We must stop making excuses and push now for full employment

In his new book, Reset, outlining a plan to get the economy back to top performance, Professor Ross Garnaut makes the radical proposal to keep stimulating the economy until we reach full employment within four years. Excellent idea. But what is full employment? Short answer: economists don’t know.In principle, every economist believes achieving full employment is the supreme goal of economic policy, because it would mean using...

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Ross Garnaut's new plan to lift us out of mediocrity

If your greatest wish is for the virus to go away as we all get vaccinated, and then for everything to get back to normal, I have bad news. You’ve been beaten into submission – forced to lower your expectations of what life should be bringing us, and our nation’s leaders should be leading us to.Without us noticing, we’ve learnt to live in a world where both sides of politics can field only their B teams. Where our politicians...

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Here's the unspeakable truth about the fall in interest rates

In these unprecedented times, Reserve Bank governor Dr Philip Lowe is having trouble explaining his actions and motivations because there are various things someone with his degree of influence feels he can’t admit. But I’m under no such constraint. So let me have a go at giving you the message he won’t.Despite Lowe’s reticence, he’s a fundamentally honest person and if you study what he’s saying – and avoiding saying – you can...

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One problem at a time: jobs first, inflation much later

It had to happen: at a time when inflation is the least of our problems, some have had to start worrying that prices could take off. Funny thing is, it’s not the usual suspects who are concerned.As so often happens, the new concern is starting in America. But since so many people imagine globalisation means our economy is a carbon copy of America’s, don’t be surprised if some people here take up those concerns.The new Biden administration...

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Water reform report’s big smile hides its big teeth: much more to do

A quick look at the Productivity Commission’s draft report on national water reform reminds me of the repeated judgment from old Mr Grace, the doddering owner of the department store in Are You Being Served? as he headed for the door: “You’ve all done very well!”Its review of the progress of the National Water Initiative signed by the federal and state governments in 2004 – encompassing agreements on the Murray-Darling Basin...

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Flogging the monetary-policy horse harder won't help

It didn’t quite hit the headlines, but when Reserve Bank governor Dr Philip Lowe appeared before the House of Reps economics committee a week or so ago, he came under intense questioning from the Parliament’s most highly qualified economist, Labor’s Dr Andrew Leigh.In my never-humble opinion, Leigh had the wrong end of the stick.One criticism was that the board of the Reserve Bank is dominated by “amateurs” – business men and...

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Why we're stuck with low interest rates for a long time

When it comes to interest rates, we’re living in the strangest of times, with rates lower than ever.Savers are getting next to no reward for lending their money. Does this make sense? Not really. But we’re moving through uncharted waters and aren’t sure how we’ll get out of them, nor what happens next.When Reserve Bank governor Dr Philip Lowe appeared before Parliament’s economics committee last Friday, he was asked whether we...

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Canberra's latest innovation: politics without policy

The most remarkable development since we returned to work this month is Scott Morrison’s barefaced announcement that the government has enough on its plate rolling out the virus vaccine and getting unemployment down, and so there’ll be no attempt to deal with any of our many other problems before the election late this year or early next.There could be no franker admission that we live in an era of leaders who lack the ambition...

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The official forecasters’ latest guess is whistling in the dark

Although everyone knows it’s impossible to know what the future holds, everyone – from prime ministers to punters – asks economists to forecast what will happen to the economy. The economists always oblige. The latest set of official forecasts for our economy were laid before us by the Reserve Bank on Friday. You beaut. Now all is known.Though economists have an appalling forecasting record, we are undeterred in asking for more,...

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RBA governor abounds in optimism about the economy’s prospects

If you think the coronacession made last year a stinker for the economy, Reserve Bank governor Dr Philip Lowe has good news: this year pretty much everything will be on the up except unemployment.All Reserve governors see it as their duty to err on the optimistic side, and Lowe is no slouch in that department. In his speech this week foreshadowing Friday’s release of the Reserve’s revised economic forecasts for the next two years,...

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Whatever our other problems, there’s much less crime to fear

When I went to Sunday school we used to sing “count your many blessings, name them one by one”. It’s good advice, enthusiastically endorsed in recent times by the practitioners of “positive psychology”. But it’s not something the media do much to help us with. So you may not have noticed that we see far fewer stories about the rising crime rate and shocking descriptions of particular crimes.That’s because, after rising for about...

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How economics could get better at solving real world problems

The study of economics has lost its way because economists have laboured for decades to make their social science more mathematical and thus more like a physical science. They’ve failed to see that what they should have been doing is deepening their understanding of how the behaviour of “economic agents” (aka humans) is driven by them being social animals.In short, to be of more use to humanity, economics should have become more...

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