Hockey can turn budget problem into big reform

Perhaps the biggest question the Abbott government needs to ask itself is whether it aspires to be a highly regarded government or merely one that's "better than the last lot". Paradoxically, to end up highly regarded you have to be bold, run risks, even do the opposite of what was expected. Consider the case of the budget. On the face of it, Treasurer Joe Hockey's problem is that the closer he got to inheriting the budget and...

Read more >>

Why borrowing for investment isn't a problem

It doesn't seem to have occurred to anyone - perhaps not even the man himself - to wonder how Tony Abbott can establish himself as an ''infrastructure prime minister'' and also get the budget back to surplus ASAP. It doesn't seem to have occurred to anyone - perhaps not even the man himself - to wonder how Tony Abbott can establish himself as an ''infrastructure prime minister'' and also get the budget back to surplus ASAP. He's...

Read more >>

Is reversing Labor all we need for our future?

I'm starting to think we didn't get much of a deal when we decided to change the federal government. We got rid of a bunch racked by infighting and bad at executing policy, but substituted a bunch with a very limited idea of what needed to be changed to get us back on the right path. What a to-do list: sack econocrats guilty of having worked with the enemy, pass an edict against climate change and discourage all discussion of...

Read more >>

No need to exaggerate Labor's failings

They say history is written by the victors, and already the Rudd-Gillard-Rudd government's many critics are busy reshaping our memory of the recent past. But, though Labor's performance was poor in many respects, they shouldn't lay it on too thick. Those who claim Labor Party governance led to "chaos" should look up the meaning of the word, while those who repeat Tony Abbott's claim that this was "the worst government ever"...

Read more >>

What's driving our dollar

The clouds over our economy got a bit darker this week with the news that the US Federal Reserve was in no hurry to begin "tapering" its quantitative easing. This underlined the reality now dawning on the new Abbott government that the outlook for the economy is quite uncertain and, unless we're lucky, quite weak. It's certainly not a time when you should shift to a contractionary stance of fiscal policy because of some misguided...

Read more >>

The transformation of Tony: can you believe it?

On Classic FM last month they used to play an ad with just a second or two of arguing politicians before the kicker: "Election? What election?" Then on with the soothing music. It was a bit naughty for the ABC, but it was just what many people were thinking. According to group discussions conducted in the last week of August by the Ipsos research firm for its Mind and Mood report, the consensus from participants' lounge rooms...

Read more >>

How business lobbies to block tax reform

There are a lot of people moving office in Canberra, thanks to the election. But not all of them are politicians. There is a parallel changing of the guard among the lobbyists - a change that will have far more effect on what happens to us in the next three years than most people realise. As has been well reported by Matthew Knott, of Crikey.com.au, Liberal-aligned lobbying firms - full of former politicians and staffers - are...

Read more >>

Death of man who inspired the emissions trading scheme

The man who first thought that governments should auction off rather give away the rights to such things as broadcast spectrum or taxi licences, and who started the thinking that led to the invention of emission trading schemes, died last week at the age of 102. He also inspired the joke economists tell each other as a warning against reading too much into statistics: "If you torture the data long enough, it will confess." He...

Read more >>

MACRO MANAGEMENT AND THE SUPPLY SIDE

Management of the macro economy has moved to a more sophisticated and thus more medium-term approach, which has increased the focus on the supply side. I want to discuss some less familiar technical terms that have become part of the debate: ‘trend’ growth, the ‘potential’ growth rate, the ‘output gap’ and how macro policy and micro policy fit together. The meaning of ‘trend’ growth It has become common to hear the RBA or the...

Read more >>

A lot of politics is unconscious pre-judgment

At last. God's in his heaven and all's right with the world. The rightful rulers of this country are back in charge, so now things can only get better. You think I'm joking? I'm not. There's an American psychological test called the implicit association test which asks people to divide nice words and nasty words, black faces and white faces, into two categories and do it as fast as they can. When journalist Malcolm Gladwell,...

Read more >>

Big change in party, little in policy

Coalition supporters rejoice! The evil incompetents have been banished and the good guys are back in charge. But don't get too excited because by the time we reached polling day many illusions about the difference a change of government would make had been shattered. A standard delusion of election campaigns is that the Coalition portrays itself as standing for lower taxes, higher spending and lower budget deficits. And Tony...

Read more >>

Little progress in economy's transition

With the election campaign supposedly fought mainly on economic management, it's surprising this week's figures for growth in the June quarter got so little attention. So what shape is the economy in as it looks like being handed over to a new government? According to the Bureau of Statistics' national accounts, it's not doing well, but nor is it doing particularly badly. Real gross domestic product grew just 0.6 per cent in...

Read more >>

Why Abbott wouldn't be a great cost cutter

If Tony Abbott wins the election would he "cut, cut, cut" to fill the "$70 billion black hole" needed to cover the cost of his election promises, as Labor repeatedly claims? Would he follow the Europeans in adopting austerity policies, as others claim? No. Why not? Because the man who'd be his treasurer, Joe Hockey, isn't that stupid and Abbott isn't that committed. Let me make a fearless prediction: should the Coalition win...

Read more >>

Why taxes would rise under Abbott

Election campaigns have become works of fantasy where, to enter the spirit of things, you have to suspend disbelief. And the greatest unreality this time is Tony Abbott's claim the budget can be returned to surplus in the coming decade while taxes go down, not up. To most people the idea of permanently paying less tax is hugely attractive. And Abbott is promising to abolish the carbon tax and the mining tax, cut the company...

Read more >>