THE CHALLENGE FOR AUSTRALIA'S "NEW" GOVERNMENT

Australia has a "new" government. Perhaps.

Most probably, it will be painting over some quickly growing cracks which were rapidly becoming an electoral tsunami which destroyed the "old" government.

Reports in the Sydney Morning Herald this morning state that four of six of Australia's states are in recession measured as declining state final demand. It also states that unemployment in Bankstown (an area of western Sydney) is twice the national average. And some, if you read my previous blogs on Australia's underemployment problem. The most reliable source of data seems to be Roy Morgan Research, not the Australian Bureau of Statistics. It is not just Bankstown.

Australia's true un- and underemployment problem is not that far away from France and other European countries. Ask the people who cannot find work, are losing their jobs in droves, and are moving back into their parents homes.

The SMH also carries an interesting article about Cash Converters, being a large listed pawnbroking firm. Middle income families are visiting the pawnbrokers. Professional people are starting to visit Centrelink, the Australian government's social insurance agency.

Interest rates, as set by the Reserve Bank, appear to be heading lower, a rare generational event. That doesn't assist small business since the banks do not reduce their lending rates accordingly. Or credit card holders. Or pensioners relying on fixed income. It does assist mortgage holders to reduce debt, an essential strategy since the deflation in house prices means that they end up in the same position viz a viz their bank loan covenants.

Electricity prices in Australia are now amongst the highest in the world, and rising. This is self inflicted in a country which has endless energy resources of most forms.

Energy price inflation is increasing. In addition, the relative decline in the value of the Australian dollar will mean significantly increased petrol prices.

This is a  double whammy for Australian business and households in an environment of deflating end product and services prices.

Some of these problems are a result of the China led boom in commodities. Most of the problems faced by businesses and households are inflicted by their own "old" government, previously led by the same person who now purports to head the "new" government.

The only saving grace may be that the leader of this "new", "old" government, may actually listen to Prof. Ross Garnaut, whom he knows well. If so, the magnitude of the problem may be realised in Canberra. Whether or not there is political will to accept the truth and do something about it remains to be seen, and will in part be determined by the fact that Australia is due to hold a Federal General Election this year. The date of this is now open (it was to have been 14th September). The date of the G20, that platform for middle power peacocks, will be a factor in setting the new date.

For Australian businesses and households, that date with destiny cannot come quick enough. Then perhaps, there can be a true NEW government, not a recycling of the failures of the recent past.