Feb 192008

Shanahan, that is. He’s right when he says that Wayne Swan should take extra care about which door way he chooses to leave televised press conferences through.

I listened to Swan’s discomfiture during Question Time yesterday, and watched it on the box last night. Swan clearly isn’t performing well when confronted by the likes of Turbull, et al who’s latest tactic in exposing the Treasurer’s ineptitude when openly questioned on economic issues is resorting to economist jargon. Non-Accelerating Inflation Rate of Unemployment being one such term. Turnbull threw this obscure piece of economist lingo into Question Time yesterday, knowing full well that Swan wouldn’t have the foggiest what it meant.

Mr Turnbull (2.34 pm)—My question is addressed to the Treasurer. I refer to the recent 35-year record low in unemployment, of 4.1 per cent, and the record high in labour force participation, of 65.2 per cent. Given the Reserve Bank’s stated intention to tighten monetary policy to slow economic activity in order to lower inflationary pressures, what does the
Treasurer regard as Australia’s current non-accelerating inflation rate of unemployment expressed as a percentage? If the Treasurer regards that rate to be higher than 4.1 per cent, how many Australian jobs does he believe should be sacrificed to achieve it?
Mr Albanese—Mr Speaker, I rise on a point of order. With regard to standing order 100, the question clearly asked for an opinion of the Treasurer. It is clearly out of order. I understand they are new to asking questions but they do need to be in order.
Mr Hockey—Mr Speaker, I also rise on a point of order. In the first place, section 100 has been interpreted liberally by previous speakers. The question is specifically about the non-accelerating inflation rate of unemployment. If the Treasurer does not know the answer, he should not have the job.
The SPEAKER—The question is well and truly in order up until towards the end and I think even the last bit is probably in order as well.
Mr Hockey—No more protection!
The SPEAKER—Order! The question has been asked. I would have thought there was a wish to have an answer.
Mr SWAN—I do thank the member for his question because it is a good question. As I indicated to the House only last week, we are optimistic about the future of the Australian economy. Unemployment is at a record low. We are in our 17th year of straight economic
growth and that is a good thing for Australia, but what Australia has to do is deal with the economic challenges that are emerging. As I indicated last week, we have an uncertain international environment and we are not immune from international fallout. But the biggest
challenge the Australian economy faces is dealing with the inflation challenge—the parting gift of the Liberal Party of Australia to the Australian people. We should always aim—
Mr Turnbull—Mr Speaker, I rise on a point of order which goes to relevance. The question was about the non-accelerating inflation rate of unemployment, and the Treasurer has made no reference to it at all.
Mr SWAN—I would like to make it very clear that the objective of the Rudd government is to get unemployment as low as we possibly can. But there is one hurdle, and that is the level of elevated inflation. The highest level of inflation in 16 years was left to the incoming government. That elevated inflation, which has been on the march for the last couple of years, has produced seven interest rate rises in a row. That is the legacy of the Liberal Party of Australia. That is the
parting gift of the Liberal Party of Australia to the incoming government. We have taken responsibility for that from day one. The Prime Minister has put out there his five-point plan. Very important to ensuring that we have sustainable growth in this economy is to put in place our five-point plan to tackle inflation, and we are doing just that.
Mr Hockey—Mr Speaker, I rise on a point of order. Again, the question was very specific. It was asking the Treasurer about the non-accelerating inflation rate of unemployment. It should be easy for him to answer it; he is the Treasurer.
The SPEAKER—There is no point of order. The member will resume his seat.
Mr SWAN—We all know that those opposite dropped the ball on inflation. If anyone wants any
proof of that, watch Four Corners tonight.
Mr Dutton interjecting—
The SPEAKER—Order! the member for Dickson!
Mr SWAN—What we will see on Four Corners tonight is all of the disunity in the former government on display in all of its glory.
Mr Ciobo interjecting—
Mr Andrews—Mr Speaker, I rise on a point of order. I ask you two things: firstly, could you draw the Treasurer back to the question and, secondly, could he answer what NAIRU is.
The SPEAKER—Order! Before the Treasurer returns and answers the question, can I ask that the members for Dickson and Moncrieff just modify their enthusiasm. Take the example of the member for Dunkley and not the member for Sturt.
Mr SWAN—I think Australians, as they are watching Four Corners tonight, when all the disunity is on display, when the complacency of the former government is on display—
Mr Turnbull—Mr Speaker, I rise on a point of order which goes to relevance. I have asked the Treasurer a question about a very important and very well-known economic term—the non-accelerating inflation rate of unemployment. He has not even mentioned it. Doesn’t he know what it is?
The SPEAKER—Before giving the Treasurer the call, I remind him that promos for ABC programs are out of order. The Treasurer.
Mr SWAN—Mr Speaker, I have answered the question. We aim to get it as low as possible. That is the objective of the Rudd government: to get it as low as possible. But I am sure the Australian people will want to know tonight—
Dr Nelson—Mr Speaker, I rise on a point of order. To assist the Treasurer with relevance, I table the nonaccelerating inflation rate of unemployment. He might consider that.
The SPEAKER—The Leader of the Opposition would have to seek leave, and leave would have to be granted. Is leave granted? Leave is not granted. The Leader of the Opposition will resume his seat. Can I take it that the Treasurer, having used the words ‘I have answered the question’, has completed his answer?
Mr SWAN—I think Australians will want to know, when these meetings were taking place at the Quay Grand, who was running the Australian economy. Who was fighting the fight against inflation?
Mr Anthony Smith interjecting—
The SPEAKER—Order! The honourable member for Casey is warned! And the honourable member for North Sydney will be outside phoning a friend.
Mr SWAN—Who was guarding against reckless spending while they were out there stabbing each other in the back? This government will always put the national interest above the petty interests of those opposite and what they were doing at that time.

No, Wayne Swan is not an economist. He holds a Bachelor of Arts, studied politics and is a Labor party apparatchik. He wouldn’t know a NAIRU if it walked up along side & licked his earlobe. Turnbull knows it, and now the entire Opposition knows it. Were I Rudd, I’d be bundling the Treasurer off to see Treasury for some swotting up on economics, pretty damn quick. Mind you, I dare say 97% of Australians wouldn’t have a clue either. I didn’t until I googled it, and even after reading the link above, I’m still none the wiser. But I’m not an economist, nor am I the nations Treasurer.
Make sure you note which door you came into the room from, Wayne.

  5 Responses to “He’s Right, You Know”

  1. I would guess that most people who heard of this would not give a flying. Very clever of course of Mr Tumbril to expose the ignorance of Mr Swine on discredited Friedmanite theories in front of the knitting circle on the opposition benches.

  2. The use of arcane jargon to baffle, endemic throughout any non productive organisation these days, is simply the ‘triumph of the airheads’ come to Parliament.
    Can anyone, anywhere suggest what function economists serve, apart from target practice?
    They can’t even be used for SoyLent Green for fear of KJDvr.

  3. The NAIRU question was silly anyway. The NAIRU is simply the hypothetical equilibrium point at which employment levels do not predispose an inflationary bidding war for labour.
    Nobody can say with any certainty what that point is, because it will be somewhat different for every economy. At best, one can know with hindsight what it probably was, long after that insight is of any use. Even if one modelled with skill and made an excellent guess, the
    measures open to a government to approach the NAIRU are too blunt and attenuated to do more than get within range. Deciding what the official cash rate should be raises the same kind of challenges.
    Most drivers know that if they enter a sweeping bend too quickly, they will lose control of their path and run the rsik of a collision or even of rolling their vehicle. Most don’t know what that precise speed is for every corner, because the data and the modelling is not available in real time, and fortunately, few test the limits. I
    daresay most don’t know what this tipping point is called (I certainly don’t) but I certainly know that it exists and that I want to stay comfortably on the right side of it.
    Swan clearly knew the concept but didn’t know the term. Big deal. Turnbull might think turning parliamentary question time into a Chaser- style trivial pursuit exercise makes him look clever, but he just looks like a pompous git. In the end, if Swan succeeds in getting housing costs down, keeping people in jobs and not having significant cost of living rises, then most won’t care whether he knows all the jargon or whether he’s failed 20 questions.
    The irony is that whether the Libs knew the term or not, some of their policies are seen by the RBA as entailing too optimistic a NAIRU — they said as much in December 2007 — and one does suspect that this approach by the Howard and Costello, whether witting or not, was
    exclusively a thing of politics rather than economics. The Libs should have been more embarrassed than Swan.

  4. Hey, thanks much for that explanation, Fran. You’ve made a somewhat ethereal concept a little easier to grasp.

  5. No worries.
    It’s worth noting, for the record, that many (and perhaps most) orthodox economists regard a modest amount of inflation and a modest amount of unemployment as virtues in practice.
    No economy can in practice function in complete homeostasis. Some prices are ‘sticky’ and thus hard to negotiate downwards. Wages might be a good example of this. So might rents. A small amount of predictable inflation encourages people to spend or to invest. Unemployment, providing it’s not structural (i.e. people not living in the right place, or not having the right skills) or longterm, can be a feature of economies with mobile workforces or continually adapting to new demands and abandoning outmoded services etc.
    Attempting to cut inflation to zero would probably entail measures that would force a recession, and trying to cut unemployment to zero would probably deprive growing industries of the supply of skilled labour they need to thrive and provoke wage-price inflation. The game wouldn’t be worth the candle. Few say that in public of course because there’s no good way to spin such a message, and it’s not feasible anyway.
    Right now I believe housing is a far more pressing problem. Despite being a lefty, my own basic approach probably owes more to monetarism. I’d make it a damn sight harder to borrow money for housing — progressively incrementing (month by montht) the proportion of equity intending mortgagors would have to be able to hold in order to qualify for a loan. I’d start it at 5% and each month it would increase until 12-15 years from now you’d have to have 20%. I’d also decrement the proportion of household income, less standing debt obligations, that people could undertake as mortgage payments. Lenders who breached these rules would be deprived of relief by legal action against defaulters.
    Over time, this would put a ceiling on property values (no pun intended) by cutting the supply of money available to bid up purchase prices. Eventually, the only reason people would purchase would be because they actually liked the place and wanted to live there securely and had saved up their dollars. Saving would make sense because by price rises would slow and then stop, and the expectation that one could make a killing in real estate would disappear.
    In the end everyone would be better off because you could then trade your houses/flats without serious penalties. People could leave the big smoke and hope to come back without being priced out.
    I also favour rezoning to create more medium density close to existing infrastructure. This would lower the cost of new housing because upgrading existing infrastructure costs less per person than creating new infrastructure. Public transport could run more full more often. You could have more viable locla schools. New developments could take account of energy and water efficiency and so forth.