The latest economic figures coming out of Japan show that the economy has contracted by an annualised 6.8%, the biggest slide in growth since the global financial crisis of 2009. This was driven by the national sales tax, which was aimed at reducing Japan’s public debt, currently highest in the world. However, it has seemingly backfired, as private consumption representing approximately 60% of Japan’s GDP dropped 5% on a quarterly basis, while household investment also dropped 10.3% (quarterly). Another indicator of declining growth within Japan was that factory production in Japan was at its lowest since the tsunami and earthquakes of 2011. It is also an alarming sign for Australia in that there was a quarterly reduction of 5.6% in Japanese exports. Japan’s role as Australia’s second largest trading partner, Australia’s second largest export partner and third largest investor, means that Australia could potentially be adversely affected, if the negative growth continues in Japan.

Sources

[1] ‘Japan Country Brief.’ Department of Foreign Affairs and Trading. https://www.dfat.gov.au/geo/japan/japan_brief.html

[2] Riley, C ‘Japan GDP collapses amid sales tax.’ CNN Money http://money.cnn.com/2014/08/12/news/economy/japan-gdp/

[3] Warnock, Nakamichi, ‘Japan GDP Slump Stirs Stimulus Talk,’ Wall Street Journal http://online.wsj.com/articles/japan-gdp-slump-stirs-stimulus-talk-1407922461

[4] Iga, Kaneko ‘Japan GDP set to fall sharply ; may increase stiumuls expectations’ Reuters http://uk.reuters.com/article/2014/08/12/us-japan-economy-gdp/

Posted by the EcoSoc Team.

By Ken Tong

In the Western World, the unity of the democratic governmental system and capitalist economic system has been often acknowledged as our dominant civilisation structures following the demise of feudalism. This system promises us freedom of speech with freedom of enterprise. This system promises us equality with increased incomes. Most importantly, however, this system promises us greater levels of satisfaction with higher material living standards. Interestingly enough, when we think about it, the fulfilment of these promises comes down to a very simple and straight-forward question: are we any happier now than, say, five hundred years ago?

Well, the government certainly tells we are. The media certainly tells we are. We are consistently being told that our life expectancies are going up, that we have persistently more goods and services at our disposal. Ironically, however, we only have to look at the singular statistic in order to find a counterbalance to this trend. Suicide rates have increased by a staggering 62% in the last two decade, with incidences quite alarmingly concentrated in advanced nations such as Japan, China and the US – all of which have embraced capitalism. While happiness and depression are often considered subjective, from these statistics and just by looking at the physical anxiousness and stress in our surroundings I think we can rather clearly infer that these promises made by democracy and capitalism have been broken.

So what has caused this increased state of unrest and depression? Well, the answer lies in looking into the core principles of capitalism and the nature of happiness. The fundamental ideals of capitalism and democracy revolve around the concept that we are all essentially equal. Not financially, but in terms of opportunity. For example, the American Dream offers the people of the US an illusion to the inalienable rights to "Life, Liberty and the pursuit of Happiness". My school, Fort Street, for example also operates under similar ideologies with our motto being, “everyone is the maker of their destiny”. This thought, of course, is equally applicable to Western civilisation in general. However, one’s feeling of importance or utility generally stems from one’s relative success to those in relative status to him. For example, we are not dismayed at our relatively low standards of living as compared to Bill Gates, but can become discouraged over superficial reasons as in the case of losing to a friend in an economics assessment.

By considering this definition of satisfaction with “increasing opportunity”, an obvious issue emerges: That individuals may take an increasing implicit reproach to the success of others. In addition, this idea that “everyone is the maker of their destiny” creates a crude logic: in that while those at the top of “society’s ladder” merit their success those on the bottom “rungs” must merit their failure. Hence, in our modern society overwhelming anxieties emerge resulting from how one is perceived by others, which, in turn, results in an unrelenting desire for people of these civilisations to “climb the social ladder”. This chronic unease is often dubbed Status Anxiety.

Perhaps the first person who saw this inevitable side effect of any Egalitarian society was the French political thinker Alexis De Tocqueville. When De Tocqueville first visited Democratic America, the Europe he was leaving behind was essentially an aristocratic feudalist society wherein people accepted the status in which they were born into. In his book titled, Democracy in America, he wrote about two seemingly paradoxical observations. Firstly, that Americans enjoyed a standard of living much higher than their counter parts in Europe. And secondly, that the American public often seemed more anxious and depressed than European societies. He came to a singular conclusion stating that: “When inequality is the general rule in society, the greatest inequalities attract no attention, however, when everything is more or less level, the slightest variations are noticed. This is the reason for the strange melancholy often haunting the inhabitants of democracies in the mist of abundance. ” I think the predictions of this man nearly two hundred years ago are very much true. A servant in a feudalist society, for example, would see nothing wrong with his relatively lowly status, accepting fate and finding utility in some form or another. On the other hand, most modern day waiters, for example, do not see their job as a means to an end but as rungs they must climb in society’s ladder. Ironically, however, capitalism does not work like this. It is heavily weighted against certain groups, namely the poor. It is a system in which the rich get richer and the poor get poorer. Hence, this waiter will never achieve the status he desires, and will be judged by others in this world of “free opportunities” as a failure.

Indeed, in our society the opinions of others are, to put it bluntly, highly overrated. A movie is given a rating for its entertainment value, students are given marks for their achievements, people are given money for their worth to society. But seriously, should the opinions of others matter so much as to make one unhappy? To drive one to depression and even to suicide? What matters to us should not be what we seem to the world but what we are, by our own standards. I leave you guys with a quote from German philosopher Arthur Schopenhauer whom said: “Greatness of soul, or wealth of intellect, is what makes a man happy. Not the opinions of others. Would a musician feel flattered by the loud applause of an audience if he knew that they were nearly all deaf?”

Posted by the EcoSoc Team.

Written by Keith Lee

``The Coalition’s new government budget released on the 13th May 2014 was pitched by Tony Abbott as a “necessity” to maintain budget commitments. Controversial changes such as the proposed $7 GP co-payment, the uncapping of university fees and future interest rate payments on FEE-HELP loans are indicative of just how tough the budget is. However, what is the motivation for the coalition government’s tough fiscal stance on the budget?

This was the government budget deficit. But how come the Coalition’s proposed budget is so much stricter than the previous Labor government’s? There are primarily two different budget forecasts, The Pre-Election Economic and Fiscal Outlook (PEFO), which is the earlier version released by the Labor government in August 2013. The election took place in September 2013, and then the Mid-Year Economic and Fiscal Outlook (MYEFO) was released in December 2013, by the newly-elected Coalition Government (refer to Figure A).

The Coalition government’s forecasts show a far more pessimistic outlook than the previous government (refer to Figure B). There is a large disparity between the estimated cash flows for the next four years between the PEFO and the MYEFO reflected by the $68 billion difference between the two government’s respective deficit outlooks. This has been driven by changes in key economic assumptions. The Coalition’s outlook is rather pessimistic predicting a 2.5% real GDP growth compared to the RBA’s 2.75%. There have also been pessimistic outlooks towards unemployment compared to the leading economic predictions of the IMF and OECD. While one can argue it is more optimal to ‘prepare for the worse’ and reducing spending, there have already been signs that these predictions are underrated, with the national accounts showing that the economy outperformed expectations for economic growth.

Read more at: http://www.abc.net.au/news/2014-06-04/abs-australia-national-accounts-gdp-march-quarter/5499524 http://workinglife.org.au/2014/05/13/how-joe-hockey-concocted-a-budget-emergency/ http://www.marketeconomics.com.au/2472-boiling-down-myefo-to-two-simple-variables

Posted by the EcoSoc Team.

Since week 4, the Economics Society has hosted an Academic Workshop every week to assist our Members with those notoriously difficult subjects, some of which include ECON2206 (Introductory Econometrics) and ECON2101 (Intermediate Microeconomics).

Many of you would have also heard and attended our successful Excel Workshop held last week on Tuesday.
A big thank you goes to our amazing Academic Director, Phuc Nguyen, for his great work in running the workshops.

This week: “ECON2206 Workshop PART II” will be held at the Red Centre in room 1040 – get amongst it!
Visit our Facebook page for Academic Workshop details.

Posted by the EcoSoc Team.