If you accept the Productivity Commission’s assumption that getting richer – “advancing prosperity” – is pretty much the only thing that matters, then the five priority areas it nominates in its five-yearly review of our productivity performance make a lot of sense.But when you examine the things it says we should do to fix those five areas, you find too much of its same old, same old, preference for neoclassical ideology over...
Monday, March 20, 2023
Friday, March 17, 2023
Ever wondered why your wages aren't rising?
It’s dawning on people that when the competition between businesses isn’t strong, firms can raise their prices by more than the increase in their costs, and so fatten their profit margins. What’s yet to dawn is that weak competition also allows businesses to pay their workers less than they should.In standard economic theory, it’s the intense competition between firms that prevents them from overcharging for their products and...
Wednesday, March 15, 2023
Don't miss the good news among the bad: we've hit jobs, jobs, jobs
Here is the news: not everything in the economy is going to hell. Right now, jobs, jobs, jobs are going great, great, great.The news media (and yours truly) focus on whatever’s going wrong – the cost of living, interest rates, to take two minor examples – because they know that’s what interests their paying customers most.This bias in our thinking exists because humans have evolved to be continually on the lookout for threats....
Monday, March 13, 2023
Why economists keep getting it wrong, but never stop doing sums
Why are economists’ forecasts so often wrong, and why do they so often fail to see the freight train heading our way? Short answer: because economists don’t know as much about how the economy works as they like to think they do – and as they like us to think they do.What happens next in the economy is hard to predict because the economy is a beehive of humans running around doing different things for different reasons, and it’s...
Friday, March 10, 2023
Can the critics prove higher profit margins are fuelling inflation?
There’s a big risk we’ll fail to learn a vital lesson from our worst inflation outbreak in decades. If inflation is such a scourge that we must pay a terrible price to get it back under control, why do we do so little to stop big companies from acquiring the power to raise their prices by more than needed to cover their rising costs?Economists are far more comfortable thinking about inflation at the top, macro level than the...
Wednesday, March 8, 2023
Relax, student loans show there's fate worse than debt
If you believe what you see in the media, our youth are groaning under the weight of debt they’ve acquired under the Higher Education Loan Program (HELP), alias the Higher Education Contribution Scheme. But I don’t believe every sob story I hear. Soft heart, hard head is my motto.The latest is an ABC report claiming HELP debt has helped entrench women’s economic disadvantage. And the Futurity Investment Group’s latest University...
Monday, March 6, 2023
RBA inquiry should propose something much better
The inquiry into the Reserve Bank, due to report this month, will be disappointing if it does no more than suggest modest improvements in the way it does its job. The question it should answer is: should we give so much responsibility to an institution with such a limited instrument – interest rates – and with such a narrow focus?In Reserve Bank governor Dr Philip Lowe’s lengthy appearance before the House of Representatives...
Friday, March 3, 2023
Now the hard part for the RBA: when to stop braking
In economics, almost everything that happens has both an upside and a downside. The bad news this week is that the economy’s growth is slowing rapidly. The good news – particularly for people with mortgages and people hoping to keep their job for the next year or two – is that the slowdown is happening by design, as the Reserve Bank struggles to slow inflation, and this sign that its efforts are working may lead it to go easier...
Wednesday, March 1, 2023
Don't waste sympathy on self-funded retirees ... like me
You probably haven’t noticed, but I never write about self-funded retirees without adding a pejorative adjective – “so-called” or, better, “self-proclaimed”. As worthy causes go, they’re at the top of their own list, but not high on mine.One day, a reader took me to task: “Why are you so down on self-funded retirees, Ross, when from what I can see, you’ll be one yourself when you retire?”Ahem, ah, yes, well... Some explaining...
Monday, February 27, 2023
The rich world should think twice about 'central bankism'
For the best part of 30 years, the governments of the advanced countries have outsourced the management of their economies to independent central banks. For many of those years, this change looked to have been a smart one. Now, not so much.If the central banks’ efforts to get on top of the huge and quite unexpected surge in inflation that followed the pandemic go too far, and the rich countries end up in a severe recession, the...
Friday, February 24, 2023
How about sharing the economic pain arround?
If you don’t like what’s happening to interest rates, remember that although the managers of the economy have to do something to reduce inflation, it’s not a case of what former British prime minister Maggie Thatcher called TINA – there is no alternative.As Reserve Bank governor Dr Philip Lowe acknowledged during his appearance before the House of Representatives Standing Committee on Economics last week, there are other ways...
Tuesday, February 21, 2023
Caring folk care about early learning. So do hard-nosed economists
So, what did you make of the Albanese government’s Early Years National Summit at Parliament House on Friday? What? You didn’t hear about it? Well, yes, it got little coverage from the media. Yet another case of us letting the urgent and the controversial crowd out the merely very important and the encouraging. Maybe it’s a pity Peter Dutton hasn’t said he was thinking of opposing it.In truth, the government’s election promise...
Monday, February 20, 2023
Central banking: don't mention business pricing power
Despite the grilling he got in two separate parliamentary hearings last week, Reserve Bank governor Dr Philip Lowe’s explanation of why he was preparing mortgage borrowers for yet further interest rate increases didn’t quite add up. There seemed to be something he wasn’t telling us – and I think I know what it was.We know that, as well as rising mortgage payments, we have falling real wages, falling house prices and a weak world...
Friday, February 17, 2023
Inflation is too tricky to be left to the Reserve Bank
The higher the world’s central banks lift interest rates, and the more they risk pushing us into recession, the more our smarter economists are thinking there has to be a better way to control inflation.Unsurprisingly, one of the first Australian economists to start thinking this way is our most visionary economist, Professor Ross Garnaut. He expressed his concerns in his book Reset, published in early 2021.Then, just before...
Wednesday, February 15, 2023
It's no wonder the young hate Boomers like me
As I get older, more parts of my body are giving me gyp and I spend more of my life seeing doctors, but the people I don’t envy are the young. They may be fit and keen, but everywhere they look they see problems.The big advantage of capitalism is supposed to be that it makes each generation better off than the last. But that’s breaking down before our eyes. The really harmful problem we’re leaving them is climate change, of course,...
Sunday, February 12, 2023
Interest rates: Lowe's not the problem, the system is rotten
When interest rates seem likely to be raised more than they need to be, it’s only human to blame the bloke with his hand on the lever, Reserve Bank governor Dr Philip Lowe. But it’s delusional to imagine that fixing the problem with “monetary policy” is simply a matter of finding a better person to run it.This assumes there’s nothing wrong with the policy of using the manipulation of mortgage interest rates as your main way of...
Friday, February 10, 2023
Globalisation has stopped, but it's not actually reversing - yet
In case you’ve been too worried about your mortgage to notice, the era of ever-increasing globalisation has ended. There’s a backlash against greater economic integration and a risk it will start going backwards, causing the global economy to “fragment”.The process of globalisation involves the free flow of ideas, people, goods, services and financial capital across national borders, leading to economic integration. But, as a...
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