The state of the economy at the street level

SirRumpole said:

Not really. They promised bigger income tax cuts for those earning under $38k, ie the people who spend virtually all of any increase they get.

Click to expand...

It is very hard to give tax cuts, to those who don't pay any effective tax, you can increase the assistance you give them.

moXJO said:

They hit small business which was slready struggling. Accountant changes was a hit to small businesses. Taking away franking credits was always going to be viewed as negative even though only a small % use it. As was the negative gearing changes with houses. You scare the voters even if they don't use the schemes.

Its the indirect impact on people already at wits end. Labor were stupid to run it. Especially with Shorten at the helm. If they ran the visionary Rudd platform they may have got people excited.

Click to expand...

Yes, I agree with most of that. Any hint of higher taxes on some gets the flock scared shiteless. Shows how stupid people are really.

Maybe if Labor bring back their mining tax plans they may be more popular.

sptrawler said:

It is very hard to give tax cuts, to those who don't pay any effective tax, you can increase the assistance you give them.

Click to expand...

True. About the only thing you can do is reduce the GST rate, but I doubt if anyone will do that.

SirRumpole said:

True. About the only thing you can do is reduce the GST rate, but I doubt if anyone will do that.

Click to expand...

I think they are on the right track, flatten tax rates to encourage endeavour and aspiration, also raise the tax free threshold and simplify welfare.
With simplifying welfare, that is probably what the living wage is about, having a complex welfare system just encourages rorting.
Once you have a defined well thought out living wage, everything below that can be indexed in line with it, rather than having all the different names and rates which correlate to nothing, other than the squeaky wheel syndrome.

sptrawler said:

I think they are on the right track, flatten tax rates to encourage endeavour and aspiration, also raise the tax free threshold and simplify welfare.
With simplifying welfare, that is probably what the living wage is about, having a complex welfare system just encourages rorting.
Once you have a defined well thought out living wage, everything below that can be indexed in line with it, rather than having all the different names and rates which correlate to nothing, other than the squeaky wheel syndrome.

Click to expand...

Flattening tax rates is fine, but the other side should be reduction of tax avoidance schemes like neg gearing and superannuation, otherwise the clever rich ones will be paying virtually zero tax.

SirRumpole said:

Flattening tax rates is fine, but the other side should be reduction of tax avoidance schemes like neg gearing and superannuation, otherwise the clever rich ones will be paying virtually zero tax.

Click to expand...

Very true, but it has to be done in a way, that still gives a positive outcome.
You still want working people, to endeavour to improve their financial position, throughout their working lives.
You also want the poor to have affordable rental properties, which in reality isn't going to be new build houses.
The clever rich ones, will always pay low tax, they have the money to structure their affairs to take advantage of which ever system works best.
Restricting negative gearing to new builds, wasn't going affect the rich, but it would have locked out the middle to low income earners.

Superannuation has to a large degree been "fixed", by putting the $1.6m cap on tax free pensions, so in reality the franking that can be earned on that amount isn't huge. As I showed earlier, a pension couple would quite easily earn more, than a self funded couple.
If they want to reduce, how much franking credit excessive super balances earn in accumulation, just put a progressive tax rate on accumulation balances and reduce the "cap" further.
This would then stop people putting excessive amounts into super, but IMO that wasn't the main function of Labor's proposal.

PZ99 said:

What happens if the can goes the other way?

Unemployment, heavy losses, bankruptcy will spike even faster.

Who is saying wages are too high ? Not the Govt. Not the reserve bank.

Zimbabwe? Try Cambodia. That's where we're heading. Freeze wages and get there quicker

Click to expand...

No I agree we can't freeze wages either. But we need to be realistic about where we are economically as a country before wages get a boost. But saying that its a very fine line walking act. You don't want people to stop spending. That usually means tax revenue takes a hit. But it will take a hit either way so its better to stimulate activity.

We either (further) develop industry the world needs, or its going to get tough. This liberal govt has really dropped the ball in that regard.

I think we hit a peak on prices, profits, housing, wages and even consuming goods. The drought is doing us no favors on food produce into asia. Neither are the tariff wars. Tax revenue will be taking a hit from most sectors.

Will the Indian middle-class save us?
We should be targeting those growing middle-class asian countries and exporting our smashed avo lifestyle.

The problem we've got is the gap between two conflicting ideologies.

High costs and free trade.

Which one do we want? Trying both is a sure fire way to ruin.

Suffice to say that I've never met a blue collar or general administrative type office worker who can't see that but I'm yet to hear even one academic who seems to grasp it. Hence the increasingly apparent political divide between the "inner city elites" and the rest.

I'll give one example but it's just an example because the same thing applies to pretty much every factory and other big industrial thing which has closed with production offshored.

Example - the former Hazelwood power station in Victoria which closed two years ago.

Now putting aside that we've since had wholesale electricity prices more than double and there have indeed been blackouts directly resulting from that closure as promised, my point is about the workers.

Many retired earlier than they otherwise would have and are retired as such. Their former jobs are simply gone and replaced with nothing at all.

The odd random one ended up working in renewable energy or some other well paying field. They're very much in the minority however.

The rest? Well they're either working in low wage jobs mostly in service industries or they're unemployed. At least that's what I've been assured by those who know.

There's the great problem. Manufacturing and investing puts people firmly in the middle class whilst service industries and welfare puts them in the lower class.

As others have suggested, I do think a Trump-like character will emerge for the simple reason that very obviously no current political party is going to address the problem. They'll all push us in the direction of more cafes and tourists and fewer stamping lines and casting plants. Push us in the direction of things which cannot and will not pay high wages and there's the problem.

Either we need a much lower cost base so as to be able to compete or tariffs are the only real alternative. Not blanket tariffs on everything, just on any country with wages or environmental standards that wouldn't be legal in Australia will do. It's not rocket science to see that's the reality and as the middle class are squeezed between rising costs and faltering wages of course they'll stop spending.

I'm not advocating that we prop up failing industries making products that nobody wants but it's a tragedy that our electronics industry didn't make the leap from TV's to smartphones, that our car industry didn't make the transition to products that consumers wanted and that increasingly we're struggling to even do things like smelting copper or aluminium. All that stuff pays decent wages whereas you won't get that with any number of cafes, mobile dog washes and so on.

How strong is our retail sector ? Concerning story on ABC news. I also look around and talk to shop owners and frankly I don't think many are winning. The internet, squeezed wages, high rents lack of spending seems to be scary.

Thoughts ?


Growing number of Australian small businesses struggling amid economic downturn
By business reporter David Taylor
Posted about 8 hours ago

Photo: NAB's analysis of electronic payments points to further retail weakness ahead. (AAP/Supplied)
Related Story: Business conditions at their worst level since 2013, with retail 'clearly in recession'
Related Story: Retail sales far worse than expected as households continue to feel the pinch
Related Story: We're hocked to the eyeballs in debt with no obvious way out
Evidence is emerging that a growing wave of businesses are going to the wall as the end of the financial year approaches.

Key points:

• ASIC figures showing the number of companies entering administration rose 11.2pc last year
• NAB's cashless sales index is pointing to continued weak retail sales growth
• Business groups warn weak trading conditions will lead to job losses in the retail sector

Private debt collectors dealing directly with businesses struggling to pay their suppliers have told the ABC's PM program their work load has "spiked" in recent weeks.

In New South Wales alone, the ABC understands the numbers of business getting a knock on the door from debt collectors is in the thousands.

Nationwide, according to Australian Securities and Investments Commission, the number of companies entering external administration increased by a staggering 11.2 per cent last year.

Economists agree that businesses in the retail sector are reeling.
https://www.abc.net.au/news/2019-06...es-struggling-amid-economic-downturn/11224246

Stagnant wages are one thing.

Broad concern about the future is another with everything from jobs to climate.

Falling interest rates benefit some but harm others so it's a double edge sword.

There's pretty much no product or service which isn't readily available and thus no real pricing power. Very few things which can be bought are actually scarce at the moment whereas in the past that wasn't always the case, there was usually at least something which was scarce.

A substantial portion of the population has significant debt which is an obvious sink for any additional income without spending on anything.

About the only thing which rather a lot of people seem to want but don't have is more holidays, particularly to anywhere overseas especially Europe. Hand someone some more money and for a decent % of the population it's either going to repay debt or it's going to fund an overseas trip.

Smurf1976 said:

Stagnant wages are one thing.

Broad concern about the future is another with everything from jobs to climate.

Falling interest rates benefit some but harm others so it's a double edge sword.

There's pretty much no product or service which isn't readily available and thus no real pricing power. Very few things which can be bought are actually scarce at the moment whereas in the past that wasn't always the case, there was usually at least something which was scarce.

A substantial portion of the population has significant debt which is an obvious sink for any additional income without spending on anything.

About the only thing which rather a lot of people seem to want but don't have is more holidays, particularly to anywhere overseas especially Europe. Hand someone some more money and for a decent % of the population it's either going to repay debt or it's going to fund an overseas trip.

Click to expand...

There really isn't much, that most people don't have, consumables have become cheap in real terms.
So what do people buy, when they have everything, as you say holidays and add to that eating.
With all the fanfare, of the impending mass introduction of electric cars, everyone is hanging on to their existing car.
No one is jumping into property, so as you say with the extra money, they either pay off debt or take a holiday.
I would hate to be in retail, unless it was food, coffee or booze.

Retail is a glutton for punishment even at the best of times.

It's good for kids getting their CV started but it's really only a hobby these days.

One of my clients I just discovered is an economics PhD who lectures at UQ.

He thinks the can kicking is close to being over. He thinks a recession is likely soon. Doesn't think this will be the big one, maybe the next one, when it comes. FWIW

wayneL said:

One of my clients I just discovered is an economics PhD who lectures at UQ.

He thinks the can kicking is close to being over. He thinks a recession is likely soon. Doesn't think this will be the big one, maybe the next one, when it comes. FWIW

Click to expand...

UQ's Economics School used to be World renowned for producing some brilliant minds. Not sure if it still is now.

Just thought I'd throw that in, as appreciation for your comedy elsewhere.

wayneL said:

One of my clients I just discovered is an economics PhD who lectures at UQ.

He thinks the can kicking is close to being over. He thinks a recession is likely soon. Doesn't think this will be the big one, maybe the next one, when it comes. FWIW

Click to expand...

I would agree with that although I think the next recession here would drag out for a very long time and maybe even culminate to a double dipper because with low interest rates, low dollar and high debt, we don't really have anything to stabilise the economy as in the past.

I think millennials are in for a rude shock when it happens.

PZ99 said:

we don't really have anything to stabilise the economy as in the past.

I think millennials are in for a rude shock when it happens.

Click to expand...

Things like manufacturing can't really benefit from a lower Dollar when local production of entire categories of goods has been completely wiped out. Even 100% growth from a base of zero is still zero.

Another issue is that I strongly suspect that certain industries which have become economically significant are so only because of the strength of the Australian economy compared to elsewhere. I'm referring there to the fact that immigration has become an industry in itself and a pretty substantial one at that whereas in the past it was nowhere near as significant. I have doubts about that continuing to be so if the economy goes into recession.

On the other hand, if the AUD drops enough then tourism should pick up with more international visitors.

One thing I've noticed as an economic indicator is to look at the news.

By that I don't mean the detail but what sort of things are commonly in the news and keep coming up over and over?

Split them into two groups - one for anything of a "social" or politically "Left" nature and the other for things of an economic or politically "Right" nature.

What I've noticed is that the "social" or "Left" stuff becomes far more prominent toward the end of the economic cycle but disappears from the news almost entirely after a slump.

My point there is about using politics and the news as an economic indicator not about who to vote for etc. Association is not causation!

Being very generic I see a lot of news about "environment" and also quite a bit about "gender", "health" and "education" but there doesn't seem to be any real discussion about "economic reform" or "international competitiveness" and taken together that tells me we're toward the end of the cycle.

Also be on the lookout for politicians raising issues which dominate debate but which are of a non-economic nature. Things like, for example, any mention of becoming a republic, changing the flag or the national anthem, matters affecting Aboriginals, "ambitious" things like elaborate transport or water projects. Stuff like that, if being brought up by the government, tends to be a diversion of attention away from the economy and a sure sign it's going to crap. That's not to say none of that's important or worth discussing but it tends to come up when the economy's bad and government wants to divert attention.

I think all the noise coming out of the Reserve Bank, indicates that small business is going to fold, unless they get some spending money into the economy.
That to me, would indicate the tax cuts need to be rolled out ASAP, because small industry can't afford another wage rise after the lift in the basic wage.
It all seems to be a bit precarious ATM, once the small shops start folding en masse, it will go like a house of cards. IMO

Smurf1976 said:

One thing I've noticed as an economic indicator is to look at the news.

By that I don't mean the detail but what sort of things are commonly in the news and keep coming up over and over?

Split them into two groups - one for anything of a "social" or politically "Left" nature and the other for things of an economic or politically "Right" nature.

What I've noticed is that the "social" or "Left" stuff becomes far more prominent toward the end of the economic cycle but disappears from the news almost entirely after a slump.

My point there is about using politics and the news as an economic indicator not about who to vote for etc. Association is not causation!

Being very generic I see a lot of news about "environment" and also quite a bit about "gender", "health" and "education" but there doesn't seem to be any real discussion about "economic reform" or "international competitiveness" and taken together that tells me we're toward the end of the cycle.

Also be on the lookout for politicians raising issues which dominate debate but which are of a non-economic nature. Things like, for example, any mention of becoming a republic, changing the flag or the national anthem, matters affecting Aboriginals, "ambitious" things like elaborate transport or water projects. Stuff like that, if being brought up by the government, tends to be a diversion of attention away from the economy and a sure sign it's going to crap. That's not to say none of that's important or worth discussing but it tends to come up when the economy's bad and government wants to divert attention.

Click to expand...

Awesome observation.

Socionomics..... as much as Prechter gets things wrong, I think its a useful study. Paying more attention to this now.

Smurf1976 said:

Also be on the lookout for politicians raising issues which dominate debate but which are of a non-economic nature. Things like, for example, any mention of becoming a republic, changing the flag or the national anthem, matters affecting Aboriginals, "ambitious" things like elaborate transport or water projects. Stuff like that, if being brought up by the government, tends to be a diversion of attention away from the economy and a sure sign it's going to crap. That's not to say none of that's important or worth discussing but it tends to come up when the economy's bad and government wants to divert attention.

Click to expand...

Flag waving exercises about refugees, terrorism, immigration or citizenship (African gangs, deporting criminals etc) are another sign especially if they can be used against the Opposition.