While the ABC continues to tear itself into pieces trying to deal with Emma Alberici’s pieces on company tax, other material slips through on the ABC site that is, even compared to the worst accusations levelled at the ABC’s chief economics correspondent, more reckless.
This morning, a piece labelled “Analysis” and based on the Stan Grant program Matter of Fact, inquired “Does Australia have a ‘zombie economy’ that is at risk of a crash?” The piece was about 800 words, most of which were devoted to giving economist Steve Keen a platform to spruik his argument that the Australian economy is about to crash because of household debt.
“Very few experts saw the global financial collapse coming less than a decade ago. Some of those who did are warning that we stand again on the same precipice,” wrote Grant. There’s only a small section at the end noting positive overall economic conditions.
As we noted a month ago, the ABC is a serial offender in giving Keen, who has been repeatedly and badly wrong with his predictions of property crashes and recessions, and other professional doomsayers like Gerard Minack, an uncritical platform to frighten people with tales of impending doom.
[Property crunches, recessions and other dud predictions from the pundits]
Keen is obsessed with household debt, which he views as the product of a dangerous financial system seemingly little different to a Ponzi scheme. So let’s ask the Reserve Bank what it thinks about Australia’s level of household debt. Handily, Assistant Governor Michele Bullock (who oversees the financial system) devoted an entire speech to household debt just last week.
It’s worth reading — and one wonders whether Grant’s researchers did in preparing his program. She goes carefully through a wide range of metrics, both empirically testable and self-reported, for debt and another idea the media likes to push, “mortgage stress”, and struggles to find any evidence of a significant household debt problem. Indeed, “the number of households experiencing mortgage stress has fallen over the past decade.” Her overall conclusion:
The information we have suggests that, while there are some pockets of financial stress, the overall level of stress among mortgaged households remains relatively low. Furthermore, the banking system is strong and well capitalised, and is supported by prudent lending standards.
Nary a mention in Grant’s piece.
The ABC certainly isn’t alone in running stories of impending doom. Just yesterday, news.com.au ran a piece on serially wrong US doomsayer Harry Dent and his warnings that a downturn worse than the Great Depression was around the corner. At least news.com.au had the decency to note that Dent “incorrectly predicted a 50 percent wipe-out in Australian property prices in 2014”. No such context from the ABC for Keen’s wrong predictions.
Meantime, the real threat to growth and prosperity is staring us in the face: it’s the insidious threat of zero wages growth and what threatens to become the normalisation of expectations of income stagnation. But that’s not as sexy as yet another conspiracy theory about how the financial sector will ruin us all. And exploring it might prompt another angry letter from Malcolm Turnbull.
Keen has locked himself into his doomsday scenario for so long, and been humiliated by his prognostical failures so often, that he probably thinks he has no choice but to keep on serving up the same old festering garbage rather than admit his incompetence, because at some point in the future he will be proved right (sort of).
Normal economic theory of the kind that Keen specialises in overlooking tells us that once interest rates start to rise beyond about 75 basis points, there will be somewhere between a medium-sized slowdown in property price rises, and some level of contraction, with the actual level depending mostly on the size of those interst rate increases. End of story, and it’ll only become a ‘Keensian’ horror story if we’re talking 400 basis points in a fairly short time, which is very hard to see at the moment.
Let’s see. Minimal or zero wages growth and inevitable rising interest rates will, just as it did in 2007 lead to mortgage stress, defaults and foreclosed properties. Nah! That could never happen could it? Thanks Bernard and Glenn for your expert advice.
One day the stopped Keen clock will be correct but until then self satisfied patronising like “another conspiracy theory about how the financial sector will ruin us all” demonstrates the authors’ slips are showing.
When money itself become a commodity, unmoored from its purpose – an agreed value as ratio of exchange there is a tectonic plate shift in the basis of the Dismal ‘science’.
Whether it is Keen, Keane or zombie disciples of Greenspan, this laissez-faire wet dream expired long ago but the malady lingers on.
As with climate change or gender politics, those who benefitted from the old abuses will not be to the fore in seeking change.
The funniest thing about that “debate” was Grant introducing it by telling us that “none of us saw the GFC coming”, then introduced two “experts” who did?
The problem was that there were those that saw it coming, but the media, rather than split from the herd, didn’t want to leave their “safety in numbers” herd mentality, to go out on a limb to report such “minority reports”?
So when Grant and other media denizens use the term “none of us saw” they mean “Bugger all of the media would do their job for fear of being wrong; that could hide in their safety in numbers to abrogate responsibility when such things went as a few were prediciting without being passed on to the general public”?
No one will date mention that immigration is a cause of increasing labor supply and depressing wages.