There are few "taxed-nots" apart from the elderly

It's a sad day when economic commentators like me have to spend so much time explaining what's wrong or misleading about the things the federal Treasurer says, rather than backing up his efforts to educate the public on economic realities and helping him fight for sensible though unpopular policies. To be fair, Scott Morrison did have useful points to make in his big speech last week, his first major contribution since the election. But...

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Our other problem: xenophilia towards foreign investment

There are few topics on which there's more irrational thinking than foreign investment. Trouble is, the illogic comes as much from economists and policy makers as it does from uncomprehending punters. Sometimes I think the wonky thinking by the economic literates is an overreaction to the crazy prejudices of the economic illiterates. The punters think we can decide not to sell off the farm – not to allow foreigners to buy Australian...

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Foreign investment helped to make us rich

If foreign investment in Australian businesses is so unpopular with so many people and such a hot potato for Malcolm Turnbull and his government, why do we persist with it? Short answer: because we prefer our material standard of living to go up, not down. This week an Essential poll revealed the full extent of the public's reservations about foreign investment. Foreign investment in mining was regarded as "bad for the economy"...

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We shouldn't feel bad about leaving public debt to our kids

There are a lot of nice people in the world, people who worry about all the debt we're leaving to our kids and grandkids. I know this from the letters I get from people. I got an email from a retired couple who said they'd be happy to pay more – a 15 per cent goods and services tax, medical co-payments or even a 10 per cent increase in income tax – if only it was guaranteed that the money was spent "to pay down debt, not rack...

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Time for new thinking on reforms to encourage growth

Disheartening times are times for fresh thinking. The voters' effective rejection of conventional economic solutions at the election require our economists and policy makers to go back to the drawing board. It's always tempting to blame the salesman for his failure to make a sale but, of late, that argument is wearing thin. It's more useful to ask whether sales would be more forthcoming if we improved the product. Everyone...

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Big change ahead for China and our export challenge

You don't need me to tell you we lucked out when we sited our island continent not too far from China. But will our luck hold? Or, more pointedly, what do we have to do to ensure we stay lucky? A major report, released this week, Partnership for Change, seeks to answer that question. It was prepared jointly by Professor Peter Drysdale, of the East Asian Bureau of Economic Research at the Australian National University, and...

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You have no idea how hard it is for big business

I have disturbing news. The big business people of Australia are feeling quite upset about the recent federal election, or so I am informed by The Australian Financial Review. Quite frankly – and this is a shocking thing to say – the mood of the campaign was "anti-business". As young people say, big business was disrespected. Those rotters in the Labor Party were shameless in their behaviour, seeking to win votes by portraying...

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Why Treasury is wrong on deficits and debt

The last speech of the retiring Reserve Bank governor, Glenn the Baptist, was a touch biblical. Whatever your point of view, you could find a verse here or there that seemed to back you up. If, for instance, you accept the conventional view that the budget deficit is way too high, that the government should be more daring in seeking to cut the deficit, and its opponents should be less opportunist and more responsible in agreeing...

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What's been happening to the distribution of our income

The single best explanation for the rise of Mr Crazy, Donald Trump, is that over the four years to 2013, the real income of the top 1 per cent of American households rose by 17.4 per cent, while that of the bottom 99 per cent rose by 0.7 per cent, giving the top few 85 per cent of the growth. Another country where the gap between high and low incomes has widened markedly is Britain. And what crazy thing have the Brit voters...

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Why much success comes with a slice of good luck

How important is luck in monetary success? A lot more than a lot of successful people are willing to admit – even to themselves. Is luck as important as hard work in becoming successful? No – but, in the end, yes. These are important questions – we ponder them often – that economists rarely bother to study. Except for one of my favourite economists, Robert Frank, of Cornell University in upstate New York. His new book is Success...

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Why the era of reform has ended

In case you haven't noticed, you're staring at the end of the era of economic reform. It has ended because it's come to be seen by many voters as no more than a cover for advancing the interests of the rich and powerful at their expense. The evidence that the jig is up is all around us, in Brexit, Donald Trump and, at home, the near defeat of a government that went to the election with just one substantive proposal - to phase...

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Why cut interest rates again? It's the exchange rate, stupid

The trouble with the Reserve Bank's continuing cuts in the official interest rate – this week to another record low, of 1.5 per cent – is that it could leave people thinking the economy's in bad shape. It isn't. As Reserve governor Glenn Stevens was at pains to point out, recent figures suggest that "overall [economic] growth is continuing at a moderate pace" notwithstanding a very large decline in investment in new mines and...

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Fast-moving China is big and bold; we think small and fearful

Sorry if I sound wide-eyed, but I was mightily impressed when I visited China as a guest of the Australia-China Relations Institute. Obviously, we were directed to the best rather than the worst but, even allowing for that, it was still impressive. Those guys are going places. In a hurry. I was struck by how fast-moving the place is – in several senses. We argue interminably about getting a high-speed rail link, while the Chinese...

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China plans big expansion of trade - without us

You've heard of belt and braces. You may even have heard of one country, two systems. But have you heard of One Belt, One Road? No, I thought not. Rest assured, you will. It's a topic much discussed in business and economic circles in China, as I learnt on a visit there sponsored by the Australia-China Relations Institute at the University of Technology, Sydney. It's a plan for the establishment of a new Silk Road between Europe...

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China does its own thing in its own way

On the prospects for China's economy, it's easy to be wrong. We analyse unfamiliar things by comparing them with things we understand, but in its massive size and economic history, China is one of a kind. That's one conclusion I've drawn from a visit to China as a guest of the Australia-China Relations Institute, at the University of Technology, Sydney, and the All-China Journalists Association. In recent years people in the...

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Liberals ignore the moderate middle at their peril

It's amazing to realise that the greatest threat to the success of the Turnbull government comes from the Liberal Party. Malcolm Turnbull's biggest enemies are inside his own government, not outside. If he's to make sufficient progress with controlling the budget and reforming the economy to warrant re-election in three years' time, he needs to mix budget restraint with fairness, and combine efficiency with equity. This, after...

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Government outsourcing has many pitfalls

Labor's Mediscare will have a benefit if it causes our politicians to think twice before they resort to "outsourcing" or "contracting out" the provision of government services, a practice that's led to a string of disasters. The pretext for Labor's claim that the Coalition was planning to "privatise" Medicare was the Turnbull government's intention to save a little money by shifting the processing of Medicare's many bank transfers...

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