Anthony Albanese - How long?

[Mofra]

All good.
More specifically how a wealth tax would apply to our situation currently?
Is it as simple as extra revenue for Governments to spend ?

Stiglitz is looking through the US lens where they have massive deficits, so his proposal is to use it to reduce structural budget issues.
Governments do have to be wary of adding to inflation pressure with spending.

 

[Saint]

I don't much care one way or the other for Philip Lowe. But he's largely being pilloried for saying, at the height of the pandemic and before the Russia-Ukraine War, that we may not see rate rises until 2024. Fair to say things changed. We also have governments that won't pull any other lever for fear of losing an election. So while I don't care if he's replaced, I reckon his successor would face the same issues of having to drive up rates to reduce inflation because it's the only option our timid governments will allow.

In the meantime, the only options people have are the tone deaf ones.

I think it's worth acknowledging that the RBA only has one lever. And it should consider whether pulling that lever will have greater unintended consequences than the RBA's very narrow targets.

For example, the current bout of inflation is heavily caused by supply factors (increased fuel and energy costs, transport costs) and not forgetting corporate profits and increased borrowing costs, which are also supply-side.

There's no doubt that there are some demand-side problems, but they should acknowledge there's also a housing/rental crisis going on. And pounding demand-side with a focus on housing costs is brutally exposing the inequality of the whole system while barely touching inflation. Most of the drop in inflation has been due to lower energy and transport costs , nothing to do with what the RBA has done.

In fact, spending in retirees with lots of disposable income and savings is going up faster than inflation. Meanwhile, young people are cutting back spending and then Lowe stands up and says they haven't cut spending enough. While him and his friends are making out like bandits from their cash holdings and multiple properties.

The disparity is galling and it's only a matter of time until it moves from Lowe to the ALP. Stage 3 tax cuts coming into effect will be the last straw for many.

 

[Kwality]

Stiglitz is looking through the US lens where they have massive deficits, so his proposal is to use it to reduce structural budget issues.
Governments do have to be wary of adding to inflation pressure with spending.

Sorry if I am being a pain.

So a wealth tax raised wouldnt impact our problems today, though would be good to reduce debt?

 

[Gralin]

I think it's worth acknowledging that the RBA only has one lever. And it should consider whether pulling that lever will have greater unintended consequences than the RBA's very narrow targets.

For example, the current bout of inflation is heavily caused by supply factors (increased fuel and energy costs, transport costs) and not forgetting corporate profits and increased borrowing costs, which are also supply-side.

There's no doubt that there are some demand-side problems, but they should acknowledge there's also a housing/rental crisis going on. And pounding demand-side with a focus on housing costs is brutally exposing the inequality of the whole system while barely touching inflation. Most of the drop in inflation has been due to lower energy and transport costs , nothing to do with what the RBA has done.

In fact, spending in retirees with lots of disposable income and savings is going up faster than inflation. Meanwhile, young people are cutting back spending and then Lowe stands up and says they haven't cut spending enough. While him and his friends are making out like bandits from their cash holdings and multiple properties.

The disparity is galling and it's only a matter of time until it moves from Lowe to the ALP. Stage 3 tax cuts coming into effect will be the last straw for many.

Did you see this?




This is mind boggling, they could have by their own estimate left rates at 3.55% but they haven't and they are still talking about more rises


while telling people to work more jobs, live with more people and spend less

but the majority of the spending is either on necessities or from people without mortgages who aren't renting.....

like the other month the cited rent increases as a reason to raise interest rates

at this point it looks to me that they have decided on an end goal and will say whatever they think they can use as a justification to getting there

and the end goal isn't inflation reduction primarily

its higher unemployment

 

[Mofra]

Sorry if I am being a pain.

So a wealth tax raised wouldnt impact our problems today, though would be good to reduce debt?

It would actually reduce the discretionary spending portion of aggregate demand, reducing the need for interest rate rises and working faster than interest rate rises in having the effect the RBA is trying to achieve.

 

[Kwality]

The disparity is galling

Someone having more after 40-50 years in work than someone with 40-50 months in work is common sense.

 

[Kwality]

It would actually reduce the discretionary spending portion of aggregate demand, reducing the need for interest rate rises and working faster than interest rate rises in having the effect the RBA is trying to achieve.

Got it, thanks for bearing with me.

 

[Mofra]

FWIW:

Monthly Consumer Price Index Indicator, April 2023

The monthly CPI indicator is a measure of inflation and includes statistics about prices for categories of households expenditure

www.abs.gov.au

There's not a lot of discretionary fat in the CPI measures. The holiday travel & accommodation figure is contentious as it may reflect a shift from international to domestic travel yet is a net contributor to monthly household budgets.

 

[The Cryptkeeper]

Inflation is a RBA problem, employment is a Government problem. Thats how it is, the theory.

The changes to the Reserve Bank board are designed to smooth the competing interests.

No mate, that's not 100% accurate. In simple terms, if you drive down consumption you drive up unemployment. Less jobs are needed because people are consuming less stuff. That's the way it works. The way the RBA drives down consumption is by raising interest rates which takes the means of consumption (ie. money) out of the economy. This in turn pushes up unemployment. The RBA has admitted this themselves.

So Philip Lowe is telling people to work more on one hand but reducing the need for labour on the other.

He should either say something constructive or shut his incompetent mouth. Or better still, resign.

 

[Kwality]

No mate, that's not 100% accurate. If you drive down consumption you drive up unemployment. Less jobs are needed because people are consuming less stuff. That's the way it works. The way the RBA drives down consumption is by raising interest rates which takes the means of consumption (ie. money) out of the economy. This in turn pushes up unemployment. The RBA has admitted this themselves.

So Philip Lowe is telling people to work more on one hand but reducing the need for labour on the other.

He should either say something constructive or shut his incompetent mouth.

Yep, competing forces is why I called it theory.

Very convenient for the Government of the day to have someone else to blame, nothing to see here.

Might be time for the Government to send Mr Lowe on gardening leave for the balance of his term, though he is taking most of the heat currently.

 

[JackOutback]

Mate, it's his complete lack of empathy. And the fact that even the most lame apology (if you can call it that) for his incorrect information had to be prised out him. He deliberately gaslighted the public for months over his commentary on interest rates.

You can see the crocodile teams from miles away. The man does not give two shits.

It's also possible he has no media skills whatsoever and is coming across poorly as a result. In general, the Reserve Bank Governor isn't supposed to be a media personality.

https://www.news.com.au/finance/economy/interest-rates/reserve-bank-boss-lashed-over-out-of-touch-comments/news-story/ad6310771eb1d8b6dba2d7d05b991cd5

Work more, spend less. And get a housemate whilst you're at it.

This is Phil the Low's answer, a man who is also going to drive up unemployment as a by-product of driving up interest rates. So work more but we'll have less jobs for you. The same grub who got a massive taxpayer funded discount on the financing of his Randwick mansion.

campaigner.

Reckon I've spent more time thinking about than I ever planned to, so this will probably be it from me, but you have to understand that driving up employment isn't his evil wish, it's literally a requirement of the economic system in which we operate. Capitalism doesn't work with 0 per cent unemployment. As pointed out, there's other methods available to drive down inflation but it'll be a cold day in hell before our governments consider wealth taxes or the like. He's just another cog in the machine.

 

[The Cryptkeeper]

Yep, competing forces is why I called it theory.

Very convenient for the Government of the day to have someone else to blame, nothing to see here.

Might be time for the Government to send Mr Lowe on gardening leave for the balance of his term, though he is taking most of the heat currently.

I'm not sure about it being convenient for government. I doubt very much if government of any political persuasion wants an economy that is sliding into a recession. I think the current federal government can plausibly deny our current economic issues are of their making given what was inherited.

As for Lowe, I think Jim Chalmers will let him see his term out and find someone else in September.

 

[JackOutback]

I'm not sure about it being convenient for government. I doubt very much if government of any political persuasion wants an economy that is sliding into a recession. I think the current federal government can plausibly deny our current economic issues are of their making given what was inherited.

As for Lowe, I think Jim Chalmers will let him see his term out and find someone else in September.

It's a balancing act for Labor... they don't want to make any of the hard decisions that they could make to bring down inflation, but they don't want to wait too long for the backlash to reach them. Right now, they are passing the blame on to Lowe, and you are probably right that they will move Lowe on in the hopes it is seen as doing something and delay the blame for another six months. But replacing him with someone of the same ilk will make no difference whatsoever. It's window dressing.

 

[The Cryptkeeper]

It's also possible he has no media skills whatsoever and is coming across poorly as a result. In general, the Reserve Bank Governor isn't supposed to be a media personality.


Reckon I've spent more time thinking about than I ever planned to, so this will probably be it from me, but you have to understand that driving up employment isn't his evil wish, it's literally a requirement of the economic system in which we operate. Capitalism doesn't work with 0 per cent unemployment. As pointed out, there's other methods available to drive down inflation but it'll be a cold day in hell before our governments consider wealth taxes or the like. He's just another cog in the machine.

I agree with all of that. But if you are the head of the RBA you should have at least some rudimentary media training, particularly when there are distressed people who are looking for some comfort. At the very least people with better media experience should brief you on what to say and what not to say.

People who are struggling do not want to hear some rich prick tell them to cut costs, work more and advertise for a housemate. They especially don't want to hear it from the guy who lied to them about interest rates, denied lying to them about interest rates and is the front man and key decision maker creating the problems that continue to escalate in their lives.

I fully understand how the relationship between interest rates, consumption and unemployment works. Philip Lowe should have been raising interest rates two years ago, at around the same time he was telling people that they would not go up. It is almost irrelevant and certainly a convenient excuse that he was blindsided by the Ukraine war. He knew how much stimulus had been pumped into the economy through covid. This economic stimulus was always going to have a massive inflationary impact. Yet he literally opened the door for people to go in over their heads obtaining cheap cash.

 

[Saint]

It's a balancing act for Labor... they don't want to make any of the hard decisions that they could make to bring down inflation, but they don't want to wait too long for the backlash to reach them. Right now, they are passing the blame on to Lowe, and you are probably right that they will move Lowe on in the hopes it is seen as doing something and delay the blame for another six months. But replacing him with someone of the same ilk will make no difference whatsoever. It's window dressing.

The problem is that the RBA's actions are hurting people but not solving the inflation problem. If the ALP let's the RBA do all the work, nothing is getting done about inflation, but a large cohort of people are hurting.

Just to elaborate on what I said before. The hurt will be really pinching about this time next year, which is when the Stage 3 tax cuts are meant to happen.

If the ALP have been cutting spending and taking actual action at reining in inflation where they can (decrease infrastructure spending for example), then they're going to look like the greatest failures if they then allow the Stage 3 tax cuts to occur for rich people to have lots more cash to splash while telling everyone else for months that they have to tighten their belts.

They might actually earn their "worst money managers of the two major parties" title.

 

[The Cryptkeeper]

The problem is that the RBA's actions are hurting people but not solving the inflation problem. If the ALP let's the RBA do all the work, nothing is getting done about inflation, but a large cohort of people are hurting.

Just to elaborate on what I said before. The hurt will be really pinching about this time next year, which is when the Stage 3 tax cuts are meant to happen.

If the ALP have been cutting spending and taking actual action at reining in inflation where they can (decrease infrastructure spending for example), then they're going to look like the greatest failures if they then allow the Stage 3 tax cuts to occur for rich people to have lots more cash to splash while telling everyone else for months that they have to tighten their belts.

They might actually earn their "worst money managers of the two major parties" title.

It feels a little like Labor is hoping that inflation will be under control by mid-2024, interest rates will be coming down and they can somehow justify these stage 3 tax cuts. They can't justify them of course but that is what they will try to do in my opinion.

 

[JackOutback]

The problem is that the RBA's actions are hurting people but not solving the inflation problem. If the ALP let's the RBA do all the work, nothing is getting done about inflation, but a large cohort of people are hurting.

Just to elaborate on what I said before. The hurt will be really pinching about this time next year, which is when the Stage 3 tax cuts are meant to happen.

If the ALP have been cutting spending and taking actual action at reining in inflation where they can (decrease infrastructure spending for example), then they're going to look like the greatest failures if they then allow the Stage 3 tax cuts to occur for rich people to have lots more cash to splash while telling everyone else for months that they have to tighten their belts.

They might actually earn their "worst money managers of the two major parties" title.

If the push through the stage 3 tax cuts as is, they will deserve the criticism.

 

[JackOutback]

I fully understand how the relationship between interest rates, consumption and unemployment works. Philip Lowe should have been raising interest rates two years ago, at around the same time he was telling people that they would not go up. It is almost irrelevant and certainly a convenient excuse that he was blindsided by the Ukraine war. He knew how much stimulus had been pumped into the economy through covid. This economic stimulus was always going to have a massive inflationary impact. Yet he literally opened the door for people to go in over their heads obtaining cheap cash.

Two years ago, we were at the height of the pandemic, people were stuck at home unable to work, if he had raised interest rates then, he would have been hung, drawn and quartered.

 

[The Cryptkeeper]

Two years ago, we were at the height of the pandemic, people were stuck at home unable to work, if he had raised interest rates then, he would have been hung, drawn and quartered.

Ok, that's fair but he should have been raising them long before he started to. He certainly shouldn't have made outlandish claims that he couldn't guarantee seeing though.

There was undeniably a pathway to a softer landing and Lowe had his blindfold on.

 

[Kwality]

If the push through the stage 3 tax cuts as is, they will deserve the criticism.

What is the current plan on the stage 3 tax cuts?

 

[Kwality]

Ok, that's fair but he should have been raising them long before he started to. He certainly shouldn't have made outlandish claims that he couldn't guarantee seeing though.

There was undeniably a pathway to a softer landing and Lowe had his blindfold on.

Did Lowe go too slowly ? 0.1 should have have been more severe ?

 

[phantom13]

I don't much care one way or the other for Philip Lowe. But he's largely being pilloried for saying, at the height of the pandemic and before the Russia-Ukraine War, that we may not see rate rises until 2024. Fair to say things changed. We also have governments that won't pull any other lever for fear of losing an election. So while I don't care if he's replaced, I reckon his successor would face the same issues of having to drive up rates to reduce inflation because it's the only option our timid governments will allow.

In the meantime, the only options people have are the tone deaf ones.

My initial comment was about how him being tone deaf is really the issue.

Making stupid untenable suggestions isn’t just dumb it’s inflammatory.

“Yeh we’re jacking your rates up, get a ****ing boarder for all I care, i don’t hold a purse string mate”.

It is inline with making dumb comments which he has history in.

 

[Mofra]

It feels a little like Labor is hoping that inflation will be under control by mid-2024, interest rates will be coming down and they can somehow justify these stage 3 tax cuts. They can't justify them of course but that is what they will try to do in my opinion.

That's what the market seems to be pricing in. One more rate rise, with potentially 1-2 cuts before Christmas.
What the broader economy looks like at that point is the worrying sign.

 

[Saint]

What is the current plan on the stage 3 tax cuts?

Not touch them and let them happen, so they don't upset the well-off ALP voters.

I think they're making a massive mis-calculation that it will be seen as the Libs to blame. Which will be nonsense, because they have a budget just months before that and the Greens have said they're on-board to get rid of them. Cutting taxes for the rich at a time when everyone, including Govt is supposed to be tightening their belt is a move only the Libs would pull. If the ALP let it happen, it'll be the worst decision they've ever made both politically and economically.

My only guess is that their calculation shows them losing most voters to the Greens and they're happy to become a centre-right party.

Another option is to extend the tax cuts to lower income earners as well (and increased taxes elsewhere), or postpone them by a year. But they should do that sooner rather than later.

 

[Kwality]

Not touch them and let them happen, so they don't upset the well-off ALP voters.

I think they're making a massive mis-calculation that it will be seen as the Libs to blame. Which will be nonsense, because they have a budget just months before that and the Greens have said they're on-board to get rid of them. Cutting taxes for the rich at a time when everyone, including Govt is supposed to be tightening their belt is a move only the Libs would pull. If the ALP let it happen, it'll be the worst decision they've ever made both politically and economically.

My only guess is that their calculation shows them losing most voters to the Greens and they're happy to become a centre-right party.

Another option is to extend the tax cuts to lower income earners as well (and increased taxes elsewhere), or postpone them by a year. But they should do that sooner rather than later.

I asked because its such a political issue for the ALP and the Greens, when inflation is the big problem & has to be factored in, politics or not.