Hockey's first budget: tough but unfair

This budget isn't as bad as Labor will claim and the Liberal heartland will privately think. It's undoubtedly the toughest budget since John Howard's post-election budget in 1996, but it's hardly austerity economics. I give Joe Hockey's first budgetary exam a distinction on management of the macro economy, a credit on micro-economic reform and a fail on fairness. Although Hockey has laboured hard to ensure few sections...

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Labor sells its soul to fight deficit levy

If you needed any convincing Labor is a party entirely adrift from its supposed values and purpose, given over now to politicking, expedience and opportunism, just wait for its reaction to Tuesday's budget. It will vehemently oppose Joe Hockey's deficit levy - no matter how watered down it is by then - and his intention to resume indexing the...

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Selfish pseudo-economics fights deficit levy

If you want to see a classic example of selfishness posing as high principle, look no further than the fuss big business's high income-earners are making over the deficit/debt levy/tax expected to be imposed in Tuesday's budget. Jennifer Westacott, of the Business Council of Australia, said "raising Australia's already high dependence on personal income tax will place an increased burden on workers [note that word] and...

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Business self-interest and economic ideology a good fit

We will hear a few toned-down echoes of the report of the National Commission of Audit in Tuesday's budget but, apart from that, the memory of its more extraordinary proposals is already fading. For most Coalition backbenchers, that can't come soon enough. But I think the audit commission has done us a great service. It has been hugely instructive. The business people and economists on the commission offered us a vision...

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Audit report: much ado about a manageable problem

Don't be too alarmed by the startling proposals by the National Commission of Audit. Few of its recommendations will make it into the budget on Tuesday week. They were never intended to. Ostensibly, the commission wants to reverse the tide of a century of federal-state relations, crack down on the age pension while leaving superannuation tax concessions unscathed, reduce Medicare to something mainly for the poor, hit middle-income...

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Greed is the market's forgotten vice

Where do Easter and business intersect? Well, what about at greed. According to Dr Brian Rosner, principal of Ridley Melbourne, an Anglican theological college, greed has been glamorised by the market economy and is a forgotten sin. Maybe it's this that allows those Christians who are business people, economists and politicians to share their colleagues' commitment to unending economic...

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Badly taught economics has high opportunity cost

Is it possible the discipline of economics is becoming so mathematical it's in the process of disappearing up its own fundament? While you're thinking about that, let me take the opportunity to ask you a quiz question (it's a holiday weekend, after all). You've won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your...

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Why manufacturing in Australia has a future

Few things about the economy are worrying people - particularly older people and those from Victoria and South Australia - more than the decline in manufacturing. But many of our worries are misplaced, or based on out-of-date information. For instance, many worry that, at the rate it's declining, we'll pretty soon end up with no manufacturing at all. And everyone knows that, unlike other states, Victoria's economy is particularly...

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Our econocrats' vision is too narrow

Part of my job is making sure readers are kept fully informed about the messages our top econocrats are trying to get across to the public. They're usually much franker and clearer than the spin we get from our political leaders. But just because I report their views faithfully doesn't mean I always agree with them. As it related to the outlook for the economy, the message in the speech Treasury secretary Dr Martin Parkinson...

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Treasury's opportunities and threats facing our economy

It shouldn't surprise you that when the secretary to the Treasury, Dr Martin Parkinson, devoted half his major speech this week to "fiscal sustainability" - the tax increases and spending cuts needed to get the budget back on track - the media virtually ignored the other half. But the budget isn't the economy. And in that other half Parkinson offered a revealing SWOT analysis of the economy, outlining its Strengths and...

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Bracket creep has become highly regressive

If you think you're having trouble coping with the rising cost of living now, just wait until you see what the politicians have in store for you over the next three years. In all likelihood, you'll be losing a significantly higher proportion of your pay in income tax, though people on low incomes will be hit a lot harder than those on high incomes. This will happen because an increase in the overall tax we pay is inevitable,...

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We need less fancy financial footwork, not more

Attention conspiracy theorists: see if you can detect a pattern in this. Tony Abbott wants to review the renewable energy target, so he appoints self-professed climate change "sceptic" Dick Warburton, who feels qualified to explain to the scientists where they're going wrong. Abbott wants to review the financial system, so he appoints a former boss of a big four bank, David Murray, who feels qualified to explain to economists...

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Your guide to business entitlement

With the Abbott government's close relations with big business, we're still to see whether its reign will be one of greater or less rent-seeking by particular industries. So far we have evidence going both ways. We've seen knockbacks for the car makers, fruit canners and Qantas, but wins for farmers opposing the foreign takeover of GrainCorp and seeking more drought assistance, as well as a stay on the big banks' attempt...

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How we can do better on Aboriginal imprisonment

You don't need me to tell you that in a country such as America, with all its history of racial conflict, the rate of imprisonment for African-Americans is far higher than the rate for whites. Twelve times higher, in fact. But you may need me to tell you we make the Yanks look good. Our rate of indigenous imprisonment is 18 times that for the rest of us. Aborigines make up 2.5 per cent of the Australian adult population,...

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Abbott's red tape play-acting hides rent-seeking

The world of politicians gets deeper and deeper into spin, and so far no production of the Abbott government rates higher on the spin cycle than last week's Repeal Day. Hands up if you believe in red tape? No, I thought not. So how about we package up a huge pile of window dressing with some worthwhile but minor measures, slip in a few favours for our big business supporters and generous donors, and call it the most vigorous...

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We own as much of their farm as they own of ours

Did you know that, at the end of last year, the value of Australians' equity investments abroad exceeded the value of foreigners' equity investments in Australia by more than $23 billion? It's the first time we've owned more of their businesses, shares and real estate ($891 billion worth) than they've owned of ours ($868 billion). These days in economics there's an easy way to an exclusive: write about something no one...

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More to infrastructure problem than spending money

We get bombarded with economic and political news. Some of it is worth knowing, some isn't. Some gets much attention, some gets little. Sometimes we give too much attention to things that aren't worth knowing and too little attention to things that are. The Productivity Commission's draft report on public infrastructure is one of the latter. Ostensibly, it's a report advising Tony Abbott on how to achieve his dream of becoming...

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Ending the mining tax will hurt jobs

Don't be misled by last week's better-than-expected figures for employment in February. If you peer through the statistical haze you see the problem is the reverse: employment is weaker than you'd expect. Follow that through and it takes you to - of all things - the mining tax. The job figures were better than expected for two quite silly reasons. First, because economists are hopeless at predicting month-to-month changes...

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Many economists don't get the labour market

The world is full of economists who, though they know little of the specifics of labour economics, confidently propose policies for managing the labour market based on their general knowledge of the neo-classical model. All markets are much the same, aren't they? I fear this is the best we'll get from the Productivity Commission's inquiry into regulation of the labour market. So a test of the commission's report will be...

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