Elizabeth Knight is one of Australia’s best economic and business journalists, and she regularly writes informative, perceptive and lucid commentary on markets, the economy, and the actions of the corporate world.
Knight is one of very few in the Nine world of whom you can assume you will read something intelligent.
Her piece this week, however, on the economic blame game being played out between the Treasurer and the RBA, in the wake of his dawning political realisation that the economy he oversees is not going to be supportive of his party’s hopes of being reelected, is not such a piece.
It is what you get when you try to have an important, informed, and intelligent conversation about an issue, which cannot mention the most important factors in the dynamic.
In its way, it illustrates the tragedy of journalism over the course of a generation. More pervasively, it is reflective of the inability of politicians and economic decision-makers to acknowledge the lived existence in the suburbs. Ultimately, it implies a nation that is incapable of being honest with itself.
That ‘hole’ into which concepts such as ‘integrity’ and ‘honesty’ or even ‘belief’ or ‘credibility’ disappear now pervades Australia’s perception of its own ‘elites’.
A good example is the recent foray into Australia’s perception of its own interest rate regime by RBA Deputy Governor Andrew Hauser and his exasperation with ‘false prophets’. While Hauser had some points to make, he seemingly didn’t want to go near the discussion of what was obvious.
To have expertise respected, the experts need to be able to demonstrate expertise in the experience of those they are providing their expertise to (or exhorting or lecturing) and articulate how their expertise shapes the experience of their readers (or viewers or listeners).
Without that, the experts are frauds as far as their audience is concerned.
As has been well and truly noted, the RBA would have a far better basis for pointing to ‘false prophets’ if they hadn’t spent more than a decade completely massacring income growth forecasts while completely ignoring Australian house prices heading into orbit.
The Australians Hauser would presume to critique have lived that income growth and those house prices.
At that point, anyone observing the income growth or the house price increases has about as much credibility as (in this case) the RBA.
That brings us back to Knight, one of Australia’s better journalists. If, for whatever reason, she writes about a demand dynamic – smashing the economy or not, and the appropriate response – she never mentions that the country has imported a million additional people over two years and is exporting massive amounts of gas with seemingly minimal economic benefit to the country. The relationship these have to that demand, inflation, and living standards are ignored, meaning her credibility is being thrown to the wolves too.
Let’s look at how it plays out.
Australia is engaging in a damaging economic blame game
Elizabeth Knight
Business columnist
September 3, 2024 — 3.42pm
Treasurer Jim Chalmers was spot on when he bemoaned that high interest rates were “smashing the economy”. And the peanut gallery’s view that Chalmers was attempting to divert blame to the Reserve Bank contains a kernel of truth.
But that is about where the sensible narrative on this story stops.
She is right and she isn’t.
Chalmers sudden advent as a 5/8 getting the blame out of the pack and handing off to the running RBA was an act of realisation. Sure, he is busy, but LvO on these very pages was identifying weeks and months ago that inflation wouldn’t subside, indeed couldn’t subside, while rents were driving inflation, and that rents were being driven by population growth solely driven by the population ponzi.
To be more specific, it almost certainly wasn’t the economic dynamic Chalmers realised, but the political dynamic. An RBA unable to cut interest rates until 1Q 2025 means an electorate being ‘’smashed’ by those interest rates, who will be voting in the next federal election.
And that mood has profound implications for a first term ALP government.
Then there are energy bills. Australia is one of the world’s largest energy exporters, yet large multinationals who are disinclined to pay taxes in Australia are gouging Australian consumers and jacking electricity bills higher. That drives a lot of inflation for a lot of people.
You don’t need to head far into suburban Australia to become aware that many Australians think their elected representatives could and should:
- reduce immigration or population growth to a much lower level; and
- enforce gas reservation to create cheaper local energy.
Any narrative about the economy which fails to identify that falls over about there and is not ‘sensible narrative’. Sensible narrative is Australia’s issue.
Informed debate on the economy has been overtaken by populist rhetoric feeding an overblown distrust of institutions, including corporations and institutions such as the Reserve Bank of Australia.
Elizabeth only has half a point here. What was once ‘informed debate’ has ceased to be ’informed’ and the participants in, as well as ceremonial presentation of, that informed debate has ceased to be respected. That is the problem for Chalmers, the RBA and Elizabeth; they aren’t feeling the respect, and they are feeling pressured to address questions posed by people they think should be showing them respect. In that context, there is a bit of heat on all round.
The government can be rightly accused (in part) of falling captive to this. Blaming supermarkets for profit gouging without any evidence is a case in point.
Elizabeth is better than this. There is ample evidence that Australia’s major grocery retailers are the highest margin grocery retailers in the developed world.
You pop down to Woolworths and Coles and they are running membership clubs, and large numbers of Australians are only too aware that if they head around the corner to Aldi things seem cheaper.
Australia’s media still regularly notes primary producers being pressured by the grocery retail duopoly pressuring suppliers.
And they are the prime beneficiaries of the actual population Ponzi boosting an endless increase in shoppers coming through their doors.
Sure the large grocery retail duopoly isnt solely to blame, but neither is it blameless.
It is hypocrisy by a government – and it would be worth noting the Liberals in power also pointed at the retail cabal with the Food and Grocery Code of Conduct in 2015 – which is only trying to show that in some way it cares and is doing something.
But it only enters the realm of ‘are these people for real’ when there is no mention of energy, and there is no mention of the increased numbers of people doing the buying.
The normally temperate chief executive of the Commonwealth Bank, Matt Comyn, made his frustrations clear last week when he decried Canberra’s performative populist politics.
He said voters were being presented with a “false dichotomy: for a company to earn any sort of income or profit, it is often inferred or related … as somehow being unjustly extracted from consumers”.
Comyn may be concerned about performative populist politics. But there is nothing new about it.
Everyday Australians have been getting performative populist politics of a different sort for years. The complete non-mentioning of immigration volumes, the continued reference to international students as an ‘export’, the ongoing look at the rising price beneficiaries of Australia’s mounting housing crisis, and the disassembly of Australian manufacturing.
Then there is the pervasive speciousness about why we don’t simply reserve gas for our own energy needs. All backed by our politicians, big business, and the mainstream media.
Another observer of the performative aspect of things is Knight’s counterpart at Nine, David Crowe in his piece ‘Smash or be smashed: Chalmers gambles on a rift with RBA’ summed things up nicely. There is a big element of theatre. We the public get it for free. We are the product being sold.
‘There is a simple way to sum up what is happening here: smash or be smashed. Households are angry about rising prices and higher interest rates. Chalmers wants to shield the government from their blame. That means reminding voters that some of this is the Reserve Bank’s fault.
The political tactic is transparent but risky. It is unusual for a treasurer to be so direct in blaming the Reserve Bank’s interest rate decisions for “smashing the economy” – as Chalmers did on Monday – even though it is a statement of the obvious.’
The performative experience Comyn is on about needs no further explanation.
The only difference between the performative populist politics Comyn sees now and the performative populist politics Australians have been witnessing for 20 years is that the theatre Comyn sees now is questioning profits, whereas the performance Australians have lived through delivered the biggest corporate profits in Australian history,
It also saw corporate Australia harvest Australia’s once-in-a millennium mining boom, while low taxing governments were in power.
Right at this moment, Australian PAYE taxpayers are stumping up for 27% of all Federal budget revenues, and that is a heavier harvest of them and their lives than Australia has ever known.
Maybe Australia’s corporate elite should spend time on a phone trying to get through to ordinary Australians with their questions while being told ‘we value your call’ every 90 seconds for a 45 minute wait, before being told their call is being recorded for training purposes and getting someone with a strange accent.
That’s the performative experience of everyday Australians.
Knight, meanwhile, is taking it all seriously still.
In reality, the post-COVID-19 wave of inflation was an international phenomenon resulting from understandably fearful governments and central banks around the world hyper-stimulating economies.
Inflation is the worldwide hangover. And higher interest rates are the Panadol for the headache.
Those ordinary Australians now being steamed for their PAYE taxes would be the same ones who looked on from lockdown as the then Morrison government blew about half a trillion dollars underpinning some of the most epic corporate profits ever seen and as every small business in the country pocketed supports, write offs and direct handouts, and specialists of all types restructured themselves to access taxpayer funded sabbaticals.
Sure, they kept some of the world’s most privately indebted people in jobs, but it was an expensive, pocket-lined way to go about it, and the expensive lined pockets were corporate.
And while the punterariat may have buttressed their wallets during Covid, the evidence is that they have played that out now and the economy is running on fumes, as the macroeconomy has us observing collapsing iron ore prices, coal being engineered out of global energy production, and Australia now importing more expensive gas that it is exporting, while funding jobs growth and pay rises with government spending.
As house prices and rents continue to spiral.
One hopes there is plenty of that Panadol Knight refers to.
But those who conclude that Chalmers is picking a fight with his hand-chosen Reserve Bank governor, Michele Bullock, have landed in the wrong place.
The treasurer is correct in calling out that he has regularly referenced the pain of interest rates on the economy and, more particularly, on the community.
He also knows that Bullock is doing the necessary but dirty work required to fight inflation.
The fact is that it is the central bank that sets interest rate policy.
Is he or isn’t he? Who cares?
It is performative. It is as ‘real’ as professional wrestling.
Knight is right about the RBA setting interest rates, and right Chalmers is now – after a couple of years telling us about jobs growth and incomes growth which were both funded by taxpayers – trying to find every last reference he has ever made to feeling economic pain.
He knows he is going to need it. But she can’t mention the bums on seats or the gas. Are they part of the pain? Are the Treasurer or the RBA calling that? Crowe didn’t mention it either. And in the same week we have the news Australia is limbering up to import gas. Go figure.
We have eminent journalists still on deck at once eminent news platforms utterly failing to square up with the public they supposedly inform.
His job, in effect, is to be the chief executive of the economy, and to make a crude analogy, Bullock is more akin to its outsourced chief financial officer. I guess that makes Albanese the chairman.
The trouble is Chalmers is a politician and a salesman. That’s tough when he knows that we are on the cusp of receiving data showing the economy grew as low as 0.1 per cent in the three months to June 30. That is a hard sell.
The corporatisation of Australian policy is shone in bright light upon the sky right there. If Chalmers Bullock and Albanese are executive identities, maybe it is time for Australia to get some people to act in the public interest. Are they about maximising corporate profits or are they about maximising the economic benefit for Australians?
On the one hand, his use of terms such as “smashing” or “hammering” regarding the impact of high interest rates on the economy, clearly suggests they are a bad thing.
On the other hand, using higher interest rates to slow the economy is one proven antidote to inflation – and entrenched inflation is an insidious scourge that depletes long-term economic health.
Higher interest rates are the bitter pill that the community and businesses need to swallow to return to economic health.
Remember, this performative exhibition is about discussing the economy in some way without mentioning immigration or gas. And his use of words like ‘hammering’ and ‘smashing’ has for sure been through focus groups and analysis to identify which is most likely to get traction with the public. That is why he is using them.
Are we talking bitter pills or LSD? The readers experiencing energy and housing costs and jobs being smothered by students are getting the pills, while the politicians, central bankers, and journalists are on the psychotropics.
With his salesman hat on, Chalmers is handing out a bit of sugar to struggling households in the form of relief on energy bills and rental payments.
The Reserve Bank is a large target for the community that is feeling the pain of higher interest bills, and from a political perspective, the government surely would like to fight an election at a time when rates are falling.
But all the indications from the Reserve Bank are that this won’t happen this calendar year.
That’s a sentence implying energy and housing are issues right there. The only sentence in the whole piece.
Even more than Knights acknowledgement of why some performative display is necessary from a political point of view is the backdrop that even if the RBA cuts rates in 1Q 2025, the effect of that is unlikely until about 3Q 2025. That’s the timeframe over which rate movements have most effect.
The good news is that in the lead-up to next year’s election (assuming it is in May), we are more likely to see the start of an easing in monetary policy.
And the weak GDP numbers to be released on Wednesday will probably also remove any lingering prospect of another interest rate rise this year.
When rates begin to fall, people will remove Bullock’s photo from the centre of their dartboards, and there will be no blame game in which to indulge.
And in the end, the economic analysis comes back to the performative theater, giving us the impression of a battle of wills, which just happens to deny Australians recognition of their actuality.
And people wonder why mainstream journalism is in the palliative care ward?
The real issue is that Australian politics and expertise is on a one-way ticket to join them.
And the off-ramp for that outcome involves discussion of immigration and gas.