Scummo has a problem

And it is this. Australia is buggered. It is at the tail end of a thirty year boom that has been on life support for the past eight years, kept alive only by running mass immigration into an economy bulging with over supply and under supply in all the wrong places.

  1. The labour market is glutted just as a structural shift is underway to greater uncertainty and stability. This is manifest in crushed wages growth and ubiquitous wage theft. Household income is weak and about to get worse.
  2. Infrastructure is crush loaded across the eastern seaboard. The recent investment boom is nothing compared to what is needed just to bring us back to where we were let alone build out the future. This is manifest in everything from school enrollments to blown commuter times.
  3. Universities have been utterly debauched. Pedagogical standards have collapsed. Many are literally in business with the Chinese Communist Party (CPC) to enslave and persecute its own people. They are overrun with CPC agents of influence sucking at the international student teat.
  4. The largest national apartment boom in the nation’s history is literally falling apart before our eyes. Stoked by out of control immigration, building standards collapsed in the last cycle. This will radically alter and slow the next cycle as nobody is going to buy an apartment again for many years.
  5. Both Sydney and Melbourne are accelerating into historic water crises. These will ebb and flow with drought but population growth means both could lurch into outright crisis as soon as next year.
  6. Property prices are not even off the canvas yet the RBA is out of ammunition, household debt is wild and a global business cycle plus commodity prices are on the verge of crisis.
  7. China is falling apart. It began with the trade war. But it’s much worse than that. It’s approaching the end of the rope of its development model and the CPC is turning hostile to external forces to offset the decline of its economic legitimacy. This is clear in the South China Sea and Hong Kong. This smashes directly into every one of the previous six problems as it overlays all with corrupting CPC influence directly contrary to the national interest.

These are only the obvious problems. Then there is climate change and the rapidly accelerating war on coal; the gas cartel and its ravaging of utility bills; the broken structure of our economy; the collapse of market integrity everywhere; the dodgy banks and on it goes.

And what is Scummo’s solution? To stuff a sausage in his face and pretend it’s all good:

Morrison has now issued an edict, effectively telling MPs: less talk, more action.

…Shut your collective trap, and go and do your jobs.

Morrison’s fresh attempt to dial down the volume of federal politics has been coupled with a stepping back from the limelight after an election campaign run solo.

This is Scummo’s version of John Howard letting Australians be “relaxed and comfortable”. It worked well for Honest John because his government was swept along on a globalistion tide that delivered untold riches to Australia without trying.

But Scummo is overseer of that same tide going out. He will need answers for it beyond burying the Government’s head in the sand as it recedes and living standards fall. But he explicitly repudiated many of the reform solutions to win the election with three vague promises:

  • rising house prices;
  • a surplus, and
  • managing population growth via “congestion busting” and a phony immigration cut.

The last two of these is breaking as we speak. The first will be in serious jeopardy next year.

Labor is lost in wilderness for now and that buys Scummo time. But his pretense that it is all good is not going to work for long when the daily lived experience of households is relentless economic pain for which he has no solution nor explanation.

Comments

    • Yup, succinct and to the point. It’s on …. deck chair, your favourite drink, popcorn.

    • Agree. I would add at the GFC there was a chance to fix the system, but it wasn’t, and all the bankers either left with loads of cash or stayed on and made it worse. Complete political/economic fail. Since the GFC we’ve been screwed in every financial way, and I even wonder if the BRC will change anything.

      • GunnamattaMEMBER

        In the years since the GFC Australia has not just missed the chance to fix the system, it has doubled down on the system, or amplified what we thought was the system many times over.

        ….The private debt
        …..The unsustainable mortgages
        …..The ghost city apartment construction
        ….The flammable cladding
        ….The euthenasing of manufacturing
        ….The energy policy
        ….The Coal
        ….The sellout of gas
        ….The Education sector
        ….The Universities
        ….The money laundering
        ….The trashing of the public sector – (eg Bureau of Stats census debacle, outsourcing of regulatory compliant positions/functions)
        ….The population ponzi goes into overdrive (post 2006)
        ….the housing estates/suburbs with no way to jobs except an on ramp onto a crowded freeway

        When the ream comes calling for Australia it is going to be a tad painful. Australia had a chance to avoid a GFC outcome, but what we have done is simply put the foot down.

    • UrbanWastelandMEMBER

      Yeah, such a compact and impactful article that I was able to read it to the girlfriend, pointing out that there are more important things than puppies on Facebook, without overloading her goldfish-like millennial attention span.

      • Even StevenMEMBER

        Good thing she doesn’t read MB. You’d be f$#%ed for that comment. And not in a nice way!

      • I’ve never understood being in a relationship with someone and having such an attitude about their faculties. I can’t even entertain the possibility of a one night stand with someone who I can’t engage with intellectually. Ah well, guess that’s why I’m single lol

      • UrbanWastelandMEMBER

        I said the same thing most of my life, and it’s totally necessary for a ONS because it adds to that compelling intensity, which helps drive things forward quickly. But I’ve found that relationships where there’s a lot of intellectual discussion have an unstable equilibrium, which starts to wobble once you’ve talked long enough to find those fundamental points of disagreement.

        There’s a lot to be said for a home life that’s simpler and that revolves around feelings of peace, acceptance, honesty, fondness, care, etc. Maybe even love? I can discuss and debate with any friend, a girl at a bar, a stranger in a comments section. That other stuff takes someone else entirely, and it’s a lot more personal and unique.

        Do I wish we could engage a little more? Of course. Hence my comment. But I also value being able to make a comment like that without hesitation, laughing about it together in acknowledgment rather than being f$&%ed. A little compromise can go a long way, and this one has proven itself to be totally worth it.

      • @UW as a young man I dated models almost exclusively, F-me they were a stupid bunch but damn didn’t I have some fun.
        Intellect isn’t all its cracked up to be.

  1. Political parties are springing up all over Europe to properly deal with climate change and mass immigration. They’re doing well and change is rapid.

    Is there seriously zero political talent in Australia to do the same thing?

    • My electorate had 7 options for the lower house and the senate must have been over 100.

      Lots of people trying but the method we use ensures that the majors are the end destination of all votes … with the exception of exceptional independents.

    • So far all we’ve had is apathy. That’s a sign that people still believe …

      Which means that when reality dawns it’ll be like an anvil on the head for most.

    • Climate Change? In which Country?

      Certainly not France where the Yellow Vest movement started in protest against increased fuel taxes.

  2. Myrpho

    Universities and young people in general have been pacified by identity politics and far left nonsense. They have yet to wake to the magnitude of how badly they have been screwed over.

    After almost 30 years of lurching right and following the LNP into the same ideological wasteland it is amazing that the ALP have anyone voting for them at all. They have chosen opposition for the next decade or two.

    But when this goes badly pear shaped my guess is that it will snap from apathy to anger. The big danger is that there is nothing there to channel such hostility and no one in the major parties commands enough respect – they are all tarnished. Our lack of credible minor parties and the two-party duopoly has created a systemic risk that may see this become volcanic.

    • SoMPLSBoyMEMBER

      Spot on Clive!
      Now almost two generations of Strayans have enjoyed enormous financial benefits asymmetrical to the input involved; happily convincing themseleves it was their destiny and entirely deserved. There will be no Act II for subsequent generations as the ingredients to ‘achieve’ what’s just been done are all gone- sold away –forever.
      The anger will quickly become despair as there will be no righting of these wrongs; greed and venality always come with a big payable invoice!

      • Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women. Not all people with uterus’s are women.

        Fkn doomed!

    • The big cohort that is Generation Zero, who came of age or were born around 2000.

      They’re getting nothing, but debt will lots of zeros in it.

      I think there’s a book title there, ‘Generation Zero’. Call my agent!

    • You might find there are racial tensions, simmering now, that will explode. Sad to say, but governments have let this happen.

  3. Great content but our politicians will never listen. We will still be here in 10 years complaining about the next failed PM.

  4. It’s remarkable how many of these seven points were aided and abetted by Rudd-Gillard, or by state Labor governments. And what is Albo’s solution? To bumble along evasively like some antipodean Corbyn, and hope that government falls into his lap via the coming Frydenberg recession. Doubt it.

  5. John Howard signed a free trade agreement with USA but accepted amendments from the ALP to stop AUS being flooded with cheap American labour.

    Moreover, Howard got USA to create a visa specifically for Aussie workers. The E3 visa.

    Gillard/Abbott/Turnbull/Scummo did the opposite. Abbott signed a free trade agreement with China that allows even cheaper Chinese labour to come in!

    19 June 2015

    If high unemployment wasn’t bad enough Tony Abbott has just signed the China FTA, a trade agreement negotiated in secret that will see local workers abandoned – locked out of good jobs.

    Under the Agreement:

    Chinese companies that invest $150 million or more in a project will be able to bring in temporary workers

    WTF?

  6. The Horrible Scott Morrison MP

    The quality of life in Australia is very high, wages are very high, rising houses prices and superannuation mean the ordinary Australian is wealthy, life expectancy is very high, the climate is beautiful. Get a grip.

  7. HadronCollision

    I feel like you were soft in systems of governance – APRA ACCC etc – and especially on Labor and the inter generational war

    Good piece though

  8. since early 80s Australia has been test bed of neoliberalism …
    there is a good chance MMT is going to be tested here first, but for that to happen we need to see recession first

    • Agree with the 80’s, disagree with your perspective on MMT because its all ready the system in use for sovereign currency issuers of developed countries … where does one think all the money comes for MIC/NSC and Corp largess. Also I don’t think Australia will lead in anything, social programs and fiscal expenditure during a transitional period would have to come from the U.S. and that will only happen if Sanders gets in.

      I also disagree on China being the fault, that would be purely a factor of Trumps desperate antics, not that it won’t affect China and by proxy Australia, but China won’t implode. Its GDP is still over 6% and coming down from its expansionary highs is expected.

      I actually think the U.S. geographical position is going for the first time to be a negative factor, to far away from other markets and increasing environmental issues.

      • few points:
        at the moment new money comes from banks (majority from private banks and if they don’t like printing too much than from semiprivate central bank) not from the state. All of this money is debt money even when it comes from central bank and goes to the budget – that is the key difference
        MMT has nothing to do with social programs, it’s just being sold to masses using social program fairy tales by fake American left. In reality is going to be used to fund more or less the same what current budget deficit is funding: military complex,corporate subsidies, discretionional budget expenditure, privately built and operated infrastructure … in other words everything that the debt money is currently is being used for. Social programs are going to be cut further after some initial giveaways (remember that Clinton was cutting social programs despite running a large surplus).

        At this stage when world is chocking in debt the only way to save neoliberal capitalism is to put it on MMT drip, because initially MMT will keep the system alive by preventing upraise and at the same time will pull world out of debt by pushing underlying inflation up over the medium term (only inflation can save world by eating away the principal).
        neoliberalism needs inflation to enable perpetual debt cycle

      • From what I can gather I sort of agree with doctor X

        All government spending is currently being cancelled by bond issuance

        Bond sales remove money from circulation

        Is this correct?

        Doing away with bond sales would increase the money supply

        Eventually the extra money is going to end up in the hands of the rich but it will pass through the hands of the poor first to allow them to consume goods and services produced by the rich , or to reduce their debt so that they can consume these services later on

        And we’re back where we started

        Ultimately capitalism collapses without aggressive redistribution of wealth

      • Yes, when people say ‘try MMT’ they actually mean ‘try funding of deficits using overt money creation,’ which is just not issuing as many bonds later on as normally happens (bonds have never really ‘funded’ anything so don’t actually need to be issued in the same value as the deficit spend but are still important for other things, like controlling interest rates).

    • It is no coincidence that this all kicked off in the early ’80s. This was the precise moment that economic malaise (brought about in part by abominable economic policies and high inflation in the ’70s) was brought to its heels by very high interest rates. Think about that for a sec — ultra high interest rates signalled the beginning of a 20yr bull market in equities and bonds and some pretty strong economic growth i.e high rates were the ‘cure’ for economic malaise.

      It should come as no surprise then that ultra low rates equate with economic stagnation (Europe, Japan …. cough, cough) and soon us and the rest of the world. Neoliberal policies? (Put that on the back-burner for now)

      • it’s because western world came out of the period of high inflation without much debt, so high growth and bull market were mostly result of debt accumulation (borrowing/shifting consumption from the future) and that future … is our present
        what the system needs is another high inflation period to wipe out the debt and enable next credit boom after

      • What the system needs is a reset but can this happen Volcker-style? No it can’t.

        Because as you mentioned above, we had little debt then — now we’re drowning in it. One man’s debt is another man’s asset and so, if you get rid of the debt, you get rid of the corresponding assets. That’s a big wealth haircut right there.

        There are no solutions to this without a severe amount of pain.

      • the most painless way would be with inflation combined with stock-market bull run to offset asset losses of rich class (who hold most of stocks)
        the asset value wipe out, in that case would happen in real estate but in real not nominal terms so plebs will not complain as much …
        so how one creates inflation needed to reduce debt?
        only by printing money, real money not debt money

      • Except, if you get inflation you couldn’t have a stock bull market — they are anathema because inflation portends higher rates and rising rates are like Kryptonite for stocks – especially at the level they’re at now. What you describe above is a variation on Ray Dalio’s ‘beautiful deleveraging’, an idea he floated 3 or 4 years ago — and one which he’s not mentioned since. I think he’s since fallen in with the sensible people and sees the golden writing on the wall 😉

    • I’m probably not understanding the point of MMT well, but if it has such promise, then why don’t we see it already operating in developing economies who need to stimulate?

      • It’s extremely controversial as there’s a very good chance it’ll unleash high inflation. Inflation, contrary to popular opinion, is not easy to control or calibrate. Once the genie is out of the bottle it’s a [email protected] to put back in. Volcker did it in 1981but he had to run cash rates up to 20% to contain the monster. And that was back in the day when debt was merely a curiosity.

        Now that we’re all up to the eyeballs in debt how do you think cash rates at 20% will sit with everyone? Ka-boom!

      • Dominic ….

        If you have not studied MMT and is history, its not new, don’t assume to know anything about it and then critique it from a position of ignorance.

        Especially when AET and mainstream economics has never had an functioning operational model of either the monetary system nor the financial system. Grounding in barter makes that a difficult task.

    • This is actually the key point.
      Most people have no idea they are being screwed as they just think this is “normal” and just go with it. They have no point of comparison to see any difference.
      Hence people will just go on blindly accepting their long commutes, expensive houses, lack of wage growth, insecure jobs, etc without a care in the world because “isn’t this just how it always is?”
      It’s the only way to explain why our youth are silent and getting taken for a ride and why negative gearing and franking credits reform failed – even when the $$$ we’re going towards cancer treatments!
      Don’t expect change soon.

    • The Traveling Wilbur

      Indeed. Never been a better time to be a rent seeking dividend taking franking-credit deeming Australian.

      Hmmm… perhaps current Government policy formation really is as simple as looking after the above group. Not ‘oldies’. Just the above oldies.

      • proofreadersMEMBER

        Yep – Johnny Howard’s, Peter Costello’s, ScoMo’s and PB Tim Wilson’s chosen ones.

    • You cynic Peachy. You have seen too many Crosby Textor bred dead cats being thrown on the table 😕

  9. Complex Carbon Unit

    Scummo sure dose have a problem alright, Rodent J Howard is sitting on his head !

  10. MountainGuinMEMBER

    It’s not Scomos problem, it is everyone’s. Scomo is someone who should be acting, but has already tied himself in knots.
    Still a case for individual action

  11. China is falling apart.

    Well according to every economist and analyst on the planet America is in the doom loop and China seems to be unaffected.

    China

    https://www.youtube.com/watch?v=L5tikuXkspU

    USA

    https://www.youtube.com/watch?v=JcmkSXXmBhw

    Seriously – its just bizarre. The entire US is in deep, insidious decay of epic proportions. There is a $4 Trillion basic infrastructure bill just to stop things from collapsing – 50,000 bridges alone are at the point of collapse.

    Its becoming unhinged.

    Dont take my word for it – Jeremy Clarkson

    https://www.youtube.com/watch?v=4-XDxCb92X4&t=8s

    • Ruin and sparkle provided by the Harvard business school. The west exported its industry to China and the result is there. Why do the Chinese want to come here?

    • blindjusticeMEMBER

      https://youtu.be/HKCfu4UJQiQ
      Rapid decline In a short space of time. Well it was gradual until recently then became rapid. This is across many places in the west. There is a similar video on London.
      https://youtu.be/gzVJw1-YrkM

      Nearly two decades of terrible monetary policy has hastened the demise of the post manufacturing globalised western economies. We are literally staring at third world conditions in some places right now….. Typhus ….!!!?? Wow.

      Things seem like they are occuring in a slow motion train wreck but when it’s all done we’ll look back and think we ruined our living standards in the blink of an eye.
      In Europe and North America they are pushing tiny houses and co living. Tiny house thinking has made it to Australia to become official policy!

      Dont let anyone you hear peddle any of this shite unchallenged.

  12. What concerns me more than anything is that there’s no industry waiting in the wings which will experience exponential growth if the insanity of our current system loses its debt funding / cashflow.
    There’s abundant evidence that the Aussie economy, as we know today, misallocates the majority of the available Capital and Labour. Yet for a real sustainable recovery this misallocation will need to reverse, but where are the Green-shoots of this reversal? where are these mythical companies that’ll pick up the slack if RE, Health-care, Construction and Mining all simultaneously implode?
    It’s often the case that just as the recession develops so to do the solutions to the recession, Labour that was unproductively deployed gets absorbed by budding Productive enterprises and these new enterprises enjoy exponential growth with all the Capital and Labour that they could possibly want being instantly available
    What are these budding enterprises?
    I know that I look for them every day but I can’t find them, least ways not in Australia
    What happens if they don’t exist? What happens if the Insanity ends but nothing new starts?

    • There aren’t any of those growth industries for a reason, and it’s all around us. The belief is that you can make stuff elsewhere and export minerals…period. You’ve spotted the elephant in the room

      • But what if you can’t simply export minerals and enjoy the good life, what happens if you need to somehow become individually productive? Elsewhere (lets call it:in the real world) both your labour and the labour of your neighbor as well needs to somehow result in an exportable product.
        What happens if the world loses its appetite for Iron Ore and coal?
        What happens if Chinese princlings decide that an Australia education is a waste of money (and Permanent Residency ain’t worth the trouble)
        What happens if the current crop of Indian and Nepalese students working at our 7/11’s and doing every other unskilled job simply take their labour elsewhere (hint I doubt they’ll keep paying for their vocational courses)
        Maybe I’m just a worry wart, but if you ask me the economic stool that we’re all sitting on feels wobbly.

    • ChristopherJMEMBER

      A deep and lasting depression, fish. Taking all those wages out of the economy spells deep spending cuts by everyone, even the rich as business profits disappear. Retail will collapse as will many smes.

      A good government would predict all this and embark on a massive spending spree to replace those lost wages, would increase Newstart and other pensions… We just don’t have one. The LNP’s austerity will only serve to deepen the shock that is coming.

      Go long liquidators

      • HadronCollision

        I think it was the Sat Paper morning dispatch or maybe Monthly arvo that said right here right now the govt has a massive opportunity to spend on renewables/green industry. Jobs, R&D, investment etc.

        Hard to disagree.

      • I’m not sure that the Government can ride to the rescue because so many of our existing misallocations are the direct result of recent government policies.
        Our Aged pension system (MyAgedCare) and our Disability system (NDIS) have both recently undergone massive restructurings BUT the outcomes are considerably worse than under the older systems. Massive amounts of money are being thrown at these two areas but we’re not just going backwards our reversal rate is accelerating. Doubling down on these welfare channels won’t fix anything because the structure into which we’re inserting additional government dollars is broken. Each additional dollar results in two big steps backwards for the quality of the system, it’s perverse.
        With this in mind I’m not counting on our government riding to the rescue matter of fact I kinda hope they simply drop the ball because that’s the only way that any private green-shoots, which happen to develop, will look attractive. Private Industry Entrepreneurial Risk must once again be rewarded (for all participants, Investors, Developers, workers…) while the safe paths (government backed welfare developments) are left to simply stagnate and die on the vine.

      • Big government spending just for the sake of pumping money into the economy, without getting much in return.

      • ChristopherJMEMBER

        Chase, the Labor government’s school halls and pink batts programs gave a big boost to the economy and almost certainly staved off the downturn that occurred throughout the rest of the world. Poorly designed programs and poorly spent (low value for money) they may have been, but they worked.
        If our current government had any clue, any sense of doing something to replace the coming downturn in many sectors of the economy, they could prevent a depression (but not a recession). Imagine multiple spending programs across tech, renewable energy, fast trains etc? A good old fashioned fiscal stimulus.

        Not with this or probably a Labor government, both are beholden to the forces of business and money. Some things will be attempted, but it will be too little and too late. Not the smartest tools our current crop of politicians and Canberra is staffed by yes men and women, hardly any of them dare mention anything socially progressive, nodding their heads sagely about how austerity is going to deliver positive results for Australia.

        Morrison will not be able to handle the tsunami that’s about to hit. He is blind to what is coming.

    • 100% fisho. What happens is not the extremes, but lower income, more tax, and a spiral down. We’ll need to be more self reliant.

    • In Australia we call it ‘dingoism’ – the unfounded belief that Australia is the best country in the world.

  13. bigpadaricoMEMBER

    Great summary and I agree 95%. ScoMo seems intent on kicking as many cans down the road as he can, exactly as every government has done since we became Relaxed and Comfortable. But I’m not sure you blokes do yourselves any favours by incessantly calling him “Scummo”. You don’t like him. We got it the first time. Got any other material?

  14. Jumping jack flash

    This!
    so good my chest hairs are tingling.

    “This is Scummo’s version of John Howard letting Australians be “relaxed and comfortable”. It worked well for Honest John because his government was swept along on a globalistion tide that delivered untold riches to Australia without trying.”

    It was a different time for old Johnny Cunning. People weren’t steeped in unimaginable amounts of debt, burnt out and frantic after just serving 10 years out of a 30-year debt sentence. Could anyone imagine back in 1996 or even 2006 taking on the better part of a million debt dollars to buy an average house? Now it is just accepted as being required, even though incomes have barely risen since then.

    The economy was also in tiptop shape after that recession cleared out all the unsustainable crap and we were left with robustness…

  15. Scomo can kick the can down the road by negative interest rates, QE, infrastructure spending and high immigration.
    His only real concern is external factors like global recession or slowing down of China.

  16. Ah. You’ve reminded me why I subscribe to Macrobusiness. Thank you. That feels so much better.

  17. Dude, ScoMo has already addressed all of these:
    1. Industrial relations reform will provide more flexibility, leading to stronger wage growth.
    2. ScoMo isn’t just investing in infrastructure, it’s “CONGESTION BUSTING” infrastructure. Nothing to see here, move along…
    3. As long as universities are working within the law what universities do is what universities do. It’s up to the VCs to run their universities, not the Federal Government and not the PM.
    4. This is a state responsibility, but the Federal Government is providing leadership by “facilitating the discussion” and chipping in for free munchies during meetings.
    5. This is a state responsibility.
    6. FHBs are being helped into the housing market thanks to the government guarantee and we even have a Housing Minister. It’s a great time to buy!
    7. Well, China waffle waffle China waffle waffle the US waffle… “Did ScoMo say something? Hey look at Trump’s latest tweet about China!”

    • St JacquesMEMBER

      Never seen a more comprehensive and well thought out set of policies in my life. Ever.

      • ScoMo is basically Do-Nothing Malcolm with the waffle replaced with short,sharp “Nothing to see here, move along”.

  18. I hate Scummo and my only fear is that he will be able to kick this thing along until the end of his term by continuing the lies.

    But just put yourself in his position: every bit of advice he is getting tells him what is stated above, probably in some areas making it worse still i.e. ballooning welfare and public health projections from all those migrants who were advertised to be young, healthy, intelligent, hard working but turned out to be the opposite, or trillion dollar defence projects that are even more f#$cked than is publicly known etc etc.

    What would you do?

    You cannot fix it inside one term, and any attempt to do so will bring so much pain and howling that you will not even be able to retain your own seat. As with many things in life, if you go near a problem trying to fix it in good faith you are immediately saddled with blame for all the undisclosed complicating features of that problem (hence the saying ‘no good deed ever goes unpunished’)

    Much as I hate to admit it, the most logical thing for Scummo to do is this:

    https://youtu.be/snTaSJk0n_Y?t=96