One reason for our inflation problem: weak merger law

Nothing excites the business section of this august organ more than news of another merger between two public companies. “Merger” is the polite word for it; usually the more accurate word is “takeover”.So, is the dominant firm offering a good price for the firm being acquired? And should the shareholders in the dominant firm be pleased or worried about the deal? Will it benefit them, or just the company executives who organised...

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Cost-of-living crisis? Why only some of us are feeling the pinch

If you believe the opinion polls, we’re all groaning under the weight of the cost-of-living crisis. And Treasurer Jim Chalmers confirms we’ve all been “under the pump”. But it’s not that simple. Some of us are doing it a lot tougher than others. And some of us are actually ahead on the deal.In any case, where did the living-cost crisis come from? That bit’s simple. The economy’s been on a rollercoaster for the past four and a...

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Construction industry a honeypot that capital and labour fight over

Don’t fall for the bogeyman theory of our troubled major constructions industry: its union has gone rogue, been infiltrated by criminal elements, and must be cleaned out, so life can return to normal. There’s much more to it than that.But first, let’s be clear. I’m trying to explain the phenomenon, not make excuses for thuggery and lawbreaking – even if perpetrated by the union movement, with successive Labor governments pretending...

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Unthinking privatisation leaves much mess to be cleaned up

It’s been a week of facing up to the various troubles caused by the fad of governments trying to solve their problems with help from the private sector.All governments have indulged in the fashion of privatising their businesses and outsourcing the provision of public services to a greater or lesser extent, with varying degrees of success. Victoria was first with the idea of selling off its electricity monopoly, and it’s had...

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Take heart! Australia is still better and fairer than most

Don’t be disheartened by recent events. Things in the Land of Oz are far from perfect, and we have our share of problems. But don’t be tempted by the thought that if America’s going to the dogs, we won’t be far behind. No, we’re holding things together much better than the Yanks are.With the US reverting to its traditional practice of taking shots at presidents and presidential candidates, this week of all weeks is the time to...

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OECD’s message to our inflation warriors: calm down, she’ll be right

Last week a bunch of international public servants in Paris launched a rocket that landed in Sydney’s Martin Place, near the Reserve Bank’s head office and the centre of our financial markets. It carried a message we should already know. Australia has a big problem with real wages: they’re too low. In which case, why are you guys so anxious about continuing high inflation?The Organisation for Economic Co-operation and Development’s...

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Forget smaller government, let's shoot for better government

We pay our taxes, then governments spend them. But where does all that money go? And how much of it is wasted? Well, where it goes is no secret, but how much of it does little to benefit us is something we don’t really know. Why not? Because we put so little effort into finding out.In 2022-23, the federal and state governments spent almost $890 billion. Nearly 33 per cent of that went on social security payments; 21 per cent...

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The moribund political duopoly is rapidly self-destructing

Why do we have so many economic problems, and why do our governments make so little progress in fixing them? Because the two main parties just play politics and by now have boxed each other in. Neither side is game to make tough decisions for fear of what the other side will do to them.Our tax system needs repair, but neither side dares to make changes somebody somewhere might not like. So we put up with poor government services,...

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Yes, we need tax reform, but it offers no easy answers

When we’re reminded that income tax cuts represent merely the partial return of the proceeds of earlier bracket creep, and that the process of clawing back the latest tax cut starts the same day it arrives, it’s easy to join the impassioned cry for tax reform. Sorry, it ain’t that simple.Surely if we could end the crazy business of bracket creep, we’d pay less tax? Well, yes – but no.Bracket creep occurs because our income tax...

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If you care about your offspring, you should support 'nature positive'

The most pressing problem we face is climate change. It’s even more important than – dare I say it – getting inflation down to 2 per cent by last Friday. But we mustn’t forget that climate change is just the most glaring symptom of the ultimate threat to human existence: our continuing destruction of the natural environment.Economists are often accused of being too narrowly focused on markets and the market prices that move up...

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Despite what we're led to believe, tax cuts are no free lunch

Isn’t it wonderful that the Albanese government – like all its predecessors – has been willing to spend so many of our taxpayers’ dollars on advertising intended to ensure no adult in the land hasn’t been reminded, repeatedly, about the income tax cuts that took effect on Monday, first day of the new financial year?But believe me, if you rely only on advertising to tell you what the government’s up to with the taxes you pay –...

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Interest rate speculators should get back in their box

There’s nothing the financial markets and the media enjoy more than speculating about the future of interest rates. And with last week’s news that consumer prices rose by 4 per cent over the year to May, they’re having a field day.Trouble is, the two sides of the peanut gallery tend to egg each other on. They have similar ulterior motives: the money market players lay bets on what will happen, while the media can’t resist a good...

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How and why the tide of globalisation has turned

Politicians banging on about “security” should always be suspected of having ulterior motives, but when you to see the secretary to the Treasury giving a speech on security, that’s when you know the world has changed radically.That’s what Treasury secretary Dr Steven Kennedy did last week. It was a sign of how much the distinction between economic issues and defence and foreign affairs has blurred as rivalry between the United...

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It's time to dig deep - but not deeper than the taxman expects

I have a request to make of all Australian taxpayers: please give more to charity because you’re making me look bad. Like a cheat, in fact. I’ll explain shortly, but first, a self-interested public service announcement. Hurry, hurry, hurry. You have only the rest of this week to make a tax-deductible donation if you want to get some of it back in your next tax refund.June 30, the biggest day of the year for the nation’s accountants,...

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Yikes! Our tiny manufacturing sector makes us rich but ugly

At last, the source of our economic problems has been revealed. Our economy is badly misshapen, making it unlike all the other rich economies. Did you realise that our manufacturing sector is the smallest among all the rich countries?Worse, our mining sector’s almost five times as big as the average for all the advanced economies and our agriculture sector’s twice the normal size.Do you realise what an ugly freak this must make...

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The RBA has squeezed us like a lemon, but it's still not happy

Let me be the last to tell you the economy has almost ground to a halt and is teetering on the edge of recession. This has happened by design, not accident. But it doesn’t seem to be working properly. So, what happens now? Until we think of something better, more of the same.Since May 2022, the Reserve Bank has been hard at work “squeezing inflation out of the system”. By increasing the official interest rate 4.25 percentage...

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It's slowing the spin doctors' spin that keeps me busy

Do you remember former prime minister John Howard’s ringing declaration that “we will decide who comes to this country and the circumstances in which they come”? It played a big part in helping him win the 2001 federal election. But it’s only true in part.The job of economic commentators like me is supposed to be telling people about what’s happening in the economy and adding to readers’ understanding of how the economy works.But...

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No one's sure what's happening in the economy

Treasury secretary Dr Steven Kennedy let something slip when he addressed a meeting of business economists last week. He said it was too early to say if the economy was back in a more normal period, “perhaps because no one is quite sure what normal is any more”.This was especially because “unusual economic outcomes are persisting,” he added.Actually, anyone in his audience could have said the same thing – but they didn’t, perhaps...

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