Treasury's advice now back in favour with the government

The Coalition’s practice of sacking a bunch of government department heads whenever it gets back to office is clearly calculated to discourage bureaucrats from giving frank advice. Fortunately for us, the Albanese government is not as arrogant.In my experience, weak managers surround themselves with yes-persons, so their brains – and, as they see it, their authority – aren’t challenged.Strong managers want frank advice from their...

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Treasury thinks the unthinkable: yes, intervene in the gas market

If you think economists say crazy things, you’re not alone. Speaking about our soaring cost of living this week, Treasury Secretary Dr Steven Kennedy told a Senate committee that “the solution to high prices is high prices”. But then he said this didn’t apply to the prices of coal and gas.How could anyone smart enough to get a PhD say such nonsense? He even said – in a speech actually read out by one of his deputies – that this...

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One small step for the wellbeing budget, giant leap yet to come

Hey, wasn’t this budget supposed to be Australia’s first “wellbeing” budget? Whatever happened to that? Well, it happened – sort of – but it turned out to be ... underwhelming. Didn’t arouse much interest from the media.It met the expectations of neither the sceptics nor the true believers. Treasurer Jim Chalmers began talking it up long before he got the job. The treasurer at the time, Josh Frydenberg, thought it was a great...

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The cost of living isn't as high as we've been told

So, as we learnt the day after the budget, the cost of living leapt by 7.3 per cent over the past year, right? Wrong. Last week we were told it’s gone up no more than 6.7 per cent for employees, and 6.4 per cent for pensioners and others on benefits.The 7.3 per cent came from the Australian Bureau of Statistics, and was the rise in the consumer price index over the year to the end of September. The other figures also came from...

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Labor will struggle with deficit and debt until it raises taxes

There’s something strange about last week’s federal budget. It reveals remarkably quick progress in getting the budget deficit down to nearly nothing. But then it sees the deficit going back up again. Which shows that, as my former fellow economics editor Tim Colebatch has put it, Rome wasn’t built in one budget.Let’s look at the figures before explaining how they came about. The previous, Coalition government finally got the...

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CONFESSIONS OF AN ECONOCRAT-WATCHER

Talk to ACT Economic Society Annual Dinner, CanberraI’m very pleased to be invited to talk to you tonight, the biggest and best of the Economic Society’s branches. I should warn you, however, that I’m a follower of the Paddy McGuinness school of public speaking, which holds that it’s no fun talking to a group from any persuasion if you don’t say something to annoy them.I imagine many of you are econocrats so, before I do, I want...

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If only Labor's wage changes were as bad as the bosses claim

Have you ever wondered why capitalism has survived for several centuries in the advanced economies? How a relative handful of rich families and company executives have been getting richer and more powerful for so long in countries where everyone gets a vote and could, if they chose, insist on something different?It’s because the capitalists, counselled and coerced by politicians anxious to keep the peace, have made sure that...

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Memo RBA board: Time to stop digging in deeper on interest rates

If, as seems likely, the combined might of the advanced economies’ central banks pushes the world into recession, the biggest risk isn’t that they’ll drag us down too, but that our Reserve Bank will raise our own interest rates too far.That’s the message to us – and everyone else – from the International Monetary Fund’s repeated warnings about the unexpected consequences of “synchronised tighten” by the big economies – America,...

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Budget will reduce need for increases in interest rates

When the economy’s needs have switched from stimulus to restraint, it helps to get in new economic managers, who can reverse their predecessors’ direction with zeal rather than embarrassment.The need for economic policy to change course became clear only during this year’s election campaign, when the Reserve Bank’s concern about rapidly rising inflation prompted it to make the first of many rises in the official interest rate.So...

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Join the dots: your taxes are heading up, not down

Treasurer Jim Chalmers’ “solid and sensible” budget is not so much good or bad as incomplete. It hints at “hard decisions” to be made but doesn’t make them. It tells us times are tough and getting tougher – which we already knew. What we don’t know is what the government plans to do about it. We were told some things, but one big gap remains.Chalmers said the budget’s priority was to provide cost-of-living relief. No, not directly...

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Creative destruction: Even pandemics have their upside

There’s nothing new about pandemics. Over the centuries, they’ve killed millions upon millions. But economic historians are discovering they can also have benefits for those who live to tell the tale. Take the Black Death of the 14th century.In October 1347, ships arrived in Messina, Sicily, carrying Genoese merchants coming from Kaffa in Crimea. They also carried a deadly new disease. Over the next five years, the Black Death...

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The knowledge economy is behind the soaring price of land

Over the two centuries and more that people have made a serious study of how the economy works, economists have fallen in and out of love with land. At first, they thought it was at the centre of everything, then they decided it wasn’t terribly important. But the wheel may be turning again. In a major speech last month, the Grattan Institute’s Brendan Coates criticised his profession for its “longstanding intellectual neglect...

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Great Aussie Pipedream: rising house prices make us feel wealthier

I guess you’ve heard. Isn’t it great? Australians are now the richest people in the world. But if you find that hard to believe, congratulations. Your bulldust detector’s working fine.According to Credit Suisse’s annual global wealth report, which tracks wealth in 20 countries, last year the typical adult Australian’s wealth – assets minus debts – reached almost $336,000.Soaring property prices lifted our median wealth by $38,000,...

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Monetary policy is no longer fit for purpose

It’s an outstanding feature of the modern economy: the multitude of people who could do a far better job of running interest rates than the fool they’ve got doing it at the moment. Welcome to the inquiry into the performance of the Reserve Bank.One small problem. About half governor Dr Philip Lowe’s critics complain he was too slow putting rates down, while the other half say he was too slow putting them up. Since interest rates...

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