Australia's Great Depression

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" height=35 BGCOLOR="#000099" TEXT="#F7F7FF"> <div> <B>Australia's Great Depression</B></div> <div> <A HREF="id61.htm" TARGET="_top" TITLE="Sydney Property Crash">Sydney Property Crash</A>   |   <B>Australia's Great Depression</B></div> <div> </div> </td> </tr><tr> <td valign="top" height=445 BGCOLOR="#FFFFFF" TEXT="#080000"> <bR> <div> Articles:</div> <bR> <div>  <A NAME="australia_s_version_of_the_us_subprime_crisis"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></div> <div> <B>The future Australian version of the US sub-prime housing crisis</B></div> <bR> <div> "Australia faces its own version of the US sub-prime housing crisis, with young homeowners risking bankruptcy thanks to the PM's economic stimulus package.</div> <bR> <div> "That's the grim warning from the economic expert who first called the debt crisis that is driving the global financial meltdown. Dubbing the looming crisis "Sub-Prime Lite'', Professor Steve Keen said Australia was making the same mistakes as the US.</div> <bR> <div> "Prof Keen said that in trying to avoid an economic crisis caused by too much borrowing, Australia was in effect encouraging the poorest in the community to take on even more debt.</div> <bR> <div> ""Yet these low-paid first-homebuyers are the people who are most vulnerable to the economic downturn,'' he said.</div> <bR> <div> "The top end of the nation's housing market has been suffering for some time. Meanwhile, the first-home buyer end of the market has been booming.</div> <bR> <div> "But economists fear this flurry of activity at the lower end has inflated prices to unsustainable levels.</div> <bR> <div> "The average Sydney property already costs nine times the average annual household income, yet Britain and the US reached a peak of only seven times average income before their markets crashed.</div> <bR> <div> "According to Professor Keen, the First Home Owner Grant has cost the Government about $200 million, but has inflated property prices by close to $3 billion.</div> <bR> <div> ""This is all illusionary wealth that could disappear very quickly,'' he said.</div> <bR> <div> ""The additional $2.8 billion or so has come from increased mortgage debt taken on by those most vulnerable to a serious economic downturn at a time when we can see very clearly that the global recession is coming our way.''</div> <bR> <div> "The Government may well extend the First Home Owner Grant beyond its planned end-date of June 30, which Prof Keen says will end up pumping the market to even higher levels.</div> <bR> <div> "The University of Western Sydney academic said he had sold his Sydney house because he feared a property crash, but his gloomy view on the market has been backed by other experts.</div> <bR> <div> "Gerard Minack, chief economist at Morgan Stanley, said property prices were likely to fall by 20 per cent in some cities.</div> <bR> <div> ""People paid Hamptons prices for properties up there but it is not the Hamptons,'' he said.</div> <bR> <div> ""Traditionally what has hurt people has not been rising (interest) rates but rising unemployment. I don't care what rate you're paying, if you have a mortgage five times your income and you lose your job, you're toast.''</div> <bR> <div> "Mr Minack said while he understood the motivation behind the grants, encouraging marginal buyers to enter the market at this stage of the cycle (just ahead of a sharp rise in unemployment and with interest rates so low), Australia risked "creating a sub-prime underbelly in our own housing market''.</div> <bR> <div> "With unemployment at just over five per cent, many economists are forecasting it will peak at eight or nine per cent in 2010, leading to a "bloodbath'' in the property market as thousands of mortgagors default on their loans.</div> <bR> <div> "Most buyers were also taking out low, variable-rate mortgages, which left them exposed to rapidly rising rates when the economy began to recover and this would also spell trouble for many buyers.</div> <bR> <div> "AMP Capital chief economist Shane Oliver said the tendency for buyers to take out low, variable-rate mortgages would spell trouble for many buyers when interest rates rose" (Glenn Milne and Nick Gardner, <I>First-homebuyers at risk thanks to stimulus package</I>, news.com.au, March 22, 2009).</div> <bR> <div> "THE NSW State Government has been accused of inviting a house-price crash with its "second-homeowner grant" announced in last week's budget.</div> <bR> <div> "Economists say the move to halve stamp duty on newly built second homes or investment properties - saving up to $11,000 - will encourage people into the market at the worst possible time.</div> <bR> <div> ""It's a terrible idea to encourage people to over-extend themselves on properties they can barely afford, because unemployment is going to rise and that means prices will fall," said Steve Keen, professor of economics at the University of Western Sydney.</div> <bR> <div> ""At the same time, you've got interest rates near the bottom of the cycle and if the economy starts improving, rates will go up very quickly. So buyers are in a no-win situation: falling prices or rising rates - probably both."</div> <bR> <div> "Morgan Stanley chief economist Gerard Minack said the added stimulus would prove useless.</div> <bR> <div> ""All the evidence says that artificially boosting demand is ultimately futile," he said.</div> <bR> <div> ""A lot of the stimulus payments simply end up in higher house prices.</div> <bR> <div> ""In areas where there are lots of first-time buyers, we're already seeing prices rise by more than the First Home Owner Grant.</div> <bR> <div> ""So you'd be better off waiting for the stimulus to end, at which point prices will fall back again.</div> <bR> <div> ""It's basic economics. If you push up demand by giving people cash handouts or reducing costs, prices will rise. But when you stop that assistance, they'll fall."</div> <bR> <div> "The NSW Government also announced that the $3000 it adds to the First Home Owner Grant of $21,000 would be available for a further six months, taking the total grant to $24,000 for buyers of a new-build property.</div> <bR> <div> "Economists also say it is debatable whether people who can afford to buy only with government assistance should be buying at all.</div> <bR> <div> "If you can't afford to buy without government help, you're clearly stretching yourself," said Brendan Darcy of property research company Hometrack.</div> <bR> <div> ""And to stretch with interest rates at historic lows is a recipe for disaster. What about when rates rise?"</div> <bR> <div> "However, the Government's move was welcomed by AMP Capital's chief economist Shane Oliver because it was targeting new properties, so should help the construction industry.</div> <bR> <div> ""It's better than the usual handouts that just apply to everybody," he said.</div> <bR> <div> ""But there's always the chance that developers will simply up their prices and effectively pocket the stamp-duty savings in the form of higher prices."</div> <bR> <div> "All experts agree that Sydney's house prices are unsustainably high - unless unemployment and interest rates do not rise.</div> <bR> <div> ""Given the likely deterioration in the economy, I think unemployment is going to get worse from here and, of course, when the economy recovers, probably next year, we'll see rates go up too," Mr Oliver said.</div> <bR> <div> "Estimates vary about the size of the property price falls that Sydney faces, but they range from Mr Oliver's 10 per cent to nearer 40 per cent from Mr Keen" (Sunday Telegraph, <I>Price crash risk from home deal,</I> news.com.au, June 21, 2009).</div> <bR> <div> <B> <A NAME="worse_to_come_for_australian_economy"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B></div> <div> <B>Worse to come for Australian economy</B></div> <bR> <div> "Australia's sharemarket will halve in value, house prices will slump as much as 40 per cent and unemployment will climb to 10 per cent.</div> <bR> <div> "That's the bold prediction from economic forecaster Harry Dent, who says a bigger crash is ahead for the global economy within the next two years.</div> <bR> <div> "And while Australia's strong financial system, links to China and young working population have cushioned the nation from the economic turmoil so far, Mr Dent says smart investors are cashing up in preparation for "the Mother of all depressions".</div> <bR> <div> ""When you have to deleverage a major bubble in stocks and housing and commodities . . . it doesn't just get over with in one year with a nice stimulus program," he says.</div> <bR> <div> "Mr Dent, who predicted Japan's 1990s recession and the present economic crisis, yesterday began an Australian speaking tour in Brisbane.</div> <bR> <div> "He says a "perfect storm" is brewing where a peak in spending by baby boomers will collide with the global commodity bubble to "leave behind the next great crash".</div> <bR> <div> "Although Australia's All Ordinaries Index may peak at between 4500 and 5000 points by the end of this year, he says a crash in about 2011 will see it slump to about 2000 points.</div> <bR> <div> "He says our house prices are "among the most overvalued in the world" and will backtrack by as much as 40 per cent while unemployment – now at 5.7 per cent – will hit double digits.</div> <bR> <div> ""I would say Australia is not paying close enough attention to the worldwide housing bubble and banking crisis," he says..." (Fleur Leyden, news.com.au, <I>Worse to come for Australian economy, says Harry Dent</I>, June 20, 2009).</div> <bR> <div> NB. Harry Dent is quoted as he roughly agrees with the likely course of future events. Unemployment will eventually be higher than Dent's prediction. Australia's banking system may appear to be strong but it has yet to face a serious housing meltdown. The real global crash will come at the end of the American recovery following the pattern of contraction-recovery-contraction.</div> <bR> <div> <B> <A NAME="the_kevin_rudd_james_scullin_and_gough"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B></div> <div> <B>The Kevin Rudd, James Scullin and Gough Whitlam Rhyme</B></div> <bR> <div> <FONT SIZE="2" COLOR="#000000" FACE="verdana" >"</FONT>The economic and consequent social problems that had arisen in the early seventies and continued into the 1980s were not new in themselves. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>Since the 1830s Australia had always depended for its economic viability upon the caprice of overseas markets and the willingness of foreign investors to risk their capital</B></FONT>. When, as in the 1840s, the 1890s and the 1930s, those outside factors had adversely coalesced to lessen market demand and to deduce investment, Australia and its people had suffered..." (John Molony, <I>History of Australia</I>, (Ringwood: Viking, 1987), p.387).</div> <bR> <div> <FONT SIZE="2" COLOR="#000000" FACE="verdana" >"The depression in Australia had been too long regarded simply as a reaction to the international crisis of 1929-31. With her heavy dependence on trade and overseas sources of capital, it was inevitable that the Australian economy should have reacted sharply to the international crisis. </FONT><FONT SIZE="2" COLOR="#008000" FACE="verdana" ><B>But domestic factors were also important in influencing the extent, timing and shape of contraction and recovery</B></FONT><FONT SIZE="2" COLOR="#000000" FACE="verdana" >..." (</FONT>C.B. Schedvin, <I>Australia and the Great Depression</I>, (Sydney: Sydney University Press, 1970), p.xiii).</div> <bR> <div> With Kevin Rudd's Labor Party winning the 2007 election the 'rhymes' of the past with the present boom cycle need to be updated and revised.</div> <bR> <div> In viewing previous Sydney property booms the Hawke bubble, after the 1987 American stockmarket correction, was 'rhymed' with the Howard Bubble after the 2000-2001 American stockmarket corrections. This was referred to as the primary 'rhyme' to view the future. The late 1960s-early 1970s property boom was also 'rhymed' with the late 1990s-early 2000s property boom. This was the secondary 'rhyme'.</div> <bR> <div> "... John Howard and his Coalition government came within 1.5% of holding on to power at the recent federal election, final figures show... the election outcome was decided in an extraordinary number of close seats that could have gone either way.</div> <bR> <div> "... With fewer than 6000 more votes in the right seats, it could have held onto government" (Tim Colebatch, <I>Howard only 1.5% from being PM again</I>, theage.com.au, January 5, 2008).</div> <bR> <div> The primary 'rhyme' suggested that John Howard would win the 2007 election and the Coalition would be in government as the boom turned to bust just as Bob Hawke won the 1990 election and Labor was in government as the boom turned to bust.</div> <bR> <div> Even with so many 'rhymes' between the boom years of Hawke and Howard favouring this conclusion it was somewhat at odds with the Future Watch primary 'rhyme' for America. The primary rhyme for the Clinton/Bush years was the Johnson/Nixon years.</div> <bR> <div> But now with Kevin Rudd the Australian prime minister the Australian and American primary 'rhymes' are now aligned.</div> <bR> <div> The Labor Party election win may turn out to be the election that it didn't want to win.</div> <bR> <div> The Labor bust associated with the world recession of 1990-91 becomes the tertiary 'rhyme' behind the primary Labor bust associated with the world recession of 1974-75 and the close secondary Labor bust associated with the 1929-33 world depression for viewing the coming Labor bust associated with a world recession.</div> <bR> <div> This article will look at the boom and bust of the 1920s-30s, 1960s-70s and 1980s-1990s 'rhyming' then with the boom and bust of the 1990s-2000s. There may not be corresponding 'rhymes' in all periods.</div> <bR> <div> An example:</div> <bR> <div> <B>Inflation boosting tax-cuts</B></div> <bR> <div> Tax-cuts may result in interest rates staying higher for longer to combat inflation. This is the dilemma that Labor faces in fulfilling its election promises.</div> <bR> <div> John Howard's tax cuts, that preceded the 2007 election, has a 'rhyme' with Keating's tax cuts, which preceded the 1990 election, which contributed to interest rates staying higher for longer which helped push the economy into the 1990-91 recession. Billy McMahon's tax cuts that preceded the 1972 election played a similar role:</div> <bR> <div> "On 16 August 1972 the headline in <I>The Australian Financial Review</I> was: 'It's a Let-'Er-Rip Budget', emblazoning McMahon's last ditch effort to buy votes before the December election. The Budget cut income tax by an average of 10 per cent; increased allowances for dependents; and lifted pensions and supplementary benefits. In a magnificent understatement, the editor of <I>The Australian Financial Review</I> remarked that the Government had 'ignored the possible inflationary effects of last night's Budget'..." (M.T. Daly, <I>Sydney Boom Sydney Bust</I>, p.11). (But see Australian economic historian, Boris Shedvin interpretation of this event).</div> <bR> <div> Kevin Rudd's election win in 2007 may have ominous 'rhymes' with Gough Whitlam's election win in 1972 and James Scullin's election in 1929.</div> <bR> <div> With the prospect of the Conservatives winning control of the Senate in 2005, which would ensure the passing of the WorkChoices legislation, Future Watch was also highlighting the Bruce-Howard 'rhyme'. The introduction of industrial relations reforms of the Conservative Bruce resulted in his defeat in 1929. So Future Watch 'rhymed' this with the possible fate for John Howard, see below.</div> <bR> <div> The Labor party defeated Conservative parties and came to power just as the American post-war booms - 1921-1929 and 1949-1973 - were about to go bust. The Great Depression of the 1930s and the Great Stagflation of the 1970s were arguably the primary reason for Labor being in office for just over 2 years and just under three years respectfully.</div> <bR> <div> The nominal high in the American blue-chip sharemarket index the Dow Jones Industrial Average peaked six weeks before the Labor took office in 1929 and the Dow peaked five weeks after Labor took office in 1972.</div> <bR> <div> The present nominal Dow Jones peak occurred eight weeks before the Rudd Labor government took office in 2007.</div> <bR> <div> The fortunes of the Rudd government may therefore depend on the American financial sector.</div> <bR> <div> If "Wall Street" is able to weather the 2007-09 crises as did in 1927 and 1997-98 then this may be favourable for the longevity of the Rudd Labor government.</div> <bR> <div> Perhaps the Liberals may once again lose an "unlosable" election. A rhyme involves the Federal upper-class Sydney electorate of Wentworth. After the Liberals, under Andrew Peacock, lost the 1990 election to Labor, John Hewson, a founding executive director of the investment bank Macquarie Bank became leader of the Liberal Party.</div> <bR> <div> After the Liberals, under John Howard, lost the 2007 election to Labor, Malcolm Turnbull, former chairman and managing director of the investment bank Goldman Sachs Australia was a candidate for leader of the Liberal Party.</div> <bR> <div> Turnbull lost by just three votes to Brendan Nelson.</div> <bR> <div> "Sydney's Abbott and Adelaide's Senator Nick Minchin, guardians of the "Howard legacy", used the Right's influence to keep Turnbull, the strong moderate, just out of the leadership and put Brendan Nelson, the weak moderate, in as Howard's successor.</div> <bR> <div> "In one of the more brutal political squelches of recent years, even the old Treasury mandarin, <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>John Stone</B></FONT>, a former National Party Senate leader, <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>was moved to say of Nelson: "He reminds me of Andrew Peacock without the substance."</B></FONT> Nelson's absurd elevation, by so narrow a margin (45 votes to 42), <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>only makes sense if you accept that sooner or later either Turnbull or Abbott will eat him</B></FONT>. Not immediately, of course, but inevitably" (Alan Ramsay, <I>Look Left, look Right, look </I>, smh.com.au, December 1, 2007).</div> <bR> <div> Now that Turnbull is the leader of the opposition we now have a 'rhyme' of two former merchant bankers and journalists, with university degrees gained in Australia and overseas, from the electorate of Wentworth, both elected to parliament in the preceding elections, leading the Liberal Party in times of recession during a Labor bust.</div> <bR> <div> "Shortly after the leadership change, Hewson made up ground on the Hawke government in the opinion polls as the Australian economy went into deep recession and unemployment skyrocketed...</div> <bR> <div> "At the March 1993 election Hewson was defeated by Keating, losing what many had described as "the unloseable election" for the Liberals" (<I>John Hewson</I>, Wikipedia).</div> <bR> <div> [While Dr. Hewson has a PhD in Economics, Brendan Nelson is a Medical Doctor. Nelson was a Labor Party member who defected to the Liberals and became the Liberal member for Bradford. Joseph Lyons was a minister in the Scullin Labor government who resigned from the Labor party and became leader of the new United Australia Party. The now conservative opposition leader defeated Labor in the next election becoming Australia's tenth prime minister].</div> <bR> <div> Kevin Rudd inherited an economy supercharge by a commodities and stockmarket bubble. This is similar to George Bush inheriting an economy supercharged by the dotcom boom. Clinton and Howard enjoined the bubble years but did not experience, in office, the fall-out from the bust.</div> <bR> <div> A month and a half after Bush's inauguration the economy went into a nine month recession and the stockmarket did not bottom until late 2002.</div> <bR> <div> "... the United States suffered a net job loss during President George W. Bush's first term. This is the first time the economy has lost jobs during a single presidential term since the Great Depression" (Oxford Analytica, <I>Why The Dollar Could Demolish Your Home</I>, forbes.com, April 7, 2005).</div> <bR> <div> The Scullin government was elected after the start of the American depression, while the Whitlam government was elected before the American recession. The Sydney property boom also peaked before Scullin's election while the Sydney property boom peaked after the Whitlam recession. The Sydney property also peaked before the election of the Rudd government.</div> <bR> <div> The Dow Jones peaked in January 1973 and went into recession in November 1973. Things went wrong for Australia in 1974.</div> <bR> <div> "This recession, the end of one era in the international economy and the beginning of another, was fully global in scope. <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>No Australian government could have withstood the shock of 1973-75</B></FONT>. Accordingly, one cannot agree with those who argue that sources of the economic difficulty facing the Whitlam government after mid-1974 were fundamentally domestic or that if a coalition government had held office at this time the difficulties faced might have been avoided. Yet more here needs to be said. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>It was Whitlam's great misfortune that he came to power at the moment when the postwar capitalist Golden Age came to an end</B></FONT>. It was his great weakness that he lacked the political skills to prevent this misfortune from turning the last eighteen months of his government into a period of high constitutional crisis and low political farce" (<I>The Australian Century</I>, Edited and Introduced by Robert Manne, (Melbourne, Text Publishing Company, 1999, p.204).</div> <bR> <div> "Scullin had tried to grapple with the financial and social problems thrown up by the Depression but he failed. The Australian electorate was unable to associate Labor with financial expertise - a quality more readily seen in their opponents. Furthermore, <FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>the Labor Party had not been in power since 1917, and it came to the Treasury benches precisely when the profligate spending in the 1920s had begun to reap its fruit</B></FONT>... Nonetheless, the inability of the Federal Government under Scullin to present to the electorate a carefully thought-out plan for economic recovery, even if it were defective, was a major cause of its downfall" (John Molony, <I>History of Australia</I>, (Ringwood: Viking, 1987), p.264).</div> <bR> <div> "... in frightening ways, is the imminent demise of the United States economy. <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>In fact the whisper, the subplot in economist circles, was that this election was one to lose</B></FONT>. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" >That whoever inherited Australia in 2007 inherited a coming economic collapse in globalised trade that would suck Australia and much of the rest of the world down with it</FONT>. For two years now the best predictions have been that the subprime meltdown would act as merely the detonator of a much larger explosive charge created long ago by US consumer debt, concealed by Chinese and Arab investment in keeping that great hungry maw that is America sucking in what it could not begin to pay for. The avalanche-like fall of US house prices will be closely followed by the same in linked economies worldwide, and presage a harsh and very different world than the one we have lived in. In short, the party is over. We are a civilisation in collapse.</div> <bR> <div> "... Rudd and Gillard are not in power for power's sake... In <FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>the coming times of deprivation</B></FONT>, they have the value systems that will be needed to care for <FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>the sudden rise in poverty, stress, and need</B></FONT>..." (Steve Biddulph, <I>The party's over and Liberals will soon be history</I>, smh.com.au, November 29, 2007).</div> <bR> <div> NB. The Scullin (1929) and Whitlam (1972) Labor victories occurred at the end of American booms while the Hawke (1983) victory occurred at the beginning of an American boom.</div> <bR> <div> NB. The end of the Gold Standard was sealed by the Great Depression; the end of the Bretton Woods quasi-gold standard was sealed by the Great Stagflation and the end of the American Dollar Standard - dubbed Bretton Woods II - will be sealed by the coming Great Depression.</div> <bR> <div> The Rudd victory, at the end (?) of the post-Cold War boom is similar to the Scullin and the Whitlam victories, at the ends of the post-WW1 boom and the post-Cold War boom respectively.</div> <bR> <div> The above three wars are turning point wars in the Future Watch <A HREF="id10_the_anglo_american_hegemonic_cycle.htm" TARGET="_top" TITLE="Britain and America">Anglo-American Hegemonic Cycle</A>, with 1787 as its chosen starting point. This Hegemonic cycle is the template that Future Watch employs to watch the future.</div> <bR> <div> WW2 begins at an upwave of the cycle while WW1 and the Cold War end at the end of the first stage of the upwave. 1815 and 1865 also marks the end of the first stage upwaves.</div> <bR> <div> The post WW1 and post Cold War booms will end in deflation, as opposed to the end of the post-WW2 boom of hyper-inflation.</div> <bR> <div> The end of the post-WW2 boom was not, as mentioned above, at the end of the first stage of the upwave in the Anglo-American Hegemonic Cycle. The second stage - the asset price inflation stage - results in the debt-saturation point being reached in the cycle - which then contributes to deflation. The American Total Credit Market Debt as a Percentage of GDP in 1973 doesn't rate compared to today and 1929. This along with the inflationary imprint of the Cold War, were arguably, two main reasons why the boom post WW2 boom ended with inflation.</div> <bR> <div> In an interview in October on the ABC Dr Steve Keen from the University of Western Sydney pointed out "the levels of personal debt, as a proportion of the economy are now twice what they were during the 1930s".</div> <bR> <div> The Australian banking sector in the 1920s was also conservative due in part to the memory of the 1890s bust. The debt levels of today spell big trouble. Taking the 1890s and 1930s into account the Next Great Depression, yet future, is going to combine the worst features of the last two Australian Great Depressions.</div> <bR> <div> <B>Bruce (1929) and Howard (2007) - Industrial Relations Reform 'rhyme'</B></div> <bR> <div> "John Howard declared he had no complaints today as he ... officially conceding defeat in the Sydney seat of Bennelong...</div> <bR> <div> <FONT SIZE="2" COLOR="#000000" FACE="verdana" >"</FONT><FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" ><B>The declaration confirmed Mr Howard's position as only the second sitting prime minister to lose his seat at an election, after Stanley Bruce in 1929</B></FONT><FONT SIZE="2" COLOR="#000000" FACE="verdana" >"</FONT> (AAP, <I>Howard congratulates McKew on win</I>, @news.com.au, December 12, 2007).</div> <bR> <div> The housing boom of today, which included inner-city apartments, is also 'rhymed' with the housing boom of the 1920s, which included 'flats' in the eastern suburbs. A political 'rhyme' is also included:</div> <bR> <div> "Towards the end of the 1920s, Prime Minister Bruce showed where his true sympathies lay in matters of social fairness. A rewritten Arbitration and Conciliation Act of 1928 severely restricted the right of employees to win just treatment by legal means... Further protest meetings in Sydney and on the coalfields were broken up... The stage was set for the year 1930, when the once-confident Australian democracy would begin to fall apart" (Michael Cannon, <I>The Human Face of the Great Depression</I>, (Mornington: Today's Australian Publishing Company, 1997), pp.11 & 14).</div> <bR> <div> "The Howard government and its conservative backers are preparing with considerable fanfare for an assault on the trade unions through so-called reform of the industrial relations system after Howard gets control of the Senate on July 1 [2005].</div> <bR> <div> "The striking thing about the Liberals' proposals is that they are an extraordinary rerun of the policies of the Bruce-Page conservative government in 1926 and 1928-29, which were defeated firstly in a referendum in 1926 and finally by <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>the electoral defeat of the Bruce-Page government in 1929</B></FONT>.</div> <bR> <div> "In some ways the social circumstances of the late 1920s were similar to now. The labour movement was in a relatively defensive situation..." (Bob Gould, <I>Introduction to Stanley Bruce's great industrial relations blunder</I>, by J.T. Lang, http://members.optushome.com.au/spainter/Stanleybruce.html).</div> <bR> <div> "Bruce's proposal in 1926 was surrounded by the same kind of rhetoric as Howard's is today about getting rid of the anarchy of divided systems, and the virtues of freedom of contract..." (Bob Gould, <I>History repeats itself, Stanley Bruce and John Howard compared</I>, http://members.optushome.com.au/spainter/Brucepaper.html).</div> <bR> <div> "The purpose of the Howard government's WorkChoices legislation was to destroy trade unions in the name of improving labour productivity and reducing unemployment...</div> <bR> <div> "The right-wing putsch against the trade unions failed for much the same reasons as it failed in 1929, when the Bruce government lost the election on the issue of abolishing the Arbitration Court and Stanley Bruce, like John Howard, lost his seat" (Kenneth Davidson, <I>Coalition's failed attempt to destroy the unions</I>, theage.com, December 23, 2007).</div> <bR> <div> "Predictions are hazardous, but it is the silly season, so here goes: among all the accolades heaped upon John Howard when he finally retires from politics, the least welcome and most unexpected will be that he sparked the revival of militant, organised labour" (Hugh Mackay, <I>More money, to go in fewer pockets</I>, smh.com.au, December 10, 2005).</div> <bR> <div> <B>Social Mood Change</B></div> <bR> <div> In comparing 'boom and bust cycles' a number of considerations have to be taken into account. One consideration is when the 'boom and bust' occurred in relation to the inflation/deflation cycle. The Scullin and Rudd governments coincide roughly in the same stage of the inflation/deflation cycle, while Whitlam's government was in a different stage - deflation for Scullin and Rudd and inflation for Whitlam.</div> <bR> <div> The consideration looked at in some detail here is the 'social cycle' and its co-related 'social-mood cycle'.</div> <bR> <div> The election of the three Labor governments are part of a social mood change. The Scullin and Rudd governments coincide with the same stage of the social cycle while the Whitlam government to a different stage. This implies that the mood change that is taking place will be more severe when compared to Whitlam's time.</div> <bR> <div> Mr Howard ... <FONT SIZE="2" COLOR="#000000" FACE="verdana" >"</FONT><FONT SIZE="2" COLOR="#6000C0" FACE="Verdana" ><B>shifted the Liberals further to the right than ever</B></FONT>. But, at 68, he failed to read signals, including a few from within his own party, that <FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>voters could tolerate only so far his often divisive approach to government</B></FONT>" (The Economist, <I>Rudd, glorious Rudd! </I>economist.com, November 29, 2007).</div> <bR> <div> The arguable 'radical' conservatism of President George Bush and former Prime Minister John Howard is what you expect in this stage of the social cycle. They were the personification of that cycle.</div> <bR> <div> <B>Sleepers awoke from slumber of indifference</B></div> <bR> <div> The above heading is the title of an article by the Australian social commentator Hugh Mackay in the aftermath of the recent Australian Federal election. It is quote below at some length as it is very important in understanding the future:</div> <bR> <div> "Over the past 12 months, we've gradually been changing from complacent, self-indulgent and self-absorbed to alert and re-engaged. <FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>We've begun to emerge from a prolonged period of social and political disengagement </B></FONT>in which we preoccupied ourselves with "lifestyle" - everything from home renovations to body piercing - as a way of distracting ourselves from a too-daunting big picture.</div> <bR> <div> This was our Dreamy Period, and Howard was our man. Relaxed and comfortable was our motto as well as his. Switch off. Shut down...</div> <bR> <div> Of course, not everyone was thinking like this. There was, for instance, the famous "doctors' wives club"...</div> <bR> <div> "<FONT SIZE="2" COLOR="#FF6000" FACE="Verdana" ><B>But they were concerned and increasingly disillusioned by what they perceived as a government becoming radical in its conservatism</B></FONT>. Being typically small-l liberal in their politics, they watched, dismayed, as their natural political home became uncomfortable and then, finally, uninhabitable.</div> <bR> <div> "The doctors' wives were not alone...</div> <bR> <div> "<FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B>They sensed, right from the start, that Work Choices had gone too far and was a symptom of ideological bitterness rather than useful reform</B></FONT>. Even if it wasn't an issue for them personally, or for their children, they saw that, too, as a moral issue (yes, that's how small-l liberals think).</div> <bR> <div> "Gradually, over the course of this year, that minority became a majority. For the Coalition, "doctors' wives" had turned out to be bellwethers...</div> <bR> <div> "For most of the early years of the new century we just kept on re-electing federal, state and territory governments, mostly with increased majorities. Was this the golden age of political contentment? No; it was the tarnished age of weak oppositions and - more importantly - a time of greater than usual political indifference and disengagement...</div> <bR> <div> "But the Coalition need not have bothered trying to spook us about wall-to-wall Labor governments.<FONT SIZE="2" COLOR="#008000" FACE="Verdana" ><B> For the next 10 years, no incumbent state or territory government will be as secure as for the past 10</B></FONT>. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>We are awake, now</B></FONT>. We have changed. We are feistier, less acquiescent, more engaged. We are hungry for inspiration.</div> <bR> <div> "The big picture is coming back into focus. We are still struggling against feelings of powerlessness, but there's renewed optimism that we might be able to do something to improve the state of the world - in the local neighbourhood and on the planet at large..." (Hugh Mackay, <I>Sleepers awoke from slumber of indifference</I>, smh.com.au, November 27, 2007).</div> <bR> <div> This article reveals the 'social-mood' change that is taking place. A similar mood change occurred, in the preceding stage of the present social cycle:</div> <bR> <div> "In his general history of the twentieth century Eric Hobsbawn identifies the hears between 1950 and the early 1970s as advanced capitalism's Golden Age. During these years - to be precise between 1949 and 1972 - Australia was governed by the Liberal-Country Party coalition...</div> <bR> <div> "During this Golden Age coalition rule was, most importantly founded on sustained economic well-being with average growth rates of 3 to 4 per cent per annum, negligible inflation and virtually non-existent unemployment. In this period ... electoral politics in Australia appeared to be dominated by what the last ALP prime minister, Ben Chiefly, had unforgettably christened the 'hip-pocked nerve'" (<I>The Australian Century</I>, Edited and Introduced by Robert Manne, (Melbourne Text Publishing Company, 1999, p.204).</div> <bR> <div> During most of this period the ALP was in disarray with leadership and unity problems.</div> <bR> <div> "From the early 1970s ... With Gough Whitlam as leader of the Labor Pary, it became a vital force in opposition. The contrary happened to the Liberal-Country Party coalition. Years of unchanged leadership under Menzies, the untimely death of Holt, continued affluence and sociological change, especially among the young, helped the coalition to falter as it tried to grapple with new values, problems and expectations. <FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B>The 1970s became a decade of politics</B></FONT>" (John Molony, p.352).</div> <bR> <div> "In August 1972 McMahon announced that Australia would go to the polls on 2 December, the last possible day. This announcement triggered the most famous campaign in Australian electoral history, centred around the Whitlamite ALP slogan, "It's Time". The slogan had three meanings...By any standards, twenty-three years was a long time. More deeply it conveyed the sense of national promise unfulfilled. <FONT SIZE="2" COLOR="#FF0000" FACE="Verdana" ><B>During the long Menzies era Australia had been asleep</B></FONT>. It was time for Australia to emerge from the cocoon of the cold war; to find an honourable place in its own region, fear of fear; to repair its relations with its Aboriginal population; to extend to all its citizens equality and the full benefits of a shared prosperity..." (Robert Manne, pp.183-184).</div> <bR> <div> "On 2 December 1972, McMahon went to the polls with little in the way of policy but relying on the coalition's twenty three years in office and the claim that Labor was an untried and untrustworthy force" (John Molony, pp.354-55).</div> <bR> <div> ...</div> <bR> <div> In viewing the future Future Watch employs the <A HREF="id10_the_anglo_american_hegemonic_cycle.htm" TARGET="_top" TITLE="Britain and America">Anglo-American Hegemonic Cycle</A>. This is informed by Socionomics and Social Cycles. Robert Prechter promotes Socionomics and William Strauss and Neil Howe promotes Social Cycles. Some quotes below provide an introduction to this field of thought:</div> <bR> <div> "Simply put,<FONT SIZE="2" COLOR="#0000FF" FACE="Verdana" ><B> </B></FONT>the socionomic hypothesis is that social mood generates social events, not the other way around. This is why the stock market - the primary historical database of collective optimism and pessimism - turns <I>before</I> pivot points in the economy and cultural expression" (<I>How Can You Use the Tax Revolt Indicator? </I>elliottwave.com June 27, 2007).</div> <bR> <div> "Socionomics is the study of social action that expresses social mood. Social mood arises endogenously from unconscious herding impulses... A positive mood motivates people to produce more, act peacefully with their neighbors, purchase uplifting entertainment, etc., and a negative mood motivates the opposite actions. So mood shapes economic, political and social trends...</div> <bR> <div> "Crowd psychology creates peaceful eras and turbulent eras. After the mood has trended positively for a longtime, peace reigns, as it did in the1920s, from the mid-'50s to the mid-'60s, and during the 1990s. After the mood has trended negatively for along time, turbulence reigns, as it did in the 1930s, the 1970s and since the peak in 2000..." (<I>What is Socionomics?</I> An Interview with Robert Prechter, Executive Director of the Socionomics Institute, socionomics.net).</div> <bR> <div> "A turning is an era with a characteristic social mood, a new twist on how people feel about themselves and their nation... A society enters a turning once every twenty years or so..." (William Strauss and Neil Howe, <I>The Fourth Turning</I>, (New York: Broadway Books, 1998), p.99).</div> <bR> <div> "None of these turns (or decades) had to be exactly what is was, but each was a phase of history America had to transit.  What we remember as the 1960s could have been altered - perhaps made better, perhaps worse. Yet with the altering we would have experienced a better or worse 1960s, not a repeat of the 1950s or a hastening of the 1980s. The American high did not require institutional racism or sexism, but it did require a social stasis. The Consciousness Revolution did not require a Vietnam War or Watergate, but it did require a youth revolt and cultural experimentation. Today's Unravelling does not require profane media or endless budget deficits, but it does require individualism and institutional decay. A Fourth Turning does not require economic depression or civil war, but it does require public sacrifice and political upheaval" (William Strauss and Neil Howe, pp.310-11).</div> <bR> <DIV ALIGN="LEFT"></DIV> <div>  <A HREF="id61.htm" TARGET="_top" TITLE="Sydney Property Crash">Previous Page</A>                       <A HREF="id89_m.htm" TITLE="Australias Great Depression">Top of Page</A>                       <A HREF="index.htm" TARGET="_top" TITLE="Future Watch">Home Page</A></div> <bR> </td> </tr></table></body>