Wage growth the key to lasting economic strength in 2018

So, no train strike in Sydney because unionists were ordered to keep working by the Fair Work Commission. Is that good news or bad? Depends on the point from which you view it – but don't assume you have only one of 'em. And if your viewpoint's from somewhere in Victoria, don't assume it's a matter of little relevance to your own pay packet. A 24-hour train strike would have caused great inconvenience to commuters and disruption...

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Who’s doing best in the rent-seeking business

Economists joke that, whereas they are taught that any barriers to new firms entering a market are bad, allowing profits to be too high, MBA students are taught that "barriers to entry" are good, and shown ways to raise them. Economists have no quarrel with businesses making profits. The shareholder-owners who provide the financial capital needed to sustain those firms are entitled to a return on their investment, one that reflects...

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How Keynesianism came to Australia

Whenever you meet someone who uses the words Keynes or Keynesian as a swear word – or as synonyms for socialist – know that their adherence to neoliberal dogma far exceeds their understanding of mainstream economics. Though John Maynard Keynes' (rhymes with gains) magnum opus, The General Theory of Employment, Interest and Money, was published in 1936, and he died 10 years later at 62, most economists – including many who wouldn't...

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Why going to a park is better than going to the beach

My father was always disapproving of people who excused their failure to turn up to his Sunday meeting by saying they'd been "worshipping God in the great outdoors". But the older I get, and the more I read, the more I think it's not such a bad idea. I'm much attracted by the American biologist Edward O. Wilson's hypothesis of biophilia, that humans have an innate tendency to seek connection to nature, for its calming effects. While...

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How Trump's tax cuts will affect Australia

The Americans' decision to drop their company tax rate to 21 per cent from the start of next year is unlikely to overcome our Senate's resistance to cutting our company tax rate to 25 per cent for big business. Which is no bad thing. It seems the forces behind the US end of neoliberalism – the distortion of mainstream economics I prefer to call bizonomics (giving big business whatever it wants will be best for all of us) – aren't...

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We should change the culture of Christmas

Christmas, we're assured, brings out our best selves. We're full of goodwill to all men (and women). We get together with family and friends – even those we don't get on with – eat and drink and give each other presents. We make an effort for the kiddies. Some of us even get a good feeling out of helping ensure the homeless get a decent feed on the day. And this magnanimous spirit is owed to The Man Who Invented Christmas,...

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Turnbull's economic luck: more forecast than actual

It's usually in the interests of us followers to have a leader who is lucky. Malcolm Turnbull has had his share of bad luck but, of late, his fortunes seem to have changed. Latest proof is the mid-year budget update. According to Scott Morrison and Mathias Cormann, everything is much improved. Although previous mid-year updates have revealed less progress than expected at budget time, this time the budget deficit is expected...

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A bigger, better public sector will secure our future

There are important lessons to be learnt from the latest news about where our strong growth in employment is coming from. But if we listen to the nostrums of the Smaller Government brigade, we'll get them exactly wrong. The (trend) figures we got from the Australian Bureau of Statistics last week showed employment growth of 370,000 – or 3.1 per cent – over the year to November. More than 80 per cent of the new jobs were full-time. Great...

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Who's ripping it off? Competition theory and reality

Puzzling over the rich economies' poor productivity improvement and weak wage growth (but healthy profits), American economists are pointing the finger at reduced competition between firms. But can this explain Australia's similar story? Jim Minifie, of the Grattan Institute, set out to answer this in his report, Competition in Australia. Economists regard strong competition between businesses as essential to ensuring market...

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Robots won't reduce the amount of work we need to do

For me, one of the most significant economic developments of this year was realising how pessimistic many of our youth have become about their prospects of ever landing a decent full-time job. To be sure, some degree of frustration on their part is understandable. Although it's true we avoided a severe recession following the global financial crisis of 2008, it's equally true that, until recently, employment growth has been...

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We should rescue economics from the folly of neoliberalism

There's no swear word in politics today worse than "neoliberalism". It's badly on the nose, and the reaction against it has a long way to run. But what is it, exactly? Where does mainstream economics stop and neoliberalism begin? The term means different things to different people. Professor Dani Rodrik, of Harvard, says in the Boston Review the term is used as a catchall for anything that smacks of deregulation, liberalisation,...

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Mixed news as economy readies for better times

Scott Morrison is right. We're experiencing "solid" growth in the economy – provided you remember that word is econocrats' code for "not bad – but not great". This week's national accounts from the Australian Bureau of Statistics show real gross domestic product grew by 0.6 per cent in the September quarter. Taking the figures literally, this meant the economy grew by 2.8 per cent over the year to September, way up on the 1.9...

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Latest attack on welfare 'unworthies' is contemptible

Remember the Turnbull government's plans to drug test people on the dole? While you and I are diverted by all the political game-playing in this week's last session of parliament for the year, the government is hoping to slip these and other mean-spirited cuts in social security through the Senate – probably after some deal with the Xenophon-less Xenophones. You can blame it on my Salvo upbringing – whose influence on my values...

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Politicians should get wings clipped on infrastructure

The more our ever-more "professional" politicians put political tactics ahead of economic strategy – put staying in government ahead of governing well – the more pressure they come under to cede more of their power to independent authorities. The obvious instance is our move in the mid-1990s to transfer control over interest rates ("monetary policy") from the elected government to the independent central bank. Shifting interest...

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Good could come from bank royal commission

The banks and other opponents of a royal commission into banking told us it would generate a lot of noise and expense without achieving anything of value. They'll probably still be claiming that when the just-announced inquiry has reported. Well, maybe. By contrast, I think there's a good chance the commission's establishment will be seen as the most visible marker of the time when the two sides of politics turned their backs...

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WHY MONETARY POLICY HAS BECOME LESS EFFECTIVE AND HOW FISCAL POLICY CAN HELP

Comview 2017As the monetarists used to like saying, monetary policy operates with “long and variable lags”. Which does much to explain why, for most of the time I’ve been an economic journalist, people have doubted its effectiveness. In 1989, when the Hawke government was struggling to slow a strong economy and booming commercial property market, with the cash rate hitting a peak of 18 per cent and mortgage rates a peak of 17...

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