News Home Just In Australia World Business Sport Entertainment Weather | Opinion Blogs

Opinion Home Essays Emails Speeches Documents Contact

Spin no cure for depression

By Bruce Haigh

Posted November 17, 2008 09:24:00

A majority of Australian households built up a less than healthy debt on the basis of government and business spin. (ABC News: Giulio Saggin, file photo)

For the past six months, communiqués on the collapsing world economy have been increasingly grim. The retreat of markets has been as steady as it has been relentless.

For investors and superannuants weekends come as a relief - no bad news, as good as a spell out of the trenches. But the fear remains, the bombardment will recommence today.

Trembling money marketeers and business professionals have convinced the government the economic slide can be reversed through a boost in morale. They contend that it is all about confidence. It is not, it is structural, caused through poor lending practices in part driven by people seeking to live beyond their means.

Spin became a primary tool of government over the past few decades. With full employment and a rising stock market it worked. It worked so well that a majority of Australian households built up a less than healthy debt on the basis of government and business spin.

We were assured that Australia was rich and blessed and was likely to get richer and even more blessed, despite a growing shortage of water and encroaching climate change. The good news spin was an effective smokescreen. The plight of refugees, the war in Iraq, the underlying strength of the economy, failure to spend on public assets and the benefits of privatisation - all were spun.

But as the NSW government has discovered, past spin has all but spun them out of power.

We have a government who inherited the Howard spin machine and all the operatives that greased it. Rudd has been happy to use the Howard machine and his grease monkeys. He has praised, promoted and defended them but the spin machine could never be a substitute for substantive policy making and implementation.

Reality can't be spun, it just makes victims of the spinners, as Menzies discovered in 1941. It would not have been good for British morale during WW11 to do any less than tell it how it was and likely to be.

The Rudd government has sought to gild the lily over what Australia faces and will have to bear over the next two or three years. The extent of private debt will ensure a rough ride. Australian managers are no better than their overseas counterparts.

The level of corporate remuneration indicates that senior managers have been infected with greed and the loss of judgement that attends it. Many younger managers know nothing but the good times; they haven't been trained to manage hard times.

It is irresponsible and immature to attempt to hide prospective problems and possible and probable outcomes. How can Australia avoid what the embrace of globalisation will deliver? By what stretch of the imagination can Australia escape what has befallen other countries?

What we do have is time and we should be making use of it, but we are squandering it through self-defeating denial.

In my opinion it was not wise of the government to throw $10 billion into the economy just before Christmas. It smacked of panic. There is an old military maxim, never commit your reserves until you know the strength of your enemy.

Rudd has thrown in the palace guard with little prospect of new recruits. He is going to have to introduce conscription - to go into debt. There's nothing wrong with that, except that he might have had $10 billion of real money to judiciously deploy on strategic targets when they presented themselves.

This panicked response is like pouring petrol on the dying embers of a camp fire at dawn. The fire will certainly flare, but when it dies down there will be little left of it. Rather he should have scouted around for some timber and gradually built the fire up again.

What is required is some leadership. Tell it like it is so that the rest of Australia can all make some timely and prudent decisions.

This is not a time for bureaucratic mumbling; this is a time to appeal to the strengths of the nation. Plain, clear headed, honest speech, of a type that Australians and their leaders were once noted for.

Rudd and the Labor Party need to take a leaf out of Barack Obama's public presentation notebook.

For if they don't, in twelve months time, Malcolm Turnbull and his air of certainty will look a lot like authority and leadership. The deniers still have an edge, but for how long? And when reality bites, how far will be their fall from grace?

Ask Nathan Rees: hell hath no fury like an electorate scorned.

Gird your loins, we are in for a tough few years, but as a nation we will come out of it stronger, more cohesive, more efficient and more self-sufficient.

Bruce Haigh is a political commentator, somewhat troubled investor and irrigator.

Tags: business-economics-and-finance, economic-trends, government-and-politics, federal-government, leadership, international-financial-crisis, australia

Search for news

Comments (101)

Comments for this story are closed. No new comments can be added. If you would like to have your say on this issue, you can do so via the Emails section of our Opinion pages.

graeme:

17 Nov 2008 9:56:36am

I'm over the blaming on sub-prime mortgages and bad US homebuyers. Most "business acquisiations, company takeovers, et al, are financed by the banks. Huge unproductive loans.
Keating got Austalia saving via compulsory super.
Costello got Australia spending and borrowing and calling it growth.
I don't see how Turnbull can turn bull into gold, but he can sure talk down the economy.

Agree (0) Alert moderator
John Michaels:

17 Nov 2008 10:15:44am

A bit of honest talking might help, or it might just take the depression to all new lows. How do you think the baby boomers are feeling when they think about having to work for the next 10 years to make up for the greatest loss on superannuation savings in the last 10 years?

Unfortunately most Australians were sold on the spin that the good times were here and here to stay. This led to a lot of upfront credit being given to people that should never have qualified for it and they spent it on assets of a depreciating value. At the same time the previous Government made it even harder for local students to get University education by increasing fees, increasing full fee places, and then by all but abolishing HECS to replace it with something that doesn't cover the cost of your degree.

Now we have the economic management of Mr. Rudd and Co. throwing money at people just before Christmas so that there might be some chance of saving the services, think any shopping centre, industry from collapse over the next 6 months. I don't agree with what he is doing however I do understand it.

Australia used to be a self sufficient Nation. It wasn't until some people in Government thought "interdependency" would be a good idea for the country that there were wholesale changes to the way Australia fed itself. Now we buy all of our consumables from everywhere else. I dare you to go to the supermarket and tell me the percentage of Australian products that remain on the shelves. And I don't mean the token "packaged in Australia" homebrand peanut butter. You're right. Too many people believed the spin yet too many of those who avoided it are still going to pay for the mistakes of the others.

Agree (0) Alert moderator
Ron Santen:

17 Nov 2008 10:18:13am

If putting more control and regulations on the whole finance sector, and banks in particular, is not the outcome of this whole crisis then all the spin and talk by politicuans and leaders has been a total waste of time.

To allow the people who control and administer banks and finance houses to continue to use funds to benefit profits, their own salaries and the so-called dividends of share owners (and I dont totally believe that) is a crime.

Self-regulation has been a total failure and its now the role of government to regulate these institutions with a very firm hand, and forget the mythology of the 'free market'.

Agree (0) Alert moderator
unfoiled :

17 Nov 2008 10:21:20am

Anyone in their right mind and with some wisdom would have seen 6 years ago that the bubble would burst. It was just a matter of when.
My partner and I decided it was a good time to have no debt. We sold everything that had a mortgage and bought a business and house debt free. So far it has worked for us, as I said 'so far'.
This year has been frustrating, seeing the govt. panic has done nothing for our confidance in business. Yet we continue to smile and remain cheerful to our customers and hope it will get better. Personally our energy is taking a battering.

Agree (0) Alert moderator
calyptorhynchus:

17 Nov 2008 10:29:33am

"It would not have been good for British morale during WW11 to do any less than tell it how it was and likely to be."

Actually, apart from rare moments of candour like Churchill's "bllod, toil, sweat and tears" speech, news in WW2 was a ruthlessly spun as it is now.

Agree (0) Alert moderator
not dormant:

17 Nov 2008 10:53:50am

It looks all the same as ever more circular arguments are presented by the week. If we don't understand what it means to live and die by a monetary debt finance - we stay inside the box.
Inside the "debt box" won't be any solution, with or without spin. The world debt trajectory will demand to exploit 3 more planets right now to avoid inflation, and we think there is a solution somewhere ? The dysfunctional monetary system is now for 300 years in place - and we forgot how it all started with dreams of wealth then by borrowing NOW, and pay [maybe never] later. So what spin does it need to tell people that all their money is debt, and that to survive in the present system, we must make profit -profit on what, DEBT ??? That's semantically and mathematically impossible - or am I schizoid ?

Agree (0) Alert moderator
Lynne:

17 Nov 2008 10:54:50am

This financial disaster is probably a goddessend for the planet. The planet can't acually cope with such a consumption driven human race. Not far off is environmental collapse.
Money is really just a medium of exchange for work and goods. Primitive people once used shells. It's logical that an economy will collapse if a small portion of the people start to hoard most of the "medium of exchange". It means less and less money is available in the general community and the ranks of the poor and the homeless grow which has happened and now it is reaching into the middle classes. Probably this is just a rather unpleasant part of the process where the middle classes crumble as the money is siphoned to those at the top through bank bailouts etc. Notice, there is no talk about getting money back from those greedy people who've been mismanaging the economy and causing the crisis.
Instead of trying to prop up this old form it's probably time to admit we've been wrong and start to really prepare for the future.
A lot of the world's economy is dependant on the armaments industry. It's provoking a lot of wars. If we work towards peace that is yet another part of the economy that will collapse.
If the seas rise it will be a disaster for the Australian property sector. Life's like that. It will keep hitting you on the head until you co-operate and make the changes that are needed.

Agree (0) Alert moderator
Nathan:

17 Nov 2008 11:15:08am

The reserve bank also has a lot to answer for.
Lets not beat around the bush, the Reserve made a monumental error in raising interest rates too much, too fast, all at a time when they knew a worldwide financial problem was unfolding, utter stupidity.
Raising rates when they should have been waiting to see what effect it would have on the Australian economy first.
Frankly I do not believe the stated justification for raising rates (inflation) as it was within the band, at the time I thought it is probably more to do with GDP being over 4% and the fear that it may lead to greater inflation later on.

But now I believe that the rate rises were due to the fact they could see a financial tsunami was looming together with falling world demand, leading to falling mineral prices, and higher rates was the only insulation they could implement to protect the Aussie dollar. And how did that work out for them?

Meanwhile they sit on their hands lowering rates 0.75% every month or so when they should be slashing rates 3-4% right now. Higher rates is like putting the anorexic patient on a diet (economy starvation).
The patient needs food now, not in a few weeks or months time when it has gone into organ failure, yet the Reserve is not keen to open the larder too often just in case the anorexic patient gets fat.

Fundamental errors are putting us in a much worse situation than we need to be in.
Interest rates were raised when government policy should have been used to slow the economy, now they waste the budget surplus on a quick Christmas splurge when it should be used on perhaps infrastructure projects that may create jobs and have a more lasting effect on the economy. I feel it is likely the pensioners will hoard the lump sums anyway, after all wouldn't you tuck it away?

Agree (0) Alert moderator
Pen Pal:

17 Nov 2008 11:19:32am

I assume Bruce Haigh is young enough to repair any financial damage done to his bank account during this GFC.

Have pity Mr Haigh on us poor mortals who are just watching our prudent savings from many years effort just slip away. What will you do for us?

Agree (0) Alert moderator
Lindsay Cooper:

17 Nov 2008 11:21:38am

Bruce Haigh has it pretty close to the mark.

But to expect any of our current crop of politicians to fix the problem is just wishfull thinking. Most of them have been born into politics, they don't know anything else bureaucratic mumbling and bumbling.

Our type of government needs a complete new system to change the incompetent and disastrous ways that have emerged over the years.

When are we going to ban currency trading, short selling, derivatives, hedge funds, unethical lending practises etc. etc. The list is long and goes on and on.

We need a complete change including the people in power of looking after us who are obviously totally incompetent.

Is this telling it straight enough.????

Agree (0) Alert moderator
muzz:

17 Nov 2008 11:41:22am

Is the glass half empty or half full? Of course it depends upon your attitude and how you view the glass.
Blaming people who take on excessive debt can be blaming the victim of a set of scams that entice us all to keep up with the Jones'.
The glass, in my opinion, has always had a hidden hole in it!!! As we attempt to add fill, it quietly seeps away.
The hidden hole is the belief that growth and consumption is the measure of our success and is the salvation of our economy and society.
It is plainly impossible to feed the greed machine without this boom and bust cycle. Poor fella who sits at the bottom of the leaking glass! Its a serious delusion that does require plain speak, a realignment of our basic values and needs and a serious set of regulations that manage the excessive greed that typifies capitalism.

Agree (0) Alert moderator
Lindsay Cooper:

17 Nov 2008 11:42:44am

Did you notice what the result of the G20 summit meeting was.

Every one agreed that they needed urgent action so their next get together is down for April 20 next year,
this is what they call urgent.??????

Agree (0) Alert moderator
sally:

17 Nov 2008 11:45:56am

I'm not sure what to make of Mr Haigh's constribution, it reads a bit like a cut and paste version of a farmer's diary. But one thing he says hits the mark: for too long we have been bombarded with spin that achieves little. Witness NSW - a basket case. Witness our PM - a wandering, aimless chatter box with no real solutions to anything much. Is this the price we pay for a media controlled agenda? Seems spin is king and will be for some time. Mr Haigh does get my vote for his call for some plain speaking, it's certainly long overdue in this country.

Agree (0) Alert moderator
Tom:

17 Nov 2008 11:56:07am

Howard, Costello, Rudd, Swan, Glen Stevens all contributed in their own way to the current mess. The Prime Mortgage was the event that started the domino effect and here we sit with the outcome, "the destruction of debt". We cannot change what has happened but must now live with the reaction of Rudd, Swan and Co. to the crisis. The consequences of their current response is too little too late as they needed to act some nine months ago. The $10B will only manage to marginally stem the bleeding for a very short time. To minimise the impact on the Australian economy petrol must be about a dollar per litre, interest rates at 2.5%, the value of the Australian Dollar must be maintained at the 70-75 cent level and a major bail out of NSW is required.

Throwing money at the problem may in fact be the only short term solution but what will the medium to long term effect be to this action. Will this lead to spiralling interest rates and inflation come 2010-2012? What if anything will the powers that be who run this country do to ensure that their current action will not lead to double digit interest rates by 2012?

Agree (0) Alert moderator
jak:

17 Nov 2008 11:57:14am

I agree that political spin has become a very irritating part of our political landscape over the last few decades.

However, I also find it irritating when people who have absolutely no knowledge of economics feal the need to lecture others on the topic. It was very difficult not to cringe when reading this simplistic and clearly uneducated economic analysis.

Agree (0) Alert moderator

Opinion

Spin no cure for depression

Search for news

Comments (101)

graeme:

unfoiled :

Emess:

moses:

Tag:

Bertrand:

maggzs:

Spooky:

Id:

Bill Anderson:

Milly:

Sammy:

coloru:

Somewhat Perplexed:

John:

Wolfgang Dempsey:

unfoiled :

Bill Anderson:

Willster:

Milly:

Spooky:

M:

James:

Don:

mike says it was planned:

John Michaels:

stephen michael:

John Michaels:

Bob:

John Michaels:

Water:

watcha:

pete:

Ron Santen:

Spooky:

graeme:

unfoiled :

watcha:

Tag:

watcha:

Tag:

unfoiled :

watcha:

m1scha:

Chappy:

Tag:

Stomfi:

unfoiled :

calyptorhynchus:

hugh jampton:

Tag:

not dormant:

Lynne:

Lindsay Cooper:

jesuisunmenc:

Nathan:

Another view:

James A:

Pen Pal:

Lindsay Cooper:

Somewhat Perplexed:

muzz:

watcha:

Lindsay Cooper:

les:

sally:

moses:

Tom:

M:

jak:

Jack:

Tag:

jak:

Jack:

Tag:

jak: