RBA warning: our supply-side problems have only just begun

In one of his last speeches for the year, Reserve Bank governor Dr Philip Lowe has issued a sobering warning. Even when we’ve got on top of the present inflation outbreak, the disruptions to supply we’ve struggled with this year are likely to be a recurring problem in the years ahead.Economists think of the economy as having two sides. The supply side refers to our production of goods and services, whereas the demand side refers...

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The real reason the budget may stay in deficit for the next 40 years

If you follow a rule that when a politician cries “look over there!” you make sure you stay looking over here, there’s much to be deduced from Treasurer Josh Frydenberg’s Intergenerational Report, before we put it up on the shelf with its four predecessors.That’s especially so with a federal election coming by May next year. Elections are times when politicians try to convince us they can do the arithmetically impossible: cut...

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Our aspirations for a Big Australia need a big trim

Almost all the nation’s business people, economists and politicians believe too much population growth is never enough. But if there’s one thing I hope to be remembered for, it’s that I always subjected this case of group think to critical examination.I remain to be convinced that a Big Australia would be better either for our material living standards or for our efforts to limit the damage our economic activity is doing to our...

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Business lobbies use the productivity slump for rent-seeking

It’s encouraging to see the scepticism with which this week’s intergenerational report from Treasurer Josh Frydenberg has been greeted. Any attempt to peer 40 years into the economy’s future will prove close to the mark only by happy accident.But it’s discouraging to see the way the usual suspects have seized on the report’s most glaring weakness to do no more than push their vested interests in the name of “reform”.This fifth...

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Sorry, I'm too old to believe an ageing population is a terrible thing

If ever there was an exercise that, since its inception, has overpromised and under-delivered, it’s the alleged Intergenerational Report. A report on relations between the generations, on the legacy the present generation is leaving for the coming generation?No, not really. If it was, it would be mainly about the need for us and the other rich countries to be acting a lot more seriously and urgently to limit climate change. The...

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There are delusions for young and old

There are things oldies tell young people that the youngsters should believe, and things they shouldn’t. One thing I wouldn’t believe is the confident predictions about the huge number of different jobs and careers they’re likely to have. One thing I would believe is that eligibility for the age pension is likely to have risen to 70 by the time they get there, whatever Prime Minister Scott Morrison says about it being off the...

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Immigration is sharply slowing the ageing of our population

Reserve Bank governor Dr Philip Lowe thinks Australia’s strong population growth in recent years is a wonderful thing, and he sings its praises in a speech this week. I’m not sure he’s right. Like most economists and business people, Lowe is a lot more conscious of the economic benefits of population growth than the economic costs. As for the social and environmental costs, they’re for someone else to worry about. But whatever...

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Econocrats doubt our ability to grow

So, how fast can we expect the economy to grow over the next 40 years? And, more to the point, where's that growth supposed to come from? That's a doubt you expect from people without the benefit of an economics education, but the intergenerational report reveals the econocrats are going through a crisis of confidence about growth. First, a disclaimer: not being as materialist as the economists, I don't see maximising our...

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How Australia's supply of labour is changing

The trouble with the way the media report developments in the labour market from one month to the next is that we don't get a sense of the major shifts that occur over time. So today let's take a much longer view, examining the trends over, say, the two decades from 1993 to 2013. We'll do so with help from an article by Professors Roger Wilkins and Mark Wooden, of the Melbourne Institute, published in the latest issue of...

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We face a year of furious debate leading to very little

Let me start my year with a confession: listening to the Australian of the Year, Rosie Batty, arguing at length for more attention to be paid to domestic violence, my first thought was she was laying it on a bit thick. There are lots of problems in the world and domestic violence is just one of them. But then another thought occurred: this year we'll be listening to hundreds of men banging on about problems far less important...

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You were a stranger, so we wouldn't take you in

Do you get the feeling we're becoming a more selfish nation? While other countries were pitching in, we hesitated until this week to send experts to help stem the outbreak of Ebola. Sending people to risk their lives in wars doesn't seem a problem, but to send people for humanitarian reasons is asking too much when their personal safety can't be guaranteed. This comes on top of our decision to slash the planned increase...

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The good news about ageing

Politicians and economists have been banging on about the ageing of the population for ages, but how much do we actually know about the likely economic consequences? Not much - until now. We've been told incessantly that ageing spells bad news for the budget - greatly increased spending on pensions and healthcare - with ageing used to help justify the harsh spending cuts proposed in this year's budget. In truth, it has...

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The news on our health is good

It's good news week. There are lots of bad things happening in the world and journalists regard it as their job to dig them out and wave them in front of your face. No piece of disheartening news should go unreported. But good things are happening, too. And I often think people would enjoy reading the news more if we didn't ignore so many of them. One of the main jobs of the federal government's Australian Institute of...

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Why weaker demand means lower pay rises

Just about everyone assumes we can never have enough jobs. So it's funny that our unending discussion about how the economy's growth is doing rarely delves into the detail of what's happening in the labour market. But that's what Dr Chris Kent, an assistant governor of the Reserve Bank, did in a speech last week. He shows it really is a market, with the demand for labour interacting with the supply of labour to help determine...

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We're a nation of stay-at-homes

Would you be surprised if I told you the resources boom and its two-speed economy had led to a big increase in the number of people shifting between states? No, I thought not. Well here's my surprise: it hasn't gone up, it has gone down. Research by Professor Jeff Borland, of the University of Melbourne, finds that the rate of interstate migration has declined over the past decade. The eternal lament of oldies (me included)...

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