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Two bankers put our economic outlook into perspective yesterday and it’s worthwhile to look at what they told us.

Bankers warn us, but as Rocky said, "It ain't so bad"

Peter Switzer
11 August 2016

By Peter Switzer

Two bankers put our economic outlook into perspective yesterday and it’s worthwhile to look at what they told us and what we should expect from the economy and our material lives over the next couple of years.

A few years back, the chief equity strategist at Macquarie, Tanya Branwhite, told me on my TV show that she expected a slow grind higher for the economy and therefore the stock market. And boy was she spot on.

Yesterday I talked to the boss of a major media organization, whose business is in strong form but he admitted that revenue growth was not easy to create. Of course, he not only has a more ‘reluctant to spend’ consumer but he thinks the Internet and the likes of Google are taking an excessive share of the ad spend out there.

A lot of people in sales are telling me the same thing that “it is tough out there”, so I believe them. However, as Rocky might have said: “It ain’t so bad” if you compare it to the alternative.

I’ve said it before and I’ll say it again: what we have here is the alternative to a Great Depression, so suck it up, princess.

Unemployment is 5.8%, not 12%. If there was a jobless rate of this magnitude, a hell of lot of people in sales wouldn’t only lack customers, they’d lack a job!

The CBA’s CEO Ian Narev summed up what his bank is seeing and it looks like a pretty succinct assessment: “We are seeing examples here of the global phenomenon where fragility in the global economy, concerns about the global geopolitical environment, creates a lack of confidence, which monetary stimulus cannot fully offset.”

What else does he see and conclude?

“So we’re expecting over the next 12 months pretty much an economy that feels like more of the same, but we do see risks to the downside if levels of confidence, driven by external events, go down and that continues to keep confidence low.

“In this sort of environment, we do need to be a bit more conservative.”

This all makes perfect sense but it’s the c-word for conservative that is killing the economy’s ability to get out of this restraint-hold that seems to be locked on our economy and others.

I talked to the CEO of Bendigo and Adelaide Bank, Mike Hirst, last night on my show and he pointed out that we Aussies have enormous savings buffers tucked away in our home loans, which means we’re playing it safe too.

That’s why the Reserve Bank Governor, Glenn Stevens, in his departing speech, showed he is an economist telling the Federal Government that, as Ian Narev pointed out, interest rates won’t solve our problems. Fiscal policy, that is, more spending and more deficits, along with borrowing, is needed!

This will shake non-economist, conservative commentators to their steely bones but Stevens is spot on, if we want to break out of this slow growth cycle. In a perfect world, a much-loved Government with a great leader would bump up spending on infrastructure — building wider, better roads would be a great start and a second Sydney airport that has been promised since the 1970s!

A very fast train, like most advanced economies have, would be a decent idea and some wasteful spending could be peeled back so the overall rise in the Budget Deficit wouldn’t be so great.

If we can show the debt ratings agencies that we’re borrowing and spending on stuff that makes out economy and workers more productive, then we could escape a credit ratings downgrade.

Of course, if our political parties stopped playing politics and accepted that we, as a people, want our governments to do a lot for us, the GST would have be raised and broadened. This could also help us peel the deficit/debt problem back and maybe kick start higher confidence levels for businesses, which might start to invest more courageously.

And that’s the problem. We lack Rocky-style courage at the government-level, the business investing level and at the consumer ‘shop-to-you-drop’ level. What I’m describing has come about since the GFC, which threatened a likely Great Depression.

Luckily, we ended up with this long, slow growth recovery and while it’s better than a slump of the 1930s proportions, we need to break out of this ‘going somewhere but slowly’ rut.

I know the census debacle is hot news and so are the gold medals in Rio but I’d love to see Malcolm do a Rocky, and tell us “it won’t be so bad” and that he’s on top of what he has to do and that he’s going to do it.

Both bankers talked about the same thing from two different standpoints. Both focused on the economic challenges but, worldwide, we have a political and leadership weakness that even makes Donald Trump appealing to some!

One of America’s greatest presidents was Teddy Roosevelt and he once came out with this pearler that only a real leader could proclaim: 

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

Unlike a lot of commentators, I respect our leaders — Malcolm Turnbull and Bill Shorten — because it’s a tough gig. But I’d love them to have the inspirational leadership skills to talk to us like Teddy!

I think we need it. I think the entire world needs it.

Our economic predicament “ain’t so bad” but it could be better. And someone has to do something about it.

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