Opportunities in the economic lab

While Australia is a relative minnow among the big world markets the county’s Reserve Bank governor Glenn Stevens has provided an excellent opportunity to judge different approaches to financial crisis – in real time.

Stevens has said he would have no hesitation raising interest rates on the eve of a likely November election if necessary. The Reserve Bank board will be armed with new inflation figures when it meets on November 5. The move might bring an election date forward, but that is another argument.

Need for regulation
Stevens has called on the Federal Government to more strictly regulate mortgage brokers in the wake of the turmoil in the US subprime loans market. "Selling finance is not the same as selling a used car - it is different and I think part of what is needed is better discipline from the sales process," he argued.

He said the bank would have to lift interest rates during the federal election campaign if an inflation figure in October showed more tightening was needed. "If it is clear that something needs to be done, I don't know what explanation we could offer the Australian public for not doing it, regardless of when the election might be due.”

The Reserve chief’s approach is certainly quite different from other central bankers around the world. He finds the idea of dropping rates to bail out the beleaguered home lender market anathema. He certainly sees an argument for the markets to sort out their own shit.

Generally, at the top end, the Australian economy is in good shape. Our issues are more to do with effective fiscal policy – the distribution of the bounty we now enjoy. I guess having buckets of money are an effective hedge if Stevens wanted to go down that track, but instead he has given us the opportunity to watch an alternative approach play itself out.

Buses at 200 paces

I love Sydney, I’m just thankful I don’t need to live there anymore. I doubt if anyone is actually allowed to enjoy the beauty of the city anymore, but way out in the western suburbs there are some who still find the exciting aspects of the place.

Unfortunately they are bus drivers. A group of adrenaline-fuelled private bus drivers have turned a bus tunnel in Blacktown into their own personal drag strip. Blacktown, when I was a boy, was the outer limits of civilisation. I enjoyed several years there in a semi rural kid heaven.

Since those times it has grown enormously and the bus interchange (we walked when I was a boy) is beneath a major retail centre. So side by side, they race down the bus tunnel underneath this shopping centre.

The game is to see who can record the highest speed down the 200m tunnel before screeching to a halt outside the busy bus stops, crammed with waiting passengers. I don’t think George W catches the local bus so there isn’t really much drama, but I’m not sure how they wind the lumbering beasts up that much.

We are so excited…

A five-kilometre-long, 2.8 metre-high fence will be used to lock up sections of Sydney's CBD during APEC.

Sydneysiders may also have to show identification to cross the street in parts of the CBD during the summit.

All this fuss is to accommodate George W, who is expected to arrive on Tuesday, September 4. But at least he is expected to leave the Leaders' Week of the APEC summit early.

Google are in on the act too and are vehemently denying any connection. Much of Sydney's city centre as it appears in the satellite images on Google Maps Australia has been fuzzed out, just weeks before the Asia-Pacific Economic Co-operation summit.

Google says the imagery was downgraded as a result of a "commercial issue" with a supplier, but there is speculation it was done at the request of police in order to minimise the risk of a terrorist attack during the September summit, where Sydney will host 21 world leaders including the US President, George Bush.

And beware those singing kids: Australian Federal Police are carrying out checks on a group of eight- to 12-year-old Australian choristers to ensure none of them poses a threat to world leaders.

Don’t impede the greedy bastards

Clever headlines aside - US paper trail rams rate rise home – the whole sub-prime debacle is becoming tedious. Well it would be if it wasn’t so bloody alarming.

Australia’s biggest non-bank lender, RAMS, is the latest victim of the global liquidity contagion, unveiling a profit and dividend warning yesterday less than three weeks after an $885 million stock exchange listing.

RAMS founder John Kinghorn said "life was cool" until last Thursday, when the contagion spread rapidly from the US sub-prime market to "all bank and sub-prime borrowers".

Correct me if I am wrong, but we have been watching the home market meltdown for many months now, so one would think industry heavies might have had a little forewarning.

RAMS has a $14 billion loan book. All of its loans are 100 per cent mortgage insured. So any defaults from borrowers would be covered by the insurance company. Of that $14 billion, only $4 billion is funded by residential mortgage-backed securities. That's mortgages that are packaged up and sold to investors.

Around $4 billion is funded by what RAMS calls 'warehouse transactions' - broadly, like an overdraft with a financial institution; until the mortgages can be packaged and sold to investors. The final and biggest - and troublesome - bit is $6 billion in US commercial paper. That ties RAMS directly into the US domestic ripples.

RAMS's $6 billion in US borrowings is just a tiny part of Australian business's - actually, mostly banks and other financial institutions - total $700 billion-plus gross non-government, non-linked foreign debt.

Which raise some other domestic issues, particularly lack of government regulation over the commercial sector; but a readiness to bail them out of their messes. On the other hand the Howard Government has choked infrastructure development borrowing by state governments.

It seems government borrowing reduces the ability for commercial interests to raise funds. Ironically industry suffers because of lack of development, but they can wall in the debt swill bucket to their hearts content.

Parfait Paranoia

Sydney restaurants, particularly those close to the APEC venue (Sydney Opera House) are receiving attention from security operatives.

Guillaume Brahimi, of Guillaume at Bennelong, the restaurant in the Opera, said his staff had been through security checks even though he said the restaurant would be closed.

Whatever the issue staff, are being grilled by people who wouldn’t know an haute cuisine if it bit them on the bum.

So here is a call for items which should be banned from Sydney menus while world leaders are in the city - (Sept 5 thru 11 07). I can come up with a few starters – any ideas?

‘Bomb Alaska’, a backed ice cream cake coated with meringue.

Shooters are obviously suspect.

Any form of flambé…

Knives and forks might be a bit of a worry

Gas cylinders should be banned

Interest free-for-all

THE US mortgage crisis has hit Australian home buyers for the first time after one lender yesterday hiked its rates by up to double last week's official interest rate rise.

Other lenders have signalled increases variable home loan rates by 0.25 per cent in coming months, independent of moves by the Reserve Bank.

Bluestone, with about $3billion worth of loans on its books, blamed higher funding costs as a result of the global credit squeeze for its decision to lift its lending rates by between 17 and 55 basis points.

Bluestone is a provider of so-called low-doc loans. About one-quarter of its customers have prior credit problems, placing them in the same category as the "sub-prime" sector in the US, where poor lending practices have caused a meltdown in capital markets around the world.

So we can forget official rate rises now. The only issue regulating rates is competitiveness, and there seems to be enough general upward movement to negate that. So we go from loans at any cost to loans at crippling cost.

Slip sliding away

“Almost two-thirds of voters in John Howard’s electorate of Bennelong believe he will retain his seat, regardless of the result of polling to the contrary.

“23 per cent believe Mr Howard will win his seat and the Government will win the election. 38% think Mr Howard will win his seat but the Coalition will lose.

“The poll canvassed 800 voters in Bennelong (Howard's electorate). It found the ALP candidate Maxine McKew leading Mr Howard, 53-47, on a two-party basis.” Hope for Howard after all, poll finds

Maxine is a former ABC (Australian Broadcasting Corporation) journalist and highly regarded for her integrity. The problem is the figures are pre-digested and adjusted to reflect the preferential voting system here. We don’t do first past the post! We also don't do straight primary figure polls it seems.

The big negative for the Prime Minister is that median house prices in his own seat are falling and homes are taking longer to sell. Howard is defending a 4% margin which should be relatively comfortable in normal circumstances. Unfortunately for the PM the current economic indices are against him locally as well as nationally.

The last prime minister to lose his seat was Stanley Bruce in 1929, a few years before my time. Prime Ministers have a bit of latitude to bulk up their numbers in redistribution, but Howard let that opportunity slide. I’m thinking hubris might be in play here.

Ciao Rove

So long Karl, and thanks for all the fish...

Apologies Douglas Adams. Irrelevant perhaps, but we have waited so long it seems like a scene from restaurant at the end of the universe.

Go figure…

“WORLD central banks have poured almost $200 billion into financial markets in less than 24 hours in a bid to stem a global financial panic.”

Some months back, at the time of our annual budget speech, I was curious as to what the $billions held back by the Australian government. We have had a bumper income from the current resources boom which wasn’t reflected in money distributed back into the wider economy.

I posited that at least some of that money had been held back as a slush fund to manipulate the market to the benefit of big business. The confirmation came when:

“The Reserve Bank of Australia had to pump almost $5 billion into the local market, about double the normal daily injection, to ensure that the cash interest rate did not spiral higher than the new 6.5per cent....”

Now I’m a bit messy on currencies here, but you will get the general picture. Australia has a population hovering around 21 million. So balance that $5billoion (about double the normal daily injection) against:

• The Federal Reserve Bank, in the US, advanced about $US24billion ($AUS28billion)
• European Central Bank - E95 billion.
• Japan - Y1trillion ($AUS10billion).

Why is it that I get the impression that the needs big business over ride those of ordinary Australians? Even worse is that those bail out funds could serve to strengthen our social and commercial infrastructure.

The Howard government refuses to intervene in market regulation but is ready to bail out these crooks on a daily basis. Meanwhile Australians are dying because there is an insufficient health infrastructure. Business is stalling because the government is determined to score cheap points against the Labor states, denying essential tax flow on funding.

But raise any of these issues among any of those suffering this bad policy and I’m quickly assured – “We don’t like to discuss politics.” Don’t you just love the way people just open their legs to be raped again and again? Frankly, I don’t!

Sunday musings

The current excitement over the sub-prime debacle tangled with a book I have been reading. The book is nothing special, being a 50 cent offering from the local thrift shop, but this 1953 thriller was an oddly timely read.

My normally boring Sunday, my turn to cook and smoked cod pie the request, was seasoned with a bit of blogging excitement. A winger attack over at praguetwin and a continuing sub-prime coverage from reality-based educator set my blood running and mind racing.

The winger attack was interesting in that it petered out on a charge that a fellow Australian (of mine) was a whacko. Well this is a country where we can freely assert that our leaders and neighbours are brain-dead dickheads. No great issue there.

But back to the book and to wider issues of US policy on economic and diplomatic practices (Australia seems to be subservient to those policies for the foreseeable future).

The novel was set between Britain and Poland in a post war setting (1953?) and one of the Polish characters expounded the contemporary little gem:

“…a hard ideology is worth a lot more than hard currency – as your American allies are beginning to learn at their cost...”

I doubt the American leaders learned any such thing, but there you go. Another leitmotif was that extreme (dictatorial) regimes tend to rely on the moral argument to shore up their dubious positions.

Hitler had a whole department to regulate the length of women’s skirts and of course homosexuals were classed with Gypsies and Jews. Stalin, Mao and others including radical Muslims have used oppressive moral codes to control the people.

Ain’t it bloody strange that George W should have homed in on that same controlling factor to cement his corrupt regime? I am no apologist for Australia’s part in all this, except to say it doesn’t really sell here. John Howard’s Christian Right is generally told to stick it in their ear!

But history keeps repeating because we let it repeat; accept these moronic moral strictures in place of logical fact. I guess fear drives people to accept the simplistic – I guess, but don’t really understand. A bully brings out the worst in me but then maybe I’m just not keyed into the realities of this life.

Take George W Bush….

Or more to the point please keep him! The recent phone call from George to John Howard was to advise that the Prez is planning an extra two days in Sydney for the Asia-Pacific Economic Co-operation summit, further disrupting the city and adding millions of dollars to the cost.

This is a city where Bill Clinton can still wander around with minimal disruption to anyone, attracting adoring fans being the biggest problem. Not so George, it seems. A major security program, including lane closures on the busiest trunk routes over the now extended period.

Fortunately George isn’t up for election in Australia; but his little holiday will do little for US/Australian relations. It won’t do much for Howard’s standing either, but he can’t really do much to harm himself more.

If I were Howard, or even Rudd, I would be inviting Bill over for a pre-election tour of the country. Some disruptions are welcome and embraced and Clinton would give a real boost to whichever leader hosted him. So if the US wants a holiday from a major political personality at least be sensitive to our sensitivities.

New government by December

I know you readers will tell me it is still too far out to declare the upcoming Australian election. Well I would be happy to put money on a Liberal/National loss right now; except I don’t want to add to ballooning consumer spending, and thus inflation.

Of course it is far too soon to get down to predicting margins, but under the rules of my beloved economic predictor the Howard government is finished. On broad figures the government have a buffer of 16 seats at the moment.

Polling consistently has Labor around 10% ahead. Given an unlikely uniform swing the government holds 43 seats by margins below 10%. 14 of those are below 3.3%. When we can look at the dynamics of individual seats a clearer picture will emerge, but the government is doomed.

Looking at the predictor, we have three main indicators – the unemployment rate, inflation and interest rates. If two or more of these rise over a full, three-year electoral cycle, the government will lose. So looking at them:

Unemployment rate – The government claims near full employment, however that assertion fails to look at part time, casual and other underemployment, dumping them all into simple employment. They can talk it up, but they can’t fool those not really benefiting from the claims.

Inflation – Since the last election inflation has risen from a weighted median of 2.4 through to highs of 3.0 and 3.2 and currently sitting on 2.8. The government argued against a rate rise on the basis of this 2.8 being satisfactory, but the Federal Reserve feared another blow-out.

Interest rates – After holding off for many months the rate has now been bumped by .25%. No big deal in itself perhaps, except it is the fifth rise during the life of the parliament without any corresponding drops.

Even discounting dubious employment figures the government is in dire straits. Perhaps a fallout from those indices is an accelerating housing crisis and of course the surging Aussie dollar against the greenback.

The latter might sound great, but not for our economy. Imports are cheaper, of course, driving consumer spending. On the other side, exports become more expensive, putting pressure on a range of markets.

Howard has been trotting out a number of mitigating circumstances for the rate rise; the latest that they are a result of a booming economy. I’m not sure many in his intended audience are seeing any benefits from a booming economy.

Rate rise bites

As widely tipped by financial markets, the Reserve Bank of Australia lifted its cash rate to 6.5 per cent from 6.25 per cent, its highest level since November 1996.

Prime Minister Howard said measures such as tax cuts and higher welfare payments would help households hurt by today's interest rates rise.

It might help them tread water, but I doubt it will be enough to win their hearts and minds. His spin also failed to address the issues beyond those on welfare or low wages. The country, from top to bottom, is overextended and the rate rise will bite.

The picture

As to the picture, well Johnny was keen to blame the states for the blow-out, but the look on his treasures face suggests that the argument won’t wash. Treasurer Costello was looking forward to snatching the leadership baton; looks like he might have to wait for it now.

I’m gratified, personally, as I can now return to my refrain of key economic indices predicting election outcomes. I have been concerned about skewed figures, such as posited full employment. Avoiding a rate hike can be justified for just so long.

The employment figures have been fudged all the way. The pressure on the Reserve to hold, by Howard and Co has been enormous. Howard went further with a pre-emptive strike on the states, blaming their borrowing. Most people I speak to understand none of that, they just know they are hurting.

Judgement Day Downunder

Bad boy John and thanks kvatch for the inspiration….

I’ve been musing lately on how judgement day seems to be closing in on John Howard. Despite a bag full of dirty tricks and wedge politicking poor ‘old’ John can’t take a trick. After a decade of dominance he simply can’t get traction for his latest campaign.

The leak of a report from his own Rovian strategists seems fishy to most commentators, given the very few people on the distribution list for these gems. The most probable scenario cited was a sort of reverse psychology, based on attacks generally flowing back in favour of the attacked.

Nothing is working for Howard or his strategists, the shadowy Crosby/Textor. Even Howard‘s most loyal shock jock had to point out that the damning report came from internal sources, not his opponents.

There was a new poll out today which shows the government slipping further behind, and that from Murdoch’s stable. Again, I expect they are pushing for a sympathy kick-in, but it seem more unlikely as time goes by.

Kevin Rudd, on the other hand, is achieving solid traction, with even fairly dumb moves being lapped up by a growing support base. For the rest of us life is lonely outside the polarised centre of interest. Media still promote either or – Howard or Rudd.

Roving the globe

Having alluded to an antipodean ‘Karl Rove’ recently, I felt moved to reveal a bit more of the story of those conservative backroom gurus. In fact Australia has a Rove tag team – Lynton Crosby and Mark Textor. Fitting, as this pair spread well beyond local influence.

Crosby/Textor are a Canberra, Australia based market research and communications company closely aligned with the conservative Liberal Party of Australia. Well that is the official version. Crosby/Textor operates in both Australia and the UK, and has formed a partnership to advise Wirthlin Worldwide clients in the Australasian region.

The pair have a long history on the seamier side of political polling and strategy, including push polling and wedge strategies. "In the 2001 elections it was Textor's polling advice that crystallised Howard's decision to run a xenophobic scare campaign based on fear of immigrants and terrorism." The Guardian

“We know that Mark Textor has learnt research strategies from extreme right-wing Republican identities in the US, [such as] the Reagan pollster Richard Wirthlin.” says Australian senator John Faulkner.

Sections of the Liberal Party, starting with the Prime Minister, are transfixed with the polling that Textor produces. Howard thinks it is gold. The latest wedge manoeuvres include the Northern Territory land grab, a particular interest area for Textor who had previously crafted racist campaigns.

With Howard’s figures looking grim the ‘dirty politics’ the Federal government are engaged in has all the hallmarks of the Rove approach. It has been a successful approach by the Howard government. Crosby/Textor might well be a home grown product, but they seem well connected to their better know associates.

UPDATE:

A leaked dossier, prepared by pollster Mark Textor on June 21, outlines a recovery strategy for the Howard Government and makes it clear that voters are looking to Labor's Kevin Rudd for a generational change.

It contains a damning critique of the Prime Minister as old and dishonest, while Mr Rudd is seen as genuine and accessible. The summary:

• Voters see PM as old and dishonest, Rudd as genuine
• Internal file tells PM to pick fights with states
• Broad expectation Labor will win election

The report was leaked to a Murdoch paper, and from a Textor report. I dunno, it sounds damaging , but the pathway of the revelation sounds bloody suspicious as well. These Rovian tactics are beyond me….

The new federalism?

In a masterpiece of marketing the Howard government have labelled their centralist push ‘the new federalism’. Relabelling is probably something dreamed up by our own ‘Rove’ – Mark Textor, pollster and strategist to Howard’s mob.

The approach is also fascinating; with the “Federal Government is just shopping around Australia, trawling through marginal seats…” seeking out targeted, vote catching, intervention in areas of state responsibility.

The latest is the Federal purchase of a Tasmanian regional hospital. The hospital had been phased out when a larger facility was established in a nearby town. The move was well in line with economic rationalism, but also handy in this marginal seat the government are trying to hold on to.

New Victorian premier, John Brumby, is ready to take the fight up to the Feds. The first will no doubt be against the Feds takeover of the country’s inland river systems. But on hospitals Brumby says:

"In recent years we've been cheated and robbed in relation to (Commonwealth) funding," he said. "For example, we're only getting 41 per cent of our hospital funding under the Medicare agreement. We're meant to be getting 50 per cent.”

He adds “…we need a better framework for federalism, in which to produce the best for the citizens of Victoria and Australia. But you can't do that if the Federal Government just bails out a hospital which is not viable."

I expect we will have a few high court battles on the federal intrusions, at least from Victoria and Queensland. Senior doctors at Tasmania's North West Regional Hospital have threatened to quit over the federal intervention in their region. That might get the smallest state mobilised as well.

My fear it that the centralist threat is only a real issue to the smaller (population) states; and Victoria which has a traditional rivalry with NSW. Western Australia is basking in a resources boom at the moment and really see themselves as separate and the NSW voters are far too self focussed to concern themselves with political infighting.

That the assault on our country’s structure will help the embattled Howard government is doubtful. But in the process, political motivation will drive the country further off course, further along the road to an American style ‘democracy’.

Ring of idiocy

Australian authorities Wednesday revealed new anti-terror measures ranging from loudspeakers on city streets to plans to secretly search and bug homes and businesses.

Qualative polling shows clearly that Sydney is the countries greediest city. Lifestyle is related to showing worth through possessions.
The census shows Sydney people are the least likely in the country to volunteer or give a rat’s arse about their neighbours.
Research clearly shows Sydney residents are the most debt ridden in the country, no doubt a reflection on the former points.

So the question, in an election year is; why program a major international conference – APEC – in a city which is bound to resent an intrusion on their acquisitive lifestyle?
Traders in Sydney are already talking about closing their doors for the duration of the APEC meeting.

A huge concrete wall will be built around Sydney's CBD in a bid to protect potential targets from terrorists and protestors during next month's APEC meetings.
Dubbed the "ring of steel", the 2.8m high concrete-reinforced fence will shield well-known businesses such as McDonald's and Starbucks amid fears they could be attacked by demonstrators.

The much-anticipated economic boost from September's APEC summit has already turned to disappointment for many Sydney businesses.
Organisers initially expected more than 7,000 delegates and media representatives would visit Sydney during the summit, boosting the city's economy.
However, luxury hotels claim bookings have not been confirmed by delegates and tourists are choosing to stay away from the city during the meeting of leaders, government officials and business people from 21 countries that starts on September 2.

New South Wales police say the trial run of a motorcade through Sydney's CBD today in preparation for the Asia-Pacific Economic Cooperation (APEC) summit has gone smoothly.
The four-hour operation is one of a number of exercises ahead of the summit, which will bring 21 world leaders to Sydney for three days from September 7.

Unruly fans at tonight's Bulldogs-Eels blockbuster will risk an up close and personal preview of the police riot squad's tactics for this month's APEC summit.
Head of the NSW riot squad, Chief Superintendent Steve Cullen, last night confirmed all on-duty officers have recently honed their response tactics for the five-day APEC summit.

Not the bloody football too? The Bulldogs draw their fan base from a heavily Lebanese population. The Eels supporters have always been a feisty lot, from when they were predominantly Anglo to the current multicultural mix. I guess it will give the cops something to practice with.

Terror in high places

Now the rules for dealing with terrorism have been established it must be time to some other outstanding cases. For example there is ample evidence against our Deputy Prime Minister to create a great deal of suspicion.

The fallout from the AWB scandal clearly suggests Vaile’s association with those who were financing a terrorist organisation, Saddam’s Iraq regime. The $300 million dollars was funded through people who the Deputy Prime Minister was known to associate with.

There were serious allegations that Saddam’s mob were in league with Al Qaeda, those links were part of the justification for sending Australian troops to oust the regime.

October 20 2000 Vaile had an ‘informal meeting’ in Egypt with AWB Iraq executive Dominic Hogan, the subject of the meeting was the growing concern over kickback claims.

Later in 2000 the Deputy Prime Minister was dealing with then AWB chairman, Trevor Flugge. Again the thrust discussions were the emerging revelations of financial support for Saddam’s terrorist government.

July 2002 the Deputy Prime Minister was adamant that dubious wheat deal should continue without interference. In 2002 Vaile met with AWB executives again, this time in he was visiting two other known terrorist states, Libya and Iran.

So should Deputy Prime Minister Vaile be charged with recklessly supporting a terrorist organisation? I obviously cannot disclose all the facts of any potential, future investigation, but there certainly appears to be ample innuendo to proceed.

That’s not pork barrelling…

John Howard has denied his decision to underwrite a Tasmanian hospital earmarked for downgrading is cynical pork barrelling ahead of the federal election. Regular readers might recall that health funding fell well short in the Australian budget some months back.

Health and particularly hospitals are a state responsibility. But having failed to fund the states sufficiently the Feds are now attempting to point score with targeted funding; just another example of a steady move to centralised government in this country.

But it is about politics and the Howard government is cherry picking issues and electorates. While the move in on aboriginals in the Northern Territory they ignore the high level of paedophile activity across the countries internet. The latter issue, communication, is well within their jurisdiction.

While they under fund education delivery by the states they are targeting special funding to targeted sectors, particularly Catholic and various other religious schools. That funding, oddly enough, was for school bloody chaplains! Why the hell would a religious school need a special chaplain?

If it isn’t pork barrelling then it is pure, bloody minded political posturing. Not that it seems to be helping them in the polls. Ironically the majority of potential voters see the opposition leader as a younger, more attractive John Howard.

Meanwhile I’m still pushing to get a credible independent candidate up in Lyne. Not that I have stopped supporting my brother Robin. More that I am convinced we must break the hold of the two major parties (and their hangers-on) on our countries politics. It might be a long fight, but there is a great opportunity to get it rolling now.

A centralist push

Any analysis of the key issues in the current Australian pre-election campaign sees devolution to a federal push to centralism. That is; reducing the powers of the individual states in favour of a central government.

I don’t recall the referendum which gave the Howard/Vaile government authority to usurp out constitution. I also find it faintly ironic from a government failing those responsibilities within its own jurisdiction.

The dramatic failure in pursuing alleged terrorists; the threat to force take over of states water responsibilities; the heavy handed takeover of Northern Territory Aboriginal lands; a dubious record of fiscal management (they have already surrendered economic management), are counterpointed by incursions into state areas of responsibility.

While withholding essential funding from the states for health, education, infrastructure and transport, the Feds have been establishing target funding and grants directly into these areas. As the states attempt to implement their rightful responsibilities the Feds are overlaying their own programs.

Without clear responsibility it becomes difficult to focus community concern where it should rightfully belong. As our basic social infrastructure continues to degrade lines of responsibility become fuzzier.

Of course Howard/Vaile are happy with that result, all the easier to lash out and blame the states as confusion reigns. Even more distressing is that the opposition, the likely next Federal Government, are simply shadowing the conservatives push to centralism.

In past years there would have been a clamour around the country and demands to return to constitutional designs. It seems now that few people either know or care about the underpinnings of our federation.

To laugh or to cry...

The circus surrounding the dubious terrorism claims against an Indian doctor being held in Australia has become even more entertaining.

Deputy Prime Minister Mark Vaile "made a mistake" when he said Mohamed Haneef's visa had been cancelled to prevent him leaving the country.

I have a special interest in Vaile, of course, he is the incumbent in the election campaign I am currently engaged in.

His comment was retracted the very next day: “Yes, Mr Vaile did make a mistake in terms of ascribing that action to [Immigration Minister] Mr Andrews, it was in fact [Attorney General] Mr Ruddock that took that action,” the spokesman said.
A strange and confusing retraction as it was Andrews who took the action, but never mind.

Political arrest?

But it was another comment in Vaile’s cock-up radio interview that caught my attention:

“It's not a political arrest -- I mean none of the senior ministers nor the Prime Minister arrested the individual concerned,” Vaile said. Okay Mark, I think I can follow that…

Truths revealed

So who are the terrorists?

The Australian Federal Police (AFP) are in danger of becoming seen as political during the first public use of draconian anti-terrorism laws. Having been thwarted by the courts over the prosecution of a Queensland doctor related to British terrorism suspects the circus continues to roll.

The political intent comes from Federal government, who have incensed the countries legal establishment by usurping the findings of the court. Dr Haneef was released on bail, largely on the basis dubious prosecution claims. The government immediately revoked the doctor’s visa and continued to hold him as an illegal.

The outrage spread to the wider community and then leaks began to claim more charges, leaks allegedly from the AFP. It was suggested Haneef was planning to blow up a major building in Queensland. The story was quickly denied by AFP, but mud sticks.

Well, unfortunately for the AFP it really does stick. It has now been revealed that AFP officers wrote the names of overseas terrorism suspects in Haneef's personal diary then interrogated him over whether he had written the potentially incriminating notes.

All this to bolster a federal election campaign, to bolster Howard’s failing popularity. The sad part is that when Howard loses government the opposition will hold onto these moronic anti-terrorism laws, as the issue has proved such a vote winner over the years.

It really is becoming a question of who is terrorising our societies. You don’t need introduced radicals of any colour when your own leadership, and potentially your police forces, can do the job so well.

Liberal quake 6.5 on the Richter scale

Polls are always problematic, more so when we rarely see the raw figures from Australian political polls. But there are other indicators I like to focus on. One is the actual state of the various parties contesting an election. When a party, particularly a governing party, starts to implode there is a fair chance they are in trouble.

I reflected recently on the conflicting comments from the Liberal leadership over Iraq. Serious as it was, it was an isolated dispute. Now Howard’s flagship newspaper, The Australian, owned by Rupert Murdoch has given its take on a more serious internal dispute.

“Liberal leadership wobbles started on Monday when Mr Howard asked his Cabinet colleagues if he was "the problem". He also sought criticism and suggestions of what he should do in the face of a series of opinion polls showing Labor in a position that he had previously said would lead to "annihilation" for the Coalition.” The Australian

That report conflicted with the rival Fairfax papers views. Far from being a new dispute the Melbourne Age says:

“Tensions between the Howard Government's two leading figures are to be exposed, with Peter Costello accusing John Howard of putting his own interests ahead of the Liberal Party's and suggesting that the Prime Minister's office leaked material aimed at damaging the Treasurer.

“In what amounts to an attack on Mr Howard's trustworthiness and truthfulness, Mr Costello also claims to be worried about the sustainability of the Government's spending programs, many of which were initiated by the Prime Minister.” The Age

Sister paper, The Sydney Morning Herald dropped an earlier story to run:

Costello quells Howard unrest

“Costello has moved swiftly this morning to try and contain any damage caused by his revelations in a new biography about the ongoing tensions between he and John Howard.”

It is a deep rift between the two top leaders of the party going back many years and underscored by rivalries between NSW and Victorian powerbases. It’s just difficult to see what Costello hopes to achieve by undermining his boss so close to an election.

Howard isn’t going anywhere before he has his chance to grandstand at September’s APEC conference. That would leave Costello an impossibly short window to make a successful transition before an election is due.

At best he can only hope to become the new opposition leader, a position which would leave him extremely vulnerable with a number of eager aspirants looking to grab the chance to lead the party back from a wilderness experience.

For all that, the signs of a party in turmoil are increasing. For once the polls might be right. Just a shame it is purely an either or scenario.

Government set to bomb

Australian Labor has a 10-point lead in primary votes, rising one point to 49 per cent, while the Coalition remains steady on 39 per cent in the national poll.

Despite tax cuts and other sweeteners, Howard’s government has not pulled out of its polling slump over the past six months.

Iraq has becomes more dominant in the Australian political contest, voters have strengthened their desire to see Australian troops withdrawn, which is ALP policy.

Sydney's lockdown – no lockdown debate for September’s APEC meeting has not gained the government many friends in the country’s most populous city. The disruption of Dick Cheney’s visit and the recent visit by USS Kitty Hawk, which both closed down parts of the city, still rankles.

"Sydney will not be locked down ... during the APEC meeting," Howard said. "There will be a significant security presence in part of the city, but any suggestion the city will be locked down is completely false."
Attorney-General Philip Ruddock said there would be no need for the 21 foreign government delegations to bring their own weapons to the summit.

While the government was hoping to gain brownie points by hosting a major international conference, their own security beat up seems to be negating any positives. Well hell, every good Australian should be ecstatic that George Bush is coming…

Housing affordability is showing as the major economic negative. Levels of mortgage default a rising through the country, particularly in NSW. House prices have crashed by as much as 7.8 per cent in crucial Sydney electorates since the last federal election.
Peel back the layers of the property market, and it is clear that house prices have been pointing in the wrong direction for the Prime Minister where it can hurt him the most, in his home state.

The terror threat also looks like it might blow up in Howard’s face over the recent terrorist arrest in Australia following the Glasgow bombing.
A leading lawyer has raised doubts about the prosecution case against the Gold Coast doctor charged with recklessly supporting a terrorist organisation. Mohamed Haneef is charged with supporting terrorism after Federal police alleged a SIM card he gave to a cousin was found in a car used in last month's Glasgow Airport bomb attack.
The Sydney lawyer Phillip Boulten, SC, said the section of law under which Haneef was charged specifically required that the person charged intentionally provided support or resources to an organisation engaged in terrorist activity.

Howard and his government are responding to all this good news with fairly terse comments, suggesting we dumb voters simply don’t under stand the big picture.

UPDATE:

Australian Immigration Minister Kevin Andrews said the decision to cancel the Mohammed Haneef's visa was made on the grounds of ''national interest.'' Australian Federal Police would issue a Criminal Justice Certificate against Dr Haneef that would pave the way for him to be transferred to Sydney's Villawood Immigration Detention Centre, he said.
''Today I've exercised my powers under the Migration Act to cancel the visa of Dr Mohamed Haneef. ''Section 501 of the Migration Act provides for the cancellation of the visa where a person fails the character test.

Before Andrews had acted, Deputy Prime Minister Mark Vaile today had said the granting of bail to Haneef was not a setback for authorities. Vaile said bail arrangements were a matter for the court to decide.

Kevin Andrews says the legal team for Indian born doctor, Mohammed Haneef, will be allowed to see the police documents on which he based his decision to cancel his visa.

Seems like the Deputy Prime Minister is well out of the government information loop.

Of mice and campaign managers

Strangest campaign I’ve ever been involved with, so much so I can contemplate writing the expose as it unfolds. Truth is, I think I found a vehicle for the weird stories of this place as well as a reflection on the campaign and my own stories.

Can’t say I ever felt comfortable writing a bio, but this is a fairly selective snapshot. The voice is still a major concern. As essentially an essayist it seems odd going down this track. My first issue is that I simply cannot fictionalise the characters or the stories.

That means I’m avoiding discussion of the various elements of corruption, as I simply do not have the documentary evidence. On the other hand, I don’t mind naming people who would never bother to read anything of substance.

So here goes – Campaign Central (pdf). Please have a look and crits are more than welcome as these are still preliminary notes. After that I get a bit touchy…

Government in meltdown?

So I am fascinated with potential election outcome predictors and struggling with my preferred economic model given the paucity of data. But another of my favourites is the incumbent government falling apart internally.

Australian Defence Minister Brendan Nelson recently alluded to the fact that the Iraq war was about oil. I’m not sure why he even raised an issue which is all but dead here, but there you go.

As a result John Howard was forced to claim it was not so, the war was in fact about installing democracy in the region. Given his democratic credentials rival those of his Bush buddy the electorate rolled their eyes and emitted a collective groan. Logically it should have ended there, but…

A day after John Howard’s denial, Foreign Minister Alexander Downer said allowing al-Qaeda to prevail would affect Iraq's oil industry and cripple the country economically. Downer said the challenge "is to make sure, first and foremost, al-Qaeda is defeated in Iraq", but this could not be separated from the issue of oil.
Downer admits safety of oil key to Iraq war

The Howard government has been in lock step for so long now it is curious to watch these ‘accidental’ or perhaps even deliberate deviations. Nelson is perhaps the most naïve of Howard’s ministers, speaking truth as he knows it without thinking of the political ramifications. Not so Downer, who simply doesn’t deviate from the party line.

Well, one crocus doesn’t make a springtime, but these slips are starting to mount up, with a few months still to go before the election. I will be watching eagerly for more electoral signs and wonders.

Faces of port

Following on from Of mice and those two-legged things…

Each time I have returned to Port over the past dozen years, this is my third sojourn; the basic nature of the place has changed. First it was a family holiday town of around 20,000, fairly innocent but struggling to provide a steady base for local business.

Then the developers took charge and saw the solution not in family holidays but a more upmarket approach. So the quaint and rustic beach houses were steadily replaced by beige holiday apartment blocks and time shares. Prices were higher, of course, to discourage the riff-raff.

Now the town has been designated a regional growth area and new town centre construction and the ubiquitous suburban mac-mansions are putting a new face on the town.

Of course the sordid underbelly was here throughout these changes, the notorious rooming houses and private hotels. There was even a special pub for the local pissheads, now converted to a luxury riverside pub.

The ‘river rats’ were always in evidence, that hardy bunch seen littering the riverside parks around the clock, bottles discreetly wrapped in brown paper bags. Council ordinance, police action and inclement weather have all failed to dissuade this hardy bunch.

Ailing business might complain about the effects of the river rats on their trade, they have to blame someone. The town’s retirees might sniff and complain as the sight assaults their daily walk, preferring the town reflected their own orderly balcony gardens.

But the river rats remain as the most visible evidence of that sordid underbelly, in turn drawing and mingling with those lucky enough to have some form of subsidised housing allowing the guzzling, snorting, spiking or puffing to take place out of sight.

Like any community there are layers which might pass each other without ever interacting. The aforementioned retirees tend to stay aloof from the rest; traders are up to their ears in surviving as traders.

Cops and justice have the good side and bad side, but then the state is renowned for the levels of corruption in its police force. There are still some excellent cops in the system, but the murky edges creep into venue security, and allegedly drug supply.

But above and below – the movers and shakers and the sordid underbelly are said to have a strange symbiosis.

The basic fact is that someone has to finance the local drug trade and who better than those intent on progress – developing every possible financially rewarding activity in the town.

So there is clearly a vested interest in maintaining the underbelly, the market for illicit and abused substances. So having set the background I shall set my mind to storifying the local characters of the underbelly, the users and abusers of this seaside town.

Of mice and those two-legged things

Oddly enough, for a writer, I resent paying top dollar for books. So my reading habits are fed from the shelves of thrift shops and second hand book shops. I’m rarely disappointed, some gem always surfaces.

Recently I was browsing a $2 bin and feeling discouraged by all the Sci-Fi and fantasy, not my preferred genre, or anyone else’s judging by the volume in that bin. But hidden among them was an excellent copy of Steinbeck’s Tortilla Flats.

Steinbeck is one of those authors I tend to acquire then give away to spread the delight of his writing. But since I have been back in Port Macquarie I have wished I had the man’s storytelling skills.

Never in my life have I encountered such a dense mix of druggies, alcoholics, habitual guests of the prison system and general low-lifes. The stories are hair raising, but unlike Steinbeck I can’t find any sympathetic handle for these characters.

The bright side is that I am receiving an education, if it was ever important for me to know the variations of bongs, cones and other drug paraphernalia. I don’t relish the culture of the needle, crowbar or whatever else they style them.

I don’t really need to hear about the repetitive abuse of both male and female serial arrestees. If they don’t like perverted treatment they receive then they should take steps to stay out of trouble.

Most of the stories tend to come back to the household rather than occur here, but there is still more action and unwelcome drop-ins than I’m comfortable with.

The flatmate has taken the not unsubtle hint and taken his consumption elsewhere, but there is always the fear of him bringing trouble back One day either the bogeymen or the cops are going to follow him home.

One telling tale came from a local defence lawyer: “All my clients are in jail for things they did not do!

• They didn’t wipe their fingerprints.
• They didn’t pick up the wallet they dropped at the scene.
• They didn’t respond to the approaching sirens.
• They did not take their ill-gotten gains somewhere other than their homes…

I toyed with the idea of a Steinbeck type chronicle, but amusing as some of the stories can be, I doubt these deadheads have the charm of his subjects; equally I know I don’t have anywhere his level of genius.

So I will be the mouse on this one. One day I might tell some of the story, one day when I’m far away from this sub-tropical ‘paradise’.

Rovian fancies downunder

Among his many achievements, John Howard is sometimes credited with the invention of "dog whistling" politics - whereby, without any objectionable or racist idea being directly stated, the dog hears exactly the message meant. The Guardian

It is easy to imagine the Howard government have their own version of a Karl Rove, but like Bush the messages are starting to backfire.

Howard has cited a "national emergency" to justify a radical takeover of indigenous affairs that will give the Federal Government control over almost every aspect of Aboriginal life in the Northern Territory.

The move is emotionally charged, containing issues such as pedophilia and child abuse, alcohol abuse, petrol sniffing and other abuses among the aboriginal community. Just the kind of hook the PM is used to dangling in front of the electorate.

Initial polling showed a strong knee jerk response form voters, but the doubts quickly set in. These reports have been around for nearly ten years and it is only when the government is in trouble they decide it is time for action.

A Galaxy poll on Monday found 58 per cent of voters believe the reforms are a vote-grabbing move while just 25 per cent think Prime Minister John Howard launched the scheme because he really cares about the problem.

Aside from that we arte now seeing headlines like: Indigenous land grab fears ludicrous, says Howard.
"The land grab from the Aborigines is actually about uranium and nuclear waste," according to anti-nuclear campaigner Dr Helen Caldicott. But her fears are also backed up by indigenous communities faced with the threat of the Federal government using the so called emergency to take back land previously granted to tribal groups.

Nose to nose

LABOR will put a rock star in charge of determining Australia's economic future. That was the simple political message from the Prime Minister's speech on climate change at yesterday's Liberal Party federal council.

Labor environment spokesman is former Midnight Oils front man, Peter Garrett. With an electorate that's increasingly worried about global warming the Howard’s front man is a former merchant banker, Malcolm Turnbull. Turnbull’s answer is to privatise resources such as water, relieving the government of even more responsibilities.

At least for now the ‘Rovian’ manoeuvres aren’t making much headway in the polls. On the other hand the electorate is being polarised between two less than perfect solutions. Howard Vs Rudd – Garret Vs Turnbull… Like the Republican Vs Democrat focus, it doesn’t leave much room for real solutions.

Private rate rises

Eight of 21 Australian economists surveyed are tipping a rate rise by the end of the year. Two even tip a hike by the Reserve Bank next week. But there is no need to hold our breaths.

Major banks, the Commonwealth, National, Westpac and St George have all introduced higher card rates that are not directly linked to RBA (central bank) interest rate rises.

The Reserve Bank has now regulated interchange and cut back the merchant service fees. As a result, card issuers have shifted more of the cost on to consumers through higher annual fees, penalty charges and interest rates.

Banks used to adjust their credit card interest rates in line with official cash rates but not any more.

Obviously the concern over an official rate rise in Australia is academic when banks are boosting their rates independently. So obviously official economic figures are no longer to be relied on when it comes to the big picture.

Talking the disconnect

The major battle for the hearts and minds of Australian voters is being fought around ‘economic management’ credentials. Call it pedantry, or even polemic, but government has long since given up the reins of the economy.

The Australian government no longer control currency or interest rates. They no longer have any function in setting tariffs or central wage fixing. They have sold off airlines, rail systems, the national telco carrier and much more. What they have not sold outright they have corporatised. Anything but economic management.

That just leaves fiscal policy, setting the level of public expenditure, distribution of the loot – or otherwise. The fact that there is still plenty of loot to distribute is thanks solely to the China boom. The resource exports to China are set to carry us for a while yet.

The fly in the ointment there really does come down to politics and who gets the kudos – state or federal politicians. So holding the purse strings the feds can behave a bit like parents doling out pocket money. More often than not there are strings attached designed to give the feds maximum glory for spending our money.

Meantime the major parties are running the agenda on this false claim of economic management. At present the Howard Government has the running in this illusory game. There are very real issues out there, but these guys know the glib jargon that gets the average punter going.

Jerking the figures

Having give my previous post, Howard faces rate rise reality, a little more thought I think I am starting to understand the dynamic. There are a couple of stand out issues; trade and domestic growth. So starting with the latter:

Like other western economies Australia has gone with the ‘growth is good’ dynamic. Of course growth is fine in its place, but you can’t keep paying off last months debt by creating another notional income stream.

“When we've got no spare capacity, the economy can't grow faster than its longer-term trend rate of growth, known to economists as its "potential" growth rate.” Gittins

Developers are driving the economy. Both commercial and residential development is the fundamentalist economic mantra. This is at a time of the country’s peak in personal bankruptcies and insolvencies. It is a time when retailers are battling to cover rising rental costs as consumer spending is falling.

On Trade:

“…growth of 4.5 per cent in the volume of exports, but then must subtract the exceptionally strong growth of 11.3 per cent in the volume of imports. Combine the two and "net external demand" (exports minus imports) subtracted 1.6 percentage points to give growth in aggregate demand (domestic plus external) of 3.8 per cent (near enough).” Gittins

The net foreign debt stood at $532 billion (or 52 per cent of GDP) at the end of March, up from $492 billion (51.7 per cent) a year earlier. This is about free trade vs fair trade. Australia has gone the free trade route and in the process sacrificed self-sustainability and self reliance.

We are sending raw product, mineral resources, out of the country as fast as we can load ships. But we are bringing in a wide range of manufactured and food products to make up for the industry sectors we have given away under various free trade agreements.

I was amazed some months back to see kiwifruit in supermarkets which came from eastern Europe. We send our wool to Italy and China, then buy back manufactured goods. I could go on, but the fact is, our masters have fallen for the pea and thimble trick. I hope so at least, the other alternative is that they will walk away with fat pockets while the country goes down the tube.

Howard faces rate rise reality

Australian Reserve Bank governor Glenn Stevens is flag the potential for a rate rise before the upcoming federal election He warned that decisions would not be influenced by the political timetable.

The warning flies in the face of government claims of a booming economy, but we have all heard that one before.

One commentator, Ross Gittins, says:

“This week's sheaf of figures may be great news for the politicians, but for the economic managers they're a worry. For most of last year, the great puzzle was why the national accounts said the economy was growing slowly when the labour force survey said employment was growing strongly.

“The national accounts say real gross domestic product grew by a rapid 3.8 per cent over the year to March, while the labour force survey says employment grew by a rapid 3.1 per cent over the year to May.

“Trouble is, with the economy having grown so strongly for so long - employment grew by 3.2 per cent over the previous year to May - you'd expect to be seeing signs of inflation pressure building, and there aren't any.

“…financial markets were right to respond to this week's figures by increasing their estimate of the probability that the Reserve Bank will raise the official interest rate again.” If it looks too good to be true, it probably is

I can’t say I fully understand the argument, but I respect the commentator and rarely find him off the mark. The bottom line is that Howard will no go to an election before his cobber George W visits Australia in early September.

The tipping is now building for a rate rise early in September which will more closely reflect the household economics of the country as opposed to the ‘booming’ markets. Good news at least for my well worn economic election prediction model.

Wading through treacle

Since being back in Australia working the blogs and my corruption website have become an annoying frustration rather than the pleasure they once were. Why?

Australia lags, says net guru

Larry Smarr, director of the California Institute for Telecommunications and Information Technology, says "real broadband" would allow connections 1000 times the speed of the current average Australian connection - and 80 times the speed the Government and Labor propose.

"Australia is great in terms of the old infrastructure … so you think of yourselves as a modern country", but on internet infrastructure, "Australia ranks 42nd in the world in the cost of internet service, 38th in mobile phone costs, 40th on the availability of skilled labour and engineers, and 20th on scientific infrastructure. If you want your living standard to remain … one of the best in the world, it's going to have to be by adding value in a globally interconnected economy."

Working on the net here is like wading through treacle. Broadband is closer to North American dial up than true broadband. One of the results I have noticed here is a real ignorance of the benefits of various net tools among people here.

Over a decade ago I was at an internet conference in Sydney where Vinton Cerf , inventor of tcp/ip took the then minister for communications to task for Australia’s appalling internet connectivity. Nothing has changed!

Constructing a campaign

As reported previously, kvatch’s commandos proved a little confronting for poor sensitive Australians. We still intend having little plastic guys spreading our message of ‘Who Cares?’ through the electorate of Lyne.

We lucked onto these construction workers, the message of building a better country fits well and shouldn’t disturb any poor puppies out there.

These guys still need to be labelled, which will happen when our ‘campaign calligrapher’ turns up for work.

The things haunting our dreams

I know there are far better things to do with our sleeping time, but I woke today with a vision, as reproduced here, of Mark Vaile riding a bull.

As leader of the junior coalition partner, the rural based Nationals, the imagery seemed to fit. If the Nationals are further reduced they will simply be absorbed into the Liberal Party and Vaile will probably become just another backbencher.

I’m not sure we can seriously damage him in this electorate, but he is still fighting for his political future.

The party grinding down

A few weeks ago we had political and media fireworks from the Australian Labor Party national conference. That event was matched this weekend with a slow hising from the Liberal party’s big event.

Very little media or fireworks. In fact the conference appeared more content to focus on the past rather than the future. Howard's message all weekend was similar. "I have a great story to tell," and; "It is never a time for a change unless a change is for the better."

Some of the more interesting media quotes:

Ultimately, workers are more swayed by their own financial circumstances than macroeconomic theory.

The elephant in the room over the weekend remained what to do if the polls did not improve within six weeks.

The internal sentiment is that things may have been different had the party changed leaders last year when there was a chance. This, however, ignores the fact that no one then knew Labor was going to switch from Kim Beazley to ...

"Howard was our power source back then," said one senior party figure harking back to last July. "Now he's like an old mobile phone battery. He doesn't hold his charge."

One MP likened the Government to the Black Knight from Monty Python and the Holy Grail, staying put defiantly with severed limbs but willing to fight. SMH

Howard said: "The question I pose to the Australian people, quite directly, is this: who do you trust to take these vital decisions about our future? Age

Given the current polling, I am surprised Howard would pose the question when he does not know the answer. Trust might not be the most effective argument to put just now.

So much for secrecy

I know some countries can’t even boast the second rate public health services available in Australia. The Howard government, fond as it is of the ‘level playing field’ is now planning to sell of the government health insurer Medibank.

They are looking to add around $2 billion to the notional national pot. Not that they have any desire to compensate the population with this supposed windfall. On latest figures the money will probably be spent on publicly funded self-advertising.

If that is not worrying enough, there is a now not so secret plan to boost Medibank’s bottom line, and sale price, by adding in another key government health service; Health Services Australia (HAS).

HAS which generates revenues of about $100 million a year provides health and disability checks, rehabilitation and vaccination services.

Minister for Human Services, Chris Ellison, who is responsible for Health Services Australia, has stonewalled over questions about proposals for a transfer, citing commercial confidentiality.

Given the outrageous spending on government advertising at present, topping $25,000 an hour nationally, we are getting a very clear idea of how Howard’s team is choosing to spend the funds from selling off our assets. So much for a healthy society.