What a wonderful world we live in now our politicians have discovered the cure for opportunity cost. In his first budget, Josh Frydenberg is doing a Gladys: he wants us to believe “we can have it all”.
Over the next 10 years, he can give us: tax cuts worth $302 billion, new infrastructure worth $100 billion, sundry other goodies, and a budget that’s back in the black and stays there, so that the net debt falls to zero. Yeah?...
Monday, April 8, 2019
Saturday, April 6, 2019
Budget makes Frydenberg an unwitting Keynesian stimulator
Treasurer Josh Frydenberg doesn’t want anyone saying the budget he unveiled this week involves applying some “fiscal stimulus” to get the economy moving faster. He’d prefer to say his budget is “pro-growth”.
But what is fiscal stimulus? And does that label apply to this year’s budget? Only if you’re prepared to be called a “Keynesian” economist. Which Frydenberg isn’t.
Why not? Because in the hard right circles in which many...
Wednesday, April 3, 2019
Budget does the right thing for the wrong reason
Set aside the politics, focus on the economy's immediate needs, and this is a good budget – though, with less politics and more economics, it could have been better.
Viewed through a political lens, this is the classic budget of a government that knows it has only a slim chance of winning the looming election but also knows it has little to lose by abandoning its stated policies and promising more government spending and yet...
Monday, April 1, 2019
The budget's getting better, but the economy's getting worse
Why would a government that boasts of its superior economic management be entering an election campaign with a budget warning of harder economic times ahead? Because it has no choice.
It will turn this admission of a bleaker economic outlook – with a slowdown in the global economy and, domestically, the risk that falling house prices could further weaken consumer spending – into a warning that now is just the wrong time to turn...
Saturday, March 30, 2019
High immigration hiding the economy's long-running weakness
How’s our economy been doing in the five or six years since the Coalition returned to office? In the United States and other advanced economies there’s much talk of “secular stagnation”, but that doesn’t apply to us, surely?
After all, we’re now into our record-setting 28th year of continuous economic growth since the severe recession of the early 1990s. This means that, unlike the others, we escaped the Great Recession that...
Wednesday, March 27, 2019
Generational conflict comes to a polling place near you
The most memorable news photo I’ve seen in ages is one from the first School Strike 4 Climate late last year. It shows a young woman holding a sign: MESS WITH OUR CLIMATE & WE’LL MESS WITH YOUR PENSION.
One minute we oldies are berating the younger generation for their seeming lack of interest in politics (although, having arrived on the scene at a time when our politicians are behaving so badly, who could blame them?),...
Monday, March 11, 2019
Economists: lonely, misunderstood angels in shining armour
If you’re tempted by the shocking thought that economists end up as handmaidens to the rich and powerful – as I’m tempted – Dr Martin Parkinson wishes to remind us that’s not how it’s supposed to be. The first mission of economists is to make this world a better world, he says. But don’t expect it to make you popular.
Let me tell you about a talk he gave on Friday night. It was a pep talk to the first of what’s hoped to be a...
Saturday, March 9, 2019
Forget what’s happening in the economy, just find a scary label
If you want the unvarnished truth, the economy’s rate of growth slowed surprisingly sharply in the second half of last year. If you prefer titillating silliness, we’ve entered a “per capita recession”.
The national accounts for the December quarter, issued by the Australian Bureau of Statistics this week, show real gross domestic product growing by only 0.2 per cent during the quarter, following growth of only 0.3 per cent in...
Wednesday, March 6, 2019
AN ECONOMY FIT FOR HUMANS
Balmoral Lectures, Queenwood school, Wednesday, March 6, 2019Some of you may remember Jill Tuffley, who was for many years in charge of economics teaching at Abbotsleigh. In 1988, Jill wrote a textbook to go with the new syllabus in HSC economics, which she asked me to launch. I complimented her on her choice of title, Our Economy, though I noted that, had I written the book, I’d have called it My Economy.But Jill was right,...
How to lose water, waste money and wreck the environment
If you want a salutary example of the taxpayers’ money that can be wasted and the harm that can be done when governments yield to the temptation to prop up declining – and, in this case, environmentally damaging – industries, look no further than Melbourne’s water supply.
The industry in question is the tiny native-forest logging industry in Victoria’s Central Highlands. The value it adds to national production of goods and...
Monday, March 4, 2019
Beware of groupthink on why the economy’s growth is so weak
According to our top econocrats, the underlying cause of the economy’s greatest vulnerability – weak real wage growth – is obvious: weak improvement in productivity. But I fear they’ve got that the wrong way round.
We all agree that, in a well-functioning economy, the growth in wage rates exceeds the rise in prices by a percentage point or two each year. On average over a few years, this “real” growth in wages is not inflationary,...
Saturday, March 2, 2019
Who pays for Google and Facebook's free lunch?
There may be banks that are too big to be allowed to fail, but don’t fear that the behemoths of the digital revolution are too big to be regulated. It won’t be long before Google and Facebook cease to be laws unto themselves.
It’s the old story: the lawmakers always take a while to catch up with the innovators. But there are growing signs that governments around the developed world – particularly in Europe and Britain - are...
Thursday, February 28, 2019
Top economy manager wants you to get bigger pay rises
This year more than usually, if you want straight talking about the state of the economy and its prospects, listen to the econocrats not the election-crazed politicians.
Late last week, Reserve Bank governor Dr Philip Lowe had more sensible things to say in three hours than we usually get in a month.
He was giving evidence to the House of Representatives standing committee on economics. For a start, he left little doubt about...
Monday, February 25, 2019
It’s not business-bashing, it’s the public’s moment of truth
With the federal election campaign being fought over which side will do the better job of re-regulating the banks, the energy companies and business generally, big business seems to be going through the stages of grief. It’s reached denial.
According to the Australian Financial Review, the Business Council of Australia is most put out that the Morrison government has yielded to pressure from Labor and some Nationals to support...
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