So that values-led capitalism didn’t last long, did it? Copies of The Monthly containing Treasurer Jim Chalmers’ essay (“Jimbonomics: A Grundrisse“) are still in the shops, together with its arts section on the touring Bratislava Shakespeare Throat Singing Ensemble, so hurry on down.
But the commitment to capitalism working for the people? Well, that got cancelled when RBA governor Philip Lowe raised the interest rate, and Jimbo and co grunted and motioned for him to carry on.
The fault lies not in Lowe’s actions per se — very per and very se in this case. If you’re going to try to slow an economy for which every possible lever of control has been ripped out, you don’t have much choice but to keep raising interest rates until inflation starts to slow. (My younger readers will recall the great Bruce Petty cartoon from the time of 17% interest rates, set in an old railway signals box, with Ralph Willis, then finance minister, I think, as the harried stationmaster answering a call from Paul Keating with the speech bubble: “What other lever, Paul?” Before him, all but one of the box’s levers have been snapped off. My older readers will recall the Hindenburg crashing.)
Australia’s interest rates are not as high as comparable countries: the UK is on 4% and the US on 4.5%. But we’ll get there. What other countries don’t have to quite a widespread degree is a combination of a ludicrous housing bubble on every kind of property, a policy of encouraging people to see property as their main investment, households running on debt, and a commitment to creating ever more instruments whereby household debt can be run up.
We are the country that gave the world Afterpay, and the Atlassian dude who paid what in memory seems like $50 million for a shed with a Sydney Harbour view. Our housing finance sector wasn’t cleaned out in the way the US one was after the 2007-08 crash, so we may be a leeetle more exposed to a very sudden ka-chunk moment than many other OECD countries.
So was this latest crunch an opportunity for Chalmers to say this was exactly what he was talking about — that the Reserve Bank has to do what it has to do, but we have to look at parallel ways to steer the economy, make more capital and affordable housing stock available, and direct superfunds to socially useful investment as an “impactful” measure?
Not to Jim’s way of thinking. He has spent the week grimly enforcing that capitalism is not “values-led” but capital-led, by capital’s holders, which are the banks. He was on RN Breakfast last week — between Warwick Hadfield’s spoken-word sports act and some music I don’t like — as part of a hell of a double-act. Chalmers was first on, grimly enforcing “the RBA makes the decisions” mantra under repeated questioning, and was followed by Anna Bligh, former Labor premier of Queensland and now head of the Australian Banking Association (ABA), telling Patricia Karvelas repeatedly that the system works well for ordinary Australians. (Bligh got much tougher questioning on Nine than the ABC. Sadly, watching the interview, that seems less to do with forensic intensity than basic sexism, directed at the only woman on the banking frontline. Sigh.)
Two days after the rate hike, Lowe went to a briefing meeting with investment bank Barrenjoey, which may well be the sort of thing that central bankers do, but looked a lot like he was reporting back to the people who really run the economy and receiving further instructions (which for the record, I do not believe he was doing. Phil will most likely have a lot of time on his hands in a few months’ time, so…).
You know, in all this, it’s the rusted-on Laborites I feel sorry for. They’ve had a tough time since the election, and to have the treasurer dangle the idea of “values capitalism” and “impactful investment”, and then fall into lockstep with the RBA and the ABA, might be a bit too much for them. Your correspondent noted, in remarking on a paragraph in Jim’s Jimbonomics essay about his home town of Logan — that its decades-long deprivation and underfunding was an exciting opportunity! — that post-Parliament he won’t be spending too much time there, and would probably move on to, you know, the ABA or something.
Having present and possible future Labor-originated bank spinners appear together is probably not a good look. For the rusteds, it’s a kick in the head from the Doc Martens that RBA assistant governor Luci Ellis used to wear during her post-punk days in Melbourne Uni student politics. Yes, I hear what you’re saying, rusteds! “This isn’t Jimbonomics! it’s Jimbochess! He plays the four-dimensional version!”
Yes, by now it’s clear to everyone that Lowe has been put in the frame for all the pain that large-mortgage-holders will be feeling at the moment. We hope it’s clear to him. It’s looking extremely likely, as far as his RBA future goes, that, well, the joey is barren. After the RBA has been skinned and made into souvenir pencil cases at the impending review, the likely next move is the government will announce a series of measures to find impactful investment and targeted capital, to, well, um…
You can see its problem. Through Jimbo Thought, the Albanese government has made it clear that it will not be interfering with the operation of capital, simply finding new “values-originated” sources of it to fill in the gaps where rapacious carpetbaggers (i.e. capital) do not want to go. But the imminent problem is not underinvestment and underemployment in people’s lives. It’s that they paid a million bucks for a concrete McMansion with no garden, mildew from the aircon, and a two-hour commute to work, in a suburb whose town centre is the Dan Murphy car park, and now they can’t afford to pay for even this, at the same time as its value is falling.
For the Reserve Bank, the wreck of such people’s lives and hopes can be written off as the inevitable collateral damage of readjustment. For the Albanese government, it is a bit more of a political problem. These are the people, in 20 or so outer suburban seats around the country, whose votes Labor must keep a fair slice of, to retain or grow what is, in absolute terms, a pitiful two-seat majority. These are the voters Labor signed up, and reaffirmed they would honour the stage three tax cuts for (even if it barely directly benefits from them). These are the voters Labor hopes will believe it when it says it’s the RBA’s fault.
But to do that, Labor has to play the “capital is capital” card. Less than a month after launching Jimbo Thought about a revolution in capitalism, the government is creeping into all meeja to say there’s nothing it can do about it, and its former leaders are going all out to defend the banks. What a great look for transformative Labor.
This represents another chance for the Coalition to get back in the game, and probably its best one to date. Hence Peter Dutton’s sudden pivot from culture wars to the exact opposite: a gruesome, toad-eating performance of apologising at the dispatch box, for walking out on Kevin Rudd’s Stolen Generations apology 15 years ago. The unctuous abasement of the act was the point, of course. As Peta, Rowan, Rita and the rest of the Sky As Dark AF crew go into conniptions about how only a Coalition devoted to restoring the Savoyard monarchy can win back Mill Park, Dutton is clearing the decks for the Aston byelection.
With a woman candidate and a strong household economic agenda, it will be an experiment to see how much it can regain of the 10% margin it once enjoyed in that seat (now sitting at 2.8%). That depends on whether it is willing to essay a bit of economic populism and talk about more than budget cutting. If it does, and if the swing back is significant, Labor will need to make sure its jowlier MHRs take a walk and a vegetable occasionally, and avoid byelections.
The teals will also have to develop a more visible line on monetary and fiscal policy. Nothing like the prospect of losing the crappy, truly ludicrously overpriced flat you bought in Malvern to concentrate the mind of someone who voted to save the planet. And to wonder what your much better off MHR thinks about it.
Still, for extra points, the Aston Liberal committee might screw things up by preselecting the only bloke standing for the seat, and you just know it’ll probably do it. But it will be a brief respite for Labor. As Ross Gittins has noted, the whole idea that monetary policy should be the means by which the economy is heated or cooled is a product of 1980s neoliberal cultism, and the current desire of politicians to avoid responsibility. Labor is desperate to maintain its non-interventionist image, at the very time that more specific and targeted state intervention is required.
So Labor might have to do something sooner than it wants to. It’s one thing to be a responsible, prudent, McKellite, blah blah Labor government. It’s quite another to decide that that is best done by being the front line for the defence of the finance sector.
So much for “values-led” capitalism. Shareholder value-led capitalism is back like it never went away. The joey is barren, Jim. The joey won’t jump. (Votre bebe kangorou ne sauterez pas.) What other tricks you got in your pouch?
“What other tricks you got in your pouch?”
That’s the crux of the matter, isn’t it? Having gradually hacked away at all other means of control over the over the past forty years under the delusion that free markets are the solution to all problems, and the country having left itself with only one mechanism for managing the economy, what the hell does the country do when that mechanism fails? Do we try and return to the ‘good old days’ prior to the ascendancy of neoliberalism (assuming that’s even possible)? Or do we try and come up with a new magic trick to deal with the situation? I submit that Chalmer’s floating of the idea of ‘values capitalism’ was a rather cack-handed attempt at the latter. If so, he needs to have another go, because it doesn’t seem like anyone is buying it.
The problem is that the current inflation crisis isn’t of the traditional making: all those Bolshie workers ramping up wages by inflicting their evil on the Godly capitalists innocently going about their daily business. Instead, leaving aside temporary perturbations of the market brought about by the pandemic and Putin, it is the ever-increasing level of corporate profits. This isn’t supposed to happen under the free market delusion, because under that, competition is supposed to rein in excessive profit raking. The fact that it is happening suggests that somehow, maybe, the real-world market is not quite so ‘free’ as it is made out to be. Perhaps, in the real world, corporations now have a little too much power and control, and consequent ability to warp the market in their favour.
The logical response to this failure would be for the government to intervene somehow, in order to limit excessive profit taking (perhaps, for example, in a manner similar to last year when it intervened in the wartime profiteering of the gas industry).
Which all sounds dangerously like socialism.
Gasp!
Suck on that one for a while, young Jimmy.
Socialism!! Bring it on!!
It’s called taxation.
Exactly. Every one of Australia’s “problems” can be solved with taxation.
Free markets as the solution to all problems may be an ideological belief of some, but in reality Australia does not have free markets. We have our own Aussie version of crony capitalism, where the best way to make a profit is capture the government (and preferably also any regulator) and rig the market.
Watch all the ‘capitalists’ scream if real free markets were introduced. The end of socialism for corporations would be described as the end of the world – and probably also labeled as the advent of socialism for the masses.
I am a bit sick of governments standing back and watching central banks struggle to run the economy with the interest rate lever. Time for some fiscal stuff. Lets start building stuff again. We are up to our eyebrows with resources we give to other people for nothing. Lets stop doing that. Not interested in the high wages argument. If we are clever enough we can make stuff that others will buy even if we have high wages. Theres the problem, cleverness. We are a bit lean on that. We really do need pollies that are prepared to build up industry again. That wont be the LNP, they hate big factories because they are easily unionised and the reason they got rid of industry in the first place. So it will have to be Labor. Wish us luck.
Negative Gearing sums it down for me.
It’s Dumb an Dumber for the economy.
Agree John…but didn’t the Labor Party try to get rid of that scourge, along with fixing the capital gains tax, at the 2019 election? That worked well didn’t it…NOT!!
Nothing terrifies a generation of Australian politicians more right now than the housing/political complex in serious trouble, although most of them probably dont get it. The easy solutions of the past 25 years – of chucking money here and there – are evaporating quick.
Chalmers – like most of his hack colleagues is clueless as their party/government operating model is collapsing. The inability to address energy costs is adding more to the cost of everything and so it will go on as rates and prices soar. Desperate claims that the RBA is going for a rise now and then cut late in 2024 when it all comes apart are hopium at best. They wont be setting the agenda – the FOMC and the bond market does. We have to follow, otherwise the AUD falls and we pay more for imported fuel and therefore everything.
Chalmers, Albo and their mates are fakes like the last lot, LARPing their way through their careers. But faking becomes impossible when trying to make 1+1=3.
Every Australian Treasurer has to deal with the incompetence of every former Treasurer in allowing the Australian property Ponzi-scheme to keep snowballing as it has. It is beyond absurd. This round of rate rises is going to see many recent property buyers go to the wall.
There is no chance this government can do anything about the property ponzi scheme. It’s the economic bombshell waiting to blow up whichever government happens to be caught holding the parcel.
Its a game called pass the parcel. We are just waiting for the music to stop.
Well said.
I hope 95dd0a7e2e4104736c7ced8008850769 isn’t your private key…
Yes. A good piece. I don’t think Lowe should get off that lightly. After al, he is a de facto PM with the controls of monetary policy. The real PM, Albo, the one we elect, deals with just fiscal policy. Lowe started raising the cash rate way too late. NZ got off the mark early, raising ir 6-8 months prior and we should have done the same. Now we have an overheated economy, like an old over heated Datsun circa 1980 with too many other problems as well, also like a Datsun circa 1980. This was sone for political purposes. To not make the Libs look bad. They only got 1 interest rate rise out of lucky Phil while Labor in government, has had to endure a further 8 with 3 more likely. I say that it is time for Phil too go and he should have been sacked by now. Chalmers has lost it!
Thought the same. When all that Covid Cash was being splashed into the economy, the neo-liberal mindset would have to come to terms with it eventually. Chicken Phil held off during the 6 month pre-election period for fear of a Scomo/Frydo bashing but eventually even he had to get off his hands before the election.
The recession Keating said we had to have in 1990s was also down to the RBA’s over-abundance of caution – adjusting interest rates, in either direction, months too late. Something about stable doors and horses that have bolted.
Would you have been game to cross that preacher who happily misused the floor of parliament to destroy the reputation of the head of Australia Post?
Smirko had no compunction and no conscience in the misuse of our money and his power, did he?
Correct. He protected the LNP Govt by not raining rates earler. Blatantly political. The RB is NOT independent.