Monday, May 12, 2008

Budget time

It is now one more sleep before the first Rudd government budget is bought down. Of course budgets, however momentous are not magic wands but they do tend to have a miraculous instant effect, if only because of expectations. This one is momentous because it marks the economic watershed between the Howard and Rudd administrations.

As opposed as I am to the neo-liberal globalization we have endured I still tend to see Australia’s economy in a global context. It would be plain dumb to ignore realities. So I intend to bounce a bit here off some of my international blogging friends and their marvelous insights.

First up, is Kvatch who recently pointed out that at least one Scandinavian country, I think Norway, actually has a well-being index. So I was also taken by this quote:

Apparently Norway and Australia are the two nations that have experienced the biggest boost to their terms of trade since the start of the decade. The prices that Australians receive relative to those that they pay to the rest of the world have climbed 40 per cent since 2004. Taken from Peter Martin (Canberra Times)

My Aussie compatriot, Lindsay's Lobes, does a wonderful job of informing me on economic realities, and never canes my knuckles no matter how far I stray from the path. He took on comments by D K Read in my previous post where Red referred to housing as an economic indicator. Charmer that he is Lindsay seems to support Red’s view.

Today in Australia statistics just released indicate the total value of housing finance approvals (excluding refinancing)fell for the second consecutive month in March - down 5.8% to $15.59bn, representing the lowest level in 18 months, whilst owner occupier approvals fell by 6.1% in the month.
Approvals for refinancing fell by 6.0% in the month, to indicate an unwinding of the late 2007 surge when customers moved loans from the relatively more expensive non-bank sector back to the big banks. The comments here

Quoting from News Limited:

HOUSE prices in some parts of Sydney have almost halved [$500,000] as battling borrowers struggle to keep up with increasing interest rates.

I tend to agree with Abi:

“"People are hurting" - that's it in a nutshell!” I’m also watching the supermarket food pricing; it is obscene at the moment. One item alone I noticed last week was a packet pasta dinner that had been on the shelves for weeks at .99c. Then I saw it was suddenly SAVE! BUY 3 FOR $3.00. Looking closer it showed the regular price as $2.30. That is a hell of a jump to justify holding the price and duping people already under pricing pressure.

These are the issues Rudd’s mob need to deal with now, runaway costs for basic essentials; food and housing. Lindsay’s tip for Tuesday budget - expect a surplus of $18 billion with about $4 billion in savings and several large scale new spending initiatives on climate change.

I agree with the surplus, though I would have expected higher to mop up the current growth spurt and dampen inflation. More worrying to me is just how can Rudd, or any other leader, turn around the mess world economics is in quickly enough to allow ordinary people to simply survive the crisis; to have a roof and to eat?


D.K. Raed said...

oops, I was just commenting back to Lindsay in your previous post when you put this up.

Re: supermarket food prices ... are you also seeing the gimmick employed here for the last few yrs where a food item doesn't appear to increase in price, but the quantity has been reduced? Usually it's very sneakily done so that the packaging looks the same, like you are getting the same amount you always have. I think we've about run as far as we can with that idea, so now the actual verifiable price increases have begun.

A few weeks ago, a local supermarket (not the cheapest in town, not the most expensive, but the one w/the best bread) increased their std loaf of fresh bread from 88-cents to $1.33 -- that's over 50% higher in just the space of a few weeks. The bread was always mostly air anyway (hence the 88-cent price). I liked it because I don't need the extra calories.

I'm almost afraid to ask if Kvatch said what the U.S.'s "well-being" index is?

Cart said...

Yes, we are getting the smaller volume approach as well. I noted today that it really does work, even when not intended. I was shopping with a friend and chunky frozen fries were on the list. She chose a 1kg pack for a bit over $3, then asked me to put it back as she’d seen another one for $2 (Weight Watchers…) I grabbed her second choice and threw them back into the freezer, to her surprise. Sure they were only $2, but they were also only 300g. She was only shopping on price and not checking the volumes as well. I wonder how many people get caught with that…

You know what kvatch's answer would be ;)

D.K. Raed said...

Cart, I hope you at least explained to your shopping friend WHY you were rudely flinging her choice of frozen fries back in the freezer! I've taken to bringing a calculator when I shop.

I just noticed you quoted in your post that housing prices in some parts of Sydney have halved? OMG, I'm shuddering to think what that type of real estate correction will do up & down the line! The best thing people can do right now is not sell if they don't have to. We are choking on a 30% correction (don't you just love that euphemism for you-just-got-screwed) around here. I hope Sydney is at least reassessing home values so that homeowners property tax rates go down along with the value of their homes. We are fighting that here, too. Seems the Property Tax people are very quick to catch increased value, but very reluctant to lower them back down to current market values.

Cart said...

Remember DK, we’ve been having rate rises for some time now. It was aimed at mortgages, but like a lot of remedies isn’t quite that specific. So if you take mortgage debt and couple it with other layers of living costs it’s got to be painful (like my lazy grammar )
I just had my rent hoisted today, just $10 but it’s another hit. I could, but can’t argue as it would be hard to find a $million outlook for a rent as low as I do pay. Added to that, I know the landlord is well over extended and I don’t carry any debt at all. Why risk my little bit of heaven? This is the second rise in six months and I could contest on that basis alone.
I’m not sure how widely the 50% reflects. The media have obviously chosen the sensational hits, I guess we’ll find out in the near future. Jeez, if the place I’m in dropped that far I might even become a convert and seek a loan..

My friend realised quickly why I was being abrupt, people soon learn I do things for a reason. I guess I must be getting too old to be tactful about it.

D.K. Raed said...

I was just having fun picturing you flinging back the frozen food & stalking off, leaving your perplexed shopping friend wondering, what the ... ?

abi said...

Off topic - Cart, this isn't you, is it?

Aussie straps in beer, not child

Cart said...

Be assured abi, I would not be found within miles of the child, never mind in the same vehicle.