Monday, July 18, 2011

Maybe it's time to think about the REAL WORLD

I get seriously concerned about the future of this country when listening to decision-makers discuss the economy. It appears that a huge gulf exists between what is happening in the real world and what data is being used to make the decisions that impact on people’s livelihood.

It has been reported that over one hundred thousand people in Australia are homeless. Another report suggests that 1.2 million people are suffering from financial stress.
This coincides with a slowdown in building design activity which does not bode well for the housing industry for the next little while. The Herald Sun reported (June 1) that “Australians appear to be shelving plans to build or renovate their homes”. That’s not news to most building designers.

Meanwhile there is continued speculation that interest rates will rise again in the second half of the year. JP Morgan economist, Ben Jarman, was quoted as saying that the “current path, combined with our expectation of further policy tightening in coming quarters, supports our view that building approvals will continue to lose ground”.
I have always tried to remain positive about the future prospects of building designers but we all know that the industry is bleeding and needs an urgent shot in the arm. Many building designers are doing it tough and it’s time that the decision-makers realised that a booming mining sector doesn’t mean that everything is rosy in the real world.

It sometimes appears that the economists believe that people are just an inventory in the pursuit of low inflation and, more recently, sustainability.
The reserve bank believes that interest rates still need to move higher even though growth is restricted to just part of the economy.

“Members noted that the significant divergences between different sectors of the economy presented challenges for policy-making, but that monetary policy had to be set for the needs of the overall economy. In this respect, members judged that if economic conditions continued to evolve as expected, higher interest rates were likely to be required at some point if inflation was to remain consistent with the medium-term target.” (From the minutes of the May 2011 Reserve Bank Board meeting)
I have another idea that could be considered.

A one off interest rate drop may just stimulate some of the “divergent sectors” of the economy and get rid of those “challenges” allowing more real people to share in the growing economy.
Speaking of economists, I have some concern about the direction of Australia’s climate change response. The great hope is that the carbon price will change the attitude of all Australians, encourage investment in renewable energy sources and reduce greenhouse gas emissions. All are worthy aims which I heartily endorse.

I fear that the reality is that those who can afford to use power irresponsibly right now, will continue to be able to pay to use power irresponsibly after the carbon price is implemented. Most of us have already been hit by huge power price increases and are taking appropriate steps now. For an increasing number electricity is becoming (or has become) unaffordable. That is really sad in a country like Australia.
Again. I have another idea that could be considered.

The government could legislate for a mandatory reduction in emissions by industry, build more renewable energy generation infrastructure and place a carbon penalty on households with higher than acceptable energy usage. We would then see some real results.
To those who say we can’t afford the renewable energy infrastructure without a carbon tax, my response is that if faster broadband is more important than climate change, what are we arguing about?

Russell Brandon