Vital Signs. If we fall into a recession (and we might) we’ll have ourselves to blame



The Reserve Bank and government have the means to keep us from recession. They’ll need the will.
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Richard Holden, UNSW

The facts are not in dispute.

Annual GDP growth has fallen to 1.8%. On a per-capita basis we have had three consecutive quarters of negative growth. The last time that happened was during the drought and recession of 1982, almost four decades years ago.

The most recent inflation reading was literally zero. Real wage growth has been stagnant for six years. Household debt is nearly double disposable income. And underemployment is more than 8%, on top of a 5.2% rate of unemployment.

What is in dispute is what to do about it.

We’ve entered secular stagnation

After being been told for years that the economy is in good shape and that we are “transitioning away from the mining boom”, it’s time to face the reality that, like most advanced economies, we are in a low-growth, low-interest rate, low-inflation trap.

Former US Treasury Secretary Larry Summers has argued for some time that advanced economies, almost universally, are suffering from what he calls “secular stagnation” — a protracted period of low growth caused by too much savings chasing too few productive investment opportunities.

If the description applies to us, and it does, there are only two ways to escape it.

We’ve two options

One is unconventional monetary policy: measures that have the effect that pushing interest rates below zero would have.

The other is aggressive fiscal policy: either big (and if necessary, repeated) tax cuts or a big (and if necessary, repeated) boost in government spending, each of which would put the surplus at risk.

What would an aggressive-enough monetary policy look like?

The starting point is a concept known as the “equilibrium real interest rate”. It’s the real (inflation-adjusted) rate of interest consistent with stable macroeconomic performance (which means full employment without financial bubbles).

1: Aggressive monetary policy

There is compelling evidence that in advanced economies such as Australia the equilibrium real interest rate is negative.

But getting there in a low-inflation environment is hard. The Reserve Bank can, if it chooses, set the cash rate as low as 0% (this week it cut it to 1.25%) but it can’t safely move it much lower than zero. If it did, if people and firms found themselves having to pay money in order to keep money in banks, they might simply take their money out, giving the Reserve Bank even less control.

This problem is known as the “zero lower bound”. It means that if the bank needs to cut rates beyond than zero it’ll probably have to do something else that has a similar effect.

The most likely candidate is “quantitative easing” (QE), whereby the central bank buys long-term government bonds and other securities from investors that have them, effectively forcing cash into their hands, which the zero interest rate means they have little choice but to spend.

It shows up in lower longer-term interest rates (rates for borrowing 5, 10 or even 30 years into the future) and should boost spending and borrowing just as much as cutting short-term rates.




Read more:
Secular stagnation: it’s time to admit that Larry Summers was right about this global economic growth trap


There are at least three difficulties with QE in Australia.

The first is that because the Reserve Bank has never done it before, there are questions about how it would mechanically execute on it. The United States and European experience is helpful in providing a template.

The second difficulty is getting out. Nobody, including the US Federal Reserve, really knows what happens when QE is unwound.

Third, if secular stagnation persists, then QE needs to be a long-term strategy. But is it possible for a central bank to expand its balance sheet buying bonds and securities indefinitely, even if it was buying them at a modest pace? Again, nobody knows.

2: Aggressive fiscal policy

If nothing else, the headaches with monetary policy suggest that fiscal policy might be an attractive alternative. It might also be more effective.

As Reserve Bank governor Philip Lowe noted in a speech on Tuesday, done in a good way government spending on infrastructure could both boost the economy and boost longer term productivity, giving a double benefit. It could be complemented by “structural policies that support firms expanding, investing, innovating and employing people”.

It’s hard to argue with Lowe’s logic. So hard in fact that some of us have been saying exactly what he just said for some time.

A quicker way to boost the economy would be to splash cash, either as Kevin Rudd did in the form of cash payments during the global financial crisis, or in the form of tax offsets of the kind the Morrison government announced in the 2018 and 2019 budgets.




Read more:
It’s the budget cash splash that reaches back in time


Delivered straight into bank accounts, both have much the same effect, even though one is classified as spending and the other as cutting tax.

The obstacle to doing such things is this government’s – make that this country’s – obsession with balanced budgets.

The surplus can wait

I have argued strongly and still believe that debt and deficits do matter, but at the moment we are in serious danger of falling into recession. That makes it imperative to act.

Given the politics of budget deficits and the narratives around economic management, it might be that the burden of action falls on the organisation the least able to pull it off in the present circumstances. That’s the Reserve Bank.

If Australia does dip into recession in the next year or two it will be an unforced error.

Not only would the government be responsible for it by not having taken strong enough action on spending when it could, the bank would also be responsible by taking action too late and letting things get to the stage where it had to act while interest rates were near zero.




Read more:
Expect weak economic growth for quite some time. What Wednesday’s national accounts tell us


The Conversation


Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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CHINA: DETAINED UYGHUR CHRISTIAN TAKEN TO HOSPITAL


Family fears for his safety; planned Easter celebration near earthquake area quashed.

DUBLIN, April 17 (Compass Direct News) – Family members of detained Uyghur Christian Alimjan Yimit are increasingly concerned for his safety following reports that police and a prison doctor escorted him in handcuffs to a hospital in Kashgar two weeks ago.

Alimjan (Alimujiang Yimiti in Chinese) called out to onlookers, “I’m sick. Tell my lawyer to come quickly to see me,” according to a China Aid Association (CAA) report.

Sources told Compass that Alimjan had been beaten in prison, although it was not clear who beat him or why.

The transfer from the Kashi Municipal Detention Center in Kashgar, Xinjiang province, came just one week after Alimjan’s lawyer met with him to discuss a court trial anticipated in May. According to CAA, this was only the second time authorities have allowed anyone to visit Alimjan since his arrest in January 2008.

Court authorities last May returned Alimjan’s case to state prosecutors, citing lack of evidence for charges of “leaking state secrets” and “inciting secession.” Family, friends and work colleagues have insisted that Alimjan is a loyal citizen with no access to state secrets, and that his arrest was due largely to his Christian faith and association with foreign Christians.

Compass sources confirmed this week that Alimjan’s family members are emotionally distraught over his continued detention and over lack of communication from prison authorities.

If convicted, Alimjan could face execution; Chinese authorities executed two alleged Uyghur separatists as recently as last Thursday (April 9).

Authorities first detained Alimjan on Jan. 12, 2008 on charges of endangering state security before formally re-arresting him on Feb. 20, 2008 for allegedly “inciting secession” and leaking state secrets to foreign organizations.

After court authorities returned Alimjan’s case to state prosecutors and after their further investigation, his case was returned to court officials for consideration in mid-October.

Compass sources claim Kashgar authorities are wary of the case due to its sensitivity. Officials initially interrogated Alimjan during his employment for two foreign-owned companies and forbade him to discuss the questioning with anyone. In September 2007 they closed the business he then worked for and accused him of using it as a cover for “preaching Christianity” among the Uyghurs. Alimjan was arrested several months later on political charges.

A second Uyghur Christian, Osman Imin (Wusiman Yaming in Chinese), sentenced to two years in labor camp for “leaking state secrets” and “illegal proselytizing,” is due for release this October. Authorities had originally called for a 10-15 year prison sentence for Osman but significantly reduced the term following international media attention.

Authorities permit Osman’s wife and children to visit him once a month.

 

Human Rights Proposal

On Monday (April 13), as family members waited to hear news of Alimjan’s condition, China’s State Council released a new document outlining proposed human rights improvements. The document focused heavily on protecting the rights of prisoners and included a pledge to abolish torture and other forms of abuse within two years.

The “National Human Rights Action Plan” was one of several measures proposed by a Chinese government delegation at a United Nations review of China’s human rights record held on Feb. 9.

The plan includes a ban on confessions extracted through torture and a new requirement for physical examinations before and after interrogations. It also affirms the right of prisoners to hire and meet with lawyers and to report abuses in writing to the appropriate authorities.

China’s state-run English newspaper, the China Daily, reported on March 24 that bullying and torture were a significant problem in the nation’s detention centers, and that at least five inmates had died under suspicious circumstances since Feb. 8, according to CAA.

 

SIDEBAR

‘Break-through’ for Christianity in China a Mirage

By Xu Mei

BEIJING, April 17 (Compass Direct News) – Prior to the event it was publicized abroad as the next great break-through for house church Christianity in China.

A giant, open celebration was to be held on Easter Sunday (April 12) in the western city of Chengdu, capital of Sichuan province. Finally, it seemed, the government would acknowledge the sacrificial work of house church Christians who came to Sichuan from throughout the country to help with rescue and reconstruction for those suffering from last May’s earthquake. It would be an open admission that Christianity – even of the house church variety – was a positive element in Chinese society.

Verbal permission had been obtained for 2,500 house church Christians throughout China to meet for the special celebration entitled, “Build Up the Church and Bless Society.” Some 50 government officials had been invited to the event, to be held at Chengdu’s new exhibition center. Christians from Singapore and the United States flew in for it.

But the day before Easter, police abruptly informed the center that the event was cancelled. Organizers hastily changed the venue to a smaller, old exhibition center where only about 1,000 people could be accommodated. Plans for a more low-key event were stitched together, to start at 5 p.m. on Easter Sunday.

But even this was too much. An hour before the event, police barred the door. The foreigners left. None of the promised government officials turned up. A few hundred bemused Chinese house church Christians seized the opportunity to hold an impromptu worship service in a nearby parking lot.

Police intervened there, too, and arrested some local house church leaders. They were released later that evening.

The debacle comes after another much-publicized “break-through,” a supposedly government-sponsored seminar in Beijing last Nov. 21-22 in which officials were said to have met with house church leaders (see http://www.compassdirect.org, “Officials Reach Out to House Churches; Raids, Arrests Continue,” Dec. 9, 2008). The chief organizer later denied there was any government involvement, much less a break-through.

Rather, a minor Non-Governmental Organization had assembled academics, including some Christians, to meet with house church leaders to discuss church-state relations and make proposals they hoped might be passed on to the government at some future stage.

Observers speculate that in both the symposium and the Easter celebration, Christians overseas and perhaps some younger Chinese Christians – who have less experience than their elders with the machinations of the Chinese Communist Party (CCP) – had overestimated the benevolence of government authorities. Faced with the enormity of an economic crisis, sources said, the government seems to be in no mood to take major steps to liberalize oppressive religious policies, let alone legalize house churches.

That the Beijing seminar was actually held, and that the Chengdu celebration could be organized only to be stopped at the last minute, could be viewed as hopeful signs of how the Chinese government has lumbered forward, at glacial pace, towards a more open policy towards Christians over the last decade or so. But powerful reactionary forces within the CCP view with dismay the extraordinary growth of the church, sources say.

Many officials still view Christianity – and especially house churches – as an ideological and political threat. Limits on the public expression of Christian worship and evangelism are clearly laid down in a welter of national, provincial and local documents issued by CCP and government over the past 25 years. Sources say minor infractions may be winked at, but major changes in a more liberal direction are not to be expected.

Officials are struggling to control a country that threatens to become increasingly uncontrollable. Depending on how long the economic recession grips China, sources say, it seems likely that for the next two years at least, the government will err on the side of caution.  

Report from Compass News Direct

CHINA: CHRISTIANS WARY AS RECESSION, UNREST HIT


Beleaguered government officials could view church as threat – or a force for stability.

BEIJING, February 25 (Compass Direct News) – With China’s central government last December issuing a number of secret documents calling on provincial officials to strive to prevent massive unrest in a rapidly collapsing economy, observers are watching for signs of whether authorities will view Christian groups as a threat or a stabilizing influence.

While the Sichuan earthquake last May proved that Christians were willing and able to assist in times of national crisis, raids on house church groups have continued in recent weeks.

The secret reports have come in quick succession. A central government body, the Committee for Social Stability (CSS), issued an internal report on Jan. 2 listing a total of 127,467 serious protests or other incidents across China in 2008, many involving attacks on government buildings or clashes with police and militia.

“Recently every kind of contradiction in society has reached the level of white heat,” the CSS warned in an earlier document issued on Dec. 16.

The document said some officials had “ignored the welfare of the masses … piling up pressure until the situation exploded,” and concluded that, “The relevant Party and State organs must … give daily priority to the task of getting rid of all the maladies which produce social instability and the present crisis.”

On Dec. 10, the Central Committee of the Chinese Communist Party and the National People’s Congress issued an internal document calling on senior provincial officials to make every effort to alleviate social and political problems exacerbated by the current recession.

On Dec. 12, the Ministry of Public Security authorized provincial officials to tighten control of all communications in the sensitive period prior to Chinese New Year, which this year fell on Jan. 25. Fearing turmoil as millions of newly-unemployed factory workers headed home for New Year celebrations, the government cancelled all leave for Public Security Bureau (PSB) officers, placed them on high alert and mobilized an additional 150,000 police and armed militia for the holiday period.

On Dec. 15, the public security ministry issued a further document calling for tightened security at government ministries, military bases, armament stores, state borders, airports and railway stations.

In its Dec. 16 report, the CSS warned that provincial authorities must try to resolve grievances by non-violent means before protestors begin attacking factories and government offices or stealing, looting and burning property.

The scale of demonstrations and riots has already reached frightening proportions. In the Jan. 2 internal assessment leaked in Hong Kong, the CSS said the 127,467 serious incidents across China last year involved participation of around 1 percent of the population. Of these cases, 476 consisted of attacks on government and Party buildings, while 615 involved violent clashes with police and militia, leaving 1,120 police and Party officials and 724 civilians killed or injured.

 

Church as Subversive

Concerned by the growth of unregistered house church groups in an uncertain political and social climate, the Chinese government has ramped up efforts both to identify Christians and to portray Christianity as a subversive foreign force.

Local governments in China last year reported on continued measures to prevent “illegal” religious gatherings and curb other criminalized religious activities, according to reports from the U.S. Congressional Executive Commission on China (CECC) on Dec. 20 and Feb. 2. (See “Tortured Christian Lawyer Arrested as Officials Deny Abuses,” Feb. 11.)

In recent months authorities have quietly gathered data on church growth using surveys at universities and workplaces, and called meetings at various institutions in the capital to discuss the supposed dangers of foreign religious influence. (See “Officials Grapple with Spread of Christianity,” Feb. 4.)

Raids on unregistered church groups have continued in recent weeks, with police perhaps prompted to ensure tighter controls on church activity. On Feb. 11, police arrested two South Korean pastors and more than 60 Chinese house church leaders from four provinces who had gathered for a seminar in Wolong district, Nanyang city, the China Aid Association (CAA) reported. The police also confiscated personal money, cell phones and books, and forced each person to register and pay a fine before releasing some of the elderly leaders.

Authorities held six of the detained leaders for several days but by Sunday (Feb. 22) had released all of them, Compass sources confirmed.

In Shanghai, police and members of the State Administration of Religious Affairs on Feb. 10 ordered Pastor Cui Quan to cancel an annual meeting for house church leaders, and then ordered the owner of the hall used by Cui’s 1,200-member congregation to cease renting it to Cui within 30 days, according to CAA.

Senior staff at Beijing’s Dianli Hospital on Feb. 6 ordered elderly house church pastor Hua Zaichen to leave the premises despite being severely ill, CAA reported. Government officials had refused to allow Hua’s wife, Shuang Shuying, an early release from prison to visit her dying husband unless she agreed to inform on other Christians, according to Hua’s son. After refusing their offer, Shuang was finally able to visit Hua on her release date, Feb. 8; Hua died the following day.

Both Shuang and her husband have suffered years of persecution for their involvement in the house church movement.

On Feb. 4, police seized Christian lawyer and human rights defender Gao Zhisheng from his home in Shaanxi province, CAA reported. At press time his whereabouts were unknown.

While other incidents have gone unreported, house church leaders in northern China told Compass in January that despite tighter restrictions in the current economic and political climate, they were optimistic about the ability of the church to survive and flourish.

 

SIDEBAR

Disenchantment, Dissent Spread Across China

In December, China celebrated the 30th anniversary of Deng Xiaoping’s “open door” economic reform policy, which had led to a high annual growth rate of some 10 percent. While Party leaders publicly congratulated themselves, an internal party document warned that 75 percent of the financial benefits had gone to only 10 percent of the population, mainly high and middle-ranking Party members and some entrepreneurs.

With the growth rate now seriously dented, relations between Party members and the general public were “about to explode,” the document warned.

The document also referred to an “ideological vacuum in Party and state,” a “moral vacuum in upholding regulations,” and a “vacuum in spiritual civilization,” in stark contrast to the moral and spiritual values held by religious groups.

According to the Research Institute of the State Council, urban unemployment among young people had already risen to 10.5 percent by last June. If foreign investors continued to withdraw funds, the institute warned, this figure could rise to 16 percent or higher, sparking more outrage against the government.

Tens of thousands of factories closed down in the first six months of 2008, well before the full impact of the global recession hit China. By November, 10 million migrant workers were unemployed; most recent estimates put the figure at 20 million, and officials admit this figure will reach at least 35 million by the end of 2009.

Vice-Premier Hui Liangyu, responsible for agricultural affairs, warned in a recent report that 30 percent of all villagers have set up peasant organizations to challenge local government officials and crime bosses. Some groups also have plans to launch armed insurgencies and their own peasant governments.

Several million university graduates will also face unemployment this year, potentially lending their voices and leadership skills to mass protest movements.

An increasing number of intellectuals have already signed Charter 08, a petition issued in December calling for multi-party elections, human rights, press freedom and the rule of law.

On Jan. 7, a prominent Chinese lawyer, Yan Yiming, filed an application with the Finance Ministry demanding that it open its 2008 and 2009 budget books to the public. On Jan. 13, more than 20 Chinese intellectuals signed an open letter calling for a boycott of state television news programs because of “systematic bias and brainwashing,” while a Beijing newspaper ran an article arguing that freedom of speech was written into the constitution, The Washington Post reported in late January.

In response, Public Security Minister Meng Jianzhu warned China’s leaders via state media that, “The present situation of maintaining national security and social stability is grave.”

Many analysts agree that the Chinese Communist Party may be facing its greatest challenge to date.

Report from Compass Direct News

CHINA: OFFICIALS GRAPPLE WITH SPREAD OF CHRISTIANITY


Christians may face increased controls as government reacts to growth, public discontent.

BEIJING, February 4 (Compass Direct News) – Concerned by the growth of unregistered house church groups in an uncertain political and social climate, the Chinese government has ramped up efforts both to identify Christians and to portray Christianity as a subversive foreign force.

Sources told Compass that authorities in recent months have been quietly gathering data on church growth, with surveys at universities and workplaces pointedly asking whether respondents were Christians. The surveys seemed largely unconcerned about other religions.

At the same time, Communist Party officials have called meetings at various institutions in the capital to discuss supposed dangers of foreign religious influence. On Dec. 20 officials called a meeting at one of Beijing’s most prestigious cultural colleges to lecture faculty members about such dangers. A Christian teacher forced to attend told Compass that the lecturers distorted historical facts to impress upon her and her colleagues that Buddhism, Daoism and Islam were “indigenous” and therefore safe. The teacher noted that Islam, having come from the Middle East, could hardly be regarded as indigenous to China, and that Buddhism originally came from India but later took on Chinese characteristics.

By contrast, the officials told the teachers that Protestantism and Roman Catholicism were foreign and hence potentially “subversive.” Party members warned participants to be on guard against these faiths.

China’s leaders have warned that 2009 will be marked by increased unrest and demonstrations as public anger mounts against increasing unemployment and corruption. Also disconcerting to the government is Charter 08, an online pro-democracy initiative launched in mid-December and signed by an increasing number of Chinese Netizens. It calls for an end to the one-party system, an independent court and freedom of speech. Many of the original signatories were well-known pro-democracy lawyers and intellectuals, but the list now includes computer technicians, construction workers and farmers.

In response to these signs and portents of unrest, the government has begun to increase political and social control. Christian leaders told Compass they did not feel a huge crackdown was necessarily imminent, but they said the overall political climate had become more tense and that this would almost certainly affect unregistered house church Christians.

House church leaders in Beijing told Compass that conditions now seemed even “tighter” than in the period leading up to the Olympic Games last August. In previous years Christians rented halls and conference rooms for large-scale Christmas events, but last year’s Christmas celebrations were deliberately low-key.

A house church leader in a major northeastern city confirmed this general sense of caution. He added that he had seen an internal document leaked from the local Religious Affairs Bureau, dated in early January, which warned against “subversion” by supposedly hostile Christian forces from overseas.

The leaders were generally optimistic about the continuing work and growth of the church, with one Beijing pastor claiming more than 1,000 new converts were baptized last year in his group alone.

 

Mixed Signals

Chinese officials last November had initiated talks with Protestant house church Christians, raising hopes for greater freedom.

Meetings organized partly by the China State Council’s Research and Development Center brought together academics and lawyers, many of them house church members, and a delegation of six Protestant house church leaders from Beijing, Henan and Wenzhou. As the Times of London reported in January, however, no Catholic representatives were invited; the Communist Party remains in a political standoff with the Vatican. (See Compass Direct News, “Officials Reach Out to House Churches; Raids, Arrests Continue,” Dec. 9, 2008.)

At the time, church leaders involved in the discussions were cautiously optimistic. Pastor Ezra Jin of Beijing’s Zion Church told the Times, “The government … has understood that the Protestant church is not an opposition force but a force for stability and harmony.” He added that the government wanted to evaluate whether house churches posed a threat to the regime and to ask why they rejected the leadership of the Three Self Patriotic Movement, an official body appointed to oversee Protestant churches.

Despite these talks, house church raids and arrests have continued. On Jan. 16, Public Security Bureau officers forcibly removed pastor Zhang Mingxuan from fellow pastor Hua Huiqi’s house in Beijing and put him on a bus to Henan province, warning him not to return, the China Aid Association (CAA) reported.

Zhang had gone to visit Hua’s ailing father, Hua Zaichen. For years the elderly Hua and his wife, Shuang Shuying, have suffered harassment for their work with the unofficial church. Authorities have now denied Shuang, currently serving a two-year prison sentence, permission to visit her dying husband.

On Jan. 2, police raided a house church meeting in Urumqi, Xinjiang province, detaining 50 people. Later that day, 48 of them were released without charge; another was released after paying a 500 yuan (US$73) fine, and the last was sentenced to 10 days of administrative detention, according to CAA.

On Dec. 3, 2008, members of the Taikang County Domestic Defense Protection Squad burst into a private home in Chuanhui district, Zhoukou municipality, Henan, and arrested 50 Christians gathered there, CAA reported. About 20 of the detainees were sentenced to 15 days of administrative detention while leaders Tang Houyong, Shu Wenxiang and Xie Zhenqi were sentenced to one year of labor and re-education.

Some house church Christians have become more vocal in their calls for justice and religious liberty. For example, following the district court’s dismissal of a lawsuit on behalf of Tang Houyong and his companions, Tang’s wife filed a motion to dismiss the Chief Justice of the court for violating legal procedures.

With the specter of serious political and social unrest looming before officials in the face of China’s economic recession, such Christian protests could add to the government’s unease over the growing number and influence of house church Christians.

Report from Compass Direct News

OIL IS UP AGAIN


The price of oil shot up today by US $25.14 a barrel at one point before closing on US $121.00 a barrel – a rise of about US $16.00 a barrel for the day. This massive rise came about because of fears that the US economy was moving into a recession and the resulting weakness of the US dollar.

The Australian dollar has risen against the US dollar, closing the day at close to 0.84 US dollars as investors abandoned the US dollar. The Australian dollar was close to parity with the US dollar several weeks ago and then fell to around 0.78 US dollars about a week ago before beginning to rise again.

For Australian motorists the price per litre of unleaded petrol has fluctuated between $1.52 and $1.62 over the last couple of weeks, with little advantage gained by the low oil price in the previous few weeks. With the rise in oil today it is unlikely that Australian motorists will see any advantage in the lower price of oil over the past couple of weeks.

It is widely speculated that Australians have been getting a raw deal at the petrol pumps over the last couple of months.