How many times have you heard commentators lamenting how low consumer and business confidence have become? Time and again. How many times have you seen journalists attempting to analyse why? Very few. How many times have you seen them sheet home any of the lack of confidence among consumers and businessmen to the negative utterances of Opposition Leader Tony Abbott and Shadow Treasurer Joe Hockey? Practically never.
Indeed, it has been only recently that some journalists have been willing to point the finger at them and the Coalition’s unending talking down of the economy. Peter Martin was one who obliquely did so recently.
Here at The Political Sword
we have maintained that the negative talk from the Coalition has had a substantial effect on confidence. Read Abbott and Hockey are endangering Australian business
, written last November. Also read Do Australian businessmen really believe Tony Abbott?
, written a week later, which is on the same theme.
Was this theme echoed in the MSM? Not until recently. Why? For the same reason the MSM highlighted in screaming front page headlines and grotesque photo-shopped photos the alleged misdemeanors of Peter Slipper and the supposed transgressions taken to court by James Ashby, but buried in its back pages Justice Rares condemnation of this Ashby action as ‘an abuse of process’, one intended to damage Slipper personally and politically, and the Gillard Government too. Much of the MSM deliberately and repeatedly buries or distorts the truth for its own commercial and partisan ideological purposes. It does the same with consumer and business confidence.
There are very few in the MSM, and none in News Limited, who will lay a finger on Abbott or Hockey. We have just a few journalists that will say it the way it is – Peter Martin and Ross Gittins are two at Fairfax, and Bernard Keane at Crikey
. Let’s look first at an article by Keane: The strange case of the national delusion on cost of living
Here are some edited excerpts from Keane’s piece: ”Essential Research asked voters to give their impressions of how much prices had changed on a range of basic consumer items over the last two to three years… 70% of voters said they were paying “a lot more” for electricity and gas…that corresponds with reality: according to ABS inflation data, electricity prices have increased by 38 index points since December 2009, or over 16% a year. Gas has gone up by 29 index points, or around 11% a year.
“But what about petrol? That’s gone up by just over 16 index points, or just over 6% a year on average – ahead of CPI, but not in the same league as electricity. Yet 50% of voters say they’re paying a lot more than they were three years ago…That’s bordering on the implausible…On water, perceptions look more plausible: 47% said they were paying “a lot more” for water, and water prices have increased 22 index points or around 9% a year on average.
“After that, though, there’s a growing gulf between perceptions of inflation and reality. 43% of voters say they’re paying “a lot more” for insurance…But insurance across the country has only increased 10 index points, or less than 4% a year – around about CPI.
“36% of voters complain they are paying “a lot more” for fruit and vegetables. Fruit and veg prices have only gone up just over 10 index points since December 2009, or less than 4% a year… 28% said they were paying “a lot more” for food generally, when in fact food and non-alcoholic beverages prices have grown at less than the CPI...
“Health costs have gone up 15 points, or just over 5% a year, but 33% said they were paying “a lot more” for medical expenses… 24% thought they were paying “a lot more” for housing (both mortgages and rent) when housing costs have only increased slightly faster than inflation…
“Education costs have gone up by around 16 points, or about 6% a year, ahead of inflation, but only 24% said they were paying “a lot more”.
“One category stands out as being the basis of what is almost a national delusion. Clothing has fallen in price by 7 index points or around 2% a year each year, since 2009 (kids’ clothing has fallen by more, 11 points). But 21% of voters say they’re paying “a lot more” for clothing…
“And there’s another factor that distorts perceptions: partisanship. On average, 10% more Liberal voters say they are paying “a lot more” for products compared to Labor voters.
“Is that because Labor voters have a positively-skewed perception of the economy, or because Liberal voters have a negatively-skewed perception? A bit of both, it seems, but more the latter. Both share the delusion about clothing prices…but 77% of Liberal voters more realistically say they’re paying a lot more for electricity, compared to 67% of Labor voters…
“Other categories, though, suggest Liberal voters see price rises everywhere even when they don’t exist. 58% said they were paying “a lot more” for petrol, compared to 41% of Labor voters. 42% said they were paying a lot more for fruit and veg compared to 28% of Labor voters. Insurance was 50% to 38%. Food, 32% to 23%. Medical, 42% to 25%...
“…A substantial proportion of voters will always be convinced inflation is much worse than it is, and in fact filter their perceptions of inflation through partisan bias....”
(my emphasis) So here is the first piece of evidence – Coalition voters are more pessimistic about price rises than Labor voters. Why? Could it be because they have taken as gospel the negative talk that Abbott and Hockey feed to the electorate every day?
Recently, consumer confidence has been analysed to ascertain from whence the lack of confidence arises. In Coalition voters underpin surge in confidence
, Peter Martin writes: ”Supporters of the Coalition are suddenly confident about the economy, moving clearly into positive territory for the first time in two years. The latest Westpac-Melbourne Institute consumer confidence survey shows optimists among Coalition voters outweigh the number of pessimists by five percentage points, a reverse of the recent pattern in which Coalition voters have been strongly negative. Labor voters remain extremely positive, with optimists outweighing pessimists by more than 20 points.
“The lift among Coalition voters has been enough to hoist the overall consumer confidence index from around 100 points to 108 on a scale where 100 means the number of pessimists balance the number of optimists.
“Westpac senior economist Matthew Hassan said the change was primarily the result of the carbon tax. Ahead of its introduction in the middle of last year it pushed the confidence of Coalition voters (but not Labor voters) into a downward spiral. ''There was the point when there was a whole series of overlapping concerns around tax changes - the carbon tax, the mining tax, the global situation was getting worse and in Queensland things looked dire. The incoming government spoke about Queensland being the Spain of Australia. At the same time low- and middle-income households likely to vote Labor were being showered with carbon tax compensation, exacerbating the wedge. In all the time we've been doing this we've never seen as big a deviation. In terms of confidence, we had a divided nation. It was off the charts.''
“Mr Hassan said the improved consumer figures represented a return to normality. The carbon tax had not been as bad as expected, the share market had climbed and interest rates had fallen.
“HSBC Australia chief economist Paul Bloxham hailed the surge in sentiment as a sign interest rate cuts were having their desired effect. ''This result is consistent with what we've had in mind, which is that the soft patch in the Australian economy may be behind us,'' he said.
“Asked whether now was a good time to buy a major household item, an extraordinary 59 per cent of Australians surveyed said yes. Only 16 per cent said no.
“One-quarter of those surveyed expected their personal financial situation to improve in the year ahead. Only one in five expected it to get worse.” Here is another piece of evidence that it is Coalition voters who are depressing confidence ratings. The thesis of this piece is that this is because they have swallowed whole the Abbott/Hockey doom and gloom narrative.
The weekly Roy Morgan Consumer Confidence Rating
of 12 February shows “Consumer Confidence rising to 121.4pts (up 2.9 pts since February 2/3, 2013) after the RBA left Australian interest rates unchanged at a record low of 3%. Consumer Confidence is now 5.7pts higher than at the same time a year ago, February 11/12, 2012 – 15.7. The rise in Consumer Confidence has been driven by an increase in confidence about buying major household items and increasing confidence about personal finances over both the last and the next 12 months.
“Now a much larger majority of 60% (up 6%) of Australians say now is a ‘good time to buy’ major household items compared to just 16% (unchanged) that say now is a ‘bad time to buy’.
“Also, now 34% (up 6%) of Australians believe they are ‘better off” financially than this time last year (the highest since September 22/23, 2012) compared to 27% (down 2%) that say they are ‘worse off’.
“Australians are also more positive about their personal finances over the next 12 months with 43% (up 2%) saying they expect their family to be ‘better off’ financially while 14% (down 1%) expect to be ‘worse off’ financially.
“Now 39% (up 2%) of Australians expect ‘good times’ for the Australian economy over the next five years compared to 18% (up 2%) that expect Australia to have ‘bad times’
“However 29% (up 4%) of Australians expect ‘bad times’ economically over the next twelve months compared to 35% (up 2%) of Australians that expect ‘good times.”
So it seems that consumer confidence is on the rise. Which begs the question, why has it been so low for so long?
Clearly, there are many factors. The residual effect of the GFC lingered long. People are still more inclined to save; less inclined to make extravagant purchases, something retailers testify; more prudent about buying an expensive house, as estate agents tell us, and banks are less inclined to lend for this purpose. This prudence is not without merit as many were spending wildly beyond their means, encouraged by retailers such as Harvey Norman, maxing out their credit cards, and entering into maxi-mortgages to buy their four bedroom, three bathroom McMansions, complete with al fresco
dining areas, and home entertainment theatres.
Then there was the Eurozone financial crisis with the dire threat of default on loans by the governments of Greece, Spain, Portugal, Ireland, and even Italy, a threat that worried many voters, one that eroded their confidence. Politicians here, to wit Campbell Newman, referred to Australia as ‘another Spain’, and even Joe Hockey hinted that Australian too was a sovereign risk. Add to that the ‘financial cliff’ saga in the US with the Republicans blocking the Democrats at every turn, together with the poor economic data coming from there, and you have an ugly picture that would depress anyone already feeling insecure.
But while there were these global factors that undoubtedly influenced the thinking and feeling of the people, there was a persistent local factor: the continual daily talking down of the Australian economy and the Gillard Government’s capacity to manage it by Tony Abbott and Joe Hockey.
While commentators largely blame overseas factors for the depressed confidence of consumers and businessmen alike, they show almost no willingness to recognize the elephant in the room – the negative, continually depressing talk of Abbott and Hockey, the demeaning of the Australian economy, day after day. What evidence is there for this assertion? Just look at the figures quoted above. It has been largely Coalition voters, those who swallow the Abbott/Hockey propaganda without question, who have pulled down consumer confidence, and I suggest also the confidence of businessmen, especially those involved in retail.
Their talk of the disaster that the carbon tax would bring about affected people’s confidence, and I suggest that the fact that the dire predictions of Abbott and Hockey, and of course Barnaby Joyce and his ‘$100 lamb roasts’, have come to naught, has ameliorated their anxiety and boosted their confidence. There seems to be an uncomplicated ‘cause – effect’ relationship between carbon tax doom and gloom and diminished consumer confidence, and between the dissapation of that gloom and improving confidence. We know that there is more to it than that, but the relationship seems germane.
In Why voters believe the economy is in trouble
, Ross Gittins offers another reason for low confidence: “With all the silly talk about 'the cautious consumer' and with punters blissfully unaware that retailing accounts for only about a third of consumer spending, all the highly publicized complaints of the Gerry Harveys helped convince the public not that the retailers have their own troubles, but that the economy must be going down the tube.
“Then there's the contribution of the unending fuss about ‘debt and deficit’, in which the government has been completely outfoxed by the Liberals. Although every economically literate person knows Australia doesn't have a significant level of public debt, the opposition has had great success exploiting the public's ignorance of public finance and of just how big the economy is ($1.5 trillion a year) by quoting seemingly mind-boggling levels of gross public debt.
“With much of this argy bargy being reported by political rather than economic journalists - how many times have you heard talk of 'the economy's deficit'? – it is hardly surprising the public has acquired an exaggerated impression of the economic significance of the budget deficit. Ironically, the budget deficit is a case where a cyclical (temporary) problem has been taken to be a structural (long-lasting) one.” And who were responsible for all the spurious ‘debt and deficit’ talk – all this scary chatter about this nation being over its head in debt and borrowing a million dollars a day to service it? Abbott, Hockey, and bringing up the rear, Andrew Robb and Mathias Cormann.
And who in the media pointed out that the nation’s debt was miniscule, indeed much lower proportionately that the homebuyer taking out an average mortgage. It was left to Ross Gittins and Peter Martin. Even the AFR, that ought to have been exposing this, defaulted. With Michael Stutchbury at the helm there, I suppose we ought not to be surprised! This piece asserts that much of the poor consumer confidence and low business confidence has been the direct result of Abbott, Hockey and the Coalition talking down the economy, mendaciously painting a dismal picture of the state of our nation, shamefully eroding confidence and damaging the economy for its own political ends, aided and abetted by a largely compliant media.
That other factors, some global, are operating on confidence is obvious, but ignoring the massive elephant trumpeting in the room where the people live – the Abbott/Hockey/Coalition elephant – is to miss what I believe is a major factor: the negativity, the doom, the gloom, the cynicism, the dismay, the distrust and the pessimism that these cynical, self-serving, ruthless politicians propagate every day, every week, every month.
And most of the media remains shamefully mute.
Tony Abbott, Joe Hockey, stop killing confidence.
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