Not a man of letters: Sydney Morning Herald columnist Paul Sheehan said this on Monday:

“Rarely has a government promised so much, spent so much, said so much, and launched so many nationwide programs, and delivered so little value for money and expectation. Two years of Kevin Rudd has produced 20 years of debt, and most of it cannot be blamed on the global financial crisis. This alphabet soup is self-inflicted.”

The column reeks of hindsight, from someone who has turned it into an art form. He is another, along with the federal Opposition and the usual collection of debt hawks and deficit nutters who would have preferred to see plummeting demand, soaring unemployment and falling growth and all the personal misery that goes with.

Virtually alone in the Western world, the federal Government has been well-placed to do something quickly to try and stop the slump impacting Australia. This is because of the work done by the Hawke, Keating and Howard governments and the Australian people. People who think Budget surpluses are somehow holy and to be protected at all costs, should get a life. It’s our money and should be used to protect the nation and the Australian people from harm.

In the SMH today, three letters in reply, all critical, two of which were from heavy hitters.

The first came from someone who needs no explanation:

Paul Sheehan’s piece was a farrago of distortions. It was, in essence, an anti-Labor pamphlet. Sheehan uses the alphabet to lay out his points but when he got to N he failed to note: No recession.

Australia, alone among the 26 countries of the OECD, avoided growth in the negative — an achievement unworthy of one note of commendation from Sheehan.

Over and over he makes the point about the Budget going from surplus to deficit and the net federal debt rising but nowhere does he tell us that this countercyclical policy was a necessity, as the global financial crisis tore away at private spending and investment.

Paul Keating, Sydney.

The second from Andre Morony, a former chief economist of BT Australia, and was their chief investment officer. He is now a Sydney company director.

Paul Sheehan says the government’s spending could save us from the global financial crisis only because the previous government built up a strong Budget position. This is probably true but is largely irrelevant.

Then he criticises the government for that spending. Hello! Would he rather we didn’t use the tax surplus we all paid to John Howard to save Australian jobs? What exactly was that surplus for?

Second, he says ”permanent migration to Australia surged 550,000 during the first two years of the Rudd Government” (that is, increased by 550,000).

Bureau of Statistics figures show that permanent arrivals in 2008 and last year totalled 310,000. Over the past 12 months permanent arrivals were 148,000, compared with 142,000 in the last year of the Howard government.

Andre Morony, Paddington

Sheehan would have been on safer ground if he had written another sledge of Rudd as a manager. He and his cabinet deserve sledging. But before doing so, he should go and look at the lacklustre performances of the first Hawke government and the first Howard government and all the resignations and acts of incompetence. The Rudd experience isn’t a new development.

Cheeseparing. The interim report of Fairfax Media took some time to read, and so a few items were slow coming to hand. The 1.1c a share in resumed dividends to shareholders will mean $2.3 million for James B Fairfax with his 9% stake. How could Fairfax management, led by CEO Brian McCarthy,  manage to get “royalties and copyright payments” down to just $66,000 in the half year, from $25.86 million in the six months to December 31. There was no explanation for that heroic effort. Staff redundancy costs fell to $1.6 million, from more than $57 million and staff costs amounted to $423 million in the half year overall, down from $465 million. There were falls in items such as paper, printing, production and promotion costs. But no royalty and copyright costs. Now seeing Fairfax owns several radio stations, and they are all talk (but there is a tiny bit of music), perhaps Brian the DJ ordered a change in the music mix at the likes of 4BC, 2UE and 3AW.

Don’t mention the renos. Consolidated Media Holdings is the apple of Kerry Stokes’ eye, but first he has to get over James Packer who is sitting on 45%, with his loyal right-hand man, John Alexander, as chairman and CEO, cutting the cents. Today’s interim report included this comment: ”We continue to focusing on minimising corporate costs,” said executive chairman John Alexander. ”The $3.1 million corporate costs this half represent a 47.3 per cent reduction on the corporate costs from the first half of fiscal 2009.” Seeing he is paid $1.5 million a year, we know corporate costs can’t go much lower without doing some terminal damage. But he needs every cent, judging by this report in the Sydney Morning Herald today. Alexander and his wife, Alice, have lost a high-profile damages claim against a Sydney developer-designer and the builder; or rather the court only awarded them $34,335.62 of the claimed amount of $455,000. Included in the claim was the news the Alexanders had spent $54,000 on a steam room (lined with black mosaic tiles) in their Southern Highlands hideaway.

Insurance week: This week the country’s three major listed operators, QBE, IAG and Suncorp Metway (Promina), all reported profits. They will be interesting given the poor performance of the likes of IAG and Suncorp’s Promina group in the past three years. But now there’s evidence of rising premium rates (costs) for some types of insurance after insurers raided their reserves to maintain profits in previous years. Now that sounds like a warning sign to regulators. And indeed, Australia’s regulator, APRA, has been watching.  This speech last week from the most senior insurer regulator in the country, APRA executive member John Trowbridge, had some revealing info. He said: “Underwriting performance is a little more difficult to understand properly from the APRA returns. APRA analysis of its statistical data and FCRs indicates that reserve releases have made a significant contribution to industry profitability since around 2005. Clearly industry profits over recent years would have been lower and loss ratios higher without the boost from prior year reserve releases.”

Ahhh, the penny drops. Trowbridge continued: “To better understand the industry’s financial performance it is necessary to examine the underlying accident year loss ratios. APRA’s internal analysis of insurers’ loss ratios shows that these have been deteriorating on an accident year basis since around 2005. This observation is in line with market commentary that competitive forces have resulted in falling premium rates and more liberal terms and conditions. On the claims side, there is evidence of the emergence of superimposed inflation in some long tail classes and adverse weather conditions have affected loss ratios for the short tail classes. However, on a more positive note for the industry, there is some evidence of increasing premium rates over the past year or so, particularly in the personal lines classes.” You have been warned, insurance is going to cost more in coming months.

The ageing bush. There’s renewed talk of a two-speed economy where the resource-rich states of Western Australia and Queensland grow faster than NSW, Victoria and Tasmania. But there should also be discussion of a two-age country; younger cities and ageing regional areas where the sea changers and tree changers go to retire. Senior treasury official Dr David Gruen made this observation in an unreported speech in Sydney on Friday: “Australia is one of the most urbanised countries in the world; by 2020 more than 90% of Australians will live in urban areas. In terms of economic activity, Australia’s major capital cities account for at least 65% of GDP. So it is likely that the quality of our cities has a significant impact on national productivity growth… At present, younger people are attracted to education and employment opportunities in capital cities. Older adults represent a growing proportion of the population outside of the capital cities. If these patterns continue, the older population risks becoming increasingly distanced from job opportunities and the workforce that will be required to deliver the services it needs.”

The reality of our current account. And Dr Gruen, who heads up Treasury’s macroeconomics division, told his audience in Sydney a couple of facts about the realities of Australia’s current account deficit, which, from time to time, gets the debt hawks and other fiscal whiners, all het up: “As I have noted, Australia’s current account deficit reflects high and rising investment — and, in particular, investment to expand the capacity of the traded goods sector. This distinguishes Australia from most other countries with large current account deficits. In the United States and the United Kingdom, for example, rising current account deficits since the mid-1990s have reflected falls in the national saving rate, with the rate of investment being broadly unchanged.” So those countries have driven their current account deficits higher by consumption, rather than investment?

Calling all bankers: China’s bankers have been told: ignore volume and look at the quality of the loans from now on. It’s called know your customer. A year ago when China was dashing to get its stimulus package into the wider economy, lending was unchecked. But loans soared to about 9.6 trillion yuan over the year, nearly twice the 5 trillion yuan limit, and there was another surge last month. Now a directive from the People’s Bank of China directs bankers to focus on loan quality control, rather than quantity restriction, and aim to make loans flow to the real economy — rather than the property and stock markets, which are susceptible to asset bubble formation. The regulations were issued Saturday night. Another tells bankers to set lending quotas after “prudent calculation” of borrowers’ “actual demand”. The repeated previous orders working capital should not finance fixed-asset investment and equity stakes. The new rules also ask lenders to give funds directly to the end user declared by the borrower, instead of directly giving it to the debtor, in an effort to make sure the loans are actually used for their intended purpose. All so obvious, and all so obviously not followed in 2009.

Hold the sherry. Just when we were getting the jam jars out for a noisy celebration about the prospects of Britain’s economic growth doubling, to 0.2% in the 4th quarter of last year, along come some party-poopers (most of them economists!) to throw a dampener on the good times. According a report released overnight in London Britain’s business environment will “never return to pre-recession normality” and weak economic growth is likely to continue until 2015, according to some of the UK’s top economists.” and UK boardrooms are “blinkered” about the true state of the economy, and some companies’ business models will “wither away and die”. And even though Britain is technically out of recession, the report, called Transitions, warns that there will be “no return to business as usual” for some time to come. Grey skies really. What’s new?