Deal or No Deal - Part 3: The Voice of Reason Re-emerges

Back in May this year, I blogged that as the Federal government stared down the barrel of a revenue write down, it had two options: to maintain a steady course of economic conservatism or to throw caution to the wind and engage in heavy borrowing to finance massive countercyclical spending.

It chose the latter of course. This past week, the Treasury revealed through its Mid-Year Economic and Fiscal Outlook, that its cash position would not be as bleak as it had previously thought (in its forward estimates). Two rounds of stimulus later and experience proves that it pays to be a risk-taker at the right moment.

Having dodged a technical recession and with unemployment set to peak at a much more moderate rate of 6.75% (compared to double digits in the US), Australians are now being warned to prepare for the unintended consequences of its debt-driven growth strategy, namely urban congestion, unaffordable housing and higher inflation.

Dual pronouncements by the RBA Governor and Productivity Commission Chair have pointed to these emerging issues. If you are a homeonwer like me who kept your job during the crisis, you would have seen the value of your property go up (according to WestPac chief economist Bill Evans) and interest rates go down to 50 year lows. This has both a wealth effect and an income effect (translation: you see yourself as being more wealthy and having more money to spend).

Granted that many of us used the temporarily low rates to reduce our indebtedness as a hedge against higher interest rates in the future, but the rise in the equity value of our homes is making many of us feel smug at the moment. We might just decide to use that equity in the coming months.

Another unintended consequence is the strong Aussie dollar which is back to its pre-crisis level nearing parity with the US greenback. That is fuelling a lot of online shopping primarily for luxury goods due to the price advantage of buying from American compared to local stores for the same item. As the Financial Review reported this week, e-Bay is experiencing a surge in spending compared to last year (ironically, it copped a massive fine last year for facilitating the sale of fake brands).

It is therefore not surprising that amid all these animated spirits released by Kevin Rudd's rubbing of the stimulatory lamp (a.k.a fair shake of the sauce bottle) that the voice of reason has cautioned the government to revert back to a more prudent approach (which the Treasury seems to be seeking to do although such spending as the school building program can only be "rephased"). In the past 12 months, such a warning might have been regarded as the voice of treason rather than reason, but not this time it seems.

Parity and Stimulus

The ongoing appreciation of the Australian dollar could mute the impact of the current fiscal stimulus working its way through the system.

A recent paper released by the Centre for Economic Policy Research in London sheds light on the ongoing debate of whether fiscal stimulus being coordinated currently by the G20 nations would have a significant effect on the long run growth of their economies. The problem essentially has to do with estimating the size of the government multipliers of the nations involved.

As highlighted by its authors, on one side of the fence are the likes of Robert Barro who argues that the peace-time multiplier has essentially been zero. On the other side sit equally learned people like Christina Romer, Chair of the US Council of Economic Advisers, who uses a figure as high as 1.6. The difference between these two views is 3.7 million US jobs by 2010.

The paper in analysing the multiplier effect of government spending distinguishes between developed and developing nations, those with open and closed economies, those with fixed and flexible exchange rates and those with and without large external debts.

The findings which I quote below show a stark contrast:

In developing countries, the response of output to increases in government spending is smaller on impact and considerably less persistent than in high income countries.

The degree of exchange rate flexibility is a critical determinant of the size of fiscal multipliers. Economies operating under predetermined exchange rate regimes have long-run multipliers of around 1.5, but economies with flexible exchange rate regimes have essentially zero multipliers.

The degree of openness to trade (measured as exports plus imports as a proportion of GDP) is another critical determinant. Relatively closed economies have long-run multipliers of around 1.6, but relatively open economies have very small or zero multipliers.

In highly-indebted countries, the output response to increases in government spending is short-lived and much less persistent than in countries with a low debt to GDP ratio.

The picture this paints is quite clear. Since most advanced economies have successfully floated their currencies and have maintained relatively open economies, their ability to benefit from their spending will be limited in the long run. While it is true that in the short-run, fiscal stimulus does provide a “quick hit” to the system, the problem in the medium term is that as the stimulus diminishes (assuming it is temporary in nature), it creates a "fiscal drag" (the opposite of the multiplier effect). As per the US stimulus, this drag will detract from its GDP by as much as 2.5% in 2011.

China, an emerging economy which does not have external debts to speak of and which has a pre-determined exchange rate, will be able to benefit much more from its stimulus without threatening its exports. Australia on the other hand has seen its dollar approach parity with the greenback and may even see it reach $1.1, as the banner story of the Australian today declared, which would be an appreciation of about 70% from its lows this past year. This will lead to the stimulus leaking out of the country in the form of higher imports and weaker exports).

Unfortunately, the criteria laid out for spending, that it be targeted, temporary and timely may have been too difficult to adhere to. The cocktail of spending measures that resulted to address both short-run and long-run growth needs might have already been countered by monetary and exchange rate policy with the effects of a rising dollar soon to take hold.

Cost of Stimulus: $50B, Confidence to Shop: Priceless

Here is a neat claymation video on the topic of stimulus (economic or otherwise) produced by the Econogirl courtesy of the National Times. Very witty.

http://media.theage.com.au/opinion/national-times/econogirl-on-stimulus-withdrawal-780804.html

The Australian Contagion

The past week saw global markets move in response to the announced hike of interest rates by the Reserve Bank of Australia. It was taken as a sign of global recovery, Australia being the first of the G20 (Group of 20) countries to come out of its downturn. The Australian dollar approached levels not seen in over a year (chart below produced from Yahoo!7Finance).

PM Kevin Rudd was criticised by the "doyen of Labor economic advisers" Ross Garnaut for his social democrat inspired stimulus package in response to the global financial crisis.

The secretary of the treasury, Ken Henry quickly defended the government response by highlighting the counterfactual scenario of an additional 100,000 unemployed and more prolonged downturn without the spending.

The latest unemployment figures seemed to support this with an unexpected drop in the unemployment rate and a rise in the number of hours worked. This was in stark contrast to the unexpected increase in the number of workers unemployed in the previous month in the United States. The Dow Jones industrial average took it all in stride ending up at new highs for the year.

Latest polling figures show the Labor government having a seemingly supreme advantage over the Liberal opposition, a result that has fuelled speculation over the fate of its leader Malcolm Turnbull.

Turnbull having staked his leadership on climate change policy was castigated by former Treasurer Peter Costello as he announced his early retirement from Parliament.

With the current government riding high on a wave of both local and international respect, the early election scenario now seems a distant possibility as Treasurer Wayne Swan predicted a better than expected result for the budget prior to the release of the Mid-Year Economic and Fiscal Outlook.

Having coupled itself to the Chinese and emerging Asian economies which have exhibited resilience against the global financial crisis and having relatively little exposure to the sub prime markets, Australia finds itself in the best of all possible worlds with the growing demand for its mineral exports triggering a huge investment project off the Western Australian coast.

The challenge for the government now would be to manage both in the near and medium term the steady unwinding of government stimulus. The first part was accomplished with the phasing out of the top-up stimulus to the housing market announced last year. The withdrawal of bank guarantees is being thoroughly studied but is proving difficult. Winding back of monetary stimulus has already begun in earnest.

With monetary and political business cycles not in sync, expect monetary and fiscal policy to be in continued conflict for the next twelve months or until the next election, whichever comes sooner.

Poor Incentives

If you were prudent enough to save and invest your money rather than spend and borrow more money, you have probably taken a hit in your shares portfolio and will face rising inflation in the next few years as a double dip recession (a W shaped recovery) takes place, eating away at your cash holdings. The banks that have been rescued and recapitalised using reserve infusions are loath to lend under the current environment and therefore will not raise rates on cash and term deposits even as the reserve rates increase given that they are awash with cash.

If you were a rural bank, saving and loans company or credit union that maintained a healthy balance sheet and avoided risky derivatives, then you were not in line for a government guarantee or a subsidised line of credit during the height of the financial crisis. You instead would have the added burden of competing with larger subsidised commercial banks with AAA credit rating not as a result of their prudential risk taking but as a result of sovereign guarantees. Your employees have probably been faced with pay cuts or no bonuses unlike the corporate executives of the bailed out entities courtesy of taxpayer dollars.

If you are in a business that was deemed “too small to rescue” having been cautious in leveraging your operation and prudent in evaluating expansion projects, then you probably did not receive any cash handouts through the stimulus plan, unlike the relics of some old smokestack age that got heaps of support to remain open. You will probably be facing higher taxes in the coming years as the need to repay the deficits in a slower growth environment forces many governments to raise taxes from “productive” units of the economy.

If you are a relatively low polluting, eco-friendly operation, then you are definitely not going to be in line for a “free” carbon credit courtesy of the government unlike trade exposed carbon intensive industries. You instead are going to have to absorb the full cost of what little emissions your outfit produces.

Is it just me, or do others see that something is truly going haywire in the system of incentives that the current crises-busting policies have adopted (by “crises”, I mean both the GFC and the CPC or Carbon Pollution Crisis)?

Deal or No Deal Part 2

I received a curious comment to the last post Revenue Write-Down: Deal or No Deal:

Rudd's budget strategy exhibits extreme political risk aversion. It would be a mistake to view it in economic terms.

This is in line with what many commentators have said was the way the budget addressed the economic recession in the near-term while avoiding the hard choice of dealing with the long-term structural imbalances identified by the Federal Treasury in its budget papers.

In part 1 of this entry, I had contended that Prospect Theory explained the way the Labor government was behaving in assessing the risks associated with the budget allocation decisions on spending and taxation. The theory predicts (accurately in my view) that faced with losses, the government would increasingly become risk-seeking as shown by its having thrown caution to the wind and engaging in deficit spending.

I failed to mention another aspect to this risky decision. This has to do with what US Defense Secretary Donald Rumsfeld made famous: the “known unknowns” or the things that we know we don’t know. In a word it’s called ambiguity.

As it turns out, the human brain has a bias against it, an aversion. When faced with a decision involving risk where the probabilities attached to events are unknown, humans prefer not to decide or to postpone a decision until the known unknowns turn into known knowns even when the risky decision involves a higher expected value. Ambiguity aversion has been shown to exist when the decisionmaker is experiencing the fear of negative evaluation (FNE) from others.

Here is a neat video explaning the theory of ambiguity aversion in relation to the Ellsberg paradox posted by another blogger.

Getting back to the comment, perhaps it was not a case of political risk aversion, but a form of ambiguity aversion. The government has in effect postponed the decision to rein in tax cuts, given the FNE associated with reliving the Keating Labor government’s experience in the last recession. And given that one single event assumed in the budget would resolve the issue for them (this is the GDP growth projection of 4.5% over six years) the probability of which was (and will remain for some time) unknown, it probably felt justified in delaying this hard choice.

As neuroeconomics shows, this is a powerful, evolutionary response that fits in perfectly with the human condition. Until ample evidence arises to clear the ambiguity or reduce the FNE associated with the structural adjustment task, we cannot reasonably expect the government’s response to be otherwise.

Revenue Write-Down: Deal or No Deal

The shifting of the Federal Labor Government position from conservative fiscal stewards to that of aggressive deficit hawks bears striking resemblance to the behaviour of contestants on the popular game show, Deal or No Deal.

The way in which the Rudd Government has framed its first and second budgets is characterised by what decision theorists would regard as an inconsistent set of risk preferences. Prospect theory, as developed by Daniel Kahneman (Nobel Prize in Economics, 2002) and Amos Tversky provides a good explanation of the way it has behaved. In short, when faced with gains, a decision-maker (i.e. the government) tends to be risk-averse; when confronted with losses, she becomes much more risk-seeking.

The theory is responsible for adjusting the standard expected utility model of decision-making under risk. As it turns out context determines whether standard models work and when they don’t, as explained by scholars Rose McDermott, James Fowler and Oleg Smirnov:

It may be that standard models work well when environmental conditions are characterized by abundance. However, when the external situation changes and individuals or groups begin to face real or perceived threats to survival, preferences will change in the predictable way.

This type of predictable behaviour has been seen in Deal or No Deal contestants when they start to lose the possibility of winning the larger cash prizes (see here for an explanation of how the game is played). Instead of taking deals equal to the average of possible cash prizes remaining, they often play on hoping to score the remaining higher amount.

Let’s play

In the first round of his fiscal budget cycle, Treasurer Wayne Swan was dealt a winning hand: a fiscal position in surplus, a smoothly running economy, strong property and commodity markets, healthy business and consumer confidence, trade surpluses as far as the eye could see (this was Treasury’s flawed assumption) and historically low unemployment. In fact, the only dark cloud on the horison was inflation, which was driven in large part by high oil prices.

So, in keeping with Labor’s election promise of delivering sound economic management, he brought down a budget that was conservative: no major spending (which would put upward pressure on inflation), a continuation of the tax cuts that the previous government had enacted, a few minor tweaks around the education revolution, but very little in terms of rocking the boat. A very respectable 2% of GDP in surplus was maintained.

Then the GFC broke. Within weeks, the official pronouncements were that a severe financial cyclone was headed our way with a ferocity that had not been witnessed in a generation. Two rounds of fiscal stimulus were announced in quick succession leaving the coffers with a surplus of merely 1% of GDP (what they were unwilling to say then was that effectively with an expected slowdown, revenue write-downs of more than 1% were inevitable, so the government had already slipped into deficit at that point, but nevermind they thought, the stimulus might actually work).

Then the second round of the budget took place. This time the government literally was willing to bet the house. It went all-in. No such thing as cutting your losses, when the prospects were looking grimmer by the day. It took them a few days to acknowledge that the nation was as a result of its budget staring down a net debt worth a whopping 13.8% of GDP. It had changed its tack from being risk averse, economic conservatives to risk-seeking big-spenders, all in 18 months. Yet, despite all the recriminations it received for trying to spin the deficit negatives into a positive, Rudd and co were merely reacting based on nature’s inbred survival instinct.

The remaining hand

Ironically, political considerations had held them back from considering the full-on risk-seeking decision of cancelling tax cuts to address the structural imbalances in the budget that had crept in as a result of overconfidence on the part of the Federal Treasury in the commodities trade boom. Again from McDermott et al a lesson in economic reform:

An important topic…is the decision by some leaders to implement radical economic reform…(f)rom Latin America to Eastern Europe, leaders like Alberto Fujimori in Peru institute bold economic reforms with severe costs for the population and, surprisingly, receive widespread support for such action. Similarly, leaders such as Boris Yeltsin in Russia and Vaclav Klaus in the Czech Republic were re-elected despite instituting costly economic adjustment plans (emphasis added).

By not addressing the fiscal imbalances in the present budget, the Feds have had to assume a V-shaped recovery; and yet, notwithstanding their optimism it will take no less than 13 years for the “temporary” debt to be erased. With the current talk of long-term bond spreads widening and credit downgrades over the horison (which will lead to higher debt servicing costs), time will tell if this act of hesitance towards reform in the wake of aggressive yet popular spending leads the government and the electorate down the track to a no deal situation.

Opposite Poles

Two eminent economists, Meltzer and Krugman, dispute the issue of whether inflation or deflation will be the next great challenge facing the US (and world) economy. A lot depends on which period of history is used as an analogue for this one.

Allan H. Meltzer is a professor of political economy at Carnegie Mellon University. He has authored the book “A History of the Federal Reserve.” He believes that the US is headed for “severe inflation”. In an op-ed piece for the NY Times, he points out that

the interest rate the Fed controls is nearly zero; and the enormous increase in bank reserves — caused by the Fed’s purchases of bonds and mortgages — will surely bring on severe inflation if allowed to remain (Inflation Nation, 3 May 2009).

He pins the blame on both political and monetary authorities, in particular

the (doubtful) commitment of the administration and the (lack of) autonomy of the Federal Reserve ... under Mr. Bernanke, the Fed has sacrificed its independence and become the monetary arm of the Treasury: bailing out A.I.G., taking on illiquid securities from Bear Stearns and promising to provide as much as $700 billion of reserves to buy mortgages.…
It doesn’t help that the administration’s stimulus program is an obstacle to sound policy. It will create jobs at the cost of an enormous increase in the government debt that has to be financed. And it does very little to increase productivity, which is the main engine of economic growth.

Meltzer recounts the Fed under Paul Volcker (who is presently advising the Obama administration) which tamed spiralling inflation following the Oil Shock of the 1970s. As some have argued, the present crisis could have been instigated and deepened by the Oil Shock of 2007. Meltzer further points to one indicator that inflation is already here; he argues

(S)ome of my fellow economists, including many at the Fed … point to the less than 1 percent decline in the consumer price index for the year ending in March as evidence that deflation is a threat. But this statistic is misleading: unstable food and energy prices may lower the price index for a few months, but deflation (or inflation) refers to the sustained rate of change of prices, not the price level (emphasis mine). We should look instead at a less volatile price index, the gross domestic product deflator. In this year’s first quarter, it rose 2.9 percent — a sure sign of inflation.

Quoting the father of monetarism, he says

Milton Friedman often said that “inflation was always and everywhere a monetary phenomenon.” The members of the Federal Reserve seem to dismiss this theory because they concentrate excessively on the near term and almost never discuss the medium- and long-term consequences of their actions.

Paul Krugman is on the opposing side of the debate. He teaches at Princeton University and has made a living out of studying economic crises. His latest book is entitled “The Return of Depression Economics.” He counters Meltzer in his blog with a graph that depicts the “lost decade” in Japan in the 1990s where the growth of money supply, high deficits coincided with deflation. Krugman’s attention is devoted to avoiding wage deflation, as he writes in his column for the NY Times that

…according to the Bureau of Labor Statistics, the average cost of employing workers in the private sector rose only two-tenths of a percent in the first quarter of this year — the lowest increase on record. Since the job market is still getting worse, it wouldn’t be at all surprising if overall wages started falling later this year (Falling Wage Syndrome, 3 May 2009).

His view is that wage deflation is a symptom of a deeper problem in the economy. And his prescription is for “more stimulus, more decisive action on the banks, more job creation”. Quoting the father of stimulus economics, he argues that

(T)hings get even worse if businesses and consumers expect wages to fall further in the future. John Maynard Keynes put it clearly, more than 70 years ago: “The effect of an expectation that wages are going to sag by, say, 2 percent in the coming year will be roughly equivalent to the effect of a rise of 2 percent in the amount of interest payable for the same period.” And a rise in the effective interest rate is the last thing this economy needs.

So there you have it: two renowned experts fighting over the appropriate fiscal and monetary measures to take in this crisis. Both use staitstics and history to bolster their arguments. The disagreement ultimately comes from which previous recession is deemed relevant for this present crisis – whether the Great Depression of the 1920s and lost decade in Japan of the 1990s or the post-Oil Shock era of the 1970s.

Krugman and Bernanke, the deficit hawks, believe that constricting growth particularly at this moment could hamper economic recovery, while Meltzer, the institutionalist, believes that protecting growth at all costs has consequences far greater than we imagine.

China and the Long March to (Global) Recovery

The unfolding bi-polar global economy emerged this week with talk of “green shoots” in the US being mimicked by “bamboo shoots” in China. Several leading indicators from stocks, housing and credit markets had some hoping that these were early signs of recovery. This was then dashed with reports of poorer than expected retail spending in the US and weaker GDP growth in China later in the week. Closer inspection of China's data however show that there were genuine signs of recovery burried in the figures.

The Economist rightly points out that the slowdown in China is a result of purposeful policy back in 2007 when authorities were worried of overheating and restricted the flow of credit. The recent data shows that lending and investments have been restored, and that consumer spending has remained robust (read Jim O'Neill from Goldman Sachs referring to China as the new shopping superpower here). What has been impeding growth overall is the slowdown in exports resulting from weak demand from abroad. Contrary to perception though, employment in the tradable sectors accounts for only 10% of the labour force and much of the content of their exports is imported from abroad (only about 18% is locally value added, which translates to 7.2% of GDP).

Andrew Peaple of Dow Jones writes in the Wall Street Journal that:

the debate among economists is becoming more alphabetical. Is this recovery V-shaped, with China set to return quickly to the high-level growth of recent years? Or is it more W-shaped, as a government spending-led recovery this year peters out and China's longer term structural issues resurface?

Manoj Pradhan of Morgan Stanley forecasts that:

(G)lobal output will probably start growing in 3Q09 (3rd quarter of 2009), with G10 output growth turning positive in 4Q (4th quarter). However, growth for 2009 as a whole will stay firmly in negative territory for all regions except AXJ (Asia excluding Japan) ... We expect AXJ’s outperformance to be sustained next year with a 6.4% increase in output, compared to 2.1% for CEEMEA (Central and Eastern Europe and Middle East and Africa), 1.1% for the G10 and 0.3% for Latam (Latin America).

That developing Asia will lead the world to recovery is evident from this forecast as well as by consulting this year-to-date chart of stock market performance around the world assembled by Bespoke Investments. Apparently, there could still be something to the BRICs and decoupling argument after all.

The Impact of China's Stimulus

Markets cheered when the leaders of the G20 emerged from their summit in London with little more than an agreement to infuse the IMF with additional capital through issuing SDRs (special drawing rights) intended for distribution among member countries. Dani Rodrik points out the significance of these measures.

To produce greater bang for each buck from a fiscal stimulus plan, countries have to increase their Keynesian multiplier. One of the things that reduces the multiplier effect is the marginal propensity to import. To prevent leakage of such spending on foreign goods (the effect of the marginal propensity to import), it is essential for other countries to "pull their weight" and engage in similar levels of spending. In developing markets, credit and liquidity was drying up, limiting their capacity for fiscal spending .

This is why the Chinese fiscal stimulus which is roughly equivalent to 90% of Australia's entire GDP was significant for advanced economies. Some estimates put the multiplier in China at 1.1, meaning $1 spent by the government leads to $1.1 of additional spending elsewhere. Picture the output of Australia for two years being disbursed in less than a year. Much of this multiplier is due to the public investment nature of the spending on roads and basic infrastructure. For this reason, resource rich countries like Australia will have much to cheer about in the coming months.

Of Voter’s Regret and Animal Spirits

Against the counsel of his “better angels” (the moderate Democrats in Congress) President Obama this week unveiled yet another blueprint for dealing with a section of the economy, amidst growing concerns that his agenda is getting overly ambitious under these difficult economic times. Here is just a sample of the views from various personalities:

David Brooks, columnist, moderate Republican: “…I fear that in trying to do everything at once, it (the Obama administration) will do nothing well.” (The Big Test, The New York Times, February 24, 2009)

Paul Krugman, Nobel Laureate, economist: “The Obama administration’s economic policy is already falling behind the curve, and there’s a real, growing danger that it will never catch up.” (Behind the Curve in Conscience of a Liberal, New York Times, March 9, 2009)

Warren Buffett, the “Oracle of Omaha”, investment guru: “we’ve had muddled messages (referring to government response to the crisis).” (Interviewed on Squawk Box, CNBC, March 10, 2009)

Andy Grove, Stanford professor, former Intel CEO: “I find myself wringing my hands, not over the goals President Obama has set but over the ineffectual ways the administration has pursued them.” (Mr. President, time to rein in the chaos, The Washington Post, March 11, 2009)

George F Will Op-ed columnist: “The president's confidence in his capacities is undermining confidence in his judgment.” (Paved with Magnificent Intentions, Washington Post, March 12, 2009)

An "Animal Spirits" Revival

With all this talk of a crisis in confidence, the release of Georg Akerlof and Robert Schiller's book, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism which they commenced writing in 2003, could not be more timely. Akerlof of “The Market for Lemons” fame made the term “asymmetries of information” popular in public economics parlance. Schiller co-developed the Case-Schiller Index, a gauge for the US housing market relied on for setting options and futures prices. In the book, they tackle the role that ideas, trust and sentiment play in the economy. It could be considered a reappraisal of the term made use of by Keynes.

The chief of OMB (the Office of Management and Budget), Peter Orszag, one of Obama's so-called "propeller heads" in the White House is reportedly getting himself engrossed with it.

The Bumpy Ride Has Arrived

This week marked another “defining moment” in Australia as the latest unemployment figures showed a steeper incline than expected. In the forecast made previously here back in November of 2008, we said that unemployment could reach 6 per cent by May of this year. The recently released data saw it jump from 4.8 in January to 5.2 in February (analysts were expecting it to hit just 5). The continuing fall of skilled and general vacancies suggests that we have truly entered into a bleak season.

Should this supply policymakers with a “teachable moment” that enables them to consider differing views on how to proceed from here on out? Again, here is just a pair of quotes from the week:

Tony Makin, Professor of Economics, Griffith University (formerly with the IMF): “Federal fiscal packages unveiled since October last year have aimed to boost consumption in the short term, in keeping with Treasury advice at the outset that the best fiscal response to the global financial crisis was to 'go early, go hard, go households'. However, an arguably sounder fiscal response would have been the exact opposite: go later, go easy, go firms.” (Follow the Kiwi Leader, not Obama, The Australian, March 11, 2009)

Michael Costa, former treasurer, NSW Government: “Confidence building may turn out to be the only effective role for government in directly responding to today's economic conditions.” (Hubris and vaudeville but little sound policy, The Australian, March 13, 2009)