Dear Readers I apologise for the lack of connectivity over the last 36 hours or so. My research centre and related WWW pages are delivered by servers that we maintain within a larger data centre in Adelaide. On Wednesday evening…
The Australian Bureau of Statistics (ABS) released the latest labour force data today (April 17, 2025) – Labour Force, Australia – for March 2025. It revealed that the unemployment rate rose 0.1 point (on rounding) to 4.1 per cent, employment rose by 32,200 (0.2 per cent), the underemployment rate was unchanged at 5.9 per cent, and the participation rate rose 0.1 point (on rounding). Monthly hours worked fell by 6 million (-0.3 per cent). The broad labour underutilisation rate (sum of unemployment and underemployment) was 9.9 per cent, which puts the claims that this is a tight labour market into perspective. There is substantial scope for more job creation given the slack that is present.
We know that after the Second World War, as nations embraced their major national policy statements (White Papers in many countries) to build their societies after the disruption of the War and the Great Depression, income inequality fell significantly. Since the 1970s, the post WW2 trend has been somewhat reversed in many (but not all) nations. The rising income inequality is particularly apparent in the Anglo advanced economies, with the US leading the way. In other nations, the trend is mixed, which suggests the link between rising income inequality and the rising support for right-wing political movements is less obvious than some commentators are suggesting. In fact, there is credible research that suggests the swing to right-wing political parties is not coming from the most precarious workers who appear to remain loyal to Leftist ideas. It is the next segment of workers up who have not yet been ravaged by globalisation but sense they are about to be who seem to have swung to the Right. In this blog post, I discuss some of these ideas and the research that is accompanying them.
It’s obviously becoming difficult to keep track of where the US government policy is on any particular day. Last week, it was ‘Liberation Day’, which included tariffs being imposed on remote penguin colonies in the back of nowhere, then Musk labelling the Trump’s trade adviser ‘dumber than a sack of bricks’, then tariffs on Chinese goods rising to 124 per cent (which will make then uncompetitive), then the ‘pause’ on reciprocal tariffs beyond the 10 per cent level … what will be next. These shifts and decisions are not exactly benign and the US Administration is displaying the sort of incompetence, capriciousness, flippancy – whatever you want to call it – that hardly befits the largest economic nation in the globe which has its tentacles spread far and wide. I was particularly interested though in the now infamous ‘Rose Garden Liberation Day’ speech Trump made last week (April 2, 2025) where he made claims about Japan, which were used to justify the imposition of 24 per cent tariffs on that nation. According to the President, Japan is among a host of countries that have “looted, pillaged, raped and plundered” the US. His evidence? None is available. The reality is that US cars don’t sell in Japan because they are inferior and ill-suited to the market. We explore that theme in this blog post.
Last week, the US President honoured his election promise, indeed his long-held commitment, to increase tariffs on imported goods and services to the US. The formula they came up to differentiate between countries was bizarre but I don’t intend commenting on that here, except to say, the imposition of tariffs on the – Heard Island and McDonald Islands – which are an ‘Australian external territory’ that is a ‘a volcanic group of mostly barren Antarctic islands, about two-thirds of the way from Madagascar to Antarctica’ (where penguins live) ranked up there with their Signal chaos. These guys have access to the ‘red button’ after all. That’s the scary thing. Anyway I was sent a document that seemingly is the theoretical rationalisation for the tariff decision (thanks Mahaish, appreciated) and so I thought I would give it some time.
We are now full-swing into the national election campaign in Australia (election on May 3, 2025) and we have a new party – the Trumpet of Patriots – (funded by a property developer/miner) channelling Trump’s approach, the conservatives channelling Trump’s approach (although with a slight more subtle voice but not much), the Greens chasing their tails, and the Labor government desperately trying to stay in power after running scared of doing very much over the last three years. It is not a great choice. The usual scare tactics from the Opposition are out in force – immigration, defence vulnerabilities, etc and the usual ‘free market’ stuff. The Labor government keeps hammering on about their fiscal rectitude – two surpluses out of three – as if we are all mainstream economists who are obsessed with those irrelevancies. But it seems that the voters are not so aligned with mainstream economists.
The Post WW2 period was marked by the mass consumption boom and the rise of the ‘middle class’, which is a sociological designation that is intended to say that the working class had segments that had experienced better conditions and outcomes than the labouring cohorts. The fact that Capital (as a class) deigned to concede to the rise of this cohort was due to the threat that the Soviet Union and the increasing interest in Marxism in Western nations during the mid-C20th posed to the on-going hegemony of capital. The solution was to share a bit of the booty out with workers, improve pay and working conditions, and provide the basis for a ‘divide and conquer’ strategy, which would effectively segment the working class into ‘individual’ elements that could be played off against each other. And to maintain the profits, sales had to expand and what better way than to encourage the ‘middle class’ households to consume like crazy and fill their ever increasing size homes with stuff. That strategy worked for some decades until the middle class and the trade unions started to get too vocal and demand more at which point something had to give. And in the early 1970s, give it did, and with Monetarism running rife in the academy and industrialists plotting to capture the legislatures (think Powell Manifesto), the conditions for neoliberalism were laid. And the next several decades have seen that ideology become dominant and establish a dynamic that is now likely to implode.
Today, I report on dimensions of that implosion.
It’s been a week of grand fiscal statements. Tuesday, it was for Australia as I discussed yesterday – Australian fiscal statement – rising unemployment amidst a moderate fiscal contraction (March 26, 2025). Then yesterday in the UK, the Labour Chancellor delivered the British Government’s – Spring Statement 2025. Both statements come at a time when the mainstream economics consensus is shifting with the US pushing protection and defunding many global initiatives. And, one of the statements was in the context of an impending federal election (Australia) and from a government that is in danger of losing that election to a bunch of populist Trump-copiers. And the content reflected that. The UK Statement was from a Government currently in no danger of losing office but which is progressively entrapping itself in its hubris and fiscal rules. An interesting juxtaposition. Anyway, the British Chancellor has lost all understanding of what the purpose of fiscal policy is. What is the purpose of fiscal policy? Don’t ask Rachel Reeves!
Last night (March 25, 2025), the Australian government delivered the latest fiscal statement for 2025-26 (aka – The Budget – and, in doing so tried to win renewed electoral appeal given its waning popularity and a national election that has to be held in the next 6 or so weeks. So it offered the tax cuts and other inducements to the voters. But the underlying tenor of the fiscal position is unsustainable not because it is predicting on-going fiscal deficits out to 2028-29 but because those deficits will be too small relative to other trends that are likely to occur (external sector and household consumption spending). While the commentariat has been in conniptions about ‘eye watering red ink’ for a far as we can see (their eyes are poor), the fact is that the projected fiscal deficit is about the average level since 1970-71. But in the current environment, the forecasted government contraction will damage the economy and push unemployment up further than they are forecasting. Sure enough, the Government handed out some dollops of cost-of-living relief to low-income families – a few pennies in the scheme of things and that will probably help them retain votes. But with all the challenges ahead now is not the time to be in contractionary mode. Winning the election is one thing, but neglecting a host of existential matters in the medium term is not the way to go.
Edward Elgar, my sometime publisher, is interested in me updating my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015). I have held them off for a few years because there have been notable developments such as Brexit, COVID-19, and more since I finished that work, which are still playing out and difficult to disentangle in such a way that definitive analysis can be made. One of the striking things about Europe, from my perspective, is that voters appear to have separated the growing economic stagnation and the insecurity it brings from their view of the euro as a currency. The most recent – Standard Eurobarometer Survey 102 (conducted in November 2024) – conducted by the EU itself, “has registered the highest support ever for the common currency, both in the EU as a whole (74%) and in the euro area (81%)”. (85 per cent support in Germany and 76 per cent in France). Given the circumstances that is a pretty stunning result. And more respondents thought the EU economy was ‘good’ than those who thought it was ‘bad’, although in Germany and France, the outlook in that regard is highly pessimistic (40 per cent good Germany, 29 per cent France). Yet, the Far Right party in Germany – Alternative für Deutschland (AfD) – which as a result of the national election on February 25, 2025 gained the second highest number of votes (20.8 per cent of total) and improved its voting outcome by a staggering 10.4 per cent. Interestingly, from my perspective, AfD is now the leading voice in Europe against the euro, while other Far Rights voices are no longer (Rassemblement National) or never have (Fratelli) advocated abandoning the euro in favour of a return to national currency sovereignty. So while most Germans like the euro, more are voting for AfD who want it scrapped. That tension is what I am researching at the moment among other things.