Politicians always profess great sympathy for people struggling to keep up with the cost of living but often fail to put that sympathy into practice. Economists like to divide the economy into consumers on one side and producers on the other. They believe the economy should be run for the benefit of consumers, not producers. The consumer is supposed to be king.
Ostensibly, pollies think the same. But they're always doing deals...
Wednesday, March 2, 2011
Monday, February 28, 2011
Carbon courage, and for Gillard, no going back
Maybe Julia Gillard will make a good prime minister after all. Her decisions of late - culminating in her commitment to impose a price on carbon from July next year - suggest she has learnt from Labor's mistakes and understands what she must do to stay in office.
Kevin Rudd's biggest mistake was to abandon his carbon-pollution reduction scheme after the going got tough, rather than seeking to get it passed after a double dissolution...
Saturday, February 26, 2011
Surge in savings masks current account rise
One little-noticed consequence of the resources boom has been a big rise in the current account deficit on our balance of payments with the rest of the world. But when we get the latest figures on Tuesday we're unlikely to see any evidence of that. Why not? Because of the surge in household saving.
The current account deficit occurs because our imports and payments of interest and dividends to the rest of the world almost always...
Wednesday, February 23, 2011
Hard to hear angels above the racist heartbeat
Scientists used to think chimpanzees - our close relatives - were a gentle, peace-loving species, until they observed their behaviour in the wild and found they could be quite murderous in the treatment of other chimps.
And what was it that caused them to become so vicious? The arrival of chimps from a different troop in the part of the forest they considered to be their territory.
I remembered this one day after failing to...
Monday, February 21, 2011
The economy is a lion disguised as a lamb
The big divide in economists' views on the outlook for the economy - and hence, for interest rates - is whether they regard the present weakness in consumer spending as worrying or welcome. And that turns on how forward-looking they are.
I suspect it's also affected by what psychologists call "salience" - the tendency for our judgments to be most affected by those events that are highly visible and memorable, those that make...
Saturday, February 19, 2011
Urge to splurge fades as savers born again
The punters, pollies and shock jocks who tell us we're groaning under the weight of the rapidly rising cost of living need to answer a question: if so, how come households are managing to save 10 per cent of their disposable income?
It has drawn remarkably little comment, but the household saving ratio - saving as a proportion of household disposable (that is, after-tax) income - is the highest it has been in more than 20 years.
You...
Wednesday, February 16, 2011
Inflation whingers bite the very hand that feeds them
Have you been struggling to cope with the rapidly rising cost of living? Well, tell it to the pollies because I don't believe it. Actually, the pollies probably don't believe it either but they'll pretend to rather than risk offending you by telling you to stop feeling sorry for yourself. They care about your approval, not your edification.
Ever since 1957, when the British prime minister Harold Macmillan caused uproar...
Monday, February 14, 2011
Fiscal heaven is pollies worrying about deficits
The most surprising thing in the great debate over how Julia Gillard should finance the cost of "rebuilding Queensland" is the alacrity with which some economists have urged her to just add it to the budget deficit rather than - gulp - temporarily increase taxation.
Admittedly, the best argument for putting it all on the tick is that the sum involved - $5.6 billion over three or four years - is too small to worry about.
And...
Saturday, February 12, 2011
A carbon price can't save the planet by itself
I have a love-hate relationship with economic rationalism. I have great respect for the power of market forces - individuals and firms do change their behaviour in response to changing prices - but I'm well aware of their limits.
To me the test of economic understanding is whether it's pragmatic and "evidence-based" or ideological and faith-based. Is the neo-classical model simply a tool of analysis, suited to some jobs better...
Wednesday, February 9, 2011
Carbon price is no fix-all
Our wide brown land has always been subject to ''extreme weather events'' - droughts, floods, cyclones, bushfires and heatwaves. That's why no one can say the extreme events we've been suffering lately are a direct consequence of climate change.
But scientists have long predicted that one effect of global warming would be for extreme events to become more extreme, which is just what seems to be happening. So it would be a brave...
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