News from the shopping trolley: retailers are doing it tough

If I told you that a big reason we're feeling such cost-of-living pressure is the increasing profits of the big supermarket chains, department stores, discount stores and other retailers, would you believe me? A lot of people would. But that would just show how little we understand of the strange things happening in the economy in recent years. The economy in which we live and work keeps changing and getting more complicated,...

Read more >>

Poor Josh Frydenberg: on the wrong tram, heading for trouble

It’s not my policy to feel sorry for any politician – they’re all hugely ambitious volunteers – but I do feel sympathy for Treasurer Josh Frydenberg. He’s not the first treasurer to be strong on party dogma but light on economic understanding, but he’s among the first to be heading into stormy weather light on expert advice from a confident and competent Treasury. There he was, thinking his first budget would be his last, primping...

Read more >>

How to multiply the bang from your budget buck

Years ago, I came to a strong conclusion: the politician who could resist the temptation to use the budget to prop up the economy when it’s falling in a heap and making voters hugely dissatisfied has yet to be born. So let me make a fearless prediction: whatever they’re saying now, sooner or later Treasurer Josh Frydenberg and his boss Scott Morrison will use “fiscal policy” (aka the budget) to help counter the sharp slowdown...

Read more >>

Kiwis go one up and bring happiness to the budget

Like the past, New Zealand is a foreign country. They do things differently there. While we’ve just had a budget promising what seems like the world’s biggest tax cut, the Kiwis have just had what may be the world’s first “wellbeing budget”. Bit of a contrast. I’ve long believed that all government politicians everywhere, when they’re not simply delivering for their backers, are trying to make voters happy and thus get themselves...

Read more >>

Perrottet uses no-probs rhetoric to hide fiscal stimulus

If you’ve ever got a dodgy proposition you want spruiked, see if you can get NSW Treasurer Dominic Perrottet to do it. His budget offers the most optimistic view of the next four years, leading our state to a new Golden Century (and here was me thinking the Golden Century was where Sussex Street Labor went for a Chinese meal). Behind all Perrottet’s bravado, however, he has taken his lumps, using his budget to absorb some of...

Read more >>

Economic reform is stalled until politicians get back our trust

For those who care more about good policy than party politics, there are unpleasant conclusions to be drawn from the federal election. The obvious one is that it was a case of policy overreach leading to failure. The less obvious one is that decades of misbehaviour by both sides have alienated so many people from the political process and turned election campaigns into such a cesspit of misrepresentation and dishonesty that,...

Read more >>

It's the budget, not interest rates, that must save the economy

According to a leading American economist, there are two views of the way governments should use their budgets ("fiscal policy") in their efforts to manage the macro economy as it moves through the business cycle: the old view – which is now wrong, wrong, wrong – and the new view, which is now right. In late 2016, not long before he stepped down as chairman of President Obama’s Council of Economic Advisers and returned to his...

Read more >>

For every problem there’s a job, and no shortage of problems

With the economy subsiding in a heap within days of Scott Morrison winning re-election thanks to the Coalition’s superior economic management skills, he and his ministers are being swamped with helpful hints about how they can get things moving again. The business lobby groups are proffering some novel solutions: what would do the trick is to cut the rate of company tax and reform industrial relations so the unions are no longer...

Read more >>

ABBA was right: Rockonomics shows the winner takes it all

Why do we live in the era of superstars – whether people or businesses? Why is there such a thing as winner-take-all markets? Why do the top 1 per cent of households get an ever-bigger slice of the pie? Short answer: because the digital revolution is disrupting far more of the economy than we realise. It’s explained in the new book, Rockonomics: What the music industry can teach us about economics and life, by Alan Krueger,...

Read more >>

Election hype about strong growth now back to grim reality

The grim news this week is that the weakening in the economy continued for the third quarter in row, with economic activity needing to be propped up by government spending. The Australian Bureau of Statistics’ “national accounts” showed real gross domestic product – the nation’s production of market goods and services – grew by just 0.3 per cent in the September quarter of last year, 0.2 per cent in the December quarter and...

Read more >>

Interest rate cuts may not do much to counter slowdown

This won’t be the only cut in interest rates we see in coming months – which may be good news for people with mortgages, but it’s a bad sign for the economy in which we live and work. The Reserve Bank is cutting rates because the economy’s growth has slowed sharply, with weak consumer spending and early signs that unemployment is rising. In such circumstances, cutting interest rates to encourage greater borrowing and spending...

Read more >>

How to dud manufacturing: be the world’s biggest gas exporter

Did you know Australia has now overtaken Qatar to be the largest exporter of natural gas in the world? But, thanks to private profiteering and government bungling, this seeming triumph comes at the risk of further diminishing manufacturing industry in NSW and Victoria. It’s yet another example of naive economic reformers stuffing things up because real-world markets don’t work the way they do in textbooks. Last week Dow Chemical...

Read more >>

As you were: getting back to budget surplus no longer urgent

Sometimes, changes in fashion are shocking. In economics, the fashion leaders are top American economists. Their latest fashion call is highly relevant to Australia’s circumstances, but will shock a lot of people: stop worrying so much about debt and deficit. Among the various big-name economists advocating this change of view, the one who made the biggest splash was Professor Olivier Blanchard, of the Massachusetts Institute...

Read more >>