Competition isn't always as good as we're told

The banking royal commission has many sub-plots. Did you notice the one where a couple of the banks blamed their decisions to keep doing things they knew were dodgy on the pressure of competition? A chap from Westpac didn’t argue when one of the inquiry’s barristers criticised it for paying “flex commissions” to car dealers arranging loans for people buying cars. The higher the interest rate the dealers could get their customers...

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Cheating cricketers symptomatic of our declining standards

I can’t see why people are so shocked to discover our cricketers have been cheating. Surely that’s only to be expected in a nation that’s drifted so far from our earlier commitment to decency, mateship and the fair go. Such behaviour is unAustralian? We do, or condone, many things that used to be thought of as unAustralian. There was a time when it would have been unthinkable for Australians to stand by while an elected government...

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We have a bad case of misdirected compassion

Why do so many of us – and the media, which so often merely reflect back the opinions of their audience – feel sorrier for those who profess to be poor than for those who really are? Last week, on the day after the single dole was increased by 50¢ to a luxurious $273 a week ($14,190 a year), Malcolm Turnbull’s henchmen succeeded in persuading Pauline Hanson’s One Nation to let him give the down-and-out part of our one nation...

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Economic case for cutting company tax rate is weak

Most people don't realise it, but we're on the verge of letting foreign multinationals pay less tax on the profits they earn in Australia because we locals don't mind paying higher tax to make up the difference. Our almost unique system of "imputing" to Australian shareholders the company tax already paid on their dividends means they have little to gain from Malcolm Turnbull's pressure on the Senate to phase the rate of company...

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How Labor is taking on the greedy elderly

Talk about missing the point. The media spent all last week working themselves into a lather over Labor's newly announced policy to abolish cash refunds for unused dividend imputation credits. (If you have no idea what that means, it probably wouldn't affect you.) This promise would be terribly unfair to dirt-poor self-funded retirees, we were told. And it was utter stupidity for Bill Shorten to drop such a monumentally unpopular...

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Immigration the cheap and nasty way to grow the economy

The ABC's temerity in hosting a debate about the merits of high population growth has drawn predictable repostes from the economic establishment. Shades of the legendary note in the margin of a politician's speech: "shout here - argument weak". There are at least four counts against the advocates of high immigration. First, their refusal to engage with the academic environmentalists arguing that we've exceeded the "carrying...

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Why protection from imports isn't smart

With The Donald now busy playing poker with Little Rocket Man, the threat of a trade war has receded. Good. Gives us time to get our thinking straight before the threat returns. Everyone knows a trade war would be a terrible thing, but most people's reason for thinking so is wrong. This misunderstanding means such a war could happen, even though everyone knows it would be bad. It seems common sense for a country to want to...

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RENT SEEKING, THE GAME OF MATES, AND THE STUFF-UPS OF ECONOMIC REFORM

Talk to Newcastle Institute, Wednesday March 14, 2018When Malcolm Turnbull knocked off Tony Abbott as Prime Minister in 2015, Turnbull decided to get rid of some older ministers to make room for young blood, and – surprisingly – got rid of his mate Ian Macfarlane, who’d been minister for minerals and industry for many years. Macfarlane, who was 60, decided to get out of politics. In a speech farewelling him, Abbott observed that...

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What's making homes hard to afford and what we could do

There aren't many material aspirations Australians hold dearer than owning their own home - but dear is the word. There are few greater areas of policy failure. The rate of home ownership, of which we were once so proud, has been falling slowly for decades. And as the last high home-owning generations start popping off, it will fall much faster. We've been debating this issue for years, while it's just got worse. Yet we have...

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How we could gang up against a Trump trade war

A possible trade war looms and, as always, an adverse overseas development has caught poor little Oz utterly unprepared. Well, actually, not this time. Just as Treasury had been war-gaming the next big world recession well before the global financial crisis of late 2008, so the Productivity Commission began thinking about our best response to a trade war soon after the election of Donald Trump. In July last year it published...

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The economy is readying for faster growth

The last three months of 2017 were yet another quarter of weak growth in the economy. Fortunately, however, they weren't as weak as we've been led to believe. According to the national accounts, issued this week by the Australian Bureau of Statistics, real gross domestic product grew by 0.7 per cent in the previous quarter, but slowed to 0.4 per cent in the December quarter. This caused the annual rate of growth to slump from...

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Sensible communities set boundaries for business

A highlight of our trip to New York after Christmas was a visit to the Tenement Museum down on the lower east side, where the movie Gangs of New York was set. It was the area where successive waves of Irish, German and Russian immigrants first settled, crowded into tenements. We were taken around the corner to see inside a tenement building restored to its original condition. As we climbed the back stairs, we were shown a row...

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Retailers affecting the economy in ways we don’t see

As uncomprehending punters complain of the soaring cost of living, and the better-versed ponder the puzzle of exceptionally weak increases in prices and wages, don't forget to allow for the strange things happening in retailing. It's a point the Reserve Bank's been making for months without it entering our collective consciousness the way it should have. The debate over the cause of weak price and wage growth has been characterised...

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Free-trade agreements aren't about freer trade

You may think spin-doctoring and economics are worlds apart, but they combine in that relatively modern invention the "free-trade agreement" – the granddaddy of which, the Trans-Pacific Partnership, is presently receiving CPR from the lips of our own heroic lifesaver, Malcolm Turnbull. It's not surprising many punters assume something called a "free-trade agreement" must be a Good Thing. Economists have been preaching the virtues...

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WHY FISCAL POLICY IS BACK IN FASHION

Comview 2018Why fiscal policy fell out of favourAdvent of “stagflation” in mid-1970sBreakdown of simple Phillips curveMonetarist attack on KeynesianismMonetarists’ slogan: Money matters! Consciousness of “crowding out”Monetary policy’s shorter “implementation lag”MP became primary instrument for fiscal policy from late 1970sHow the float changed form of crowding outOriginal belief was that govt borrowing to cover fiscal...

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Too many school leavers are off to uni

If you had a youngster leaving school, what would you encourage them to do? Get a job, go to university, or see if there was some trade that might interest them? For a growing number of parents, that's a no-brainer: off to uni with you. But maybe there should be more engaging of brains. It's widely assumed that, these days, any reasonably secure, decently paid career must start with a university degree. Don't be so sure. The...

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