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Re: Australian economy

Postby Bam » 05 Nov 2017, 12:12

Lefty wrote:Interesting titbit....

Dodgy FTA’s helped kill the car industry

The first Toyota closure reason was actually the so-called “free trade” agreements that Australia signed. Probably these agreements had more of an effect on Japanese executives in Nagoya than anything else.

The Japanese could not understand why we kept signing “free trade” agreements that were not free trade agreements at all. John Howard signed the Thailand free trade agreement, which allowed free entry of Thai motor parts into Australia but whacked huge tariffs and other restrictions on exports of Australian motor parts and cars into Thailand. We were conned.

General Motors in Australia complained that the so-called US “free trade” agreement prevented unfettered access of Australian cars to the United States. Conned again.

In 2013-14, the Japanese believed that the looming Korean — and indeed Japanese — “free trade” deals would see the Australian motor industry unfairly disadvantaged once again.

Australia could overcome the effect of these “free trade” deals with massive subsidies. The Japanese could never work it out and assumed that Australians were either stupid or did not want a motor industry.


I worked as the Australian Treasury’s trade guy in the early-2000s when the Thailand-Australia and the Australia-US FTA’s were negotiated. And I distinctly remember the former included a clause giving Thailand unfettered (but unreciprocated) access to the Australian market, which subsequently helped fuel the explosion of imported commercial utes into Australia (let alone car parts).


Australians - at least many of the elite - seem to posses a unique brand of ideological stupidity difficult to find elsewhere. The remarkable zeal that we show at so willingly gutting ourselves of any truly productive capacity and crushing our own ability to innovate and adapt into the dirt must be regarded with amazement by other nations. The Japanese invented hari-kari and they still appear astounded at our ideologically-driven slow suicide.

How many other nations have taken their own entire mechanical engineering capacity - and all the spin-offs than arise from R&D in the field - and just casually tossed the entire industry in the garbage, in the unshakable belief that food and dirt exports and selling each other real estate are all we will ever need - we can just import every other last thing we consume.

To say call this stupidity really is inadequate and does not do justice to what we keep doing - this deluded belief that we can (and should) just ditch any ability to produce anything except bulk commoddities and can remain a rich first-world nation by simply borrowing to consume most of what we consume is stupidity on such a monumental scale that it really should have it's own special dictionary definition.

This sort of dullwitted tomfoolery happens whenever the Coalition is in power. Their adherence to neoliberal ideology mandates signing free trade agreements no matter what the cost. The result - the gutting of so many Australian jobs without creating new ones, and lining the pockets of the few at the expense of the many.

By rights, we should scrap all the free trade agreements that we have signed, renegotiate new ones with much better terms, and sign no free trade agreements without the voters ratifying them first with plebiscites.
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Re: Australian economy

Postby HBS Guy » 05 Nov 2017, 12:36

Hear hear Bam!
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Re: Australian economy

Postby Lefty » 07 Nov 2017, 06:54

Merryl Lynch understands the one-way street nature of using private sector credit growth as the major economic driver....

"We concede that official rates at 1.5 per cent did not get to levels seen in the major economies during the 'race to the bottom' of global QE, but the longer that rates remain on hold, then the greater the number of marginal households that take on debt at the current level of rates will make any future adjustment more painful," they write.

http://www.smh.com.au/business/markets-live/markets-live-asx-set-for-bright-start-20171105-gzff9c.html

I'm skeptical that the RBA actually now can raise rates by any meaningful amount. The household sector whose spending makes up over half of economic activity is geared (addicted) to extremely cheap and easy credit in order to maintain that level of spending. Remember in the wake of the GFC - (which Australia largely avoided thanks mainly to Labor's swiftly implemented and significant-sized stimulus package, not because of mining: that mining saved us is a complete myth!!!) - the RBA declared "crisis over" and began to quickly raise interest rates back toward "normal". Do we all remember what happened? They didn't even make it to the floor of the official neutral cash rate of 5% - 6% before the economy started showing signs of stalling and they were forced to cut back down past the GFC trough, right to where we are today.

And in our de-regulated credit system, that private sector debt load has simply continued to bloat and bloat.

So now, what's done is done - most of the amazingly bloated debt load is mortgage debt which means it will take decades to work through the system. Start raising rates and the consumer spending that drives the economy will begin to wither. It won't be just "marginal households" that cut back, the effect will be broad.
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Re: Australian economy

Postby Lefty » 07 Nov 2017, 06:54

Yes, hear hear Bam!
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Re: Australian economy

Postby HBS Guy » 07 Nov 2017, 08:22

They should never have cut below 2.5%, utterly pointless! Except to keep speculation in housing going,

They raised rates one Melbourne Cup day, took a year to admit their error and cut them again. Utterly incompetent the RBA! Monetary policy is a brake not an accelerator. We need government stimulus.
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Re: Australian economy

Postby Lefty » 07 Nov 2017, 08:43

Damn right we do!

And that's part of the problem. As long as the ideologically-driven surplus fetish remains central, it is politically out of the question. Turdfull and co would sooner tip us into recession than be seen guilty of "socialism".

The bit of growth we're seeing at present has it's origins in what is effectively government stimulus - the very large infrastructure drive occurring at the state govenrment level by our two biggest states. This is good but it's not enough on it's own. It won't last all that much longer.
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Re: Australian economy

Postby Bam » 07 Nov 2017, 09:08

The RBA has several problems.

Firstly, it only has one tool in its toolbox - interest rates. They have too narrow a scope: adjusting them only affects people and businesses that actually have debt. Those without debt are not affected. The RBA desperately needs other means of controlling the money supply.

If it could also adjust the level of compulsory superannuation, it could change the amount of money people save and so control the level of national savings. This adjustment would change the take-home pay of workers because the company's total bill would be unchanged.

The RBA's job is made harder because we have a badly-designed taxation regime that foregoes tens of billions of dollars a year with unjustifiable tax concessions. To help the RBA out here, we need to tax capital gains to their full value, scrap negative gearing and scrap dividend imputation. Those measures would take the excess heat out of the top end of the economy that is stifling growth elsewhere.

Secondly, some of the measures that the RBA relies on are unreliable. Unemployment figures are particularly unreliable because they are fiddled by governments and have a very narrow scope. How can anyone take the unemployment figures seriously if they understate the extent of unemployment by 3% to 5% of the workforce? The RBA should remove unemployment figures entirely from its considerations, place much less weight on them, or abandon the harmful fiction that one million people out of work and another million without enough work is defined as "full employment".
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Re: Australian economy

Postby HBS Guy » 07 Nov 2017, 09:24

The RBA also relies way too much, or used to anyway, on NAIRU, the on-accelerating inflation rate of unemployment and sets NAIRU, inflexibly, at 5%. If productivity grows NAIRU can be set lower. Conducting policy to keep 5% of people wanting to work unemployed is fucking evil!

The low inflation rate is also kicking savers in the teeth. Pensioners, those looking to save towards a deposit on a home etc. This cuts a huge swathe through private expenditure.
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Re: Australian economy

Postby Lefty » 07 Nov 2017, 13:23

Firstly, it only has one tool in its toolbox - interest rates. They have too narrow a scope: adjusting them only affects people and businesses that actually have debt. Those without debt are not affected. The RBA desperately needs other means of controlling the money supply.


Agree - monetary policy is a poor substitute for fiscal policy. The RBA for the most part has only a hammer and when all you have is a hammer, everything looks like a nail.

Essentially, we have turned over a good part of control of the money supply to the private sector in order to pursue neoliberal ideals such as balanced/surplus government budgets. These are not historically normal. The private banking system is not merely an intermediatary between depositors and lenders - banks create money under license from the sovereign. The startling fact is that loans in the system do not require there to be "money in the kitty" - the act of making a loan creates a deposit within the banking system which is backed by reserves after the fact. This totally counter-intuitive reality needs to be more widely understood by the public at large. Those in the top levels of banking understand it, entities such as the Bank of England openly admit this is how it works.

Modern money is after all, an abstract concept. An idea, an accounting identity - not so much a physical thing.

We have allowed powerful private players too much free reign to leverage the sovereign's own high-powered money. Bank lending may create money and expand the money supply but the private sector - particularly households - becomes increasingly heavily indebted as the process expands. Lower and lower interest rates are ultimately needed to support larger and larger private debt burdens until we reach the stage where we seem to be about now, a household sector choked on debt to the eyeballs and very little if any scope to make repaying any more affordable.

We would do well to nationalise the banks - they are only able to create Australian dollars because the sovereign Australian government allows them to do so. Ten rturn fiscal policy to it's rightful place as the best economic counter-stablisation tool.
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Re: Australian economy

Postby Lefty » 07 Nov 2017, 13:24

The RBA also relies way too much, or used to anyway, on NAIRU, the on-accelerating inflation rate of unemployment and sets NAIRU, inflexibly, at 5%. If productivity grows NAIRU can be set lower. Conducting policy to keep 5% of people wanting to work unemployed is fucking evil!


That bit makes me sick! :mad
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Re: Australian economy

Postby Squire » 08 Nov 2017, 01:14

The proletariat is whining because wages are not rising as fast as they expected. However, these people seem to be unaware that in most other countries during the GFC wages actually fell and unemployment rose over 10%. Europe still has not recovered. EU is 7.7%, France 9.8% and Germany is 3.7% falling from a peak of ~11.5% ahead of the GFC.

China is busy diversifying its sources of mineral and hydrocarbon imports and is financing mineral extraction in Africa and South America. This portends future lower prices and reduced volumes, as China's imports from Africa and South America rise.

The rise of Australian wages 2009-2017 are one of the reasons Australia has been uncompetitive in manufacturing.

The Australian economy is wallowing in the absence of any strategic planning by the governments at federal and state levels.

Many Australian politicians have patted themselves on the back for Australia's emergence unscathed from the GFC. However, it was mostly the demand from China that raised mineral prices and export volumes that saved Australia. It was just sheer luck which addicted the proletariat to wage growth in excess of world levels. Governments too became addicted to rising tax revenues and are now suffering increasing deficits.

There are huge uncertainties from the emergence of Donald Trump which may have economic consequences that have not yet been recognized on international trade and military conflicts. Australia is a small economy that can only react rather than cause disturbances in the international economy. However, a lack of strategic planning will be a source of future negative effects on the economy.
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Re: Australian economy

Postby Lefty » 08 Nov 2017, 06:15

However, it was mostly the demand from China that raised mineral prices and export volumes that saved Australia.


Australia was saved from recession by a swiftly-implemented stimulus package - demand for minerals came later.

Trust me , I live in a mining region - when the GFC hit, mining went backwards and shed jobs hand over fist. I know people whose scalps were claimed. It later recovered and surged up thanks to a government stimulus package when the Chinese government passed a stimulus package two-thirds the size of the Australian economy, which greatly boosted the demand for commoddities.

When economic shock strikes, the key thing is to act quickly before unemployment can surge. Mining's boom came far to late to mitigate the initial shock. It was good to have but it would not have saved us from a domestic recession without our governments stimulus package.

It is crucial that we do not keep repeating misunderstandings such as "mining saved us from the GFC" - the facts quite simply lie elsewhere and this widely-repeated alternative fact allows the neoliberals to hoodwink the public into believing that their real saviour was a waste of money.
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Re: Australian economy

Postby Lefty » 08 Nov 2017, 06:49

The Australian economy is wallowing in the absence of any strategic planning by the governments at federal and state levels.


Well we certainly agree here.

A lack of strategic planning stems from the dominance of the neoliberal ideology. Strategic planning and lassiez-faire are pretty well mutually exclusive overall.
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Re: Australian economy

Postby HBS Guy » 08 Nov 2017, 09:28

The GFC had hit—there were thousands of unemployed miners suddenly. The Chinese stimulus came months later.

Bam is not quite correct that interest rate changes only hit people that have debt: they hit savers too, especially pensioners with savings, their extra income from term deposits etc are slashed. Same for people saving up to buy a home.
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Re: Australian economy

Postby Bam » 08 Nov 2017, 11:35

Lefty wrote:
The RBA also relies way too much, or used to anyway, on NAIRU, the on-accelerating inflation rate of unemployment and sets NAIRU, inflexibly, at 5%. If productivity grows NAIRU can be set lower. Conducting policy to keep 5% of people wanting to work unemployed is fucking evil!

That bit makes me sick! :mad

Yes, I loathe this too - it's little more than a work of neoliberal fiction, not supported by credible evidence.

What makes it worse is people are not encouraged to make the connection between the so-called "spare capacity" in the economy and involuntary unemployment, and this true nature of unemployment is not discussed openly. We have governments - particularly the current foul mob - who actively demonise the unemployed, and never discuss the fact that the unemployed are not unemployed by choice.

The Federal government could reduce poverty by 75% within three to five years if it so chose, by guaranteeing employment for all with federally-funded jobs. It wouldn't even cost much in new money, less than $10 billion, by redirecting the wasteful spending on controlling and managing the unemployed into the creation of useful jobs. They won't, because it suits their secret agenda to keep people in poverty.

The job market is like a wedding for 100 guests and only enough meals catered for 80. If it's wrong to provide insufficient meals at a wedding, why is it considered correct to maintain artificial scarcity in the job market?
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Re: Australian economy

Postby Squire » 08 Nov 2017, 13:10

Bam wrote:
Lefty wrote:
The RBA also relies way too much, or used to anyway, on NAIRU, the on-accelerating inflation rate of unemployment and sets NAIRU, inflexibly, at 5%. If productivity grows NAIRU can be set lower. Conducting policy to keep 5% of people wanting to work unemployed is fucking evil!

That bit makes me sick! :mad

Yes, I loathe this too - it's little more than a work of neoliberal fiction, not supported by credible evidence.

What makes it worse is people are not encouraged to make the connection between the so-called "spare capacity" in the economy and involuntary unemployment, and this true nature of unemployment is not discussed openly. We have governments - particularly the current foul mob - who actively demonise the unemployed, and never discuss the fact that the unemployed are not unemployed by choice.

The Federal government could reduce poverty by 75% within three to five years if it so chose, by guaranteeing employment for all with federally-funded jobs. It wouldn't even cost much in new money, less than $10 billion, by redirecting the wasteful spending on controlling and managing the unemployed into the creation of useful jobs. They won't, because it suits their secret agenda to keep people in poverty.

The job market is like a wedding for 100 guests and only enough meals catered for 80. If it's wrong to provide insufficient meals at a wedding, why is it considered correct to maintain artificial scarcity in the job market?


Unemployment at 0% is not possible because it would lead to uncontrollable wage rise pressure.

In fact, it is immigration and employment temporary visas that are preventing upward pressure on wages.
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Re: Australian economy

Postby Lefty » 08 Nov 2017, 14:22

In fact, it is immigration and employment temporary visas that are preventing upward pressure on wages.


At least partly correct.

Unemployment at 0% is not possible because it would lead to uncontrollable wage rise pressure.


Incorrect. It is completely possible to have full employment without wage-price spirals through the use of a Non-Inflation Accellerating Buffer Employment Reserve - or "Job Guarantee" for short. Government would fund a programme guaranteeing employment to anyone who needed it, with renumeration set at - and only at - the legal minimum set down in legislation. Employers need only offer more than the legal minimum to bid labour out of the pool which does not compete with the private sector since it takes those who have by definition, been rejected by the labour market and sets a minimum floor below which no employer can legally pay anyway.

We once had true full employment in this country for decades because it was government policy to not allow involuntary unemployment - the right to sustain oneself and family through work was basically enshrined as a human right. Nowdays, the unspoken policy is to ensure that there remains a permanent pool of joblessness (with poverty, disadvantage and all the other attendant negative consequences) in order to ensure a shock absorber against inflation.

Isn't that nice? Let's use some percentage of the labour force - human beings - as sacrifical lambs for the system, knowing that the unknowledgable electorate can so easily be swayed to believe that all unemployment is a choice rather than a consequence of the system.
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Re: Australian economy

Postby Lefty » 08 Nov 2017, 14:26

es, I loathe this too - it's little more than a work of neoliberal fiction, not supported by credible evidence.

What makes it worse is people are not encouraged to make the connection between the so-called "spare capacity" in the economy and involuntary unemployment, and this true nature of unemployment is not discussed openly. We have governments - particularly the current foul mob - who actively demonise the unemployed, and never discuss the fact that the unemployed are not unemployed by choice.

The Federal government could reduce poverty by 75% within three to five years if it so chose, by guaranteeing employment for all with federally-funded jobs. It wouldn't even cost much in new money, less than $10 billion, by redirecting the wasteful spending on controlling and managing the unemployed into the creation of useful jobs. They won't, because it suits their secret agenda to keep people in poverty.

The job market is like a wedding for 100 guests and only enough meals catered for 80. If it's wrong to provide insufficient meals at a wedding, why is it considered correct to maintain artificial scarcity in the job market?


Spot on.

Bill Mitchell's parable of 100 dogs and 95 bones demonstrates how simple it really is to understand the facts here. You can put the dogs through endless bone-finding training schemes, punish them, do whatever you like - but it is a basic fact of the most simple accounting that if there are 100 dogs out looking but only 95 bones to be found, at least 5 dogs must come home without a bone.

So to, the unemployed cannot find jobs that do not exist.
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Re: Australian economy

Postby Bam » 08 Nov 2017, 16:14

Squire wrote:
Bam wrote:
Lefty wrote:
The RBA also relies way too much, or used to anyway, on NAIRU, the on-accelerating inflation rate of unemployment and sets NAIRU, inflexibly, at 5%. If productivity grows NAIRU can be set lower. Conducting policy to keep 5% of people wanting to work unemployed is fucking evil!

That bit makes me sick! :mad

Yes, I loathe this too - it's little more than a work of neoliberal fiction, not supported by credible evidence.

What makes it worse is people are not encouraged to make the connection between the so-called "spare capacity" in the economy and involuntary unemployment, and this true nature of unemployment is not discussed openly. We have governments - particularly the current foul mob - who actively demonise the unemployed, and never discuss the fact that the unemployed are not unemployed by choice.

The Federal government could reduce poverty by 75% within three to five years if it so chose, by guaranteeing employment for all with federally-funded jobs. It wouldn't even cost much in new money, less than $10 billion, by redirecting the wasteful spending on controlling and managing the unemployed into the creation of useful jobs. They won't, because it suits their secret agenda to keep people in poverty.

The job market is like a wedding for 100 guests and only enough meals catered for 80. If it's wrong to provide insufficient meals at a wedding, why is it considered correct to maintain artificial scarcity in the job market?

Unemployment at 0% is not possible because it would lead to uncontrollable wage rise pressure.

I didn't actually mention 0% unemployment.

That remark about 0% unemployment is a false argument that is not actually supported by any evidence. It's just an article of faith propagated by neoliberal alarmists, many of whom make their unearned money from everyone else's debt.

When we had real full employment in the 1950s and 1960s, the real unemployment rate was typically around 1%, and virtually all of it short term. Long term involuntary unemployment almost did not exist. During that time, we didn't have inflation out of control.

Now, we have one million people locked out of the employment market and another one million with highly insecure work. How the bloody hell is keeping two million Australians of working age in real, grinding poverty better than the fictional inflation scenario of what might happen if real full employment was reinstated?
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Re: Australian economy

Postby Squire » 08 Nov 2017, 17:03

Bam wrote:
Squire wrote:
Bam wrote:
Lefty wrote:
The RBA also relies way too much, or used to anyway, on NAIRU, the on-accelerating inflation rate of unemployment and sets NAIRU, inflexibly, at 5%. If productivity grows NAIRU can be set lower. Conducting policy to keep 5% of people wanting to work unemployed is fucking evil!

That bit makes me sick! :mad

Yes, I loathe this too - it's little more than a work of neoliberal fiction, not supported by credible evidence.

What makes it worse is people are not encouraged to make the connection between the so-called "spare capacity" in the economy and involuntary unemployment, and this true nature of unemployment is not discussed openly. We have governments - particularly the current foul mob - who actively demonise the unemployed, and never discuss the fact that the unemployed are not unemployed by choice.

The Federal government could reduce poverty by 75% within three to five years if it so chose, by guaranteeing employment for all with federally-funded jobs. It wouldn't even cost much in new money, less than $10 billion, by redirecting the wasteful spending on controlling and managing the unemployed into the creation of useful jobs. They won't, because it suits their secret agenda to keep people in poverty.

The job market is like a wedding for 100 guests and only enough meals catered for 80. If it's wrong to provide insufficient meals at a wedding, why is it considered correct to maintain artificial scarcity in the job market?

Unemployment at 0% is not possible because it would lead to uncontrollable wage rise pressure.

I didn't actually mention 0% unemployment.

That remark about 0% unemployment is a false argument that is not actually supported by any evidence. It's just an article of faith propagated by neoliberal alarmists, many of whom make their unearned money from everyone else's debt.

When we had real full employment in the 1950s and 1960s, the real unemployment rate was typically around 1%, and virtually all of it short term. Long term involuntary unemployment almost did not exist. During that time, we didn't have inflation out of control.

Now, we have one million people locked out of the employment market and another one million with highly insecure work. How the bloody hell is keeping two million Australians of working age in real, grinding poverty better than the fictional inflation scenario of what might happen if real full employment was reinstated?


They are in grinding poverty because prices in Australia, particularly rent, are rising faster than minimum wage and social welfare payment rates.

Price rises in Australia are out of control and the proletariat chases it's tail while the elite class laughs at them.
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Re: Australian economy

Postby Lefty » 08 Nov 2017, 18:04


They are in grinding poverty because prices in Australia, particularly rent, are rising faster than minimum wage and social welfare payment rates.


They are in poverty because they are without a job and welfare doesn't cover it.
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Re: Australian economy

Postby Squire » 08 Nov 2017, 18:54

Lefty wrote:

They are in grinding poverty because prices in Australia, particularly rent, are rising faster than minimum wage and social welfare payment rates.


They are in poverty because they are without a job and welfare doesn't cover it.


Let them eat cake.

They are better off than poms. The Australian minimum wage is not far below UK's average wage.

https://www.youtube.com/watch?v=DiWomXklfv8

[url][url]http://www.bbc.com/news/business-25759780[/url][/url]

What is the national UK minimum wage, and who gets it?
The minimum wage depends on age and whether the employee is an apprentice. Only those of school leaving age or above are eligible.
It currently stands at £6.31 for the over-21s (a rate which was increased on 1 October 2013 by 12p an hour.)
Those aged 18-20 must be paid £5.03 an hour, while under-18s receive £3.72 and apprentices must get £2.68.
The minimum wage was introduced by Labour in 1999, at a rate of £3.60 an hour for the over-22s. Workers under the age of 22 were to be paid £3 an hour.
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Re: Australian economy

Postby HBS Guy » 08 Nov 2017, 19:04

Wages don’t benefit the unemployed.
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Re: Australian economy

Postby Lefty » 09 Nov 2017, 06:19

HBS Guy wrote:Wages don’t benefit the unemployed.


This fact might be lost on Squire.
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Re: Australian economy

Postby Lefty » 10 Nov 2017, 10:15

Here we go again. The Turnbull Government has inked another “free trade agreement” (FTA), this time with Peru, which once again promises to shower Australian exporters with riches:

Australia and Peru will sign a Free Trade Agreement in Vietnam on Friday, and farmers will be one the biggest beneficiaries of the deal, which eliminates 99 per cent of tariffs facing exporters to the South American country….

It is the fastest FTA Australia has ever negotiated, as talks started only in May this year…

“The equation is simple: more trade means more exports; more exports means more jobs, higher wages and better incomes,” Mr Turnbull said…

Under the Peru Australia FTA, or PAFTA, Australian farmers who have effectively been shut out of the market will be able to compete on a level playing field.


Ok.............but what did we give them in return? They obviously wouldn't have allowed our farmers almost open access without wanting something quid pro quo. I'm not aware of any other country that just signs FTA's with the kind of reckless abandon and lack of any forethought the way Australia does.
https://www.macrobusiness.com.au/2017/11/get-processes-right-inking-free-trade-deals/
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