QE: not certain, not soon, no great help, no let-out for govt

The big economic development this week was Reserve Bank governor Dr Philip Lowe giving the financial markets’ expectations about QE – “quantitative easing” - and other unconventional monetary policy an almighty hosing down. In his speech on Tuesday he disabused the financial markets of the notion that, as soon as the Reserve had cut the official interest rate to zero, it would be on with QE and business as unusual. Equally,...

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High immigration is changing the Aussie way of life

The nation’s economic elite – politicians of all colours, businesspeople and economists – long ago decided we need to grow our population as fast as we can. To them, their reasons for believing this are so blindingly obvious they don’t need to be discussed. Unfortunately, however, it’s doubtful most ordinary Australians agree. A survey last year by researchers at the Australian National University found that more than 69 per...

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Confessions of a pet shop galah: much reform was stuffed up

As someone who, back in the day, did his share of being one of Paul Keating’s pet shop galahs – screeching "more micro reform!" every time they saw a pollie – I don’t cease to be embarrassed by the many supposed reforms that turned into stuff-ups. My defence is that at least I’ve learnt from those mistakes. One thing I’ve learnt is that too many economists are heavily into confirmation bias – they memorise all the happenings...

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Weak wages the symptom of our stagnant economy, but why?

If you don’t like the term "secular stagnation" you can follow former Bank of England governor Mervyn King and say that, since the Great Recession of 2008-09, we’ve entered the Great Stagnation and are "stuck in a low-growth trap". On Friday we saw the latest instalment of our politicians’ and econocrats’ reluctant admission that we’re in the same boat as the other becalmed advanced economies, with publication of the Reserve...

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Mental health: the smart way to increase happiness

You have to hand it to Scott Morrison. He is, without doubt, the most skillful politician we’ve seen since John Howard. He runs rings around his opponents. It’s just a pity he puts so much time into strengthening his own position by making his opponents look bad and so little into strengthening our position by working on some of our many problems. Speaking of problems, on the very day the Royal Commission into Aged Care was...

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Aged Care: the crappy end of the Smaller Government mentality

What do you get when politicians and econocrats go for decades trying to foist Smaller Government  on an unwilling public? Bad government. And the delivery of crappy services – often literally in the case of aged care. The interim report of the royal commission into aged care is absolutely scathing about the appalling state the system has been allowed to fall into. Its summary is headed: 'A Shocking Tale of Neglect'. Aged...

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It may upset you to think about climate change and the economy

It’s coming to something when we get so little leadership from the bloke we pay to lead us that the unelected have to fill the vacuum. Now 10 business organisations have united to urge Scott Morrison either to set out the climate policy rules to drive action by the private sector, or end up spending a shedload of taxpayers’ money fixing the problem himself. It’s not just business that’s dissatisfied. The Morrison government...

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Health insurance: paying to boost specialists' incomes

I think I could probably get to the end of the year just writing once a week about the many problems Scott Morrison faces, but doesn’t seem to be making any progress on. And that’s before you get to climate change. Take private health insurance. The public is terribly dissatisfied with it because it gets so much more expensive every year and because, when you make a claim, you’re often faced with huge out-of-pocket costs you...

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Morrison hasn't noticed that economic times have changed

Apparently, if you think Scott Morrison's refusal to use the budget to boost the economy is motivated by an obsession with showing up Labor by delivering a huge budget surplus, you’re quite wrong. No, he’s sticking to the highest principles of macro-economic management (which principles Reserve Bank governor Dr Philip Lowe doesn’t seem to understand). We now know this thanks to the first speech of the new secretary to the Treasury,...

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Treasury explains why we shouldn't worry about the economy

There’s a lesson for Scott Morrison in new Treasury secretary Dr Steven Kennedy’s first public speech this week: put the right person at the top of Treasury and they’ll defend the government’s position far more eloquently and persuasively than any politician could. The econocrat’s greater credibility demands they be taken seriously. I fear that time will show it's been a costly mistake by the government not to respond to Reserve...

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Insincere, misguided displays of concern make the drought worse

Sometimes I think our politics has got into a vicious circle: the worse our politicians behave, the more of us give up and tune out. But the less we monitor their behaviour, the worse and more lackadaisical the politicians become. Take the drought. Good politicians would see it as a recurring problem and try to find substantive ways of helping farmers cope with droughts in general; weak politicians settle for giving the impression...

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Morrison’s hang-ups make him a bad economic manager

Scott Morrison’s problem is that he gets politics – and is good at it – but doesn’t get economics. The Prime Minister doesn’t get that if he keeps playing politics while doing nothing to stop the economy sliding into recession, nothing will save him from the voters’ wrath. Neither he nor Josh Frydenberg seem to get that if we endure another year of very weak growth before they pop up next September boasting about their fabulous...

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Traffic congestion will continue until we're game to tax it

The governments of NSW and Victoria lost zero time in rejecting the Grattan Institute’s proposal that all state governments introduce “congestion charging” in their capital cities. But don’t imagine this unpopular idea will go away. It will keep coming back until we buy it. Australians and their political leaders have a record of trembling on the brink for decades before belatedly accepting the inevitability of upgrades to the...

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Politicians too poor at their jobs to fix poverty

You could be forgiven for not knowing this is anti-poverty week. The poor, as we know, are always with us – which is great because it means we can focus on our own problems and worry about the poor’s problems later. We can fight to protect our tax breaks, then get around to wondering about how easy we’d find it to be living on $280 a week from the Pollyanna-named Newstart allowance. But it’s not just our natural tendency to...

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Barring another financial crisis, it will be a long wait for QE

It’s amazing so many people are so sure they can see where the Reserve Bank is headed. Once interest rates are down to zero it will be on to QE - “quantitative easing” – and negative interest rates, they assure us. Don’t you believe it. What’s surprising is how heavily the self-proclaimed experts are relying on their vivid imaginations. Or maybe lack of imagination, falling back on the lazy market dealer’s assumption that we...

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Why surpluses aren't necessarily good, or deficits bad

According to the Essential opinion poll, only 6 per cent of people regard the size of the national surplus as the most important indicator of the state of the economy. I think that’s good news, but I’m not certain because I’m not sure what “the national surplus” is – or what the respondents to the poll took it to mean. They probably thought it referred to the balance on the federal government’s budget. But the federal budget...

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Why are the Viking economies so successful? They pull together

I’d like to tell you I’ve been away working hard on a study tour of the Nordic economies – or perhaps tracing the remnant economic impact of the Hanseatic League (look it up) – but the truth is we were too busy enjoying the sights around Scandinavia and the Baltic for me to spend much time reading the books and papers I’d taken along. But since I always like telling people what I did on my holidays (oh, those fjords and waterfalls...

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Why we don't get more joy out of our super

When one of our top econocrats gives a speech about behavioural economics, you know we’re making progress. Take the ever-present problem of income in retirement. “BE” explains both why it’s a major area of government intervention in our lives and how that intervention can be made more effective. One of the greatest limitations of conventional economics – based on the “neo-classical” model, which focuses on how prices are determined...

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