Save before Reserve Bank forces you

Barring some global catastrophe, the outlook for our economy is particularly bright - so a lot of people aren't going to like it. Why not? Because of something many people have trouble getting their head around, the great paradox of macroeconomics: good things happen in bad times and bad things happen in good times. We're looking at a long period in which a lot more people find jobs and part-timers get to work the longer hours...

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How to limit looming interest rate rises

It's a pretty safe bet we'll get another rise in the official interest rate this year and several more next year. A rise next Tuesday is possible, though the Reserve Bank board has a predilection for changing rates on Melbourne Cup day, after it has seen the quarterly consumer price index figures. After the minutes of last month's board meeting and the speech the governor, Glenn Stevens, gave last week, there's not much doubt...

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Setting rates by the rules has worked a treat

I touch wood as I say this - hubris has a long history in economics - but we're doing a lot better at the day-to-day management of our economy than we used to. That's clear when you compare our management with most of the rest of the developed world at present, but it's also clear when you look back on our performance over the years. When I got into this business 36 years ago, the economy was out of control. So was the budget...

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The word we ignore at our peril

Symbolism is important because it affects the way people think and act. Symbolism is particularly important to politicians because it influences people's perceptions, and pollies know that, with voters, perceptions are often more real than the reality. That's why it was such a bad sign for Julia Gillard to announce her cabinet - initially, at least - without mention of the word ''education''. She had Chris Evans as Minister...

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Don't make taxpayers subsidise status seeking

Sometimes I despair of our politicians. They went through the election campaign carrying on about wasteful spending and the desperately urgent necessity to get the budget back to surplus and eliminate the public debt - all while promising to add to middle-class welfare. Take the federal government's spending on grants to private schools, under which more than half the schools receive more than they're entitled to under John...

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Getting richer as we mess up our world

I guess you've heard the good news: the devastation of the Christchurch earthquake will be a godsend to New Zealand's gross domestic product, giving it an almighty and much-needed boost. So maybe it's a pity earthquakes don't happen more often. Perhaps we could do the Kiwis a favour and send our air force bombers over there to use a few cities for target practice. If you think this sounds stupid, you're right. To anyone in...

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Our deprived country folk, and other myths

So, we're back to worrying about RARA - rural and regional Australia. Thanks to the newly acquired political leverage of the two country independents, we're now being told the regions haven't been given their fair share and, in future, "equity principles" should prevail. There's a lot of righteous indignation on the part of many country people and, I suspect, quite a bit of sympathy on the part of city folk. But there are also...

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AN ECONOMIC MANAGEMENT UPDATE: TAX REFORM

Talk to Victorian Commercial Teachers Association September 13, 2010 The survival of the Gillard government with the support of the various independents has breathed new life into the debate about tax reform and the recommendations of the Henry tax review. Ms Gillard has agreed with the two country independents to hold a tax summit before July next year to discuss the economic and social effects of the reforms proposed by the...

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Rationalists just don't get the new paradigm

The dismay with which economic rationalists have greeted the ascension of Julia Gillard's "weak and hopefully short-lived government" is overdone. What we're getting is different from what we expected, but I'm not convinced it'll be any worse. What the rationalists want is continued sound management of the macro economy plus loads of unpopular micro-economic reform to lift our flagging productivity improvement. Considering most...

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A FISCAL POLICY UPDATE

VCTA Student Revision Lectures September 12, 2010 The economy has been on a roller-coaster ride from resource boom to global financial crisis to recovery from the mildest of recessions to the likelihood of an early return to the resources boom and an economy at near full employment. Monetary policy played its accustomed role in all this and Keynesian fiscal policy returned to the fore. But did we have a recession? And just what...

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Debt is good when it means investment

One of the most remarkable, but unremarked, features of the election campaign was the extraordinary fuss made about a net federal government debt expected to peak at a mere $90 billion, while not a word was said about Australia's net foreign debt of $670 billion - and rising. Similarly, despite all the feigned concern about the size of federal budget deficit, nothing was said about the current account deficit, which is...

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Perhaps now politicians will stop trashing their reputations

Let's hope it's not back to politics as usual. And let's hope the fortnight or so since the voters' collective refusal to award the election to either of the major parties has allowed both sides time to reflect on something that hasn't troubled them to date: when will the political profession decide to call a halt to its trashing of its own reputation? The process by which our politicians have slowly destroyed their credibility...

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