Morrison’s hang-ups make him a bad economic manager

Scott Morrison’s problem is that he gets politics – and is good at it – but doesn’t get economics. The Prime Minister doesn’t get that if he keeps playing politics while doing nothing to stop the economy sliding into recession, nothing will save him from the voters’ wrath. Neither he nor Josh Frydenberg seem to get that if we endure another year of very weak growth before they pop up next September boasting about their fabulous...

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Traffic congestion will continue until we're game to tax it

The governments of NSW and Victoria lost zero time in rejecting the Grattan Institute’s proposal that all state governments introduce “congestion charging” in their capital cities. But don’t imagine this unpopular idea will go away. It will keep coming back until we buy it. Australians and their political leaders have a record of trembling on the brink for decades before belatedly accepting the inevitability of upgrades to the...

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Politicians too poor at their jobs to fix poverty

You could be forgiven for not knowing this is anti-poverty week. The poor, as we know, are always with us – which is great because it means we can focus on our own problems and worry about the poor’s problems later. We can fight to protect our tax breaks, then get around to wondering about how easy we’d find it to be living on $280 a week from the Pollyanna-named Newstart allowance. But it’s not just our natural tendency to...

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Barring another financial crisis, it will be a long wait for QE

It’s amazing so many people are so sure they can see where the Reserve Bank is headed. Once interest rates are down to zero it will be on to QE - “quantitative easing” – and negative interest rates, they assure us. Don’t you believe it. What’s surprising is how heavily the self-proclaimed experts are relying on their vivid imaginations. Or maybe lack of imagination, falling back on the lazy market dealer’s assumption that we...

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Why surpluses aren't necessarily good, or deficits bad

According to the Essential opinion poll, only 6 per cent of people regard the size of the national surplus as the most important indicator of the state of the economy. I think that’s good news, but I’m not certain because I’m not sure what “the national surplus” is – or what the respondents to the poll took it to mean. They probably thought it referred to the balance on the federal government’s budget. But the federal budget...

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Why are the Viking economies so successful? They pull together

I’d like to tell you I’ve been away working hard on a study tour of the Nordic economies – or perhaps tracing the remnant economic impact of the Hanseatic League (look it up) – but the truth is we were too busy enjoying the sights around Scandinavia and the Baltic for me to spend much time reading the books and papers I’d taken along. But since I always like telling people what I did on my holidays (oh, those fjords and waterfalls...

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Why we don't get more joy out of our super

When one of our top econocrats gives a speech about behavioural economics, you know we’re making progress. Take the ever-present problem of income in retirement. “BE” explains both why it’s a major area of government intervention in our lives and how that intervention can be made more effective. One of the greatest limitations of conventional economics – based on the “neo-classical” model, which focuses on how prices are determined...

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Governments are learning to nudge us down better paths

The world is a complicated place – partly because humans are complicated animals. One of the many things this means is that when governments try to influence our behaviour, their chances of stuffing up are surprisingly high. Consider this. Say I’m an investment adviser telling you (or your parents or grandparents) where to invest your retirement savings. I warn you that, should you take my advice, I’ll be paid a commission by...

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Our leaders slowly come to grips with a different economy

The beginning of economic wisdom is to understand that the advanced economies – including ours – have stopped working the way they used to and won’t be returning to the old normal. Second in the getting of wisdom is to understand that economists are still debating why the economy is behaving so differently – so poorly - and what we can do about it. Last week Reserve Bank governor Dr Philip Lowe gave a speech to a...

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If you think surpluses are always good, prepare for great news

Don’t look now, but Australians’ economic dealings with the rest of the world have transformed while our attention has been elsewhere. Business economists are predicting that, on Tuesday, we’ll learn that the usual deficit on the current account of the balance of payments has become a surplus. If so, it will be the first quarterly surplus in 44 years. If not, we’ll come damn close. You have to be old to appreciate what a remarkable...

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Greater social inclusion makes us wealthier, not just happier

If you like made-up, clunky words you could call it the humanisation of economics. And it’s one of the most exciting developments in a field most people don’t consider very exciting. It’s the product of economists’ search for reasons why the economies of the developed world have stopped working as well as they used to. This week our Reserve Bank governor, Philip Lowe, gave a short but sobering speech at a conference of central...

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Why government-controlled prices are soaring

As if Scott Morrison didn’t have enough problems on his plate, we learnt last week that government-administered prices are rising much faster than prices charged by the private sector. Last week my colleague Shane Wright dug out figures from the bowels of the consumer price index showing that, over the almost six years since the election of the Abbott government in September 2013, the prices of all the goods and services in...

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How strange could money get if the worst came to the worse?

With our official interest rate heading ever closer to zero, there’s much talk that the Reserve Bank may be forced to join other central banks in resorting to “unconventional monetary policy,” including QE – “quantitative easing”. But how likely is this? What might it involve? Are there alternatives? And would it be good or bad? These questions were debated by Dr Stephen Kirchner, of the United States Studies Centre at Sydney...

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Recycling is all about being taken for a ride

Another day, another crisis. The crisis in kerbside recycling has been building since China effectively refused to take any more of our rubbish about 18 months ago. Then we sent it to other Asian countries, but now they’re jacking up, too. The disruption to the local recycling industry has caused one company that accepted recycled material from local councils in Victoria and South Australia to collapse, leaving five big warehouses...

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We’re relying on a government that spurns economic advice

I’m starting to wonder if the trouble with our politicians is that they’ve evolved to do politics but not economics, making them unfit to cope with the economic threats we now face. On the one hand, they’ve been able to leave the management of the economy to the independent Reserve Bank, whose tinkering with interest rates – up a bit, down a bit – has successfully kept the economy growing for 28 years. On the other hand, the...

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Worried Lowe flouts convention to push for wage rises - now

The most important piece of local economic news this week was no news: the wage price index remained stuck at an annual growth rate of 2.3 per cent for yet another quarter. I’ve said it before but I’ll keep saying it until it’s sunk into the skull of every last politician: we won’t get back to healthy growth in the economy until we get back to healthy growth in wages. That’s because economies are circular: all of us standing...

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We need more helicopter pollies caring for our kids

Sometimes I think that if our politicians spent as much time trying to fix the country as they do playing political games – slagging each other off and finding ways to “wedge” their opponents – we’d be in much better shape. The world becomes ever more complicated and right now our future is looking, as a pollie might say, “challenging”. Not least among our challenges is ensuring our children have better lives than ours. So...

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