Hey RBA boomer, things have changed a lot since the 1970s

Sorry, but Reserve Bank governor Dr Philip Lowe’s call for ordinary Australians to make further sacrifice next year in his unfinished fight against “the scourge of inflation” doesn’t hold water. His crusade to save us all from a wage-price spiral is like Don Quixote tilting at windmills only he can see.In one of his last speeches for the year, Lowe “highlighted the possibility of a wage-price spiral” in Australia. A lesson from...

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Weakening competition is adding to our inflation woes

We’ve worried a lot about inflation and its causes this year, but in one important respect the economy’s managers have yet to join the dots. The most basic economics tells us that what stops prices rising more than they should is strong competition between firms. If competition has weakened, that will be part of our inflation problem.But is there evidence that competition is less intense than it was? Yes, lots. It was outlined...

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2022: The year our trust was abused to breaking point

As the summer break draws near, many will be glad to see the back of 2022. But there’s something important to be remembered about this year before we bid it good riddance. Much more than most years, it’s reminded us of something we know, but keep forgetting: the central importance of trust – and the consternation when we discover it’s been abused.Every aspect of our lives depends on trust. Spouses must be able to trust each other....

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Who knew? The price of better government is higher taxes

Have you noticed? Since the change of government, the politicians have become a lot franker about the budgetary facts of life. And now the Parliamentary Budget Office has spelt it out: it’s likely that taxes will just keep rising over the next 10 years.The great temptation for politicians of all colours is to make sure we don’t join the budgetary dots. On one hand, they’re going to improve childcare and health and education,...

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Weak starting point for next year’s threats to the economy

It’s clear the economy’s started slowing, with the strong bounceback from the lockdowns nearing its end. That’s before we’ve felt much drag from the big rise in interest rates. Or the bigger economies pulling us lower, which is in store for next year.To be sure, the economy’s closer to full employment than we’ve been half a century. But limiting the decline from here on will be a tricky task for Anthony Albanese and, more particularly,...

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Both sides exaggerate significance of wage bargaining changes

Do you realise, in just the six months it’s been in office, the Albanese government has passed 61 bills, covering most of what it promised to do at the May election?Just last week it passed the National Anti-Corruption Commission Bill and the controversial Secure Jobs, Better Pay bill. According to Anthony Albanese, the latter involved “the biggest workplace reforms since the 1970s” and its passing made last Friday “a huge day...

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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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