Sandpit

July 6th, 2015 1 comment

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

Categories: Regular Features Tags:

Monday Message Board

July 6th, 2015 2 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

Backing down on Greece’s debt is the safest, most rational option

July 6th, 2015 37 comments

I wrote this for The Guardian and Crooked Timber in response to the Greek referendum result.

Lots of people have raised the suggestion of applying game theory to the the Greek debt crisis. I haven’t attempted this, reflecting my general scepticism about game theory in the absence of a well-defined strategy space. But now the Greek government and public have made, what is, in effect, a final move. In view of the No vote, Syriza can’t accept a deal that doesn’t include an explicit debt write-off or one that obviously crosses its stated red lines. Within those parameters, its clearly eager for a face-saving compromise.

For the other side (effectively the Troika and the German government), since Syriza’s move has already been made, the problem has now been reduced to one of decision under uncertainty, which is something I am comfortable with. More precisely, it’s a choice between a “safe” option, with an outcome that is fairly predictable, and a “risky” option where the outcome is uncertain.
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Categories: Economics - General Tags:

Locke and the Declaration (crosspost from Crooked Timber)

July 5th, 2015 2 comments

I didn’t take part in the book event on Danielle Allen Our Declaration, except as a commenter. But, as it happened, I converged on some of the central questions by a different route. For some time now, I’ve been writing critically about John Locke and his propertarian theory of liberalism. Increasingly, I’ve come to the view that Locke is best seen as an American rather than an English political theorist, even though he was an absentee owner rather than an American resident.

Further, while his writings appear liberal if interpreted in the English context, and if attention is focused on the passages where he is seeking to diminish the power of the English monarchy, his crucial contributions to the theory of propertarian liberalism are his justifications of expropriation and enslavement in the American context. The combination of the two made him the ideal theorist for those who wanted a Declaration of Independence that justified rebellion against the British monarchy, in combination with rule by a slave-owning aristocracy in the newly independent country.

James Wilson’s contribution to the Daniel Ellen seminar, The Declaration of Independence isn’t egalitarian enough explores many of the issues, as does Gabriel Winant.

I’ve made a start to spelling out the arguments in a piece for Jacobin magazine, entitled John Locke Against Freedom, which has given rise to some interesting discussions on Facebook, Twitter etc. Chris Bertram has raised some effective criticisms, and hopefully will spell them out in more detail later on. A couple of notable points, with partial responses

* I’ve overstated the extent to which Locke’s influence was confined to the American context, although it remains clear that his political theory mattered more in that context than in England

* Even if Locke himself advocated and benefited from expropriation and slavery, it’s not obvious (as I assert) that his theory of classical liberalism necessarily entails these things. I plan to spell out the argument in more detail soon.

Categories: Philosophy Tags:

The IMF: An inexcusable, incorrigible failure

July 4th, 2015 47 comments

Chris Berrtram at Crooked Timber has already pointed out the failure of the core European institutions in their response to the global financial crisis. One excuse that can be made for these institutions is that they are still in the process of development, and were ill-prepared, intellectually and institutionally, for an event so far outside their experience. The ECB and EC developed in a period when controlling inflation and stabilizing government debt were the key imperatives, and they responded to the crisis accordingly.

No such excuse can be made for the third member of the Troika, the International Monetary Fund. The IMF has understood from the start that the austerity policies it has imposed are economically unsound and a repetition of past failures. And yet it has been unwilling and unable to do anything else.

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Economists call on climate change policy

July 2nd, 2015 66 comments

I’ve just signed a statement drawn up by a group of economists from the Toulouse School of Economics and the Université Paris-Dauphine, in advance of the current COP21 international negotiation. The aim of the statement is to encourage the parties to aim for a more comprehensive and economically effective agreement that would ultimately supersede the patchwork of voluntary commitments being put forward at present. While the commitments being made for COP21 represent a huge advance on the vague aspirations that emerged from Copenhagen, we should not lose sight of the ultimate goal of decarbonizing the global economy in a way that minimizes the economic costs by taking advantage of the power of price mechanisms.

From an Australian viewpoint, the most important part of the Call is Part 3: “Free rider” behavior must be hindered. The current government’s attempts to position Australia as a free rider on the efforts of others cannot succeed in the end, and will only do Australia harm.

If you’re a professional economist and agree with Call, you can sign it here. More generally, it’s open for discussion in the comments thread.

Categories: Economics - General, Environment Tags:

Happiness and unhappiness

June 30th, 2015 53 comments

I have a chapter in a newly released book on happiness, extracts of which have been published in The Conversation. My argument, summed up as Measures of happiness tell us less than economics of unhappiness, is a reworking of points I’ve made in the past. In particular, I argue that it’s more useful to think about removing avoidable sources of unhappiness, and that has been the great success of social democracy and the welfare state.

Categories: Books and culture, Life in General Tags:

A progressive alternative economic agenda

June 26th, 2015 194 comments

This is a statement released yesterday and endorsed by a group of unions and individuals, including me. It calls for a progressive alternative economic policy. It’s a statement of principles rather than a program, and essentially a restatement of the social democratic position that represents the best of the Australian labor movement, free of both dogmatic leftism and the capitulation to market liberalism we’ve seen over the past thirty years or so.

A program developed on these principles would, I believe, be electorally popular if only we could get it before the public. But the policy elite, including journalists and the press, remain under the spell of market liberalism, despite its evident failures. So, our public debate will continue to be dominated by silly pointscoring about debt, deficits and the need for “reform”.

The full text is over the fold (the link goes to a properly formatted version)

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Categories: Economic policy Tags:

Adani Galilee Basin project on hold: threat or alibi?

June 25th, 2015 36 comments

In an interesting sequence of events, Adani has halted engineering work related to its proposed Carmichael mine in the Galilee Basin.

Last week, it appears, Adani sent out notices to our major engineering contractors, including WorleyParsons, Aecon, Aurecon and SMEC, to stop work. A team of up to 40 engineers at WorleyParsons’ Brisbane office, which was working with Aecon on the rail joint venture, was among those pulled off the project. No public announcement was made.

Yesterday, the Guardian revealed the stopwork, citing “sources”. Adani declined to comment

Today, Adani is claiming that the stopwork was due to delays in regulatory approvals, a claim denied by the Queensland government. It’s worth noting that the new Labor government quickly resolved the biggest outstanding issue for Adani’s rail line and port expansion, namely where to dump the dredging spoil from the port. The solution was neat – they offered land that had been reserved for an expansion proposed by BHP Billiton, who have abandoned the idea, as have most of the other big players.

So, there are two possible explanations. One is that Adani is pressuring governments to hurry up with the threat of bad publicity about putting the project on hold, lost jobs and so on. But if so, why not make a big splash with the announcement. The other, more plausible in my view, is that Adani is preparing to cut and run, and wants to be able to blame government interference rather than its own misjudgement of the market.

Categories: Economics - General Tags:

How about that hiatus?

June 23rd, 2015 132 comments

The US National Oceanic and Atmospheric Administratioh has just released its global climate analysis for May 2015. The results

May 2015 was

* The warmest May on record globally
* The warmest May on record on land
* The warmest May on record on the oceans
* The warmest May on record in the Northern Hemisphere
* The warmest May on record in the Southern Hemisphere

Also, the warmest March-May, Jan-May and (I think) 12-month period in the record.

Comment is superfluous, but don’t let that stop you.

Categories: Environment Tags:

An optimistic view on climate change

June 23rd, 2015 65 comments

Regular readers will be aware that I have a generally optimistic disposition. You may wish to bear this in mind when you read this Inside Story piece arguing that the prospects are good for stabilising global greenhouse gas concentrations at 450 ppm.

On the whole, though, I think excessive pessimism is a bigger problem than over-optimism. As I’ve argued before, I think lots of people have locked themselves into positions (eg advocacy of geoengineering, or belief in the end of industrial civilisation) that are based on the assumption that stabilisation is impossible. Many of these people are not open to evidence that stabilization is feasible, and even likely.

There’s a strong case that we should do better than 450 ppm, with a common ‘safe’ figure being 350 ppm. Since we passed that level some time ago, that requires a long period of negative net emissions, which cannot easily be achieved with current technology. Still, if net emissions are reduced to zero in the second half of this century, and some technological advances are made over the next fifty years (a plausible assumption if we put in some effort), even 350 ppm might be feasible.

Australia is dragging the chain under the Abbott government, but even Abbott seems to be feeling the international pressure judging by recent reports. With luck the last couple of years will turn out to have been a temporary detour in progress towards decarbonization.

Categories: Environment Tags:

Reversing reverse parking (update)

June 22nd, 2015 42 comments

Back in 2013, I gave a rare nod of praise to the Newman government for a proposal to get rid of reverse parallel parking in the test for new drivers. I’m happy to say that this has actually happened. The new test will focus on safe driving, rather than on skills that might come in handy for drivers, like reverse parking or changing the oil.

The original post is over the fold

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Categories: Life in General Tags:

In the press

June 16th, 2015 116 comments
Categories: Economics - General, Environment Tags:

To help poor people, give them money (Draft excerpt from Economics in Two Lessons)

June 16th, 2015 97 comments

Here’s another draft excerpt from my book in progress, Economics in Two Lessons. To recap, the idea of the book is to begin with the idea that market prices represent opportunity costs for the households and business who face them (Lesson 1), and then go on to explain why market prices won’t in general equal opportunity costs for society as whole (Lesson 2). A lot of the book will be applications of the two lessons, and this section is an application of Lesson 1.

As before, all kinds of comment and criticism, from editorial points to critiques of the entire strategy are welcome.

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Categories: Economics in Two Lessons Tags:

John Locke, an enemy of freedom

June 15th, 2015 65 comments

“Freedom Commissioner” Tim Wilson has been quoted in The Australian saying that Australian schoolchildren ought to learn more about classical liberal theorists like John Locke. While loath to squeeze yet more material into an already overcrowded curriculum, I’d certainly be glad if there was more awareness of Locke’s actual ideas and actions, as opposed to his prevailing image as an early apostle of freedom. A proper treatment of Locke would have to explain how

* His theory of natural rights in property was designed to justify the expropriation of indigenous populations
* His advocacy of freedom included support for slavery
* His theory of religious toleration excluded atheists and Catholics
* His theory of political freedom did not extend to freedom of speech.

How then did Locke get such a high reputation? The answer isn’t all that mysterious. Locke was closely involved in the British colonisation of North America, both as an investor and as a participant in political activity such as the drafting of the Constitution of the Carolinas, which ratified the expropriation of the indigenous population and enshrined the absolute power of slave-owners.

When the slave-owning colonists achieved independence from the British Crown, it was natural for them to look to Locke to provide the basis for their political theories (theories that did not preclude the passage of the Alien and Sedition Acts restricting political freedom). Locke then benefitted from the same historical amnesia that has absolved all the US founders from their role in maintaining and extending slavery.[1]

Instead of Locke, it might be better for students to learn about that old-fashioned Tory, Dr Samuel Johnson, who remarked “How is it that we hear the loudest yelps for liberty from the drivers of Negroes”, and whose friendship with his Jamaican servant, Francis Barber, a former slave, was a striking testimony to his character.

fn1. of course, the American Revolution embodied much nobler hopes than those of the Southern aristocracy that dominated the early years of the United States. Realising those hopes took decades of struggle and a bloody civil war.

Categories: Philosophy Tags:

Economics in Two Lessons

June 12th, 2015 56 comments

I’m still redrafting the opening section of my book, on the concept of opportunity cost. Some applications to specific problems coming soon, I promise. In the meantime, comments and criticism, including editorial corrections and nitpicks, much appreciated.
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Categories: Economics in Two Lessons Tags:

Big Oil changes sides in the War on Coal

June 11th, 2015 44 comments

As the time left to save the planet from uncontrolled climate change gets shorter and shorter, the previously glacial pace of movement on the issues has speeded up. One of the most important, and surprising, developments has been a string of increasingly sharp attacks on coal, coming from representatives of major oil and gas companies. As this (rather excitable) piece explains, the reason is simple. The policy debate has crystallised around the idea of a carbon budget – the remaining amount of CO2 that can be emitted while keeping atmospheric concentrations at levels consistent with 2 degrees of warming or less.

Obviously, if such a budget is imposed and adhered to, a lot of fossil fuel resources, currently sitting on corporate account books, will have to be left in the ground. Unsurprisingly, fossil fuel companies have done their best to prevent such an outcome, promoting science denial, and encouraging national governments to shirk their share of the burden with the argument that others should do more. Such a strategy implies a united front among fossil fuel owners, since the longer the imposition of a budget can be delayed, the better off they all are.

The recent break in the fossil fuel coalition therefore marks a new stage. Rather than try to expand the budget for all fossil fuels, the oil and gas companies have decided to get as much as possible for themselves, which means shutting down coal as fast as possible. The facts that have made such a strategic switch sensible are many and varied but the most important are

(a) the increasing recognition of the health effects of burning coal which gives national governments like that of China a strong incentive, independent of climate change, to reduce coal use
(b) the fact that the most immediately promising alternatives to fossil fuels are renewable sources of electricity which compete directly with coal, and are, to a significant extent complementary with gas (as a dispatchable source, gas-fired electricity tends to offset problems associated with the variability/intermittency of renewables.

What’s the appropriate response here? In the end, it will be necessary to phase out fossil fuel use altogether. But the logic of tackling coal first is inescapable. If that logic drives a wedge in the fossil fuel coalition, so much the better for all of us.

Categories: Environment Tags:

Monday Message Board

June 8th, 2015 137 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Since it’s notionally the Queen’s Birthday today, I’d be interest in thoughts about the prospects for, and politics of, an Australian republic.

Categories: Regular Features Tags:

Sandpit

June 8th, 2015 35 comments

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

Categories: Regular Features Tags:

The end of the “hiatus”

June 8th, 2015 52 comments

Graham Lloyd in the Oz (not going to link) is pretty upset about the latest research showing that there is no significant difference between the rate of global warming over the 15 years since 2000 and that over the 50 years 1950 to 2000. The finding is the result of some corrections to data on sea surface temperatures, with the result that the estimated temperature at the beginning of the period is higher (so warming since 1950 is lower) and the fact that the period since 2014 has been the warmest on record.

Lloyd and others have popularized the term “hiatus” to refer to the slowdown which could at least plausibly be found in the data prior to this update and correction. Climate denialists capitalized on the ambiguity in this term to keep alive their beloved, but long discredited, “no warming since 1998, no significant warming since 1995” talking point.

For those interested, there’s a good analysis at Real Climate.

Categories: Environment Tags:

Nuclear power in Australia

June 7th, 2015 44 comments

I’ve decided to make a submission to the South Australian Royal Commission into the nuclear fuel cycle. I can’t actually submit until I find a JP or similar to witness it. This is a minor inconvenience for me, but may be a big problem for plenty of interested groups (for example, indigenous people). On the upside, I have time to ask for comments, and maybe make changes in response. This thread will be open to discussion of any issues related to nuclear power. However, in the event of lengthy two-person debates emerging, I’d ask the parties to move to the sandpits and leave room for everyone else.

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Categories: Environment, Oz Politics Tags:

Profit and public health

June 4th, 2015 74 comments

Amid the abandonment of tariff protection and the continued assaults on trade unionism, one union/lobby group has been consistently victorious. The Pharmacy Guild has managed to restrict competition so successfully that it’s impossible to open a pharmacy if it might hurt the profitability of an existing business, even if that business is failing to serve a significant group of customers. I ran into an example when I was at James Cook University in Townsville. A request for an on-campus pharmacy was rejected because it was within the market area claimed by a suburban pharmacy, more than a kilometre away and inaccessible by public transport.

Far more important to the Guild is the imperative of keeping supermarkets out of the pharmacy business. The key argument is that supermarkets are just businesses, happy to sell anything to make a buck, whether it’s cigarettes or cancer medications.

So, I was interested to read the Guild’s reaction to a proposal that medical professionals should stop prescribing homeopathic products. Whatever you might think about alternative/complementary medicines in general, homoepathy is plain quackery, combining a magical theory of medicine with the preposterous physics of water memory. Unsurprisingly, research has proved beyond any doubt that it’s no better than a placebo. So, the Royal Australian College of General Practitioners (RACGP) has formally recommended GPs stop prescribing homeopathic remedies and says pharmacists must also stop stocking such products.

The Guild’s reaction:

it is not a regulatory authority, and as such there will be no recommendation backing RACGP’s call for homeopathic products to be taken off the market.

In other words, selling medicine in the same shop as alcohol is unthinkable, but it’s entirely OK for a health professional to promote and sell water as a treatment for serious illness.

This episode demonstrates, to anyone who cares to look, that the Pharmacy Guild is (and in fact claims to be) nothing more than a rent-seeking lobby group, whose sole concern is the profitability of its members. As the Tobacco Institute of Australia would be quick to point out (if it were still around), there’s nothing illegal about that. But when profits and public health come into conflict, the Guild and the Institute are on the same side.

My response to Grattan on solar PV

June 1st, 2015 71 comments

Crikey has published my reaction to the Grattan Institute’s Report on solar PV (over the fold). My summary

the headline finding of the Grattan Report is totally wrong, even ignoring all the criticisms that have been made of the analytical framework. The report should be retracted and rewritten.

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Categories: Economics - General Tags:

Sandpit

June 1st, 2015 23 comments

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

Categories: Regular Features Tags:

Monday Message Board

June 1st, 2015 50 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

Opportunity cost: A Fabian idea?

May 26th, 2015 124 comments

As part of the research for Economics in Two Lessons, I’m looking in to the history of some of the ideas I’m talking about, including Pareto optimality, externalities and of course opportunity cost. I’m undecided as to whether I’ll include this material, perhaps as starred (skip if you feel like it) sections, or in an Appendix. Suggestions on this point are welcome.

My research on the intellectual history of opportunity cost has so far gone no further than Wikipedia, which attributes the term to Friedrich von Wieser, an Austrian economist in both the national (he was Minister for Finance there in 1917) and theoretical senses. Turning to the article on von Wieser, I was surprised to read that he put forward an argument very similar to mine regarding the relationship between opportunity cost and the distribution of wealth

Instead of the things that would be more useful, there are things that pay better. The greater the difference in wealth, the more striking are the anomalies of production. The economy provides luxury to the capricious and greedy, while it is deaf to the needs of the miserable and poor. It is therefore the distribution of wealth that decides what will be produced, and leads to a consumer of a more anti-economic variety: a consumer wastes on unnecessary, guilty enjoyment that which could have served to heal the wounds of poverty. —Friedrich von Wieser, Der Wert Natürliche (The Natural Value), 1914.

It turns out, even more surprisingly to me, that von Wieser was linked to a Viennese group of Fabians.

I’m still trying to digest this, and work out where to go next with it. Can anyone point to useful information about von Wieser?

Categories: Economics in Two Lessons Tags:

Standard Chartered and Galilee

May 23rd, 2015 63 comments

Among the international banks that might finance Adani’s massive Carmichael coal mine, and the associated rail line and port development, the most significant is probably Standard Chartered of the UK, currently Adani’s largest lender outside India. The media is providing mixed messages here.

Standard Chartered has announced its intention to “review” its involvement, stating, according to the Financial Times that

We will go no further with this until we are fully satisfied with the environmental impact of this project.

The chairman added that

He added that the bank was in “active dialogue” with the Australian government about the issue.

I’d normally read this as a euphemism for “we are going to pull the plug, like everyone else”, except that the Fin reports that the bank is.

running a now fairly discreet process because of the line-in-the-sand assault by the environmental defenders on banks that support coal

We’ll find out soon enough, I guess, given that Adani claims that it will start dredging in September. But given that the previous CEO and Chairman were forced out a few months ago, mainly because of bad loans to mining companies, it’s hard to see what the bank could gain by extending more credit to a venture that’s both financially marginally and politically toxic, or how it can claim to have satisfied itself on the environmental impact of a mine that will contribute as much to global warming as all but a handful of national economies. Surely they don’t believe that they will please anybody by announcing that the Abbott government has assured them that everything is fine.

Categories: Environment Tags:

Economics in Two Lessons: Draft Preface

May 23rd, 2015 38 comments

Over the page, the draft preface for my book-in-progress, Economics in Two Lessons

I got some great comments first time round, but I can see it would be easier if I presented my drafts in a more orderly fashion, though not necessarily sequential. So, I’ll begin at the beginning. Comments, both critical and favorable, much appreciated.

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Categories: Economics in Two Lessons Tags:

The end of coal

May 23rd, 2015 23 comments

I have a piece in The Conversation, looking at the continued fall in Chinese demand for coal, and a highly relevant IMF study confirming previous findings that, even disregarding climate change, the health costs of burning coal make it more costly than renewables. So, the idea that the path to development lies through coal is a nonsense. The Chinese government has recognised this and acted, and the same will be true in India before too long.

I’ve reprinted over the fold.

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Categories: Economics - General, Environment Tags:

Queensland in recession?

May 22nd, 2015 6 comments

There’s been a bit of fuss over the announcement by Queensland Treasurer Curtis Pitt that Gross State Product contracted during the last two quarters of 2014, which were also the last two full quarters under the Newman LNP government. Two quarters of negative growth is a common criterion for declaring a recession, and much of the controversy concerns Pitt’s use of this term. Is it justified. Obviously, the LNP and their allies would like to prove that it is not, and have made vociferous attempts to do so.

Some can be dismissed pretty easily as bluster. Joe Hockey, demonstrating the grasp of quantitative analysis for which he has become famous, declared Pitt’s claim “complete rubbish”. His supporting arguments were a mixture of irrelevance “There’s certainly no evidence of that at a national level” and wishful thinking “the bottom line is, we want Queensland to grow”.

Similarly, the claim I’ve seen quoted by Opposition spokesman Langbroek that the numbers exclude net exports appears to be just plain wrong.

A more serious objection, at least potentially, is that these figures are derived from preliminary Queensland Treasury figures, rather than the ABS numbers due in June. June isn’t far away, and will either confirm the preliminary numbers or not. It will be interesting to see if anyone is willing to eat humble pie.

A more interesting question, to my mind, is whether two quarters of negative growth is a good definition of recession. This article (in the Murdoch Courier-Mail, but authored in part by the excellent Paul Syvret, suggests not.

According to the data released yesterday, Queensland was by strict definition in recession in the latter months of 2014, but it was not one accompanied by waves of retrenchments (outside sections of the resources sector), business failures and plunging consumer sentiment.

Part of the problem here is that the only recession most Australians can remember is that of the early 1990s, long and deep and followed by a jobless recovery. Before that, the recessions of the 1970s and 1980s were also severe. The last time we had a mild recession, of the kind for which the two-quarter rule was proposed, was back in the 1960s.

This is fairly accurately summed up in the same article

in the second half of last year we had gradually rising unemployment, and a more marked slowing in business investment as major resource sector projects tapered off. At the same time public sector investment was dragging on growth as the government concentrated on fiscal consolidation ahead of its planned privatisation and asset recycling program.

To sum up, the numbers are bad enough to demolish any idea that, to the extent that governments have any influence on the economy, the LNP government and its federal counterpart were doing a good job for Queensland in 2014. But we already knew that the economy was slowing down with the end of the mining boom.

Categories: Economics - General Tags: