Top economists think much further ahead than Morrison & Co

If Scott Morrison and Josh Frydenberg are looking for ideas about what more they could be doing to secure our economic future – after all, they’ll be seeking re-election soon enough – they could do worse than study the views of the 56 leading economists asked by the Economic Society of Australia to comment on this month’s budget.Two points stand out. First, almost all the economists were happy to support the budget’s strategy...

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Reform of “human services” the triumph of hope over experience

Those leftie academics who keep accusing Scott Morrison and his government of being “neo-liberal” aren’t keeping up. This government’s neo-liberal days are long gone. But “micro-economic reform”, on the other hand, is alive and well.If neo-liberal has any meaning, it’s a belief in free-market capitalism, privatisation and smaller government. It’s a presumption against government intervention in markets.But that’s just what Morrison...

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Big spending on aged care not right to fix the problem

Budgets come and, all too soon, budgets go. A big deal in the latest one was the government’s response to the royal commission’s report on the scandal-plagued aged care system. We were told lots of changes will be made, at an extra cost of “$17.7 billion over five years”. Problem solved. Now we can all move on.Sorry, not so fast. The bright young things of the media may have lost interest, but I’d like a closer look. You can...

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Key reform needed to fix debt and deficit: ditch stage 3 tax cut

Scott Morrison and Josh Frydenberg won’t admit it. But most economists agree that at the right time, the government should take measures to hasten the budget’s return to balance, even – to use a newly unspeakable word – “surplus”.Economists may differ on what they consider to be the right time. But, if we’re to avoid repeating the error the major economies made in 2010 by jamming on the fiscal (budgetary) policy brakes well before...

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Treasury boss confident big government debt is manageable

Whether they realise it or not – probably not – the people up in arms about the size of the federal public debt and criticising Scott Morrison and Josh Frydenberg for not doing more to get it down in last week’s budget are saying they should have made the same error the major economies made early in their recovery from the Great Recession.If you’ve heard Frydenberg saying he won’t “pivot to austerity policies”, you’ve heard him...

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Don't believe what lightweights tell you about debit and deficit

If you’ve gained the impression that in their pre-election budget Scott Morrison and Josh Frydenberg have gone on a wild, vote-buying cash splash spending spree, leaving us – not to mention our grandchildren – with a string of bigger budget deficits and much increased government debt, you’ve been misled.Some of it’s simply not true, much of it’s exaggerated and the rest has been misunderstood by people who didn’t do economics...

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Budget shock: Morrison hit over the head by a paradigm

The media missed the big story in last week’s budget. They were present to observe a rare event – a shift in the economic management paradigm – but all they saw was just another big-spending, vote-buying pre-election budget.Since the post-World War II Golden Age ended in the ignominy of stagflation in the mid-1970s, the first rule of politics has been that most of it’s economics. Economies don’t run themselves, and managing them...

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The new normal: much more reliance on government spending

What this week’s budget proves is that fiscal (budgetary) stimulus really works, something many economists had come to doubt over the four decades in which monetary policy – the manipulation of interest rates – was the main instrument used to manage the economy’s path through the business cycle.That potency’s the main reason the economy has rebounded from last year’s government-ordered deep recession far earlier and more strongly...

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This budget couldabeen a lot better than it is

This is the lick-and-a-promise budget. The budget that proves it is possible to be half pregnant. Which makes it the couldabeen budget. Scott Morrison and Josh Frydenberg had the makings of a champion of budgets, but their courage failed them.It’s not a bad budget. Most of the things it does are good things to do. Its goal of driving unemployment much lower is exactly right. Its approach of increasing rather than cutting government...

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Years of neglect won't make it easy to get wages up

In Tuesday night’s budget, it will be important to note its assumptions about when our international borders will be back to functioning normally. Not because they’re sure to be right, but because our borders will have a big impact on Scott Morrison’s new strategy of getting unemployment down to get wages – and thus living standards – up.As the Commonwealth Bank’s Gareth Aird has reminded us, fancy calculations about how low...

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Our closed borders have turbo-charged the economy's recovery

The economy’s rebound from the lockdowns of last year has been truly remarkable – far better than anyone dared to hope. Even so, it’s not quite as miraculous as it looks.As Tuesday’s budget leads us to focus on the outlook for the economy in the coming financial year, it’s important to remember that the coronacession hasn’t been like a normal recession. And the recovery from it won’t be like a normal recovery either.The coronacession...

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Politics and economics have aligned to permit a ripper budget

Sometimes I think the smartest thing a nation can do to improve its economic fortunes is elect a leader who’s lucky. The miracle-working Scott Morrison, for instance.This may be a controversial idea in these days of heightened political tribalism, when one tribe is tempted to hope the other tribe really stuffs up the economy and so gets thrown out. What does a wrecked economy matter if your tribe’s back in power?Morrison was...

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Now we're trying Plan C to end wage stagnation

Be clear on this: Scott Morrison and Josh Frydenberg are dead right to make getting the rate of unemployment down to 4.5 per cent or lower their chief objective, with the further goal of inducing some decent growth in wages. But this approach to economic recovery is very different to our econocrats’ former and more conventional advice.That the econocrats have changed their tune so markedly is an admission that the way the economy...

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FISCAL POLICY v MONETARY POLICY IN OUR WEAK ECONOMY

 Last year, after the arrival of the pandemic and the coronacession as governments locked down the economy to stop the spread of the virus, we witnessed a rare economic event: a changing of the guard in the main policy instrument used to stabilise demand as the economy moved through the business cycle. Monetary policy stepped back and fiscal policy stepped forward. Governments always turn to fiscal policy when recessions...

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