Here's my summary of the key news overnight the weekend in 90 seconds at 9 am, including news of booming equity markets.
Stocks rose in New york on Monday, extending a recent rally as Italy formed a government and relieved a two-month-long overhang of geopolitical uncertainty from the market.
In addition, better-than-expected US housing data boosted market optimism and both the Dow and the S&P500 look like they will close at a record high.
US consumer spending unexpectedly rose in March, official figures have shown. Spending rose 0.2% in the month, according to the Commerce Department, beating economists' expectations for no change. However, the increase is the smallest in consumer spending for three months, and marks a slowdown from February's 0.7% jump and January's 0.3% rise.
The data showed American personal income also grew last month, rising by 0.2%, compared with 1.1% the previous month.
There is a US Fed review on Thursday (our time) and Fed officials are likely to continue their easy-money policies, in part because recent inflation measures have fallen well below the Fed's target. However, there appears to be little interest by them in expanding these QE programs.
The Australian Prime Minister, in the middle of a very long election campaign, has warned that new taxes will be needed and will be in her May 14 budget. She is trying to contain a budget bowout. Julia Gillard raised the prospect of a special levy to fund her proposed National Disability Insurance Scheme and said that business, families and institutions will be hit at the upcoming budget to help pay for the scheme and the government’s school funding reforms.
In Europe, markets are now expecting the ECB to cut rates when it meets on Friday. Overnight the Greek parliament passed a bill dismantling the widespread rorting of the public service. As we previously reported, 15,000 will lose their sinecures, to be replaced by 15,000 new workers. Unions were not happy; there was rioting.
There seems to be growing and self-sustaining gloom in Europe these days with confidence measures falling faster than expert predictions.
Among all this news, New Zealand seems to stand out and that is reflected in the demand for our currency. The Kiwi dollar starts today higher at 85.7 USc and up almost 1c on the day, 82.8 AUc, and our TWI is at 78.8.
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12 Comments
I'll split hairs with you. Within the context of text book economics pump'n grow (Fed flooding the market) was more than offset by (Govns and states) doing austerity at the same time. The NET difference was still austerity and hence GDP has shrunk, if you take out the mark to fantasy financial components etc.
So no, I dont agree. Economics 101 (Keynesian and the zero bound trap, IS-LM macro) is sound,
http://krugman.blogs.nytimes.com/2013/04/22/building-a-mystery/
Of course that was before peak oil in 2006. Which really shows that when you build an economic model and leave out an essential part (energy cost impact) as BEFORE it wasnt significant you get rubbish now.
Interestingly I think somewhere I read a comment from Keyne's along the lines of "we will get out of this Great Depression because we have the resources to do so" Makes me wonder if he looked out to the future and pondered.
So what we are up against now is a significant part of the world's economists, CEOs, bankers, and indeed financial industry who ignored Keynes in their formal education now dont have anything to even test against to reliase the world has fundimentally changed.
Bit more advanced than economics 101, but I think too many failed it, yet they are our leaders, that makes me think we are in deep doo doo.
regards
Electricity privatisation has failed to result in cheaper power for consumers and has not improved the sector’s efficiency, a report by the Australia Institute has found.
Read more: http://www.smh.com.au/business/electricity-privatisation-failed-think-tank-20130429-2io2o.html#ixzz2RtBwCfGX
Since Victoria privatised power in the 1990s, electricity prices have outpaced the rate of inflation, rising by 170 per cent compared with an increase of 60 per cent in the consumer price index according to a study by the Australian Institute.
A productivity slump in the electricity sector has contributed to price hikes, the author of the study, David Richardson, said.
“Since June 1995, productivity in electricity, gas and water declined by 24.9 per cent. All other Australian industries saw an increase of 33.6 per cent,” he said. “The number of managers in the electricity sector has increased by a staggering 217 per cent since 1997.
‘‘Yet, at the same time there was a much smaller increase in front line staff, with the number of technicians and trades workers increasing by just 28 per cent.”
In 1997 there was one manager for every 13 workers, yet by 2012 there was one manager for every nine workers.
Over the same period, the number of sales workers increased from 1000 to 6000.
“It seems remarkable that a sales force of 6000 people is necessary to sell a product which everyone needs,” the Australia Institute's Mr Richardson said.
When Victoria’s electricity network was privatisated, promises were made that it would deliver lower prices and a more efficient industry, and former Premier Jeff Kennett continues to sing the praise of privatisation, Mr Richardson said.
“While Premier O’Farrell and Peter Costello might believe a power sell-off is the answer to New South Wales’ and Queensland’s budget problems, it’s unlikely to ease cost of living pressures and might even slug consumers with higher bills and worse service,” he said.
This paper also examines the increased capital costs associated with privatisation. Private buyers tend to pay more than the value of an electricity plant is worth because of the potential for profits. In order to achieve profitability these businesses are required to increase prices to achieve a competitive return. In this way further costs are passed onto consumers.
https://www.tai.org.au/index.php?q=node%2F19&pubid=1142&act=display
“Since June 1995, productivity in electricity, gas and water declined by 24.9 per cent. All other Australian industries saw an increase of 33.6 per cent,” he said. “The number of managers in the electricity sector has increased by a staggering 217 per cent since 1997.
‘‘Yet, at the same time there was a much smaller increase in front line staff, with the number of technicians and trades workers increasing by just 28 per cent.”
In 1997 there was one manager for every 13 workers, yet by 2012 there was one manager for every nine workers.
Championing the career prospects of the not so bright children of entitled, but capital poor, middle class parents is a rort we need to be rid of.
Perhaps you two could refer to my recent opinion-piece.
Australia's electricity is about 85% coal-fired, Victoria's is 90%.
You mine the best, closest coal first. Thereafter, it sequentially gets further away, and/or harder to get (if you must, read: more expensive). That's the reduced 'productivity', right there.
So help me, it's a hard road teaching economists about reality. :)
Yep....I dont think you can, tahst because they have no idea how to actually make things or the effort involved. Maybe put them in minecraft for say a month, then they'd understand, if not well then they should become carrot pullers as they are un-educatable in the real world.
regards
PDK,
The coal price seems the easy target in looking at their productivity. However a quick check here http://www.infomine.com/investment/metal-prices/coal/all/ shows that since 2001 (the earliest this site seems to go back) the coal price has gone from USD 40 a ton to US$ 60 a ton. At the same time the AUD has gone from ~US$.50 to over US$1.00. So in AUD terms, the price of coal has come down from A$80 a ton to A$60 a ton; a 25% reduction in costs, and that is before inflation. Probably a 40% to 50% reduction in real terms.
So the reduction in productivity has to be elsewhere, and the obvious clues are in Henry's note. A massive increase in no doubt highly paid "managers" and over 6,000 sales people; as well as no doubt very healthy profit margins.
Am sure Henry is really making the point that largely NZ has followed the same model; although has not until now actually sold off these bureaucratic cash cows.
StephenL - you still don't get it, do you?
When I read "A staggering increase in managers of 217%" I know we're looking at hype. In this case, left wing hype. What was the output increase?
The 'cost per ton' is not enough alone, and a red herring anyway. That's why I refer to EROEI, which is real. The cost is in terms of energy supply/quality, relativity to real incomes. Why you take a global coal-only money-related cost beasts me; This is a case of a secondary energy, sourced from a finite primary one, delivered by another (which has increased in your 'price' 10-fold in half the time-frame, by the way).
Sure, privatisation and pseudo-competition result in a heavier top-end and a lighter bottom-end, but the real effort required is the only true measure. You left vs right folk are arguing about who gets what share of the cake - I'm pointing out that from here on the cake cannot grow, and indeed will diminish.
And your previous comment is a hint at where you miss it - an optimism that exponential growth somehow 'isn't there yet', and that efficiencies can offset real limits. Exponential growth goes vertical, regardless of %, efficiencies fall away in an inverse trend, and at some point, it becomes increasingly meaningless to value anything in $ terms.
PDK,
Show us the data, not just sloganeering. Henry's linked paper scores productivity in dollars; hence the money link. It was you who pointed out that Victoria's electricity is nearly all coal powered- hence my focus on coal prices. Presumably all their coal comes from Australia, so transport costs would be fairly trivial. So by a money score the influence of peak fossil fuels is proven to be a red herring in Victorian electricity; is my point.
As I have also stated before, I think we will be getting close to peak energy, (and particularly peak fossil fuel energy) but largely due to demand slowing, not supply coming to an end. See one of Bernard's top 10s today that supports that view.
No doubt the lower productivity showing in electricity already reflects slowing demand.
Henry's link is more a demonstartion of how some modern major corporate, if given the market freedoms and circumstances, will first look after its senior managers and directors; then perhaps its shareholders, while customers and other stakeholders are a distant last in consideration. Most industries thankfully don't allow those circumstances- although banking may well be one. Electricity here, and apparently in Australia, is clearly another.
By the by, I agree this is not a left or right issue. It is all about sub conscious cronyism frankly, and can happen on either side of the spectrum.
The argument that large private industry is more efficient v Govn mandarins is shown here as the falacy it is IMHO.
Looking around I see a lot of middle and lower level managers (ie the parents above) losing their jobs over the last 4 years...funny thing I saw the same thing 30 years ago in the UK. Never ever become a manager IMHO...
regards
Lets look at all the ways we have to measure inflation or non-inflation,
http://krugman.blogs.nytimes.com/2013/04/29/inflation-nation-not/
"Actually, at this point the Fed is worried that inflation is too low."
So what is our RBNZ thinking I wonder....
regards
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