The IMF’s gloomy economic predictions

Behind a bland title a reason to be concerned. When the boffins from the International Monetary Fund reckon the fiscal conservatives are wrong we really do have reason to worry.

Hidden behind the somewhat bland title “Will it hurt? Macroeconomic effects of fiscal consolidation” released overnight by the IMF revealed some gloomy predictions of what will follow from the worldwide rush to reduce government budget deficits.

The report says:

“Our findings suggest that in today’s environment, fiscal consolidation is likely to have more negative short term effects than usual. In many economies, central banks can only provide a limited monetary stimulus because interest rates are already near zero.

Moreover, if many countries adjust simultaneously, the output costs are likely to be greater — since not all countries can reduce the value of their currency and increase net exports at the same time.

Our simulations suggest that the contraction in output may be more than twice as large as our baseline estimate when central banks cannot cut interest rates, and when the adjustment is synchronized across all countries. But for economies considered at high risk of sovereign default, short-term negative effects are likely to be smaller.”

Go west for the money. Further evidence this morning that going west was the thing to do during the noughties.

Growth of average income from wages and salaries — by statistical local areas 2003-04 to 2007-08

Australian Bureau of Statistics figures show the vast majority of SLAs with the highest average annual growth rate of average Wage and salary income between 2003-04 and 2007-08 were located in Western Australia and Queensland.

In Western Australia, these included over twenty inland and coastal SLAs surrounding Perth that offered semi-rural or rural lifestyles within two to three hours drive of the city (e.g. the SLAs of Wandering, Cuballing and Boddington) and also the remote mining area of Ravensthorpe in the state’s south east.

In Queensland, many of the areas of highest growth were associated with emerging energy resource sectors (e.g. Dalby-Chinchilla in the state’s Western Downs region and Barcoo in the state’s south-west). Other SLAs with high growth rates were located in Queensland’s Central Highlands and in Mackay (which contains much of the region’s engineering, manufacturing and mining services industries).

The ABS pointed out that high growth rates do not necessarily equate to high incomes. For example, whilst the SLA of Kojonup (in Western Australia’s wheatbelt) experienced an 8% average annual increase in average wage and salary income between 2003-04 and 2007-08, by the end of the period the average annual income in the area was just $31,434 (well below the national average of $43,921).

Some SLAs with high average wage and salary incomes experienced low average annual growth rates, while other regions recorded both low incomes and low growth rates in average Wages and salaries.

A Murdoch update as a quote for the day. From Paul Krugman in the New York Times:

Something else has changed, too: increasingly, Fox News has gone from merely supporting Republican candidates to anointing them. Christine O’Donnell, the upset winner of the G.O.P. Senate primary in Delaware, is often described as the Tea Party candidate, but given the publicity the network gave her, she could equally well be described as the Fox News candidate. Anyway, there’s not much difference: the Tea Party movement owes much of its rise to enthusiastic Fox coverage.

As the Republican political analyst David Frum put it, “Republicans originally thought that Fox worked for us, and now we are discovering we work for Fox” — literally, in the case of all those non-Mitt-Romney presidential hopefuls. It was days later, by the way, that Mr. Frum was fired by the American Enterprise Institute. Conservatives criticize Fox at their peril.

So the Ministry of Propaganda has, in effect, seized control of the Politburo. What are the implications?

Perhaps the most important thing to realize is that when billionaires put their might behind “grass roots” right-wing action, it’s not just about ideology: it’s also about business. What the Koch brothers have bought with their huge political outlays is, above all, freedom to pollute. What Mr. Murdoch is acquiring with his expanded political role is the kind of influence that lets his media empire make its own rules.

Playing the balls. Bolivian president Evo Morales is a political leader in the Tony Abbott tradition who likes to show the voters that he is still a fit and active sporting participant. Thus he took to the football field this week with his own team to take on a Mayor of La Paz XI to mark the opening of a new stadium.

If Harry Jenkins had been referee the president, in green wearing No 10 in this video clip, would surely have been red-carded.