Morrison anymore.

      He reeks of say anything desperation and everyone knows it.

      In the absence of a specific commitment to specific cuts it is all just BS.

      • Got that right Phf….he’s not called Mugabe “Pinocchio “ Morrison for nothing.

        As for Ms Irvine? Daft as a brush.

      • Agreed but it’s what people want to hear (cutting immigration that is) if shorten doesn’t start saying it also he’s going to lose the election.

      • Shorten likely won’t say it as Labor is very reluctant to offend migrant families. Which raises the point that the larger the immigrant community becomes its political power grows. This power is generally not putting Australia’s interests first as their values and identity were developed elsewhere.

      • That may be true, but if senior politicians start promising to cut immigration, they are fuelling an expectation in the electorate that they will do so, which added to the electorate’s existing opinion on the current immigration levels is going to make it harder to avoid cutting in the future.

    • Mathew Guy just offered to buy everyone a TV if they vote for him – while having coffee with another convicted Mafiosa – “Im sure she’s a nice person”.

      Who cares what Libs say.

  1. Mining BoganMEMBER

    Democratic disconnect eh. Why do I get images in my head of the King of Id out on the balcony telling the Wiz that the peasants are revolting?

    The King is a fink!

  2. “It’s not overly complex, Jess. It is you.” Well, yes and no. Yes because she cannot discern all the issues HnH raises. But my generation (the much maligned boomers) are also to blame. I see Jess’s failings in my kids and their friends – they have been brought up in a very one dimensional environment where their parents aim was to give them the best possible start in life by shielding them from risks. They read about downturns and recessions, but hardship to them, like real gut-wrenching hardship is to have to tolerate instant coffee rather than barista coffee. So when I tell them to get out of debt, that things may not always be rosy, they just roll their eyes. Jess personified.

    • The Rule: when the RBA tries to seduce you with emergency interest rates you must remember this is only to provide cheap debt for government deficit spending.
      So only borrow short term…five years.So take out a thirty year loan on a very affordable property and pay it off in 5 years.

      • And the idiocy of it is the government doesn’t need debt to spend. It can print as much as it wants.

  3. One could summarize your whole rant as:
    The direct correlation between personal Wealth and Wages ceased to exist about 20 years ago and for the last decade wages have been simply irrelevant.
    Said another way: All good Aussies know in their heart of hearts that you get rich by “investing in RE” not by saving your wages, so wages really just don’t matter …..until they do.

    Are we once again at the crossroads where wages become a path to wealth?
    One can never really know, but I can say with some certainty that there is zero evidence that we are approaching this junction.
    Think about it: Is labour really scarce?
    Is labour being effectively and efficiently deployed by the available capital?
    Is efficient labour allocation simply a function of its wealth generation potential?

    In my opinion there are zero economic indications that we’re approaching a junction where Labour has real intrinsic value, this insane expansion of the butt-wipe / barrista economy couldn’t exist if Labour were really scarce,
    If jobs were rationed/ allocated by collective need (Socialist model) than I doubt that our current over allocations for the FIRE/Health sectors would be viewed as sensible. Insane maybe but sensible never. This miss allocation goes to the heart of the problem: Capital scarcity is no longer the driving force for Labour allocation and by extension Wages / savings are no longer the path to wealth for the majority of the populace.

    Maybe Jess is just way ahead of the curve, she’s young enough to be not locked into one of two failed models / understandings of the economy….alas it’s only with the benefit of hindsight that we can ever know anything for sure

    • “the path to wealth for the majority of the populace”
      The majority of the populace can never be wealthy, they can only be average. Wealthy is by definition the top percentiles, and most will never achieve it no matter what. By the standards of 200 years ago someone on the dole is wealthy.

      • Wealthy is by definition the top percentiles
        Indeed! But whatever you call this differential advantage that “working class” strive for it is no longer a function of their wages.
        Accumulated capital, Inheritance, Property Ladder gains….the list of differential advantages goes on and on but wages themselves is somewhere near the bottom of the list.
        Interestingly this is exactly the dysfunctional corner that robbed East Germany of potential…wages were simply not important …everything else mattered more, so in that sense it isn’t simply a Capitalist problem rather it goes to the heart of our western model for creating social advantage.

      • Wealthy is by definition the top percentiles, and most will never achieve it no matter what.

        But the gap between the top and the average can be – and has been in the past – a lot smaller, making the average higher overall.

      • The Social benefits of having a high Median wealth as opposed to simply a high Average wealth is certainly not lost on me.
        However it does raise the question: By what mechanism is the 50% to 95% percentile extracting (or maybe creating) their wealth? In Australia this advantage (especially over the last decade) most definitely comes at the cost of the bottom 25% of the population.
        An excellent example of this is the trend towards working class landlords. In working closely with a Tenancy Advocacy group I’ve seen all manner of social malfeasance occurring wrt House rentals.
        In NSW for instance “No Cause” lease terminations are still legal …we’ve just gone through the Tenancy reform process and left this most egregious of laws (customs) in place. And it’s not there to so much protect the rental revenue streams of the very rich but rather is most often exercised when the Landlord wishes to regain use of the property so that he can sell it without the encumbrance of an in place tenant.
        Most very wealthy landlords would rather buy a house with a good long term tenant in place than have to mess around with getting a new tenant however in Australia’s property starved market new tenants are easily found so F’em they’ve become a group that’s universally raped’n’pillaged to fulfill our middle class wealth concepts.

    • Jumping jack flash

      I think it is generally accepted that the only people who got rich from property are those who already had it.
      And they got rich by getting a generation-load of rubes to take on mountains of debt and hand it all to them.

      Its not the most sophisticated of schemes, it doesn’t require any effort at all really, but it sure is effective!
      Get someone to borrow a metric fkton of debt, and hand it all over. Instant riches. Magic.
      Get on board!
      I can’t see any problems with doing that a few million times over, no sir.

      And yes, it generally worked.
      It works great while there’s rubes, and debt.

      While labour may not have any value, it certainly has more value than a mountain of negative money in your bank account, attached to a property that’s value is governed by the amounts of debt attached to all the properties around it.

      Sounds stable.
      And yes, its generally stable while there’s rubes, and debt.
      And wages – you know, for the rubes to use to repay their debt.

      • I think it is generally accepted that the only people who got rich from property are those who already had it.
        Bit of a stretch there.
        Consider the “fools” that took on a mountain of debt when MB first started preaching from Steve Keen’s Bible.
        In 2011 the average Sydney property was somewhere around $500K to $600K (fundamentally it was only woth $250K to $300K) so it was already overvalued . Now if they took on this huge debt they could have sold their house in 2017 for upward of $1M That’s $100K pure profit each year that they held the asset. With lending standards as lax as they were they could easily have gotten in to the RE game for under a $50K deposit.
        That’s one healthy ate of return. On just one house oh and btw did I mention that these gains were non-taxable if it was your primary residence or incurred only 50% tax rate if it was an IP.

        So I suspect the gains from this group stupidity were far more widely distributed than you’d have us believe with the only people who got rich from property are those who already had it. statement

        Unfortunately there are no free lunches: as you sow, so shall you reap still applies it just takes more than one year for the cycle to complete.

      • But how many of them have sold and realised that gain ?
        Not sure I understand, What do you mean by Realized gains?
        A house is a far better instrument for long term saving than cash (or bank deposits) that are are being inflated away to zero by easy capital.
        In my opinion the realized gain occurs when you dispose of the worthless asset (excess wages aka savings) and replace them with a class of asset that we’re collectively refusing to inflate the F out off.
        Saving is always, in my opinion, the process of swapping that which your society has in excess (money) for that which is kept scarce eg housing (or is genuinely scarce eg gold, gems…. )or can generate bucket loads of free cash flow (eg a fully automated factory)…Gains are realized at this transition to scarcity, especially if the reverse transaction happens only out of necessity.

      • Not sure I understand, What do you mean by Realized gains?

        Saying the house has made $100k/yr only holds true if the house is sold for that higher price (or if you do something else that leverages the increased value like borrow against it – and even then, if you’re just using it to buy more property, that’s questionable).