Month: May 2019

The search for yield

AustralianActuary Economics

Investors want yield. Many will take on quite a degree of risk to earn it. But yield has become difficult to find over the last five to eight years and there is every prospect that it will remain elusive for the foreseeable future. Are we mired in a never-ending low yield out-look?

To a large extent, the low yield environment has been deliberately generated by central bank policy in most countries. Faced with the prospect of a recession after the the sub-prime financial crisis, including the collapse of some banks, US and UK central bank policy engineered a reduction in interest rates by creating cheap easy money (in effect, printing banknotes) as a matter of priority. On top of that, fiscal expenditure programmes were instituted in haste, a course of action followed in Australia to the ludicrous extent of the Government mailing $900 cheques to citizens (including dead ones, of course). The end result has been budget deterioration, increased public debt and, crucially, a distortion in the structure of interest rates in the market and the delay in cleaning out bad investment projects.

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Bob Hawke

AustralianActuary Life

Bob Hawke, former Australian Prime Minister, died today. Bob was a larrikin and a stalwart of the Australian Labor Party. His partnership in government during the 1980s with Treasurer Paul Keating was a genuine advantage for this country and set in place many reforms that added to our fortunes, for the nation as a whole.

Bob was a Labor PM unlike those before and after him. A Rhodes scholar, a firebrand, a union leader, a heavy drinker and guilty of certain other alleged character flaws not for me to air, he came to the leadership of the ALP at the exact time the election was called in February 1983. The election date itself was March 5, 1983 and the ALP with Bob at the helm, won. Malcolm Fraser’s prime ministerial career was over, the Liberal/Country Party coalition government was over and, amazingly, Labor was back in power federally only 8 years after the previous disastrous Labor government under Gough Whitlam had been thumped at the ballot box and kicked out in disgrace.

Bob was cut from a different cloth than was Gough. Bob was economically literate. He served his country very well.