New economic rule: the budget's the only game in town

There’s a trick for governments trying to manage their economy. Once in a while – maybe every 30 or 40 years – the rules of the economic game change. What used to be the right thing to do becomes wrong, and now the right thing is something we’ve long believed was not the way to go.

Trouble is, the game change is never announced by thunder and lightning flashes from on high that everybody sees. Those paying close attention soon get the message, but many people – even many economists – don’t.

Some people have invested their careers – and their egos – in the old way of doing things and resist any talk of change. They stick to their ideology when it’s time for pragmatism and re-examination of old ideas to see if they still work.

These rare times of change are dangerous for governments. Those that don’t get the message in time stuff up and get thrown out.

Our last government to badly misread the economy’s changed circumstances was Gough Whitlam’s. And we know what happened to it. But that was more than 40 years ago, and now the sharp-eyed can see the rules have changed again.

If Scott Morrison and Josh Frydenberg can’t see it, the economy’s recovery will peter out and, sooner or later, they’ll be out.

Fortunately, it seems from Frydenberg’s speech on Thursday that they and their Treasury advisers do get it, and are acting accordingly.

For about 30 years after World War II, Australia – and all the developed economies - enjoyed a Golden Age of strong economic growth, full employment, low inflation and a narrowing gap between rich and poor.

The economy pretty much managed itself, leaving governments free to focus on other issues. After 23 years in opposition, Whitlam’s Labor came to power with a long list of economic and social reforms to be made.

It got on with “the Program” – involving massively increased government spending – not realising that inflation had got away, that “stagflation” meant rates of unemployment of less than 2 per cent would never be seen again, and that governments now had to spend most of their time worrying about the economy and making sure their “reforms” didn’t make things worse.

In the years after WWII, the rich economies’ focus was on keeping demand for goods and services growing strongly so the workforce could stay fully employed. It was decided that, of the two main “instruments” available for managing the economy, “fiscal policy” – using the budget to change government spending and taxation – was better.

The other instrument, “monetary policy” – moving interest rates up or down to discourage or encourage borrowing and spending – should play a subsidiary role by keeping rates perpetually low.

But by the late 1970s, the rich economies realised that high inflation – caused by the demand for goods and services running ahead of the economy’s ability to supply them – was the key problem, and the best instrument to control inflation was monetary policy. This would leave fiscal policy free to be used to keep budget deficits down and limit the build-up in government debt.

That’s been the conventional “assignment of instruments” for the many decades since then, the one everyone’s used to and many have come to view as the God-ordained way for the economy to be managed. It fits well with the populist fearmongering about “debt and deficit” that Tony Abbott & Co used to help get the Coalition back to power in 2013.

Trouble is, over the decades, inflation in the prices of goods and services has pretty much gone away. But weak growth in the advanced economies since the global financial crisis means unemployment has remained high – well above anything that could be called full employment.

It’s clear the basic problem we face has switched from excess demand relative to supply to insufficient demand relative to supply. Low inflation means low nominal interest rates, but when rates are already low, cutting them a bit further doesn’t do much to encourage businesses to borrow for expansion or households to borrow more for consumer spending (as opposed to bidding up the price of houses).

That’s been true for some years, but now the coronacession has pushed the official interest rate almost to zero, while “quantitative easing” only seems to push up the prices of houses and other assets.

Get it? With monetary policy having lost its potency, fiscal policy becomes the only game in town. The only policy instrument capable of being used to stimulate growth and keep our economy and everyone else’s recovering and unemployment falling.

But as well as being the only lever left, it’s also the one better suited to boosting demand and taking up idle supply capacity. When the problem is the private sector’s reluctance to expand, and the wages households use to increase their consumer spending have stopped rising, the only way to keep the economy moving until the private sector revives is spending by the public sector.

Frydenberg’s speech makes it clear he gets this and, rather than use the budget to get the deficit down, he’ll focus on continuing to use it to foster growth. In time, this will “repair the budget by repairing the economy”.

I think most voters will happily go along with this policy switch.

But there are still many economists and others who don’t get the need to change tack and will oppose it. Particularly those with a vested interest in active monetary policy – money-market people and economists specialising in monetary economics.

But also, amazingly, Labor’s Shadow Treasurer, Jim Chalmers, who’s calling for an inquiry – a royal commission? - into the Reserve Bank’s alleged mishandling of monetary policy.

He seems to think monetary policy’s steady loss of potency in Australia (and all the rich countries) over a decade or more can be explained by the Reserve Bank governor’s repeated failure to meet his KPIs for inflation.

Sack the governor, change the procedures, problem goes away. Really, Jim?

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Morrison's budget task: stop the economy's roar turning to a meow

Scott Morrison and Josh Frydenberg look like they’re sitting pretty as they finalise what may be their last budget before the federal election due by the first half of next year. Look deeper, however, and you see they face a serious risk of the economy’s recovery losing momentum over the coming financial year. But, equally, they have a chance to show themselves as the best economic managers since John Howard’s days.

So far, the strength of the economy’s rebound from the “coronacession” has exceeded all expectations. Judged by the quantity of the nation’s production of goods and services, the economy contracted hugely during the three months to June last year. As our borders were closed, many industries were ordered to stop trading and you and I were told to leave home as little as possible.

But with the lifting of the lockdown in the second half of the year, the economy took off. It rebounded so strongly in the next two quarters that, by the end of December, our production – real gross domestic product – was just 1 per cent below what it had been a year earlier, before the arrival of the coronavirus.

The rebound in jobs is even more remarkable. The number of people in jobs fell by almost 650,000 in April and May, and that’s not counting the many hundreds of thousands of workers who kept their jobs thanks only to the JobKeeper scheme.

But as soon as the lockdown was eased, employment took off. By last month, it was actually a fraction higher than it had been in March 2020. We’d been warned the rate of unemployment would reach 10 per cent, but in fact it peaked at 7.5 per cent in July and is now down to 5.6 per cent. Before this year’s out, it’s likely to have fallen to the 5.1 per cent it was before the pandemic.

The confidence of both businesses and consumers is now higher than it has been for ages. Same for the number of job vacancies. Share prices are riding high (not that I set much store by that).

Little wonder the financial press has proclaimed the economy to be “roaring”. Hardly a bad place to be when preparing another budget. What could possibly go wrong?

Just this. The main reason the economy has rebounded so strongly is the unprecedented sums the government spent on JobKeeper, the JobSeeker supplement, HomeBuilder and countless other programs with gimmicky names. Spending totalling a quarter of a trillion dollars.

What it proves is that “fiscal stimulus” works a treat. Trouble is, all those programs were designed to be temporary and the biggest of them have already been wound up. So, though not all the stimulus has yet been spent, it’s clear the stimulus is waning.

And this at a time when there’s no other major force likely to drive the economy onwards and upwards. Business investment spending is way below normal. Growth in the wage income of consumers has been weak for six years or more and, for many workers at present, frozen.

Because all the stimulus programs are stopping, the government’s update last December estimated that the budget deficit for the next financial year will be $90 billion less than the deficit for the year soon ending.

This may sound good, but it means that, whereas last year the government put far more money into the economy than it took out in taxes and charges, in the coming year it expects the budget’s contribution to growth to fall by $90 billion – the equivalent of about 4 per cent of GDP.

So that’s the big risk we face: that before long the economy’s roar will turn to no more than a loud meow.

Now to Morrison and Frydenberg’s chance of greatness. Their temptation is to get unemployment back to the pre-pandemic rate of 5 per cent and call it quits. That’s certainly what previous governments would have done.

But let me ask you a question: do you regard an unemployment rate of 5 per cent as equal to full employment? Is that where everyone who wants a job has got one?

Hardly. And, as Professor Ross Garnaut has argued in his latest book, Reset, there’s evidence that we can get unemployment much lower – say, 3.5 per cent or less – before we’d have any problem with soaring wage and price inflation.

The good news is that the answers to the Morrison government’s risk of economic failure and its chance of economic greatness are the same: keep the budgetary stimulus coming for as long as it takes the private sector to revive and take up the slack.

That means finding new spending programs to take the place of JobKeeper and the rest. And here Morrison’s political and economic needs are a good fit. Making an adequate response to the report of the aged care royal commission will take big bucks.

And he needs to make this a hugely women-centred budget in marked contrast to last year’s. Obvious answer: do what the women’s movement has long been demanding and make childcare free.

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My love letter to The Sydney Morning Herald

It’s not something any hard-bitten journalist should admit, but I’m in love with The Sydney Morning Herald. Have been since, at the age of 26, I quit chartered accounting in disillusionment and stumbled into a cadetship at the Herald. I quickly realised I’d found the only place I wanted to be.

After four years they gave me the title of economics editor and sat me in an armchair with a licence to air my opinions about anything economic. It’s probably the only job I’m capable of doing with any competence. I’ve been so fulfilled by my work that, in 47 years, I’ve never wanted another job on the paper and, certainly, never wanted to move to another paper.

I suspect that by now I’m actually addicted to column-writing and to staying one of the Herald‘s roosters rather than one of its many feather-dusters. When my designated retirement date arrived, I had no desire to hang up my boots and luxuriate on the Herald’s more-than-generous super scheme. And, apart from Jessica Irvine, detected no desire by my colleagues to wave me off.

But I promise you (and Jessica) this: I’ll be out of here the moment I find I’ve worn out my welcome with our readers or my bosses, or realise I’m starting to lose my marbles. That I’m still keen to learn more about the economy and to work rather than play, I credit mainly to three gym sessions a week with my physio trainer, Martin Doyle. Exercise is good for mental as well as physical fitness.

I did feel I should at least stay on to do my bit in helping the Herald make the seemingly improbable “transition” – what a fashionable word that’s become – from “legacy asset” to successful digital “masthead”. Fortunately – and touch wood – we’ve passed that test now we’ve switched from chasing clicks to seeking digital subscriptions.

The thought of the Herald ceasing to be appalled me. As Australia’s oldest metropolitan daily newspaper, for 190 years it’s been one of the pillars on which Sydney rests. I get an enormous kick from being a tiny part of that grand history – for, I realise to my amazement, almost a quarter of its existence. It tickles me that, in the days when governors of NSW and Anglican archbishops of Sydney were recruited from England, so were editors of the Herald.

I’m proud of the many big names to have worked for the Herald at some point in their career. Banjo Paterson was our correspondent covering the Boer War. C.E.W. Bean was a Herald writer before becoming the federal government’s official war correspondent in World War I. Angus Maude, one of our last English-export editors, became Maggie Thatcher’s Paymaster General. I remember Thatcher’s daughter Carol working for a few months in our newsroom.

The playwright and speech writer Bob Ellis’ Herald career lasted 11 days. Columnist and poet Clive James lasted longer before he went off to England to make his name. I remember author Geraldine Brooks cutting a swathe through our feature writers’ room before she went off to New York to make her name. The others wrote one feature a week; she wrote one a day.

Together with her journalist husband George Johnston, Charmian Clift was a celebrity in 1960s Sydney before the word had been invented. This was explained by the years they’d spent living on a Greek island, where (we’ve learnt only recently) they were friendly with some Canadian singer named Leonard and his girlfriend Marianne. Charmian wrote a highly popular weekly column in the Herald, before ending her life.

William Stanley Jevons, a celebrated English neo-classical economist and polymath of the 19th century, discoverer of the Jevons paradox, spent part of his early career working at the Sydney Mint. He didn’t work for the Herald, but he did write letters to the editor. Hearing that made me proud to work where I did.

The Herald has changed greatly over the years I’ve been here and, leaving aside the many journalists we lost as we made our painful adjustment to the digital revolution, mainly for the better. Some years ago, someone got the idea of honouring our longest-serving journos by presenting them with a framed copy of our front page from the day they joined the paper. I was shocked by how dreary mine was. We were busy sticking to traditional standards as the world around us was changing without us noticing.

These days we cover a wider range of subjects – crime and lifestyle interests – all in a livelier, brighter, cleaner, more cleverly written way. I like to think I’ve been part of our move to a less formal, more relaxed and conversational writing style. The old-timers would be appalled to see us saying “kids” rather than “children”.

The Herald is far from perfect – no “first draft of history” ever is – but I value being at the more careful, intellectually respectable and, dare I say, gentlepersonly end of the news media. I feel privileged to write for such a well-educated audience.

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Wealth and happiness don't give meaning to our lives

Easter Monday’s a good a time to reflect on what we’re doing with our lives and why we’re doing it. I’ve been banging on about all things economic for more than 40 years, but if I’ve left you with the impression economics and economic growth is the be-all and end-all, let me apologise for misleading you.

The more I’ve learnt about economics, the more aware I’ve become of its limitations. Economics is the study of production and consumption, getting and spending. But as someone connected with Easter – not the Easter Bunny – once said, there’s more to life than bread alone.

Unfortunately, the conventional way of thinking about the economy has pretty much taken for granted the natural environment in which our economic activity occurs, and the use of natural resources and ecosystem services on which that activity depends.

We’re learning the hard way that this insouciance can’t continue. We’re damaging our environment in ways that can’t continue. I keep writing about the need for economic growth because, as the economy is presently organised, it’s pretty much the only way to provide sufficient jobs for our growing population.

But that just means we need to redefine economic growth to mean getting better, not bigger (and probably should do more to limit world population growth).

Conventional economics focuses on the material aspects of life: producing and consuming goods and services; buying and selling property. There’s no denying the inescapable importance of the material in our lives – “bread” – but conventional economics encourages our obsession with material accumulation at the expense of other important dimensions of our lives.

Some aspects of economic activity can damage our physical health – smoking, drinking, burning dirty fossil fuels, even eating fast foods – but we need to become more aware of the way the fast pace and competitive pressures of modern life also threaten our mental health. Too many people – particularly the young – suffer chronic stress, anxiety, depression and suicidal thoughts.

Too much emphasis on material success can also come at the expense of the social aspect of our lives – our relationships with family, friends and neighbours – which, when we’re thinking straight, we realise give us far more satisfaction than any new car or pay rise. Economists often advocate policies that will increase the efficiency of our use of resources without giving a moment’s thought to their effect on family life.

Nor should we allow our pursuit of material affluence to come at the expense of the moral and spiritual aspects of lives. I’ve just read social commentator Hugh Mackay’s book, Beyond Belief, which has done so much to clarify my thinking about Christianity, religion and spirituality that I’m sorry I didn’t get to it earlier.

Yet another thing that mars conventional economic thinking is its emphasis on the individual as opposed to the community, it’s effective sanctification of self-interest as the economy’s only relevant driving force, and its obsession with competition and neglect of the benefits of co-operation.

Mackay says that, if you ignore the doctrines and dogmas of the church – all the things you’re required to believe in – and focus on the teachings of Jesus, the first thing to strike you is that none of it was about the pursuit of personal happiness.

“The satisfactions offered or implied are all, at best, by-products of the good life,” he says. “The emphasis is on serving others and responding to their needs in the spirit of loving-kindness, the strong implication being that the pursuit of self-serving goals, like wealth or status, will be counterproductive.”

Jesus’ teachings “were all about how best to live: the consistent emphasis was on loving action, not belief. According to Jesus, the life of virtue – the life of goodness – is powered by faith in something greater than ourselves (love, actually), not by dogma.”

Mackay says we should “avoid the deadly trap of regarding faith as a pathway to personal happiness. The idea that you are entitled to happiness, or that the pursuit of personal happiness is a suitable goal for your life, is seriously misguided.

“If we know anything, we know that’s a fruitless, pointless quest – doomed to disappoint – because . . . our deepest satisfactions come from a sense of meaning in our lives, not from experiencing any particular emotional state like happiness or contentment.”

The self-absorbed mind’s entire focus is individualistic. It’s “the polar opposite of the moral mind. Its orientation is towards the self, not others; its currency is competition, not cooperation; it’s all about getting, not giving. Its goal is the feel-good achievement of personal gratification, however that might be achieved and regardless of any impact it might have on the wellbeing of ‘losers’.”

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Cutting workers' pay and conditions worsens productivity

It’s a long weekend, so let’s relax and think more laterally than usual. I’ve been pondering one of the great mysteries puzzling the rich world’s economists: why has there been so little improvement in the productivity of our businesses over the past decade or two?

I’m wondering if a big part of the explanation is that business people have been finding easier ways to make a bigger buck.

Economists worry about productivity – producing more output of goods and services from a given quantity of inputs of labour, physical capital and raw materials – because it’s the secret sauce that’s made market capitalism so hugely successful over the past 200 years. That’s made us many times more well-off materially than we were back then.

The key driver of productivity improvement is technological advance: mainly bigger and better machines, but also better roads, railways and other infrastructure, as well as more efficiently organised farms, mines, factories, offices and shops. Not to mention increased investment in “human capital”: better educated and trained - and thus more highly skilled - workers.

You’d expect the digital revolution that’s working its way round the economy – disrupting industry after industry while creating new or improved products that meet customers’ needs much better – to be causing a marked improvement in productivity, but it’s not showing up in the figures.

So, why has productivity – most simply measured as gross domestic product per hour worked – been improving much more slowly in the past decade or two than in earlier times, not just in our economy but in all the advanced economies? Why is our material standard of living improving only very slowly – if at all?

As I say, that’s something economists are still debating. But I’ve been thinking much of the explanation may lie in the changed way our business people are going about their business.

If you listen to the business lobby groups, productivity isn’t improving because of successive governments’ failure to “reform” the economy. Nonsense. A moment’s thought reveals that the efficiency with which inputs are turned into outputs is determined primarily by the collective actions of each of the nation’s businesses.

Firms improve their productivity as part of their efforts to increase their profits. But their ultimate goal is higher profits, not necessarily being more productive. And, since improving productivity can often be quite hard, I’ve been wondering if productivity isn’t improving much because firms have found easier ways of increasing their profits.

Such as? Just by cutting costs. Particularly the cost of labour. One way to cut labour costs is to install better labour-saving machines. Doing so does improve the productivity of the workers who remain – and will show up in the productivity figures.

But if you find ways to limit the increase in – or even cut – your workers’ hourly wage rate, this does nothing to improve your productivity, but does increase your profits. Many employers have moved from fixing their wage rates by “collective bargaining” – which involves workers pressing for higher wages by having their union threaten to go on strike – to “individual contracts”, which often involve no bargaining at all.

Or you could cut your labour “on-costs” (including sick leave, annual leave, workers compensation insurance and superannuation contributions) by changing your workers from employees into (supposedly) independent contractors.

This, of course, is a big part of the motive for the rise of the “gig economy”. And there must surely be cost savings associated with the use of labour-hire firms.

Businesses have become a lot more conscious of the costly risks involved in running a business. They’ve sought better ways of “managing” those risks – which, in practice, has often involved shifting risks from the firm to its workers. For instance, moving to independent contractors shifts to workers the costs associated with the risks of them getting sick, being injured on the job, or even not having saved enough for retirement.

The move to firms carrying much lower inventories of raw materials and spare parts – “just-in-time” inventory management – means that the risk of interruptions to a firm’s supply chain can cause workers to be stood down on no pay until the problem’s fixed.

Yet another way firms have been saving on labour costs is by spending less on training their own workers and then, when they’re short of skilled workers, bringing them in from overseas on temporary work visas.

The trick is, these cost-saving measures don’t just fail to improve the productivity of labour, they can actually worsen it. Textbook economics sees firms continually comparing the cost of employing workers to perform tasks with the cost of using a machine to do it.

When wage costs are rising strongly, firms are more inclined to invest in labour-saving equipment. When wage costs are low or falling, however, firms become more inclined to avoid investing in machines and just hire more workers – even to perform quite menial tasks.

Before the pandemic, economists were continually surprised to see employment growing at a faster rate than the fairly weak growth in production (real GDP) would imply. That’s good news for employment but – as a matter of simple arithmetic - bad news for labour productivity: GDP per hour worked.

But it’s worse than that. For technological advances to improve our living standards, you don’t just need people inventing new and better machines, you need businesses across the economy regularly buying and using the latest, whiz-bang models to produce whatever it is they do.

That’s just what hasn’t been happening. As Reserve Bank governor Dr Philip Lowe noted recently, business investment in plant and structures has averaged just 9 per cent of GDP since 2010, compared with 12 per cent over the previous three decades.

Sometimes I think that, while businesses’ modern obsession with finding any and every means to minimise their wage costs no doubt fattens their profits in the short term, one day we’ll realise it’s been hugely destructive of our living standards.

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Why journalists have a trust problem

As journalists know – but probably try not to think about – polling shows that, as an occupation, journalists don’t rank highly. We’re well down the list, held in roughly the same esteem as politicians, real estate agents and people selling used cars. Similarly, with the notable exception of the ABC, the “mainstream media” news outlets we work for are not highly regarded by the audiences we serve. If there was ever a time when we were highly trusted, we are less so today. If there was a time when journalists had great credibility with their audience, we’re less so today.

A joke I saw on the net. Patient: Doctor, when do you think covid 19 will be over?

Doctor: I don’t know, I’m not a journalist.

I find our low credibility worrying. It worries me that the work we do – the work that’s so important to the lives of our audience and so important to the good functioning of democracy – isn’t greatly trusted by our readers, listeners and viewers. The news we bring isn’t necessarily believed.

Journalism has always been competitive – both between news outlets and within the same outlet – but I think it’s become more so in recent decades. We’ve had to compete harder for eyeballs, partly because of the rise of online-only news outlets, but mainly because of the almost infinite proliferation of ways people can spend their leisure time other than reading, listening to, or watching the news. The online world has allowed our audience to be much more choosy about the news it wants and doesn’t want. Facebook has allowed people who can’t stand our politicians to redefine news as being “what my family and friends have been doing lately”. Turns out we don’t decide what’s newsworthy – what news is – our customers do.

Journalists – particularly those who manage to last in this business – like competition. They enjoy it for its own sake – because most of us convince ourselves we’re doing pretty well in the comp. As an economics writer I’ve thought a lot about competition. It can be a good thing, keeping everyone on their toes and trying harder to be better than before and better than their competitors. But, as with most things, there can be forms of competition that make things worse rather than better. Journalism is far from the only profession where competition can make us too inward-looking. The social commentator Hugh Mackay has observed that the key to successful competition is to focus on the customer, not your competitors. Do the best job of satisfying the needs of the customer, and you’ll win the comp.

This is why my motto as a journo - my compass guiding me in how to do my job - has long been: Serve the reader. I suspect much of the reason our profession is less trusted is that we’re too focused on our competitors at the expense of our audience. We focus on the comp because we enjoy competing. The besetting sin of journalists is to write to impress other journos. The temptation facing editors is to edit to impress other editors.

When you focus on the audience, you realise that, though it’s undoubtedly true that people find bad news much more interesting that good news, if competition leads us to fill page after page, bulletin after bulletin, with more and more news about how utterly rotten the world is – my news is much badder than yours – you can make the audience so depressed they stopped wanting to know your news. Focus on the audience, and you realise you should be including a fair bit of good, heart-warming, uplifting, human-interest, entertaining, odd and funny news in the mix.

One of the things we tell ourselves on Walkley award nights is how the role of good journalism is to hold the powerful to account. True. But I fear that the intense competition between journalists – particularly those in federal and state parliamentary press galleries – makes us sitting ducks for governments of either colour whose goal is to manipulate the media for their own nefarious purposes.

The power of governments and their media minders comes from their near monopoly over political news. A lot of their news they put out in press releases, but a lot they don’t. A lot of the background information we need they give out verbally – giving more and better to those journos who haven’t incurred their displeasure by running too much criticism. Journos want exclusives? Fine. Some stories you leak to particular journalists or particular outlets. But on condition the story’s given much prominence and run uncritically. The nicer you are to a government, the better the stories it gives you. Some stories, particularly snippets from the next day’s speeches, are given first to the morning newspapers, with TV and radio always getting the second bite. This is a technique for ensuring the media focus on the parts of a speech we want them to focus on. TV and radio will take more interest in the speech story now they’ve seen how seriously the mastheads took it.

Press releases are given to gallery journalists hours before they’re put up on websites and thus become available to people outside the parliament. Why? Because you want your stories covered by those journos you know and can discipline, not journos beyond your control. But also because you know the gallery journalists don’t want people back at head office pinching their stories, so you oblige. Politicians, their staffers and gallery journalists are part of a club, where the struggle between the members is subject to a host of unwritten rules of behaviour everyone knows and conforms to. Rules designed make life more comfortable for everyone, including gallery journalists’ FOMO.

The media managers have learnt how to turn journalists’ weaknesses to their own advantage. Journalists are obsessively concerned with deciding what’s new and what’s not new. This is why the manipulators save up embarrassing reports and put them out on a day when some big happening has turned everyone’s attention elsewhere. Or they put embarrassing news out late on a Friday afternoon when the media are wrapping up early ahead of the weekend. The manipulators know that, by Monday, journos will be far less interested because by then they think the story is “old”. When the manipulators are trying to play down some embarrassing scoop, they play on journalists’ reluctance to write follow-up stories, which we regard as an admission that we were beaten by a rival. The reason these tricks work is because we focus on what our competitors will think about our story – “It was old!” - not on our duty to the audience. We should ask: Do people need to be told about this story? It may be old to me and my mates, but would it still be news to my audience?

Another journalistic weakness is our short attention span. The media manipulators exploit this when they want to draw the public’s attention away from some embarrassment. They do their “hey, look over there” trick and it usually works. The media has been diverted by something that’s new, but not of great significance. The powerful have tricked us into ceasing to hold them to account.

I think a big part of the reason we’ve lost credibility with our audience is that competitive pressure keeps tempting us to run stories we ourselves don’t actually believe, just because, if they were true, they’d be a great yarn. And, in any case, “I didn’t say it, he did – so if it’s not true, blame him”. A common example is when some business lobby group is campaigning against some tax change and pays some “independent expert” to come up with modelling purporting to show that the tax change would destroy 50,000 jobs. In other words, we knowingly mislead our audience for the sake of a good story – and then we wonder why they’ve stopped trusting us. We do this even though we accept no obligation to run every story we’re sent and, indeed, choose not to run loads of stories we judge to be mere self-promotion or lacking in credibility.

The media go along with media-management by governments when they attend the annual budget lockup, the sole purpose of which these days is to keep journalists locked up until so late in the evening they have no chance to consult independent experts before publication. By contrast, issuing a major government report without a lockup – without giving the media time to read it before your press conference (as with the aged care royal commission’s recent report) – is another media manipulation technique. In election campaigns, the media allow their senior reporters to be shipped around the country on campaign planes and buses, given policy announcements just minutes before the press conference, and kept out of touch with anyone outside the politician’s bubble.

Editors fully understand the way this ties up their reporters, but rarely decline to participate. Why? Because they fear that doing so would put them at a disadvantage relative to their competitors. This is another example of the way politicians and other powerful interest groups can take advantage of our competitive instincts to stop us performing the role we keep telling the public we do perform. Economists call this situation where we know we’re doing things we shouldn’t, but don’t want to be the first to stop doing them, a “collective action problem”. Solving such problems isn’t easy, but being more honest with ourselves about the lack of excellence in much of the reporting we do would at least be a start.

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