Lowe Expectations For Albanese Government!

Let me begin with a couple of irrelevancies because that’s how economic predictions usually work.

Yesterday in “The Australian Financial Review” I read a tribute to the actor, Robert Duvall by someone called Ronnie Collin. Among the gems about his acting talent was this rough diamond:

“You can see him harness that restraint to devastating effect in To Kill a Mockingbird, in which the then 31-year-old Duvall, as the haunted oddball who plays a pivotal part in the obtaining of justice in the Depression-era South, doesn’t utter a single line in the film’s 129 minutes.”

Now, you may not be familiar with either the novel or the film but several things stand out in this, making me wonder whether the piece was aided by Chat GPT… although to be fair, I can’t see Chat GPT getting so many things wrong in a single sentence. Leaving aside his thirty seconds or so on the screen would be hard to be anything other than “restrained” and the fact that it’s his first screen appearance suggests that he wouldn’t have had a great deal of creative input beyond doing what the director said, the following things stand out:

1. His character, Boo Radley, has nothing to do with the court case, which is hardly a pivotal role.
2. The “obtaining of justice” is also a strange line given that the court case results in the conviction of Tom Robinson, an Afro-American who is clearly innocent.
3. After the guilty verdict, Tom is shot when trying to escape. Perhaps this is regarded as the “obtaining of justice” because it is a refusal to comply with the instructions of officials which in today’s USA is an acceptable reason to shoot people, but again, Boo Radley had nothing to with this.

Moving on, I’d like to point out that the best judge of a person will be the ex-partner who was dumped by them and that they would surely have no other agenda than to give an accurate picture… I don’t know why I bring this up when my main aim was to talk about a recent speech made by Phil Lowe about how badly Australia is doing, economically speaking.

Of course, you know my view on economic commentary: The economy is always doing badly, even when it’s doing well. Take today’s unemployment figures: they’re bad news. Ok, they haven’t been released yet, but take it from me, they’re bad. Either they’ll have gone up and that’s bad because it shows how weak the jobs market is and how growth is likely to be low OR they’ll be down and this will make it a near certainty that interest rates will need to be raised, if not next month, then certainly at some future date.

Anyway on to Phil Lowe, who you may remember, was the RBA guy who told us that there’d be no rate rises until at least 2024, only to change his mind and give us a dozen or so. Lucky Phil wanted to say on as head of the RBA but the Labor government said no, even though Mr Lowe owned up and said that his prediction was wrong, unlike many economists who argue that they’re prediction was correct; it’s the real world who got it wrong.

Case in point, Steven Kean told us at various points that the housing market was about twenty percent overpriced in Australia and that we’d be wise to sell. At no point has the housing market dropped by the twenty percent he predicted apart from in a few exceptions. At one point, Mr Kean was forced to admit that his prediction was incorrect because he made a very specific bet which was wrong. However, this didn’t stop him continuing to tell us that he was basically right, it was just that the facts got in the way of that particular bet.

In his speech the other day, Mr Lowe explained that it was government spending that was driving inflation and they’d better stop wasting their money on silly things like people.

The article reporting his speech also contained a rather interesting statement which probably only fascinates me. It talked about getting inflation down to the Reserve Bank’s target of 2.5%. In fact, the RBA’s stated inflation target is between 2-3%, and yes, 2.5% is between those figures but there’s a big difference between aiming to get something below 3 and aiming for 2.5. It means that, if inflation does drop below three percent, then there’s still work to do and interest rates may still be raised to get to the “target” of 2.5!

Of course, the target range is an arbitrary figure anyway. Yes, we don’t want inflation to slip too low and have deflation where prices are falling because that has its own problems. And yes, we don’t want runaway inflation where we need to take a wheelbarrow to the supermarket if we’re paying in cash. Ideally inflation should be somewhere between the two and Australia has the 2-3% mentioned before, but it could just as easily have one of 3-4% without the world coming to an abrupt halt.

So when the next lot of inflation figures come out, you can be sure of one thing. No, not that they’ll be down… or up… no, you can be sure that they’ll be bad news. Either they’ll mean that interest rates will need to go up to counter this runaway inflation (which is still much less than most of the 70s and 80s), or they’ll mean that the economy is in much worse shape than we thought and we’re on the verge of a recession.

If economists were weather forecasting, every burst of rain would be a potential flood, while every sunny day would be an upcoming drought.