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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Our economic challenge will be feast not famine

Perhaps we're seeing the emergence of a new law of elections: the real issues facing the economy in the next term won't bear any resemblance to those discussed during the campaign. In the 2007 campaign, the Liberal slogan was Go for Growth and Labor wanted the growth to involve more investment in training and infrastructure. In reality, the Reserve Bank was hauling on the interest-rate brakes because of rising inflation...

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Our resources boom comes bouncing back

This time three months ago it was clear the economy was being propped up by rapidly withdrawing budgetary stimulus, and it was not clear private spending would perk up in time to take over the running. This time two weeks ago it seemed clear business investment spending was doing OK but households were dragging the chain, with retail sales and home building approvals surprisingly weak. What a difference three months...

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House, marriage and children - in their own sweet time

The media leap on any suggestion of social change. At present there's talk of younger people being happy to keep renting rather than buy their own homes. Before that there was talk of career women not wanting children. And before that, we kept hearing about young people not bothering to get married, even after the kids had started arriving. I guess there's some truth in all these stories. Perhaps the truth is that, whereas...

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Why political rivalry reduces voters' options

Simple economic theory tells us competition leads to increased choice. But as the election campaign showed, competition between the two main parties seems to be reducing the choice we're offered. Before the election, many people complained about how unengaging the campaign was. It didn't seem to be aimed at people with brains. It seemed dominated by trivia. The two sides were locked in furious argument, but the policy differences...

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Numbers say we're growing quite nicely

The mildness of last year's recession means the economy has now entered its 20th year of growth since the deep recession of the early 1990s. But how has this growth been distributed through the economy? That's a question Ric Battellino, the deputy governor of the Reserve Bank, set out to answer in a most informative speech last week. It's a question you can answer in different ways. For a start, since June 1991, 3.5 million...

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Revolution of thinking voter turns politics green

Sorry but I'm not convinced a hung parliament is a terrible thing. It may end up being a good thing. I see it as the revolt of thinking voters against an election campaign that was aimed almost exclusively at unthinking voters. Labor's been given an almighty kick in the pants but there was no enthusiastic embrace of the Liberals, whose campaign was almost completely negative. The parties should take it as a warning that if...

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Voters censure Labor's lack of principles

The one thing we can be sure of is Labor has suffered a huge reverse. While we wait to learn which party will form government, it's instructive to ponder what it did wrong. By all the rules of federal politics, Labor should have romped home. The rules say first-term governments get an extension to finish proving their worth. They say governments get tossed out after they've allowed the economy to bomb, not after they've...

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The deficit we really should worry about

The biggest and most worrying deficit in this election campaign has been the policy deficit: the reluctance of both sides to debate any aspect of economic management bar the budget. What has passed for economic debate has proceeded from the proposition that the federal budget equals the economy. So let's see if we can get through a discussion of our economic policy challenges without further mention of that instrument. The...

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Both sides fall victim to budget humbuggery

It's not just Tony Abbott who has been running from a debate on the economy. Both he and Julia Gillard have avoided serious discussion of the economy in this election. Federal election campaigns usually focus on the economy, but this time both sides have been obsessed with something much narrower; the federal budget. Managing the economy involves concern about inflation, unemployment, interest rates and - conventionally...

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