Big cities have become the engine of the economy

Old notions die hard. If you took all the production of goods and services in Australia and plotted on a map where that production took place, what would it look like? Any farmer could tell you most of the value is created in the bush. A miner, however, would tell you - a bunch of ads have told you - these days most of the wealth is generated in areas such as the Pilbara in Western Australia and the Bowen Basin in Queensland. Then,...

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Mining boom our gift to rich foreigners

The mining tax - whose last-minute reprieve may well prove temporary - is the greatest weakness in the argument that we gained a lot from the resources boom. The blame for this failure should be spread widely, with economists taking a fair share. Late last week a majority of senators passed the bill repealing the minerals resource rent tax, but not before knocking out its provisions cancelling various programs the tax was...

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How to reform industrial relations

Tony Abbott's strategy for getting back into government was to make himself a small target by adopting few controversial policies. He mollified his big business backers by promising to hold many inquiries and take any proposals for controversial reform to the 2016 election. But once in government Abbott couldn't avoid announcing many unpopular measures to get the budget back on track. These have hit his standing in the...

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Carbon tax not real reason for soaring power prices

Tony Abbott is right about one thing: the price of electricity has shot up and is now a lot higher than it should be. It's a scandal, in fact. Trouble is, the carbon tax has played only a small part in that, so getting rid of it won't fix the problem. Until a rotten system is reformed, the price of electricity will keep rising excessively, so I doubt if many people will notice the blip caused by the removal of the carbon...

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Bankers and wealth managers take ethics oath

As the misadventures of the can-do Commonwealth Bank remind us, even though our bankers didn't bring the house down in the global financial crisis as happened elsewhere, we still had too many victims of bad investment advice losing their savings. So, what's the answer? Tighter regulation of banks and investment advisers, or a higher standard of ethical behaviour by individuals working in banking and wealth management?...

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How economists changed their tune on minimum wages

When the Fair Work Commission announced a 3 per cent increase in the national minimum wage to more than $640 a week - or almost $16.90 an hour - from last week, employers hinted it would lead to fewer people getting jobs and maybe some people losing theirs. And to many who've studied economics - even many professional economists - that seems likely. If the government is pushing the minimum wage above the level that would...

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Ignoring climate change will cost the economy

Sometimes I fear Australia has decided to go backwards just as the rest of the world has decided to go forwards. Take climate change. If the repeal of the carbon tax gets through the Senate this week there will probably be celebrations in the boardrooms of all the business groups that lobbied so hard for its removal. But if they imagine the lifting of this supposedly great burden on them and the economy will mean it's back...

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Tough times restore productivity performance

It's official: Australia's rate of improvement in the productivity of labour returned to normal during the reign of Julia Gillard. How is that possible when big business was so dissatisfied and uncomfortable during Gillard's time as prime minister? The latter explains the former. According to figures in a speech by Reserve Bank governor Glenn Stevens last week, labour productivity in all industries improved at an annual...

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We've handled the resources boom surprisingly well

Are we in for big trouble in the aftermath of a misspent resources boom, or has the boom been over-hyped, leaving us in good shape to face the future? This is a matter of debate among some of Australia's most prominent economists. Professor Ross Garnaut, of the University of Melbourne, advanced the former argument last year in his book Dog Days: Australia After the Boom, and Dr John Edwards, a fellow of the Lowy Institute...

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The news on our health is good

It's good news week. There are lots of bad things happening in the world and journalists regard it as their job to dig them out and wave them in front of your face. No piece of disheartening news should go unreported. But good things are happening, too. And I often think people would enjoy reading the news more if we didn't ignore so many of them. One of the main jobs of the federal government's Australian Institute of...

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Ulterior motives abound in privatisation push

The trouble with the latest round of state government privatisations is that those who oppose them do so for the wrong reasons, but their promoters are also pushing them through for the wrong reasons. Joe Hockey's 15 per cent incentive payment to encourage "asset recycling" - selling existing government-owned businesses to fund the building of new infrastructure - has fallen on receptive pockets in the NSW and Queensland...

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Why weaker demand means lower pay rises

Just about everyone assumes we can never have enough jobs. So it's funny that our unending discussion about how the economy's growth is doing rarely delves into the detail of what's happening in the labour market. But that's what Dr Chris Kent, an assistant governor of the Reserve Bank, did in a speech last week. He shows it really is a market, with the demand for labour interacting with the supply of labour to help determine...

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No handouts for miners not paying enough tax

It's in the nature of the news media to focus on the new, on the bit that's changing. So when people like me bang on about the resources boom - as we've been doing for about a decade - it's probably inevitable we leave many people with an exaggerated impression of the size of the oh-so-important mining industry. Most people have little idea how mining compares with the rest of the economy. Some, when asked, say it may...

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Economists face criticism over poor ethics

Are economists ethical? Short answer: no more than most. Long answer: well, it's not something they think about much. The question of ethics is starting to raise its head among economists, both overseas and in Australia, particularly in NSW. It's an issue the Sydney branch of the Economic Society is likely to start debating in the next few months. The issue is arising as more economists find ways to sell their services...

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States change lanes in two-speed economy

You've heard of a Goldilocks economy where everything is just right. Well, when it comes to the states, welcome to the biblical economy, where the last shall be first and the first shall be last. We're still looking at a two-speed economy, but the fast lane is turning into the slow lane and the slow lane into the fast. During the 10 years of the resources boom to 2012-13, the West Australian economy grew by 62 per cent...

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How to get more happiness per dollar

If I wanted to get more happiness into my life, I wouldn't do it by trying to earn more money. I'd concentrate on spending more time with family and friends and getting more satisfaction from work itself rather than the money it brings in. That's because, though money does buy happiness, it buys far less than we expect it to. It suffers from rapidly diminishing "marginal utility" - each extra $1000 you spend brings less...

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Mike Baird's high-risk election strategy

Mike Baird is nothing if not game. His first budget as Premier is a model of fiscal rectitude - which wins him high marks from people like me, but makes this a most unusual budget for a politician facing an election early next year he can no longer be certain of winning easily. The budget offers little in the way of tax breaks and few new spending initiatives, save for more money on child protection, disability services...

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We're a nation of stay-at-homes

Would you be surprised if I told you the resources boom and its two-speed economy had led to a big increase in the number of people shifting between states? No, I thought not. Well here's my surprise: it hasn't gone up, it has gone down. Research by Professor Jeff Borland, of the University of Melbourne, finds that the rate of interstate migration has declined over the past decade. The eternal lament of oldies (me included)...

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Botched reform causes higher power prices

There's no subject more likely to stir people up than rising electricity bills. With prices roughly doubling since 2007, that's hardly surprising. But why have prices risen so fast? And will they keep rising? It has suited various business lobbies and Coalition politicians - federal and state - to leave people with the impression the main reason is the carbon tax and the renewable energy target, which requires that 20...

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