Archive for the ‘Economic policy’ Category

Save the weekend! (now with link)

October 12th, 2017 18 comments

I have a piece in The Conversation about the decision to cut weekend penalty rates. This decision needs to be put in the context of forty years of policy aimed at pushing down wages, eroding conditions (such as the weekend) and weakening the position of unions.

I talked to Fran Kelly on ABC RN Breakfast just now.

Categories: Economic policy Tags:

Who will pay for Adani’s infrastructure? We will

October 7th, 2017 19 comments

A couple of days ago, it was announced that the Fly In Fly Out workforce for Adani’s putative Carmichael mine would be split between Townsville and Rockhampton. Since I’ve long argued that the mine is highly unlikely to go ahead, I didn’t read the news stories closely. So, I missed the fact, buried in the middle of this ABC news report, that the deal requires Townsville and Rockhampton councils to build Adani an airstrip at a cost of $20 million. It turns out that not everyone in Townsville is happy about having their money spent on a project far away from the city.

This outcome is consistent with what I and others have been arguing for some time. Adani has to keep the project alive to avoid recognising the loss of the money its spent so far, and admitting that coal volumes at its Abbot Point port will be far lower than planned. On the other hand, there’s no point throwing good money after bad. So the strategy is to move slowly on the development, building a railway with money from the Commonwealth government and, now, an airstrip paid for by the people of Townsville. When, with much regret, the mine is deferred indefinitely, the Australian public will be the proud owners of a railway to nowhere, with the option of a flight back.

Categories: Economic policy, Environment Tags:

Three observations on guaranteed and universal basic income

October 3rd, 2017 27 comments

I’ve been working for a while on the idea of Universal Basic Income (UBI), and the closely related alternative of a Guaranteed Basic Income (GBI), in which the payment is phased out as income increases. I’ve now developed a very simple model to illustrate some of the crucial points. Here are three observations. Only Observation 2 requires the model, and the assumption that the distribution of income is broadly similar to that prevailing in Australia today.

Observation 1: Any UBI scheme can be replicated by a GBI with the same effective marginal tax rates, and vice versa

Observation 2: A GBI equal to 40 per cent of average income, with a phaseout rate of 40 per cent, would require additional transfer payments equal to between 8 and 10 per cent of national income.

Observation 3: A UBI equal to 40 per cent of average income, with no phaseout, would require additional transfer payments equal around 30 per cent of national income, but would have the same effective marginal tax rates as a GBI.

A rare outbreak of unanimity on PFI

September 19th, 2017 13 comments

I’m doing some work on privatisation and wanted to look at recent UK experience with the Private Finance Initiative. So, I Googled for PFI in the last year (as Google personalizes searches, your mileage may vary). The result is a surprising degree of unanimity. Across the political spectrum, there is agreement that

* PFI is a disaster, enriching private firms at the expense of the public
* The other side is (mostly) to blame

Read more…

Categories: Economic policy Tags:

How to replace the National Electricity Market

September 12th, 2017 42 comments

There are quite a few proposals around to intervene in, or repair, the National Electricity Market. In my view, it’s much too late for that. We need to scrap the NEM and start on a new path towards a zero-carbon electricity and energy system. I’ve written down some preliminary thoughts. I’d appreciate comments and also suggestions as to how I might push this idea along a bit.

Read more…

Categories: Economic policy, Environment Tags:

Shorten changes the game on electricity

September 8th, 2017 64 comments

Somewhat lost in the noise surrounding yesterday’s High Court decision on the equal marriage survey was Bill Shorten’s statement that privatisation of the electricity industry in the 1990s was a major contributor to the current disaster. He’s essentially correct, though ‘privatisation’ has to be taken as shorthand for ‘the process of disaggregation and market reform of which privatisation was a central part’. I’ve been over this ground many times, including here and here, and have argued that renationalisation is the only solution.

Unsurprisingly, there’s been pushback from the Oz, which ran a piece headlined ‘Bill Shorten’s power play debunked” with the lead ‘Bill Shorten’s claim that the electricity crisis has been driven by privatisation has been dismissed by business leaders and energy experts,’.

It’s remarkably lame job.

The only business leader quoted is Tony Shepherd, formerly of the BCA, and last seen heading the disastrous Commission of Audit. Next up is Labor deserter, Michael Costa, followed by Jeff Kennett. Both Shepherd and Costa are climate denialists, which instantly destroys their credibility. Costa and Kennett have already had their privatisation policies rejected by voters, so it seems unlikely that their criticism will scare Shorten. In fact, he’s already hit back*

The only serious expert quoted is Tony Wood, but he doesn’t really help the Oz. He’s quoted as saying “Grattan Institute energy director Tony Wood rejected privatisation as the cause of the energy market crisis. He said 15 years of political disagreement on climate change policy and regulated monopolies in the electricity distribution networks were contributors to the current electricity crisis. He also pointed to the fact that in Queensland, the Palaszczuk government in June was forced to order its state-owned power generator Stanwell to pursue lower profits during heatwaves because of spikes in power prices.”

The first point is accurate enough, but the point about Queensland proves the opposite of what the Oz wants us to believe. It’s only because Stanwell is publicly owned that the Palaszczuk government can order it not to exploit the mess that is the National Electricity Market.

Turning to the politics of the issue, Shorten’s recasting of the debate is going to cause Turnbull a lot of problems. He’s made energy a central issue,, and is convinced that it’s a winner for the government. And, having attacked Shorten as wanting to turn Australia into North Korea, they can scarcely leave the privatisation debate.

This is likely to be disastrous for the government. Not only is privatisation politically toxic, but the government has already undermined any possible credibility on the issue with speculation that it will finance a new coal fired power station, along with Snowy 2.0 and other interventions. Once the debate moves on to the real issue of the failure of market reform, the culture war rhetoric on which the government has relied so far will be totally irrelevant.

* We shoudn’t pay too much attention to comments threads but it’s notable that even the Oz commentariat, almost uniformly made up of rightwing climate denialists, is far from united in support of privatisation.

Categories: Economic policy, Oz Politics Tags:

Restating the case against trickle down (updated)

September 2nd, 2017 16 comments

I’ve just given a couple of talks focusing on inequality, one for the Global Change Institute at UQ, following a presentation by Wayne Swan and the second at a conference organized by the TJ Ryan Foundation (including great talks by Peter Saunders, Sally McManus, and others), where I was responding to a paper by Jim Stanford from the Centre for Future Work. Because I was speaking second in both cases, I didn’t prepare a paper or slides, but tailored my talk to complement the one before. That can be a high risk strategy, but in this case, I think it worked very well.

It led me to a new, and I hope improved, statement of the case against ‘trickle down’ theory. As always, the most important part of a refutation is a clear statement of the theory you propose to refute, so that it can be shown where it falls down. After the talks I wrote this up, and it’s over the fold. Comments and constructive criticism much appreciated.

Read more…

Universal Basic Income: What to aim for and how to get there

August 22nd, 2017 20 comments

That’s the title of a presentation I gave to a workshop on UBI run by the Academy of the Social Sciences in Australia. I wasn’t able to attend in person so I called in for my session. The result is that I can’t give a summary of the event, but Tim Hollo has one here. My presentation is here. Also, there’s a Facebook group and a couple of useful links.

Categories: Economic policy Tags:

Left hand, meet right hand

August 17th, 2017 13 comments

A crucial part of the case for the Adani coal project is the “pit to plug” strategy in which companies in the Adani Group would mine coal in the Galilee Basin, transport it by rail to Abbot Point, ship it from there to India, burn it in Adani Power’s coal-fired power stations and sell the generated electricity to Indian consumers. This claim is important to Adani for three reasons

* First, it is supposed to mean the big decline in the world price of coal since the project began is not a problem. The idea is that Adani Power will take the coal regardless of price
* Second, it undercuts arguments that exports from the Galilee Basin will compete with other Australian coal mines, leading to a loss of jobs
* Finally, it is central to the argument that the Adani project is necessary to end energy poverty in India.

All of these arguments have been rehearsed at length in the Australian media. But it seems that the memo hasn’t reached Adani Power in India. A month or so ago, they span off their Mundra Power station, loaded with a lot of debt, into a subsidiary, and offered a 51 per cent interest to the Gujarat government for a nominal price. Now, they have announced a strategy to get access to allocations of domestic coal and “do away the need for importing coal”.

Meanwhile, it’s interesting to take a look at the Adani jobs portal, announced with some flourish a month or so ago. When it was set up, there were only a couple of dozen Adani jobs on offer. Now there are none at all, though there are a handful on SEEK. AFAICT, the only people employed at the Townsville Regional Headquaters are 80 or so people who have been moved there, presumably from Brisbane.

Given the lavish promises of hundreds or even thousands that have been made to the people of NQ, isn’t it time Adani put its money where its mouth is?

Categories: Economic policy Tags:

Tertiary education should be universal, non-profit and free

July 28th, 2017 28 comments

Last week, I spoke at the Australian Conference of Economists in a panel on Higher Education Policy. My talk was covered by John Ross of The Australian Higher Education Section which, unlike much of the Oz, seems still to be more interested in accurate reporting than political pointscoring. I talked to Steve Austin of ABC Radio Brisbane

To sum up my main points

* As a society we should set a goal of providing appropriate tertiary education (that is, post-school through university or TAFE) for all young people. Instead, policy is still heavily influenced by nostalgia for the days when working class kids (actually, just males) could leave school at Year 10 and be apprenticed to a trade, middle class kids could leave school at Year 12 and get a nice safe job in a bank, and universities were the preserve of an elite, either smart enough to jump the hoops to get in or with parents rich enough to pay

* The provision of a universal publicly funded service like this should not be entrusted to for-profit firms, as has been shown by the VET FEE-HELP disaster

* We should abandon the market liberal rhetoric of choice, competition and incentives and instead focus on professionalism and a service ethos.

* Once we get close enough to the goal of universal tertiary education, we might as well finance it through the tax system as we do with schools, and develop some special policies for those who, for one reason or another, miss out. I’ll post more on this sometime.

Categories: Economic policy Tags:

A couple of quick links on inequality

July 25th, 2017 5 comments

The issue of inequality is finally attracting some attention. I have a piece today in Inside Story, an update of a post here from 2012, on inherited wealth. Also, Greg Jericho in The Guardian and Bernard Keane in Crikey (paywalled) refute the attempts by the government and its apologists to claim that inequality is not growing in Australia. I’ll have a bit more on this soon, I hope.

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Governments are buying up where the market has failed. Is this the end of privatisation?

July 5th, 2017 8 comments

That’s the title of my latest in The Guardian. The write-off sums it up nicely.

What we are seeing is the inevitable chaos that follows the collapse of a dominant orthodoxy. But we shouldn’t see it as a new dawn of socialism

Categories: Economic policy Tags:

OECD vs Globalisation

June 16th, 2017 11 comments

Not quite, but the OECD has finally recognised that globalisation isn’t currently working to deliver improved living standards for everyone, a fact implicit in the title of its latest report Making Globalisation Work: Better Lives for All, I have a piece in Inside Story, headlined: The OECD joins the backlash against unfettered globalisation looking at a recent report they’ve issued. The subheading is

But can an organisation that has promoted a globalised world economy take on the massively powerful finance sector?

(Hint: Probably not).

Categories: Economic policy Tags:


June 16th, 2017 11 comments

I’ve been flat out for the last couple of weeks, and haven’t had time to post. But I’ve finally found enough time to read the Finkel Review into the Future Security of the National Electricity Market (NEM). There are four inter-related points that come out of the report

1. The NEM has failed in its own terms, that is, with respect to the objective of providing reliable and affordable electricity. The Review recommends a variety of tweaks to the market rules, but the core measure is a shift to central planning by a new Energy Security Board, which effectively overrides the multiple existing market bodies. Not surprisingly, given the political environment the Review ignored my submission calling for renationalization of the Grid, but the logic is the same.

2. We need a carbon price, in one form or another, if we are to reduce emissions in line with our commitments. Given that all economy-wide options have been ruled out, we may as well start with an electricity specific policy. Within electricity, the existing Renewable Energy Target is a crude kind of price mechanism, with only two prices, one for renewables and the other for non-renewables. But, if we tweak that a bit, we can replace the largely irrelevant notion of “renewability” with emissions-intensity, and we have something like a carbon price. I pointed this out a couple of years ago. The Clean Energy Target Finkel Review doesn’t quite get there, but it goes most of the way.

3. The only way to get lower wholesale electricity prices is to expand renewables and let the owners of coal-fired power station take a corresponding hit to their profits.

4. Policy uncertainty has been at least as big a problem as bad policy. This was most obviously true of the Abbott government’s attacks on the RET, which stalled investment in renewables, while doing nothing for coal. Abbott is correctly blamed for many of our current problems. The implication is that a bipartisan compromise is better than holding out for the right policy, only to see it reversed after the next change of government. Whether that judgement stands up remains to be seen. If Turnbull does indeed face down Abbott, Abetz and the rest, and can reach an agreement with Labor, the arguments of the Review will be vindicated. And, with the denialists sidelined, it will become obvious that we need and can easily achieve more ambitious targets.

Categories: Economic policy, Environment Tags:

What is Adani thinking?

June 8th, 2017 31 comments

A couple of days ago, Gautam Adani made the long awaited announcement that the Adani board had decided to proceed with the Carmichael mine-rail project in the Galilee Basin. As usual there was an asterisk. Construction work won’t start until Adani can get financial backing. This was previously supposed to in June 2017 (that is, within weeks) but has now been deferred until 2018. Still, Adani has opened a head office in Townsville, promises to hire up to 250 staff and is also saying it will begin pre-construction works like land clearing in the September quarter.

But on the same day, unnoticed by almost the entire Australian press, with the exception of Peter Hannam at the SMH, the board of Adani Power, the putative buyer of Carmichael Coal, made a much more consequential decision. They are spinning off the 4GW Ultra Mega Power Plant* at Mundra, along with a huge load of debt, into a subsidiary, provisionally called Adani Power (Mundra). The plan it seems is to sell majority ownership, hopefully to the government of Gujarat, and thereby leave the slimmed down Adani Power with a manageable debt load, while it shifts further away from coal and into renewables.

But without Mundra, Adani Power won’t have nearly enough coal-fired plant to take up the output of even the first stage of Carmichael. And this “mine to plug” model was crucial to the viability of the project. Even if the modest recovery in thermal coal prices over the past year were sustained, Carmichael couldn’t cover its costs by selling on the world market.

So what is Adani up to? I’ve thought about a bunch of hypotheses and now I have one that I think makes sense. Adani doesn’t want to write off the $2 billion or so it’s already put into acquiring the mine site, but it also doesn’t want to throw good money after bad. Suppose that, Adani gets $1 billion in loans from the Turnbull-Canavan Northern Australia slush fund to build the rail line, which is owned by a separate Adani company in the Cayman Islands. They could use that money to get started on the rail line, while discovering yet more reasons not to start spending their own money on the mine.

That would buy them perhaps a couple of years during which something might turn up. The price of coal might go up a lot. abd the Hancock-GVK Alpha project might somehow be revived. If so, the rail line could be viable even without Carmichael.

And, if nothing did turn up, Adani would have bought a couple of years breathing space before writing off the losses that have already been incurred, without spending a significant amount of its own money. Adani (Caymans) would slide gracefully into bankruptcy and the Australian public would be left with a half-built rail line to nowhere and a billion dollar hole in our collective pockets.

Of all the explanations I’ve tried out, this is the one that makes most sense to me right now. Comments appreciated.

* I love this grandiose name, redolent of the great days of Soviet-inspired central planning. The UMPP program was started with great fanfare a decade or so ago, but has now collapsed almost completely.

Categories: Economic policy, Environment Tags:

The last gasp of a failed model

June 8th, 2017 14 comments

I have a piece in the Guardian headlined ‘Asset recycling may look new and exciting. But it’s the last gasp of a failed model‘ which pretty much sums up the piece. Also, in the Monday Message Board, commenter stockingrate points (via Yves Smith) to a much more comprehensive analysis by Josh Bivens and Hunter Blair of the Economic Policy Institute. To get a feel for the way this is playing in the US debate so far, this article in the Washington Post, where I’m quoted very briefly, is a good starting point.

Categories: Economic policy Tags:

Clean coal

May 31st, 2017 37 comments

The Energy Minister Josh Frydenberg has announced legislation to allow the Clean Energy Finance Corporation to fund coal-fired power stations using Carbon Capture and Storage (CCS), often called “clean coal”. Although there has been plenty of criticism, this is actually a Good Thing.

If it worked at low cost, CCS would solve a lot of problems, particularly for Australia. We could burn coal, and store the resulting carbon dioxide underground, fixing much of the climate change problem without changing anything else. The ease of this (hypothetical) solution is why CCS plays a big role in lots of climate change scenarios.

Unfortunately, cost-effective CCS doesn’t exist, and isn’t likely to. So, barring some great new discovery, the change in CEFC rules is purely symbolic.

What makes the announcement a Good Thing is that avoids the “bait and switch” used by Frydenberg and others in the past, where clean coal is described in terms of CCS, then shifted to included “High Efficiency, Low Emissions” (HELE) coal plants. This term refers to the fact that plants constructed today are indeed more efficient, and therefore have lower emissions per unit of electricity, than those built thirty years ago. But they are still far worse than gas-fired plants let alone renewables or (if it could be made to work) CCS.

Categories: Economic policy, Environment Tags:

Queensland government backing away from Adani?

May 29th, 2017 21 comments

Looking at news coverage and the emails I’m getting from climate action groups, it looks as if I may have misinterpreted the Queensland government’s move on royalties (or maybe I posted before the decision process was complete). The latest news is that the state government will take no part in processing any loan to Adani from the Northern Australia Infrastructure Fund. I’ll try to post again when I get a clearer picture on this.

What remains clear is that Adani is having a lot of trouble finding bank loans or equity investors to invest in the Carmichael mine project. Given the poor economics of the project, any money lent by Australian governments is likely to be lost, leaving the publci with a stranded and useless asset.

Update 31/5/17 The Guardian reports that to defer nearly all of its royalty obligations for the first five years of production under the new deal, with interest charged on anything owed to the state above that. Almost certainly the interest rate would be well below what a commercial lender would charge, given the risk of default.

More noteworthy, I think, is the following

That would be the trigger for what the company has flagged would be $100m to $400m of preliminary works. But the deadline for financial close, the securing of bank backing to build the mine and rail to haul coal to the coast, is early 2018

As has been true for the past several years, the date when the project actually starts still seems to be at least a year away.

We’ll see at least some money on the table if the “preliminary works” start on the supposed schedule. But my guess is that the scale of the work will be less than meets the eye. I wonder, for example, whether the expenditure figure includes work done before Adani mothballed the project back in 2015.

Categories: Economic policy, Environment Tags:

Drug Wars: Crosspost from Crooked Timber

May 25th, 2017 10 comments

I got a preview of Drug Wars by
Robin Feldman and Evan Frondorf
. It’s not about the War on Drugs, but about the devices used by Big Pharma to maintain the profits they earn from their intellectual property (ownership of drug patents, brand names and so on) and to stave off competition from generics. Feldman and Frondorf propose a number of reforms to the operation of the patenting system to enhance the role of generics. I’m more interested in a fundamental shift away from using intellectual property (patents and brand names) to finance pharmaceutical research.
Read more…

Categories: Economic policy Tags:

Simple, but not easy

May 24th, 2017 10 comments

I’ll be debating John Rivett at lunchtime today on the subject of Easytax. Rivett is a lawyer who works with John McRobert, the main proponent of the tax (three Johns have got a bit confusing at times). Details are here

I’d have preferred a free event, but I left it to the proponents to organise, so I can’t complain I guess. I’ve attached my presentation, which gives a fair idea of what I’m going to say, and I believe a video of the event will be made available.

Categories: Tax and public expenditure Tags:

There are better things to spend $1 billion on than the Adani coal mine

May 20th, 2017 10 comments

That’s the self-explanatory headline for my latest piece in the Brisbane Times (reproduced in the other Fairfax papers, I think). Text is over the fold.

And, on the same theme, Richard Denniss.

Read more…

Categories: Economic policy, Environment Tags:

Killing the zombies

May 10th, 2017 20 comments

Among the measures in last night’s budget was the decision to kill off, once and for all, more than $10 billion of “zombie measures”. These cuts proposed in Joe Hockey’s disastrous 2014 Budget, rejected by the Senate, but kept on the books as proposed savings until now.

More importantly, the Budget abandons the undead ideology of market liberalism (aka economic rationalism, neoliberalism and so on) that dominated policy thinking in Australia in the decades leading up to the Global Financial Crisis, and continued to be taken for granted by most of the political class long after that.
Read more…

Categories: Economic policy Tags:

Debt and taxes

May 4th, 2017 4 comments

To misquote Benjamin Franklin and others, the only certainties in economic life are debt and taxes. Among the themes of political struggle, fights over debt (demands from creditors to be paid in the terms they expect, and from debtors to be relieved from unfair burdens) and taxes (who should pay them and how should the resulting revenue be spent) have always been central.

I mentioned in a comment at Crooked Timber recently, that Pro-debtor politics is always in competition with social democracy, and a couple of people asked for more explanation.
Read more…

Categories: Tax and public expenditure Tags:

Time to kill the debt bogeyman once and for all

May 3rd, 2017 35 comments

Here’s a piece I wrote in the Guardian responding to Scott Morrison’s distinction between “good” and “bad” debt. Unfortunately, the comments included plenty of people who are under the impression that, thanks to Modern Monetary Theory, there’s no need for taxes and therefore no need to think about budget balance. That’s wrong, as I explain here, with an endorsement in comments from leading MMT economist, Warren Mosler.

Categories: Tax and public expenditure Tags:

Where did all the money go?

April 29th, 2017 10 comments

That’s the title of a podcast I did recently. University of Melbourne Vice-Chancellor Glyn Davis has a regular podcast called The Policy Shop, and he was talking to me and Judith Sloan. That might have been a recipe for a slanging match, given that we don’t agree on much, but it actually worked pretty well.

Categories: Economic policy Tags:

Alternatives to Adani

April 29th, 2017 14 comments

Westpac’s announcement of a new policy that appears to exclude funding for the development of mines in the Galilee Basin appears likely to sound the death knell for Adani’s proposed Carmichael Mine and rail line. Westpac was the last of the four big Australian banks to announce such a policy. It joins at least 17 global banks, notably including Standard Chartered, which had previously been a major source of finance for Adani

In these circumstances, the proposed $900 million loan from the government’s Northern Australia Infrastructure Facility would involve a high risk of loss, and would therefore be an improper use of public funds. The same is true, admittedly to a lesser extent, of the rival proposal for a rail line put forward by Aurizon (the privatised business formerly known as Queensland Rail).

But if the NAIF doesn’t fund coal railways, how should its resources be allocated? And, what about the jobs promised by the Adani project that will not now be created? Obviously, these two problems are inter-related.

On the evidence of Adani’s own experts, the Carmichael project would create around 1000 jobs (despite this, the discredited figure of 10 000 jobs continues to be touted). So, the proposed NAIF loan would involve an investment of nearly $1 million of public money for every new job created. It shouldn’t be too hard to match that.

But what’s really needed is an alternative to the outdated developmentalism that has characterized not only the Adani proposal but the whole idea of a Northern Australia policy. What are the real economic and social needs of the people of the region, including indigenous people, who are directly affected by the Adani proposal? I’m planning more work on this soon.


Categories: Economic policy, Environment Tags:

Renationalise energy

April 27th, 2017 14 comments

Looking at the Turnbull government’s move to limit gas exports, I can’t do better than quote Bernard Keane in Crikey (paywalled, but here’s the bit that matters)

A while back I suggested Turnbull had been “mugged by reality” on energy policy. But he’s far from the only one. All of us who have advocated free markets and the primacy of the private sector in delivering essential services have copped the same mugging; now we need to accept that liberalisation has dramatically failed in energy. A mystifyingly complex market was designed for private sector operators with the intent of freeing up government capital and driving greater efficiency. And while the Coalition’s climate denialism created investor uncertainty that proved a key factor in the crisis, it’s the relentless opportunism of industry players to game the system and exploit every opportunity to jack up prices, and Santos’ truly spectacular bungling, that has led to this. As you sow, so shall you reap. Back to hardline regulation.

I was in the minority in a recent economists poll on this topic, supporting gas reservation, though not with any great enthusiasm. My statement

Energy policy in Australia is a mess. Prices don’t reflect economic or climatic costs. Availability of some low-cost gas would obviously improve the situation here, in particular allowing an adjustment away from coal. I don’t know whether the opportunity cost of forgoing overseas sales is accurately reflected by the export price.

The policy announced by the Turnbull government amounts to a partial nationalisation, since the government has taken control of our gas reserves back from the supposed private owners. But it’s a half-baked and half-hearted step. What we need is properly national, publicly owned energy grid, in which the role of private ownership is to fill gaps left by the public.

Categories: Economic policy Tags:


April 5th, 2017 40 comments

Like most people, I don’t like being suckered. But I was well and truly suckered by Aaron Patrick of the Australian Financial Review today. Patrick wrote to me saying he was doing a feature article on penalty rates and I gave him a long interview setting out my position. In particular, I made the point that, if (say) a 10 per cent reduction in wages produced only a 1 per cent increase in hours of work demanded by employers, the average worker would end up doing more work for less money. This is a standard point in the analysis of minimum wages.

As it turned out, I was wasting my breath. All Patrick wanted was the concession that lower wages might produce some increase in employment, thereby justifying the Gotcha! headline ‘Even union economists accept cutting penalty rates creates jobs’.

Given my history with the Fin, I shouldn’t have been surprised, I guess. But my general experience, even since Michael Stutchbury became editor, has been that most AFR journalists are straightforward professionals.

Also, most journalists these days understand that the game has changed with the rise of blogs and social media. Twenty years ago, the only response to a shoddy smear like Patrick’s would be a letter to the editor, which might or might not get published long after the event. Now, I can respond here and on Twitter, Facebook and so on. My readership might not be as big as the measured circulation of the AFR, but, after you deduct all the people who only look at the business pages, it’s not that different.

In any case, Patrick and the Fin are on a hiding to nothing with this one. Most people work for a living, and most have worked out by now that when the bosses talk about flexibility and productivity, they mean “work more for less”.


April 4th, 2017 14 comments

We’re all used to the fuss that takes place when the Reserve Bank cuts interest rates and banks don’t follow suit. On the other hand, when rates go up, the increase is almost always passed on rapidly and in full. But does this matter in the long run, or does competition sort things out. In this context, my wife Nancy pointed me to this interesting graph from the Housing Industry Association.

It seems pretty clear here that bank margins have increased steadily over the past ten years. I haven’t checked the data, but at least for mortgage rates, the current numbers look right to me.

Faith-based energy policy: the case of nuclear power

March 16th, 2017 23 comments

If you want to explain the success of Trump and Trumpism, despite Trump’s blatant reliance on falsehood, it’s crucial to understand that the mainstream political right has been rendering itself more and more impervious to reality for at least two decades. A striking example is the belief that nuclear power is the answer to our needs, and that the only obstacle is Green Nimbyism. This claim has recently been restated by a number of LNP Parliamentarians, by no means all of whom are on the hardline right.

Rather than rehearse the arguments I’ve put many times, I’ll quote the conclusion of the SA Royal Commission into the Nuclear Fuel Cycle:

a. on the present estimate of costs and under current market arrangements, nuclear power would not be
commercially viable to supply baseload electricity to the South Australian subregion of the NEM from 2030 (being the earliest date for its possible introduction)

b. it would not be viable
i. on a range of predicted wholesale electricity prices incorporating a range of possible carbon prices
ii. for both large and potentially new small plant designs
iii. under current and potentially substantially expanded interconnection capacity to Victoria and NSW
iv. on a range of predictions of demand in 2030, including with significant uptake of electric vehicles

c. nuclear would be marginal in the event of a lower cost of capital that was typical for the financing of public projects and under strong climate action policies.

That closes off just about every loophole a pro-nuclear advocate might want to use. And the Royal Commission was anything but anti-nuclear. It pushed hard for the idea of a nuclear waste dump (not really credible, but not as obviously infeasible as nuclear electricity generation).

Read more…

Categories: Economic policy, Environment Tags: