Imagine a marathon. Each country’s currency is a contestant. Most are far behind, stopping to catch their breath and grab a quick smoko break. Some have broken away into their own little pack.
Sweden’s Krona and Switzerland Franc’s are chugging along, sticking to the centre of the group to conserve energy, and keeping hydrated.
Great Britain’s Pound, on the other hand, is powering ahead confidently, if only they could stop dropping hurdles in front of themselves to trip over.
The European Union’s Euro evidently got the wrong memo and have taped all their legs together. Now they’re too busy bickering about who isn’t running fast enough to actually run.
Canada’s running like they just watched Chariots of Fire and Australia is running like they just stole something… which they probably did. There’s only one problem… they’re both 4-foot-tall and their little legs can only run so fast.
Zimbabwe’s dollar decided to start juicing to get an edge… and ran into a brick wall.
Japan’s Yen was surging ahead of the competition and some even thought it was leading, but a while ago it blew a hamstring and has been limping along ever since.
Russia’s Rubel is a hulking behemoth of a man… with the little baby legs of Australia.
Cryptocurrencies like Bitcoin weren’t invited to the race and are at home furiously sprinting on a treadmill and live streaming their results.
And finally, the Malaysian Ringgit… is irrelevant but admit it, that’s a cool name for a currency.
That leaves the two main contenders: America’s Dollar and China’s Renminbi, also known as the Yuan.
China actually can run faster than it currently is, and many think it should. Maybe it will in the future, who knows. But for now, China has a side bet going and will make more money if it’s not in the lead, so whenever they start to pick up speed, they jam a fork into their thigh.
Now, I didn’t mention it before but America is hosting this marathon. Unbeknownst to the other runners, America pooled together all the fees that the other countries paid to enter the race and has paid Usain Bolt to run for them.
As you can imagine, this slapdash group of miscreants don’t stand a chance against Bolt. So, when it comes time to bet on the race, every punter with cash in their pockets puts their chips on America.
This is important so I will say it again. Since everyone expects Bolt to win, everyone bets on Bolt.
This is even if America (Bolt) messes up. Even if falters, no one is banking on Bolt being overtaken by the likes of baby legs Rubel.
There are two other factors to this race that makes it weird. Clearly its originator was a big Keanu Reeves fan because the track is rigged to explode if everyone drops below 50 mph. Effectively, all currencies can’t be worth $0 all at the same time. The second factor comes from the Hunger Games movies… Do you remember that scene where popular contestants are given care packages from the viewers at home to help them survive, teaching children the importance of being popular and the value of match fixing?
Well, the economy is like that.
You see, everyone has a lot of money riding on Usain Bolt winning. Not only the viewers, but the other runners have bet that Bolt will win. So much so that the reward for winning the race is less than winning the bet on Bolt.
So if Bolt trips up (from a national financial meltdown) or leads all the runners down the wrong path (like a global financial crisis), there is always someone desperate enough to not lose their bet that they will strap a rocket to Bolt’s back (in the form of Quantitative Easing and the buying of US Bonds).
If instead Bolt decides he wants to slow down (and we’ve all seen him do it before), the rest of the runners might slow down to match him, ending up in the world’s dorkiest power walk.
It might not seem like it, but most currencies don’t want Bolt to lose.
Much like China hobbling themselves and keeping their economy undervalued, countries would rather have a high-valued US dollar to help with trade.
This leads to its own problem (the Triffin Dilemma) but that’s an issue for another metaphor.
This is starting to get confusing. For now, all that matters is that when things are good, people bet on the US dollar and when things are bad… people bet on the US dollar.
So, if you’ve wondered, amidst COVID and sky-high healthcare debts and student loan debts, how the American Economy can be doing so well, just picture Usain Bolt with a rocket so big it would make Kim Jong Un blush. Just don’t Google it.
Think your name would look good in print? Woroni is always open for submissions. Email write@woroni.com.au with a pitch or draft. You can find more info on submitting here.
For the first time in most university students’ lifetimes, Australia is in recession. But this is not an ordinary recession. It is a recession that I think will change our society for the better.
When we hear of the current state of the economy, the phrase “this is the worst recession since the Great Depression” is often used. So, what happened in the Great Depression and what did the economy look like after it?
Unemployment in 1929 reached up to 30 percent. The government of the United States responded to the depression in a way that is unimaginable now. Based upon the economic thinking of the time, the government pursued cuts of 20 percent to spending and 10 percent to wages in the name of ‘balancing the budget’. This was well intended but only worsened the economic environment.
Whilst the Great Depression was occurring, a Cambridge mathematician-turned-economist known as John Maynard Keynes wrote of a new way of approaching economic crises. Keynes thought that when the economy enters a recession, governments should spend more money than they earn, creating a budget deficit.
Keynes’ theory was not adopted in the Great Depression, but ten years later when another crisis shook the globe, World War II, his theories were welcomed by policy makers across the world. In Australia we pursued a policy that was known as Full Employment, where the government facilitated a job for anyone who was willing to work. There was massive stimulus to welfare, housing, electricity generation and manufacturing after the war. And this was all done based on Keynesian theories.
Fast forward to a decade ago when the Global Financial Crisis threatened the livelihoods of Australians. Our policy makers continued this near century-old Keynesian method. The Labor Government injected billions of dollars into the economy, saving Australia from recession whilst creating a budget deficit.
Since that deficit was created, it has been the mission of both sides of politics to ‘balance the budget’ and deliver a surplus. At the 2019 election, the Liberals based their campaign off delivering a surplus in 2020 whilst Labor promised an even bigger surplus than the Liberals.
However, no one could predict COVID-19. Instead of delivering the first surplus since 2008, this year the government is going to create the largest budget deficit in history. The deficit is predicted to be upwards of $200 billion whilst debt will exceed $1 trillion.
These are financial figures which are incomprehensible. And something is going to have to change in our management of the economy. Right now, I am taught in my economics major that governments should achieve a budget surplus and then pay down debt. Australia won’t achieve a budget surplus whilst I’m at university and it will take at least 20 years of budget surpluses to pay back the $1 trillion of debt. I will be nearing retirement before Australia can achieve what I’m told is ‘good economic management’.
So what needs to change? Like Keynes did in the 1930s, there are already economists now thinking of new ways to approach budget management. And whatever new approach is adopted, it needs to consider that budget deficits must be continued in the long run. The only way you can create a budget surplus, especially in the post-COVID economic environment, is if governments tax more than they spend. There are only two ways to achieve this:
Spending stays the same whilst taxes are increased
Spending is cut whilst taxes stay the same
When unemployment is above 10 percent and the economy is in the worst recession since the Great Depression, doing any of those two things in the name of a ‘balanced budget’ would only spiral us into a deeper recession. It is what occurred in the Great Depression and we’re still learning from it a century later. But we need to do more than just learn from the mistakes of the past. We need to respond to the issues that pervade our current economy.
Wage growth was stagnant even before the crisis. That needs to change. The workforce was increasingly casualised before the crisis. That needs to change. The climate was not at the forefront of economic policies before the crisis. That needs to change. And marginalised groups in society had not achieved economic equality before the crisis. That too needs to change.
When we can acknowledge that budget deficits are now going to be integral in our post-COVID economy, and when we acknowledge that there are systemic barriers in the economy, we can progress the economic management of Australia to a more inclusive economy that promotes sustainable growth.
This is the worst recession since the Great Depression. And this is a horrific economic environment to be living in. But it is also a moment which will change the future of our world. Let’s hope that change is for the better.
Think your name would look good in print? Woroni is always open for submissions. Email write@woroni.com.au with a pitch or draft. You can find more info on submitting here.
Joke 1
A young boy walks into his father’s office.
“Can I have some money to buy a bitcoin?”
His father looks up from his newspaper. “How much?”
“$10.”
“$45? Do I look like I have $204? Where am I going to get $13?”
The joke is that Bitcoin’s prices fluctuate a lot…
I’ll wait for the raucous guffawing to die down. But as funny as that side-splitter was, to people that must deal with exchange rates for a living, this is serious business. Let’s say you sold onesies for cats that have their owner’s face on them… you know… to really hammer home the loneliness… and you tried to sell these yourself, pricing them in each country’s native currency.
Joke 2
A young boy walks into his father’s office.
“Can I have some money?”
His father looks up from his newspaper.
“How much?”
“$67 Arubian Florins.”
“$113 New Israeli Shekels? Do I look like I have $38 Costa Rican Colons? Where am I going
to get $4 Polish Zloty?”
A good joke is worth repeating.
So, if you’re trading one product all around the world, it’s prohibitively difficult to figure out how much to charge. It’d be a lot easier if you just used one currency. Thankfully, almost everyone trades in US dollars.
Joke 3
A young boy walks into his father’s office.
“Can I have some money?” His father looks up from his newspaper.
“How much?”
“$10.”
“$10.02? Do I look like I have $9.99? Where am I going to get $10.01?”
The joke’s still a hit.
“But wait,” some of the more pedantic of you readers cry, “there is still some change each time.” Right you are. There would still be a difference in exchange rates between your currency and the US dollar. There isn’t a huge difference, but with the scale of sales of Cutesie CatsieTM, discrepancies in price add up to a lot of money. The solution? Peg your currency to the dollar. This means that your currency is always worth the exact same number of dollars.
Joke 4
A young boy walks into his father’s office.
“Can I have some money?”
His father looks up from his newspaper. “How much?”
“$10.”
“$10? Do I look like I have $10? Where am I going to get $10?”
You get the idea.
This is exactly what petrocurrencies do. A country with a petrocurrency is just a currency that’s main export is oil. Bubbling Crude. Texas Tea. None of this extra virgin garbage. These nations rely so heavily on the price of oil, that they peg themselves to the US dollar in order to keep it stable. Places like Saudi Arabia, Kuwait and the United Arab Emirates all follow this method.
This is good for trade, but it does mean you are very dependent on oil prices going up. As Venezuela can tell you, when oil prices are good, they are very very good and when they are bad, they are horrid. This would be like finding out your cat onesie is knitted out of lavender. If you already knew cats were allergic to lavender, you know too much about cats. In good times, these countries make more money than they know what to do with, and in bad, they starve. Let me stand on my bio-degradable hippy soapbox and point out that oil is not a renewable resource. Eventually, oil wells dry up. To these Petrocurrencies, this is what you would call, a bit of a bummer.
So how do you fix this?
Well let’s say that after you had to discontinue Cutesie CatsieTM, you had millions of dollars in sales, but no way of getting any more. Would you:
A) Blow it all on a drunken bender in Vegas with cocaine and women?
B) Invest the money in shares like the kind of sweater-wearing cretin that reads the financial section of a newspaper and really enjoys chess?
If you picked B, congratulations, you’re thinking like a petrocurrency giant. When a country gets so much money so quickly that it doesn’t know what to do with it, rather than throw a rager, it invests the cash into a sovereign wealth fund. This is sometimes known as Petrodollar recycling, but the scientific term is ‘a big ol’ pile of stocks, bonds and assets.’ When the money from the oil runs out, these countries can use the dividends they make off the sovereign wealth fund to pay for government services. This means that Kuwait, with its sovereign wealth fund of 650 billion, Saudi Arabia with 900 billion and the UAE with its fund of 1.35 trillion, seem to own just about 1 percent of everything on the planet. It also makes these oil producers some of the world’s leaders in the funding of renewable energies. Doesn’t that just mess with your moral picture of climate change?
Joke 5
A young boy walks into his father’s office.
“Can I have some money?”
His father looks up from his newspaper. “How much?”
The child’s phone pings.
“Wait, never mind. My amazon stock just paid me a couple thousand in dividends.”
The child walks out of the room.
The father, being nothing but a facilitation device for this joke, continues to read his paper,
trapped in an endless purgatory, waiting for a punchline that never comes.
He is not needed anymore.
His life lacks all meaning.
The point of all this was to teach you a bit about currency pegs, sovereign wealth funds and how some countries with no resources can still make money, but I promise you that the only thing you will remember is that terrible joke.
Think your name would look good in print? Woroni is always open for submissions. Email write@woroni.com.au with a pitch or draft. You can find more info on submitting here.
CONTENT WARNING: Sexual Exploitation, Body Image, Brief Mentions of Xenophobia and Misogyny
Sometimes the stories that make the biggest impact are those which play out in real time. News and academia seem immeasurably married to events. If someone in the Sydney Morning Herald wrote an amazing article about the eruption of Mount Vesuvius and the destruction of Pompeii today, few would read it. However, a lower quality story about the spontaneous eruption of Mount Ainslie would probably crash the Sydney Morning Herald’s website. Very limited attention is given to stories about things that have happened over long periods of time. Business and economics is not a topic that inspires ‘The eruption of Mount Ainslie’ type stories.
Instead, it gives material form to abstract patterns, evolutions and phenomena that we would otherwise forget about, but which shape our world as we know it. It is my view that articles and stories about business and economics should aim to shine a spotlight on these changes and the implications that they carry for our society, our money and ourselves.
So much of our reality exists without material form at the behest of companies like Netflix, Amazon and Facebook to name a few. These corporations control so much of what we do every day and often bleed into one another to the point where they monopolise everyday life.
Since the emergence of computers and smart-phones, more and more of our lives are conducted online. Some of our relationships exist as much online as they do in person. Our money, most of which we will never see nor hold exists only as a number on our screens. We spend hours binging shows like Sex Education, The Office and Watchmen (all personal favourites) on streaming services, all of which exist on our laptops and phones, not anymore, it seems, on our televisions.
As a consequence of their great size and power, these companies often contradict themselves and operate outside of their own corporate identities. Amazon, for example, was established as an online book store. It now controls the online shopping market, Whole Foods shopping markets (with 500 stores in the United States and counting), produces films and has launched its own streaming platform to rival Netflix. Imagine if 20 years ago someone told you that by 2020, a company which sold books online would control a chain of supermarkets, launch its own on-line television channel and become one of the largest tech corporations in the world. What more can a company control other than food, technology, entertainment and shopping?
It gets weirder. The Walt Disney Company, originally responsible for Mickey Mouse and The Lion King, not only owns Lucasfilm and Marvel but is the par- ent company of Fox Corporation. The very network that gave us Fox News and Roger Ailes, Bill O’Reilly and Tucker Carlson is owned by the same company that gave us Lilo and Stitch and Bambi. I don’t know if Pinocchio would agree with their demonisation of immigrants or their blatant misogyny, but I guess the board of Disney wouldn’t invite him.
These companies, through monopolising everyday life and exploiting it, for all it’s worth have managed to creep into politics and business to amass great wealth and power. They remind me of the fictional media conglomerate Waystar Royco from the show Succession, gigantic and seemingly indestructible but morally corrupt. Like Waystar Royco these corporations wield enormous political power, sourced from the sheer volume and size of their political donations and their control over news networks. Facebook for example decides what political material appears on our feeds no matter the legitimacy of the add or the substance of the claim. This has an enormous impact on how we form our political opinions and ultimately how we exercise our right to vote.
Amazon, Disney, Facebook and others represent the closest thing we have to despotic actors in the world of business and economics, these titans of industry wield enormous power sourced from their immense wealth and ability to control what we see and how we see it. The $4 trillion question is, how did we let them grow so powerful to the point where they are en- trenched in our economic, social and political fabric?
The answer is sex.
Sex, bodies and seduction, and business and economics seem to have nothing in common. Monetary policy appears to play little role in who we find at- tractive and talk of fiscal policy would never make us swipe right. The reality is that how we spend our money is governed by appearances and sex. We are more likely to spend big on something that is glamorous and sold to us by a perfect celebrity or model, even if it is in our interests to do the opposite. Over time, media conglomerates like Facebook, Amazon and Disney have monopolised this dynamic in order to control not only what we buy but what we see, when we see it and how we see it. As a result, these companies have amassed great wealth and power to the detriment of consumers. The monopolisation and commercialisation of sex has had untold consequences on our economy, our politics and on ourselves.
People will often succumb to the ‘buy this get this’ trick or the ‘buy this become this’ idea whereby some model will stand behind a product, leading the consumer to buy it due to some subconscious wish to become or attract the model. Fox News has expand- ed on this to create a ‘believe this get this’ dynamic where questionable news and political claims become more believable because of the glamour be- hind the ugly propaganda.
Selling products or news using sex also encourages impulsive buying, which is particularly common on-line. Most of the things we buy online are low-risk, relatively cheap and low-information products such as books, accessories and small electronics. Amazon for example, tries to make it as easy as possible to purchase something so that you have little time to consider if you really need it. The model standing behind the product telling you how great it is makes it even more likely that we will think ‘if only I buy this useless hat, I can be as good-looking as they are’.
The same dynamic is exploited in news. Some channels push fast-paced discourse and furious agreement so that the viewer doesn’t have time to consider the implications of what is being discussed. All we see is two seemingly respectable, good looking people in such vehement agreement that there is no time to think more deeply about the issue until they have bought the claim being discussed. Viewers seem more likely to believe something if it is sold to them by someone they find attractive or alluring, especially if the news program is fast-paced and filled with more graphics than analysis. This has allowed Facebook and Disney to buy millions of viewers, giving them one of the biggest viewerships in the world and the billions that come with it.
It doesn’t take a genius to see that giving billions to lawless and morally corrupt media conglomerates by allowing them to play on our sexual desires and in- securities isn’t great. It is impossible to calculate the psychological or economic damage that it has had on people who suffer from severe body issues and chase product after product clinging to the hope that it will give them the perfect body and appearance. Who knows how much Facebook or Fox has been able to push its own agenda by tuning us to accept questionable, or blatantly wrong claims because we are more inclined to believe someone who we find attractive? This has only allowed these companies to amass great wealth and power, making them so politically immune that they can survive even the most strident efforts of government to regulate or monitor their behaviour.
It has become fact since the emergence of the inter- net and these conglomerates that sex breeds sales and viewers, sales and viewers breed money, money breeds power and power breeds impunity. This is not something that has happened all at once, and there is no moment in time that can be pinpointed as the day this began to go beyond our control. This is not an ‘Eruption of Mount Ainslie’ story. This is something that has developed over a long period of time as our everyday lives became more and more dependent on the online economy.
The use of sex and envy in advertising and news has allowed these conglomerates to maximise their market share and become some of the most powerful entities in the modern world. To the psychological and economic detriment of consumers, we have been trained to neglect our better judgment and give into our lesser desires. The dynamic they have created be- tween us and them is dangerous, toxic and seemingly-unshakable. It might not quite be the eruption of Mount Ainslie, but volcanic events are limited by the rules of nature. Facebook, Amazon and Disney know no rules, natural, political, economic or otherwise.
Comments Off on All Tip and No Iceberg: Ceremonial Economics in Australia
What is something ceremonial? Shiny objects like orbs, crowns and sceptres? Or grand and powerful characters such as the Governor-General, the Pope or the Queen? They are highly revered, and beautiful to look at. However, too close a step can offer a glimpse beyond the façade and reveal the idleness beneath the surface. The power of ceremony is that it can distort the true meaning of things with fancy rhetoric and hyperbole. The Imperial Crown of the United Kingdom, while beautiful and famous, is still an object. The Pope, while admired and worshipped, is still human.
Ceremony is also present in our politics and economics. Over the past 40 years, countless governments and oppositions have coated simple phenomena and concepts in spin and hyperbole to distort their meanings for personal benefit. They have created ceremonial economics in order to sell political narratives to voters for political gain.
Today, Prime Minister Scott Morrison’s surplus is the best example of ceremonial economics. If, as the Liberal government has promised since they were elected in 2013, there is a return to surplus this year, it will not mean what the government wants us to believe it means. Morrison will spin it as a return to the predictable and prosperous fiscal discipline of the ‘Howard years’, and as an indication of a healthy and rot-free economy. It will be presented as a sign of economic and political success that belies its actual significance and implications. A budget surplus now has a conferred ceremonial power which alters its true meaning.
The creation of ceremonial economics has had alarming effects on our politics and public discourse. As the state of the economy and fiscal management are key concerns of Australian voters, real political outcomes are decided on the basis of distorted meanings and ceremony, while meaningful substance is neglected.
Since Morrison came to power in 2018, he and his treasurer have emphasised the government’s determination to return the federal budget to surplus in the 2020 to 2021 financial year. In the 2019 federal budget, the centrepiece of Josh Frydenberg’s speech was restoring ‘fiscal discipline’, announcing that Australia’s gross national debt had steadily decreased, and that there would be an $11 billion surplus in the coming year.
Federal budgets, while officially a statement to the public about the state of the national accounts, are always political. The return to surplus was qualified with the assertion that ‘only one side of politics can do this’, with a casual reference to former Prime Minister John Howard and former Treasurer Peter Costello’s paying off Labor’s ‘debt’. Neither in the speech, nor in the election material that followed, was there any exploration of what paying off Labor’s debt would mean for voters. Instead, the Coalition used the misleading ‘surplus’ to convince voters that it had saved the Australian economy. And it worked. They won the ‘unwinnable’ election, and proved that in elections, economic management is always supreme.
Despite this victory, and the surplus we will no doubt see within in the next three years, the Australian economy continues to sputter, one painful limp at a time. In October of last year, the International Monetary Fund (IMF) predicted that the economy had grown just 1.7 per cent in 2019, and would only grow by 2.3 per cent in 2020. This was before the catastrophic bushfires that have devastated much of NSW and Victoria. This makes 2019 the worst year for the Australian economy since the Global Financial Crisis 11 years ago. Given that a healthy growth rate is considered to be between two per cent and four per cent, there is considerable cause for concern.
The government has reassured people that despite ‘economic headwinds’ the ‘fundamentals’ of the economy are strong. What these fundamentals are, if wages are stagnant, trade tensions are rising, and interest rates are dangerously low, is unclear. A budget surplus in the near future will not solve these problems. At a time when the Governor of the Reserve Bank has pleaded with the government to spend to stimulate the economy and prevent recession, a manufactured surplus might be the last thing we need. In fact, it will be window dressing, the much anticipated delivery of a political promise made in 2013. The Coalition will use it as evidence of their prudent economic management and remind the electorate of how long it took to clean up ‘Labor’s mess’. This is despite the threats that Australia faces and the deep structural imbalance of our economy.
The $11 billion question is why, at a time of great economic uncertainty, is this surplus, the result of inaction and political points-scoring, so celebrated? Why isn’t it seen for what it is? Why is it all tip and no iceberg?
The answer is, ceremony. For decades both sides of politics have painted one another as incompetent economic managers, and pronounced themselves as the only party that can be trusted with the economy. This has led to 40 years of spin and ritual. Simple economic phenomena have been dressed up so much that their significance has become distorted and their meaning malleable, if not broken altogether. Through endless attacks, rhetoric, and tricks, a lack of fiscal discipline has become deadly in Australian politics. Politicians have conferred a type of nominal power on economics, resulting in its purely ceremonial meaning.
In 1975, former Prime Minister Gough Whitlam and his government, the first Labor administration in over 20 years, werewas removed from office in a crushing electoral defeat after just three years. Despite their sweeping social reforms, the Whitlam government was plagued by chaos and economic mismanagement. The Coalition argued that Labor had failed to control inflation, led the country into an oil crisis, and induced a recession. This, compounded with the many scandals of the Whitlam administration, was enough to remove Labor from office. The failures of the Whitlam government became the foundation of a narrative that economic mismanagement is always linked to internal chaos and instability.
In 1983, the newly-elected Hawke government turned the tables on the Coalition by publicly revealing that the deficit left by former Prime Minister Malcolm Fraser was $3 billion larger than what was stated during the campaign. This deficit of $9.6 billion (around $31 billion in today’s dollars) meant that the incoming government would have to cut most of its spending plans for its first term. The blame was used to paint the outgoing government as fiscally incompetent, unbalanced, and untrustworthy. This cycle was repeated in 1996 when John Howard inherited a $14 billion deficit (roughly $24 billion in today’s dollars), which was significantly larger than expected. Howard also came into office with the national debt approaching 20% of GDP, the highest level since Whitlam.
In both these cases, highly unpopular governments were swept from power in dramatic fashion. Fraser in 1983 and former Prime Minister Paul Keating in 1996 were both vehemently disliked, and avoided answering questions about the deficit and the net debt accumulated during their time in office. In both cases, fiscal mismanagement was linked to untrustworthy, unpopular, and chaotic administrations.
Conversely, Howard was able to marry economic prosperity, rising wages, and low inflation to surplus after surplus. After the 1997 to 1998 budget, all but one of Peter Costello’s next nine budgets were in surplus. Howard and Costello won four successive terms and governed for over 11 years. In the minds of the electorate, stability and general wellbeing went hand-in-hand with a balanced budget.
A crucial element of Labor’s successful campaign in 2007 was painting themselves as ‘economic conservatives’ who would not spend big as Whitlam and Keating did, but would follow Howard’s prudent fiscal management. However, Labor was forced to erase Australia’s budget surplus, and spend to avoid a potential recession brought on by the Global Financial Crisis. Despite the fact that Rudd’s policies likely prevented a recession, the opposition used this to convince the public that Labor could not manage the economy. This was not helped by the instability that plagued Labor from 2010 onwards: a minority government, a midnight coup, and spill after spill followed by deficit after deficit. Once again, economic mismanagement followed chaos and instability.
Whitlam proved that governments live and die on their management of the economy. Hawke tied together unpopularity, failure, and untrustworthiness with a massive budget deficit. Howard married political stability and economic prosperity with unbroken rivers of gold flowing from the treasury. As the Rudd/Gillard government ate itself alive, the public again saw headline after headline about a rotten budget and a sky-rocketing national debt. Gradually, the meanings of economic terms hadwere been eroded, and all that remained was their raw political value. Because a surplus must be good and a deficit must be bad, their significance is lost. Instead, the budget is smothered in ceremony as complex economics are reduced to ritual talking points on breakfast television programs Sunrise and Today. Both sides of politics have used the state of the federal budget to attack each other and promote themselves, to the point where a surplus has become the jewel in the crown of competent economic management. Like a crown, when removed from ceremony, it becomes irrelevant.
The problem is that the state of the budget is so much more than just a shiny object. The finer, but more important, implications of budgets and economic phenomena are so often lost in political noise.
As the last four decades have made the national accounts purely ceremonial, the government is chasing a budget surplus to try and once again marry a balanced budget with prudent economic management. However, a political, at-all-costs surplus is the last thing the Australian economy needs. All signs point to a global slowdown and stagnant growth in the very near future. A recession is more than possible. Interest rates are at historic lows, and monetary policy has run out of room. If the government continues to chase a surplus it will be unable to stimulate the economy, resulting in a recession for the first time in 25 years, rising unemployment, falling revenues, and years of recovery. It would be a surplus that Australia could not afford.
Comments Off on Want To Write For Edition 2? Check Out These Prompts!
Woroni is looking for YOU to write for our second edition of the magazine! You can write about pretty much anything, but here are some prompts to get your creative juices flowing (hint: the theme of this edition will be SEX!). First drafts are now due next Tuesday (25/2).
International:
What is considered ‘appropriate’ when it comes to sex? How does it differ between cultures?
Are standards of sexual attractiveness different in different cultures? Do you think we can all be sexy?
Talk about STIs – why is there a stigma surrounding it when it happens to so many people?
Reviews:
Parasite
Tame Impala’s new album
Literally anything else!
Arts:
How can sex and bodies be used as protest? Think the #freethenipple, sex strikes etc. Do they work?
How do you feel when you see your body naked? Are you liberated, or embarrassed, and why is this?
How has the tv show Sex Education brought sexual wisdom to a mainstream audience?
Talk about a sexual experience that has had a lasting impact on you, positive or negative. What was it about this experience that made it so memorable?
Multilingual (for foreign language speakers):
Talk about sex and social media! Think about sexting, online dating etc. and the impacts they’ve had on you.
Talk about the presence of sex in the films you’ve watched and the music you’ve listened to! Who are the people who engage in this, and does it matter?
How has your mental health affected your sex life? (can be anonymous)
Creative:
Poetry
Fiction
Photography
Painting and drawing
Scripts
Satire
Science
Talk about fat-shaming! How can we have productive discussions about health without implying blame?
Apparently, giraffes express sexual attraction through drinking each other’s pee! What are some examples of animal sexual practices that put humans to shame?
Are ageing and death as inevitable as we thought? Are they even preventable?
Turns out, some people don’t have an inner monologue! Do you have one? How does having a rich inner life or the lack thereof impact on your life?
Have you ever had imposter syndrome in a sexual relationship? Why was this?
According to several studies, our generation is having a lot less sex than previous generations. Why do you think this is? Why are these studies so important?
How do you really feel about your body? Tell us openly and honestly (and anonymously, if you like).
Business and Economics
Porn is a multimillion dollar industry! Why is porn so popular, and why, despite its popularity, is it still stigmatised?
Talk about sex work! Is sex work inherently oppressive? Should we legalise it?
Do you own any sex toys? Talk about them! Why are they important to you, and why don’t people really talk about them?
Give an overview of online dating. Talk about some of the various websites, how popular they are and what purposes they serve.
My podcast addiction began three years ago with The Tim Ferris Show, a podcast in which bestselling author, entrepreneur and investor Timothy Ferris interviews high-performing people across a wide range of disciplines. Since then, I’ve listened to countless conversations between bestselling authors, billionaires, television personalities, athletes, presidential candidates, philanthropists and justices of the Victorian Supreme Court. Russell Brand to Jordan B. Peterson. Elon Musk to Melinda Gates. History, politics, marriage counselling and book reviews: Apple Podcasts has it all.
The idea of listening to podcasts might still seem like something your overcommitted friend studying law and commerce might do (guilty). But the reality is that a greater number of people are choosing Revisionist History over Coldplay. It seems that every day a new celebrity announces their foray into the ‘audio space’, armed with nothing but a quirky ‘personality’ and ‘a story to tell’. It is also true that an increasingly large number of companies are using podcasts to promote their message, inform their client base and recruit new people. Being a commercially orientated student with an interest in this audio space, I decided to determine just how commercially viable podcasting as a medium is.
What actually is a podcast?
For the few readers unaware, a ‘podcast’ is a type of digital content, produced episodically, usually in the form of an audio or video file. Common genres involve dramatic retellings of historical events, ‘round-table’ conversations on a particular topic and interviews with interesting high-achievers. Popular podcasts like The Joe Rogan Audio Experience and Dan Carlin’s Hardcore History usually release long-form content unsuitable to the traditional platforms of radio and TV – we’re talking three or more hours of content per episode.
There are a number of common reasons to start a podcast: to promote a book, a business or a cause, to produce interesting content that can be monetised, or a mixture of both – to produce content that promotes a certain message and can be monetised due to the insightful nature of its material.
How do podcasters make money?
True to form, Tim Ferris has produced an insightful article which breaks down this question nicely. Podcasters who are taking the ‘monetisation’ approach usually produce interesting content that users are willing to either: (1) support through the purchasing of sponsored goods, or (2) support through the use of donations. Hardcore History is a podcast that makes usage of the latter model, producing 12-hour-long epics and asking for $1 donations at the end of each episode. Clearly, it works, as they pay an entire team to research for and produce the podcast all year round. Tim Ferris uses the former approach, monetising his podcasts using a CPM (cost-per-thousand) approach. After approaching a sponsor, Tim will set a price – usually between $25-$100 CPM – and is paid depending on how well the podcast does. He’s quick to note that despite the possibility of his podcast generating $2 to $4 million USD per year using this approach, he likes to ‘cap’ the amount sponsors will pay in order to retain his audience. If that number seems incredible, Tim’s podcast barely breaches the Top 50 podcasts on Apple Podcasts. In 2015 The Joe Rogan Experience was seeing approximately 15 million downloads per month, and Rogan usually includes about three sponsors per episode.
How big is podcasting?
These figures prompt the question, how big is the podcasting industry? This is a multi-faceted question with a complicated answer. Like with YouTube, actually identifying an exact figure is difficult. Podcasters do not always publish their listener numbers, let alone their earnings, and the process of identifying either is usually a matter of speculation.
In addition, many podcasts are designed to promote external content and businesses, so the monetary value they generate is even harder to identify. A good example of this approach is the The GaryVee Audio Experience, with which the company Vayner Media promotes its vision and mission in the form of a podcast called the Ask GaryVee Show. The original production involves the company’s CEO sitting down with another influential business and sports personality as they answer a number of user-submitted questions. The program runs for about 30 to 60 minutes. This content is then dissected into 10 to 15 minute long pieces of content, distributed on Instagram, Facebook and LinkedIn. Particularly impressive anecdotes are further transformed into cartoon panels for distribution on these same platforms, or one-minute long ‘insights’ that viewers can easily share with their unsuspecting family members. Instagram and Snapchat stories are next, hosting their fair share of insights that divert viewers back to the long-form content where the message is clear: Vayner Media knows what it’s talking about when it comes to Topic X. All in all, the company is able to produce around 30 to 60 pieces of content a day – all from a single 60 minute podcast.
Clearly, podcasting is on the rise, and with larger numbers of celebrities, companies, and even government departments using this platform to connect with their respective audiences, it is bound to grow even more in the years to come.
Analysing the standard of living of a population is a bit like doing a personal reflection on the state of your happiness, but for an entire nation. It is a necessity to be able to understand the world’s motion of direction throughout time, and to examine strengths and weaknesses in an economic state. When undertaking the mammoth task of measuring standard of living in a country, there are many tools to choose from. The method that is most common and generally agreed upon is Gross Domestic Product (GDP), defined as the total market value of all final goods and services produced within an economy. There is no doubt that GDP, and often GDP per capita (the average prosperity of a given citizen), has been useful, efficient and reliable for the most part.
Measuring the economic standard of living has long been a task delegated to the metrics of GDP and GDP per capita. It is easy to see why this is the case. GDP, and GDP per capita in particular, make a lot of intuitive sense and are generally dependable ways of getting a snapshot of the economy. Having a lot of money to spend means that it can be spent on all of the good things such as healthcare, education and limitless choices of consumer goods, that eventually contribute to a happy society. High GDP per capita overall, tends to reflect this as well. The richer your citizens are on average, the more they are able to spend on goods and services that increases their happiness. It measures production levels, employment and incomes well, all elements that increase standard of living. They say money can’t buy you happiness, but it certainly seems to help.
While human happiness is a complex but important thing to measure in a fast-moving, modern world, its measurement demands attention to more than GDP alone. GDP carries with it far too many limitations to be the quintessential indicator of a country’s standard of living. GDP metrics don’t account for crucial things such as leisure time, actual health levels, standard of education, environmental wellbeing, hobbies, quality of goods and services being exchanged, and the levels of technology. All of these things can make quite a difference to the individual’s mental health and happiness. This is where composite indicators – economic indices that combine multiple indicators into one – are a really great tool to use for measuring living standards. The most well-known composite indicator is the Human Development Index (HDI), which is an amalgamation of GDP per capita along with life expectancy and education. It builds a broader picture of standard of living, and by extension the development levels in a country, much better than any of the indicators on their own.
There are other good national happiness indicators, for example the Sustainable Development Goals and the Happy Planet Index, which both focus on the sustainability of human wellbeing and are being increasingly utilised. New Zealand’s 2019 budget even included reports on how national spending impacts wellbeing. But what if happiness metrics in an economy were taken to yet another level? In Bhutan, the government is guided by the philosophy of ‘Gross National Happiness’. The idea of Gross National Happiness was enacted into the Constitution of Bhutan in 2008 to keep the country moving forward, with a focus on the wellbeing of its citizens rather than what has often been the reiterated economic goals of making mega-trillions and fuelling consumerism.
We are beginning to do a good job of normalising and bringing in other measurements of standard of living that used to be seen as insignificant. The likely reason for this is our new-found understanding that higher levels of happiness contribute even more to the economy, especially as we move into more service-based sectors. Composite indicators like the HDI satisfy the need for keeping our eye on more than just GDP. They provide a more balanced snapshot of where our happiness is at.
Comments Off on What Morrison’s Tax Reforms Mean for Australian Families
Australians will see the first of several tax reforms from the Morrison Government in this year’s tax return. The latest election has led Prime Minister Scott Morrison to claim a political ‘mandate’ to pass some of the largest tax cuts in a generation. But will the average Australian family benefit, or is this just another political promise with little real advantage for Australian households?
The answer is both yes and no. While all Australians would hypothetically financially benefit from these tax reforms, the reforms also bring along budgetary disadvantages. This means that the negative impacts of the reforms on government services will outweigh the financial benefits for numerous Australian families.
To summarise the tax reforms, they will take the shape of three separate policies, labelled tranches. The first tranche will be implemented in the 2018-2019 financial year, and lifts the low- and middle-income tax offset to include levels of income up to $126,000. The maximum amount of the offset will be lifted from $530 to $1080. Importantly for lower income earners, the base amount of the tax offset will be increased from $200 to $255. The second tranche will be implemented from the 2022-2023 financial year, and lifts the 19% and 32.5% tax bracket. The third tranche will be implemented in the 2024-2025 financial year, and will lower the 32.5% tax bracket to 30%. This tranche will also extend the bracket to cover what used to be the 37% tax bracket. Additionally, it will push the minimum income for the highest tax bracket of 45% from $180,000 to $200,0000. These reforms can be seen as a move towards a flatter, rather than more progressive, tax system.
The most significant aspects of these reforms for families are their implementation schedules and their impacts on essential services. Low- and middle-income individuals will experience the fastest change as they receive tax offsets this year. However, the second and third tranche, primarily regarding middle- and high-income individuals, carry a start date of at least 2022. For Australian families this three-year delay could see multiple movements between tax brackets as their fortunes change. It undermines the ability of families to adequately prepare and form economic expectations.
Perhaps the most important aspect of these policies is their estimated cost to the government of at least $158 billion over the next decade in foregone tax revenue. If the reforms are fully implemented the government may find that they have to pull the purse a little tighter. Programs like Medicare, Centrelink, and the NDIS that underpin the health and prosperity of families, especially lower income families, may find themselves the victim of smaller government budgets. It is unlikely that the money these households save from the tax offsets or lower rates will be able to cover the services provided by these programs.
An often-overlooked segment of society that will not see any benefit are families with members working in Australia’s black economy. Frequently a source of employment for disadvantaged and underprivileged Australians and non-naturalised immigrants, the nature of their work precludes them from reaping any of the rewards of the new system. Due to the reform’s impact on government services, these members of society and their families may find themselves the victims of reduced government services without tax offsets or lower marginal tax rates.
An aim of Morrison’s tax reforms is the intention to put more money into the pockets of Australian families. However, the small financial gains Australian families will make are outweighed by the subsequent cuts to essential government services. Nowhere will these cuts be felt worse than by lower-income families and members of Australia’s black economy.
Comments Off on The Budget 2019-20: Why does it matter?
Out of all events in the Australian political calendar, the Federal budget is rarely the pivotal moment in an average person’s voting habits. This is understandable. To fully comprehend any sort of nation-wide and long-term piece of economic policy – let alone a Federal budget – requires a considerable investment of time and research that many outside of academia or economics-related professions do not have. Furthermore, reporting and coverage in the mainstream media often gives us a shallow understanding the complexities at hand. However, budgets are a critical part of a government’s blueprint for the short to long term, outlining a national direction and plans for the machinery of government. Budgets have the power to make or break a nation’s economy –particularly on the eve of an economic downturn.
To analyse the 2019-20 Federal budget, one should look into the economic conditions and probable future of the Australian economy. On the surface, Australia has had a fortunate run of economic prosperity for nearly 30 years. Continual economic growth has seen unprecedented development relative to the OECD – that would lure one to believe that Australia’s economic future is no serious cause for concern. The economy’s uncanny ability to miss financial earthquakes like the GFC has restrained many from considering less pleasant alternatives. Unfortunately, the actual predicted outcome is not so bright. More economists are expecting a major downturn in the economy to occur as soon as 2019. Many of these forecasts are steeped in an understanding of the dangerous levels of household and corporate debt in Australia that have long been incubating.
Without getting too technical, it is worth outlining the exact mechanisms by which debt can hinder an economical performance. Economic activity to grow an economy comes from several sources, such as consumer spending, investment by individuals and businesses, and, in some cases, government policy. The former two are common ways economies grow on the private side of the economy – through consumers spending more on goods and services, and businesses driving development and expanding operations through investment. Often, these groups need to take out loans from financial intermediaries (banks) to properly and safely finance their activities, in the process creating a debt – in this case, private debt if the borrower is not government affiliated. Thus, debt is often a natural by-product of a growing or booming economy. As history professor, Yuval Noah Harari has pointed out, the idea and process of debt have been a fundamental part of allowing economic growth and development in areas from science to technology. By representing imaginary goods or gains on future investment as credits (or debt), institutions and individuals can more confidently lend to the borrower to undertake entrepreneurial and economic activity essential to an economy’s growth, paying the borrower as stipulated in the terms of this debt.
Problems arise, however, when this level of debt is left unchecked and grows out of control. Numerous models show that when individuals or firms have a strong tendency to invest, the level of private debt in an economy begins to rapidly increase relative to GDP (i.e. the debt to GDP ratio increases). This can easily be passed off as economic growth, since debt is often used to power economic activity and, as debt to GDP increases, the percentage of GDP debt also increases. Just before a crisis, volatility in unemployment ceases, giving the impression of economic tranquillity. Critical mass –when the economy’s GDP and employment crash to zero – occurs when this debt growth begins to slow down, resulting in a potentially cataclysmic economic crash.
In Australia, we are close to hitting this critical mass of debt. Since 1995, debt to GDP has skyrocketed from 120 per cent to 210 per cent in 2015. Most worryingly, this ratio has begun its decline since then, dropping to 205 per cent in 2017, signalling the approach of critical mass. If no policy action is taken, the only way out of this situation for the near future would be an impossible increase in household borrowing. This would make total private debt nearly 250 per cent of GDP, which would be the highest level ever recorded in the OECD. Given this, it is likely an unavoidable economic slowdown is on the cards.
Returning to the original question at hand: does this budget have what it takes to mitigate the worst of a hypothetical but probable crisis? As a short-term measure, the budget has sound and robust policies at its disposal. During any kind of economic calamity or financial crash, it is imperative that the government ensures that the economic activity continues. The tax cuts proposed in the budget are one such stimulating measure: $158 million worth of tax relief has a high chance of increasing the spending of consumers, particularly those in lower socio-economic levels who stand to gain up to an extra $1080 annually in income. Furthermore, plans for extensive investment into essential infrastructure is a sure-fire way to keep the economy ticking over in a recession, as demonstrated by Roosevelt’s Works Progress Administration in the 1930s. The promised $2.6 billion will largely contribute to regional and urban road upgrades and construction. This on top of further funding for upgrading telecommunications in regional and rural areas will likely help to create jobs in a hypothetical contracting economy, and may help to stabilise and stimulate economic demand, particularly in these centres.
But aside from these measures, the budget fundamentally does not seem equipped to deal with the possibility of a recession. Many of the underlying assumptions that are used to justify budgetary spending or restraint are highly unrealistic. For example, an assumption of a 0.4 per cent growth in health spending in real terms is improbable given the retirement of the boomer generation and increased strain on health systems this brings. The defence has received a similar projection for its expected unlikely growth, since such departments often need huge amounts of funding to achieve their policy goals. The budget is constructed in a way to discourage further spending; effectively limiting the scope of government policy for the near future. Overall this budget is one of restraint and prudence, taking the title for the lowest projected spending in the past 50 years. While in normal economic times this stance is welcomed, in the lead-up or during a recession it is not the right mindset to have. Such assumptions will have to be violated for the government to help restart the economy through spending, such as once-off lump sum payments to consumers or businesses, or increased spending on public works, and further tax cuts. Otherwise, non-intervention for the sake of sticking to budgetary goals will likely make the situation worse. It is clear from the nature of the budget that some policymakers do not anticipate a recession despite the growing evidence and support for this viewpoint. Even if a recession does not originate in Australia, growing economic woes in the US or elsewhere could easily create a chain reaction effect, much like in the GFC, that could severely damage the unprepared Australian economy.
While it is easy to criticise a budget for its lack of preparation, one must remember these are highly politicised documents, and they often shirk economic truth for the purposes of political warfare. Economic predictions can be lost in the desire to one-up a political opponent; most if not all political parties are guilty of this, both in Australia and across the globe. Nonetheless, it is important to realise such faults and make alternate suggestions from an economic perspective. Investment in infrastructure and tax cuts are solid short-term measures, but these alone will not be enough. Longer-term investments that pay for themselves, such as investments into increasing economic productivity and technology, are all incredibly powerful ways to stimulate short-term and long-term growth well after a crisis has subsided. Even better, ways that tackle the heart of the problem, like gargantuan levels of private debt, are a promising way to delay or avert the crisis before it begins. History has shown us time and again that poor governmental policy in the face of recession – be it in the Great Depression, the EU crisis (specifically Greece, Ireland and Cyprus) and the GFC – only makes the situation far worse. Australia has weathered crises before, and with sensible and diligent policy-makers in government, business and banking, we can weather it again.
Unfortunately, the actual predicted outcome is not so bright. More economists are expecting a major downturn in the economy to occur as soon as 2019. Many of these forecasts are steeped in an understanding of the dangerous levels of household and corporate debt in Australia that