The secret sauce is missing from our recovery recipe

According to Reserve Bank deputy governor Dr Guy Debelle, a big lesson from the global financial crisis was “be careful of removing the stimulus too early”. Good point, and one that could yet bring Scott Morrison and his nascent economic recovery unstuck. But there’s something that’s even more likely to be his – and our – undoing.Debelle was referring to the way the British and other Europeans, having borrowed heavily to bail...

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Economy's rebound goes well, but now for the hard part

Does the economy’s strong growth last quarter mean the recession is over? Only to those silly enough to believe in "technical" recessions. Since few economists are that silly, it’s probably more accurate to call it a "journalists’ recession". Makes for great headlines; doesn’t make sense.It’s probably true – though not guaranteed - we’ll suffer no more quarters where the economy gets smaller rather than bigger. But people fear...

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Super risk: be poorer today so you can live it up tomorrow

For a columnist, the trouble with taking leave is that something really interesting or important is likely to happen while you’re away from the keyboard. It’s now more than a week since the Treasurer Josh Frydenberg released the long-awaited review of retirement income by former Treasury heavy Mike Callaghan. But not to worry. I suspect we’ll still be furiously debating the report’s findings come the next election.For most people,...

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THE POST-COVID ECONOMY: How our economy has changed

Talk to virtual Comview conferenceI want to talk to you about how the Australian economy has changed as a result of the pandemic, including a once-in-30-year change in the macro-economic policy mix, and consider how the economy can recover from this unique recession.You don’t need me to tell you that the coronavirus is the greatest threat to the health of Australians and the entire world since the “Spanish” flu pandemic a century...

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Reserve Bank suffering relevance deprivation syndrome

I’m sorry to say it, and it’s certainly not the done thing to say, but the Reserve Bank looks to me like that emperor with a serious wardrobe deficiency.Apart from the nation’s allegedly “self-funded” retirees – whose angry letters to Reserve governor Dr Philip Lowe must by now be absolutely blistering – no one wants to question last week’s decision to make what must surely be the smallest-ever cut in the official interest rate,...

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Treasury chief warns big changes are on the way

When finally the pandemic has become just a bad memory, we’ll see it has left big changes in the way the macro economy is managed and the way we work and spend. Whether that leaves us better or worse off we’ve yet to discover.That’s the conclusion I draw from Treasury Secretary Dr Steven Kennedy’s (online) post-budget speech to the Australian Business Economists on Thursday, the restoration of a tradition going back to the 1990s.Kennedy...

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We should stop backing losers in the Climate Change Cup

The big question for Scott Morrison and his colleagues is whether they want to be a backward-looking or forward-looking government.Do they want to enshrine Australia as the last giant of the disappearing world of fossil fuels, and pay the price of declining relevance to the changing needs of our trading partners, with all the loss of jobs and growth that would entail?Or do they have the courage to seize this opportunity to transform...

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Economies malfunction when we can't trust our leaders

With the federal, NSW and Victorian governments all mired in questionable conduct but refusing to accept responsibility for their actions, a reminder of the value of ethical behaviour to the good governance of the nation is timely.A report, The Ethical Advantage, by John O’Mahony, of Deloitte Access Economics, and commissioned by Dr Simon Longstaff’s Ethics Centre, reminds us that while ethical behaviour and trust are different...

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How inflation became a big problem, but has disappeared

Treasury Secretary Dr Steven Kennedy observed this week that there’s been “a fundamental shift in the macro-economic underpinnings of the global and domestic economies, the cause of which is still not fully understood”. He’s right. And he’s the first of our top econocrats to say it. But he didn’t elaborate.This week we got further evidence of that fundamental shift. The Australian Bureau of Statistics’ consumer price index for...

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Privatisation crusade is core business for tribal Libs

Critics of this year’s strange budget, which claims to be “all about jobs” but is really about helping some people and not helping others, accuse Scott Morrison and his faithful Treasurer of being “ideological”. That’s not a sensible criticism.To accuse someone you disagree with of being “ideological” is dishonest and hypocritical. It misuses the word, turning it into a meaningless term of abuse. It implies that you’re being...

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Putting pollies back behind the wheel means a bumpier ride

This budget marks a historic shift in how the macro economy is managed. After 30 years, the dominant influence has moved from monetary policy (interest rates) to fiscal policy (the budget). Which means day-to-day economic power has transferred from the econocrats back to the politicians.And as Paul Bloxham, of the HSBC bank, has reminded us, that means we’re in for a bumpier ride. It’s a fair bet that our days of a long gap between...

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Budget's infrastructure spend more about sex appeal than jobs

Economists haven’t been enthused by inclusion in the budget’s big-ticket stimulus measures of $11.5 billion in road and rail projects. Why not? Because spending on “infrastructure” often works a lot better in theory than in practice.Economists were more enthusiastic about infrastructure before the pandemic, when Scott Morrison’s obsession with debt and deficit had him focused on returning the budget to surplus at a time when...

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Budget is blokey because Morrison's 'core values' make it so

I'm sorry to have to agree, but Grattan Institute boss Danielle Wood is right to say this is a "blokey" budget. As are those who add it's a blokey budget from a blokey government.Scott Morrison is offended by the charge, but the trouble is, the blokier you are, the harder it is to see what's blokey and what's not. Women see it sticking out, but blokes often can't.The simple truth is that, over the centuries, what economists call...

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This one-year, fold-away budget won't do the trick

From the way the budget blows out debt and deficit, it may seem that Scott Morrison and Josh Frydenberg have stopped caring how much they rack up, but it ain’t so. This budget is just a one-year plan, which not only brings the handouts to an early stop, but then starts reeling much of the money back in.This budget is like a fold-up bike you can put back in the boot after you’ve finished with it. Technically, its design is clever....

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Budget is big on political correctness but weak on job creation

The more I study the budget, the less impressed I am. It spends a mint of money – which it should - but Scott Morrison and Josh Frydenberg have chosen its measures based on how well they fit the government’s "core values", not on whether they’re likely to deliver "bang for buck" – maximum jobs per dollar forgone.The funny thing is, if you read the budget papers carefully, they admit that its measures were run through the filter...

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