How budget update affects stance of fiscal policy

The most remarkable thing about this week's mini mini-budget is how many words the media could spill without clarifying a rather important question: how will it affect the economy? One of the ways politicians (and journalists) make such announcements sound big is by giving us the cost of measures ''over four years''. But the economy is lived through, and managed, one year at a time. So it's the year-by-year figures that matter...

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Farmers fall silent while food brings home the bacon

Sometimes, as when Sherlock Holmes solved a mystery by noting the dog that didn't bark, the story is not what happened but what didn't happen. If so, don't hold your breath waiting for the media to tell you such a story. Omission is much harder to notice than commission. But let me ask you - in this year of endless complaint about the supposed two-speed economy - what's been missing? The retailers have been doing it tough and...

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Econocrats get smarter on dodgy forecasts

You've heard the joke that economic forecasters are there to make weather forecasters look good. What you haven't heard is that the nation's top economic forecaster, Glenn Stevens, the governor of the Reserve Bank, thinks the joke "has something going for it". There's an even older joke: everybody complains about the weather, but no one does anything about it. Actually, nothing we could do would change the weather. But, as Stevens...

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Why economists are obsessed by the resources boom

The world is throwing two big things at our economy. One is new, exciting, even frightening, and is getting all the headlines. The other is old news and getting boring. But get this: the boring one is by far the more important. The new and exciting story is the increasingly worrying developments in the euro area. The old story is the resources boom. Both come to us from the rest of the world. In terms of their effect on our...

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Outlook for politics and government in 2012

Talk to Australian Business Economists Annual Forecasting Conference Sydney, November 24, 2011 Taken as a whole, the first full year of the Gillard government has been terrible. Julia Gillard has hardly taken a trick all year and her present standing in the polls is worse - much worse, consistently worse - than it was at last year’s election, when she failed to attract enough votes to form government in her own right. Her present...

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Facts count, because what's mined is yours

By far the biggest development in the economy in recent years is the mining boom, and it's likely to roll on for at least the rest of this decade. But Australians are having a lot of trouble getting their minds around the boom's implications. The area abounds with worries and misperceptions. Economists keep banging on about the mining boom because it's the biggest factor driving the economy's growth. We've...

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Internet commerce will foster price competition

The critics of economists often accuse them of trying to change the world to make it more like their textbooks. But now the mountain is coming to Muhammad. The internet, and the electronic commerce it promotes, is making real-life markets work more the way economists assume they do. As the retailers - particularly the department stores - have sought to explain the weak growth in their sales, their gaze has fallen on the internet....

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The dots linking us to Europe's woes don't join

Humans are story-telling animals. We seek to understand developments in the world around us by turning them into ''narratives''. When several things happen in the same field, people - including journalists - have a tendency to turn them into a coherent story by stringing them together. For instance, the biggest economic news story for months has been the trouble the Europeans are having with their currency and high levels...

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Change is workers' only certainty

The shape of our economy is always changing, but lately the pace of change seems to have got a lot faster. Some industries are expanding, while others contract. Particular industries are having to change the way they operate - or the range of products they produce - in response to many pressures. These changes almost always leave us better off materially. ''Structural change'', as economists call it, has been central to...

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Shouting slogans will not further Fair Work debate

It's a compelling narrative: in the 1980s we deregulated the financial markets, slashed import protection and deregulated many markets for particular products. But then it dawned on us that deregulated, highly competitive product markets could hardly co-exist with a centralised, highly regulated labour market. So Paul Keating started to deregulate the labour market, ending centralised wage-fixing and moving to collective bargaining...

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Storm clouds over Europe, but sun is shining elsewhere

If you're confused about what's happening in the European economies, why it's happening and what it means for the world economy, don't feel you're alone. The media's great strength is the speed with which they can bring us myriad details about the latest happening in Greece, Italy or anywhere else. Unfortunately, their great weakness is...

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We may be two-speed, but we are all sharing dividends

Forgive my absence at such an anxious time but I've been away on holiday in Western Australia, walking bits of the Bibbulmun Track, which runs from Perth to Albany. The wildflowers were unbelievable. And so was the affluence in Perth, where the mining companies' skyscrapers are so tall they can be seen from Rottnest Island, 19 kilometres away. How'd you like to be living in Perth, in the winners' circle where everything is on...

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