Economic commentary is as prone to fashion as haircuts and skirt lengths, but there’s one Australian look that’s always popular – ‘We’ll all be rooned’, to quote the poem Said Hanrahan by John O’Brien.
Fund manager and former highly-rated equities analyst Mike Mangan calls the constant pessimists DGB – the Doom-and-Gloom Brigade. He took them on in his newsletter, starting with a sample of quotes before the latest Reserve Bank board meeting:
“The RBA could and should cut interest rates if it was serious about lowering unemployment and getting inflation back into its target band”: Economist Stephen Koukoulas.
“It’s better to raise rates now than wait six months” ANU economist and former RBA board member Professor Warwick McKibbin.
Drawing a line between the two, Mr Mangan thinks interest rates are about right. He cited the retort by AMP chief economist Shane Oliver to Professor McKibbin – raising interest rates to create a buffer against potential overseas volatility “would be like shooting yourself in the foot, so you can practise going to hospital”.
And Dr Oliver summed up the RBA decision to yet again sit pat: “While a brightening outlook for mining investment, strengthening non-mining investment, booming infrastructure spending and strong growth in export volumes argue against a rate cut, topping dwelling investment, uncertainty around the consumer, continuing weak wages growth and inflation, falling home prices in Sydney and Melbourne, tightening bank lending standards and the threat to global growth from a US driven trade war all argue against a hike. So it makes sense for the RBA to remain on hold.”
Mr Mangan thinks it’s an Australian cultural trait as well as fashionable to belong to the DGB. He also thinks the brigade is very wrong – and has been throughout our unprecedented 26 years of unbroken growth.
Given the overwhelming media predilection for “scary” news, it’s worth reading his spray for a little perspective: “DGB tend to focus exclusively on one issue – for example, high household debt – and then conveniently ignore everything else going right in this country.
“Notwithstanding overpriced and unsold beachfront apartments at Surfers, this country is pumping. DGB forget the mineral and rural bounty we extract.
“Commodity prices are slowly recovering, unemployment is falling, job vacancies increased 21 per cent over the last year, interest rates remain at multi-decade lows and tax cuts are ‘a coming. Even the falling A$ will support all our export industries including tourism, education and of course real estate. Government debt, spending and contingent liabilities are amongst the lowest in the western world.
“So even if there is an economic mis-step, the government has plenty of firepower to fight it, just as they did during the GFC in 2008-09.
“Frankly you couldn’t dream of a better economic combination facing Australia and New Zealand if you tried. DGB completely ignore the cultural attractiveness of this place. They can’t put a number on it, they can’t measure it, so they don’t even think about it. Throw in a pleasant climate and strategic depth and the whole world wants to come here. Who can blame them?
“Migrants bring with them energy and desire, skills and dollars. And they catalyse a multiplier impact across our economy as we scramble to build infrastructure and housing to accommodate them. The danger is that in our scramble, we unwittingly create the slums and ghettos of the mid to late 21st century.
“Meanwhile ordinary ANZACs are getting on with the job. Today we have world-class expertise in finance, advertising and media, digital economy, education, medical research, transport, law, property development and construction, tourism, education, sport (sport is about 1 per cent of GDP) and, more recently, infrastructure.
“OK we’re not great at making widgets. Never were. But that’s not really the direction the 21st century ‘gig’ economy is heading. Compared to other western peers, our outlook is fantastic.”
Mr Mangan’s call for perspective extends to corporate chiefs with limited vision.
“In late June I listened to one public company chairman wax lyrical about the ease of doing business in the US. He was pumped after just returning from Woodstock for Capitalists in Omaha. (Warren Buffett’s annual briefing.) Then he started whinging about all the restrictions imposed on him in Australia.
“I pointed out that American society is in crisis, about 30,000 per annum are shot, American life expectancy is falling (deaths of despair from drugs spiralling higher) and in all probability the US is headed for civil war with political rhetoric similar to the 1850s.
“He went silent. Hmmm, probably hadn’t considered that as an economic issue before. And I hadn’t even raised the imminent US constitutional crisis.”
Mike Mangan is no Pollyanna. In the shorter term, he was ahead of local mainstream media writing about the falling copper price, often posts for the global economy and, in the longer term, he’s concerned about both the risk of societal and potential economic breakdown in the US and what he sees as China’s desire to make countries like ours economic satellites, dependent on Chinese goodwill.
But both those threats are external.
Domestically, it’s nice to keep some balance, to understand that while we certainly have our challenges, we also have a strong, diverse and blessed economy. It’s indeed possible we won’t “all be rooned”.