Truth in Labelling: Universities Australia edition

A while ago, I suggested that bodies like Universities Australia should dissolve themselves and make way for a body that actually represents universities as communities of scholars (students and academics) and the workers (professional and administrative) who support them. I see I’ve been joined by Stephen Parker from the University of Canberra who describes UA support for deregulation as a “suicide ritual”. Meanwhile, Pyne is quoting the support of UA and its elite subset the Go8 as evidence of “consensus” in favor of his reform, treating the support of 30-odd individuals as more important than the overwhelming opposition of hundreds of thousands of students and staff.

Since these organizations appear determined to drag out their useless existence, can I at least ask for some honesty in labelling. How about

University Senior Management Australia and
Group of Eight University Senior Managers Who Are Better Than All The Others.

Seriously, it’s obvious that, while students, academics, other staff and senior managers have some common interests, they also have lots of conflicting interests. That’s true of universities, just as its true of the workers, bosses and customers of any industry in the private sector. The idea that a policy supported by top managers must be good for universities as a whole is on a par with the old claim that “what’s good for General Motors is good for American”

Deficit fetishism

As the Mid-Year Economic and Fiscal Outlook approaches, talk about the budget deficit is approaching panic. This piece from Deloitte, warning that “the budget is burning” is typical. It predicts a 2014-15 budget deficit of $34.7 billion, and future deficits “as far as the eye can see”.

Billion dollar numbers are big and scary, but some perspective is useful. Australia’s GDP is currently $1.6 trillion dollars per year, so the massive deficit is about 2 per cent of GDP. On Deloitte’s current “disastrous” predictions, the deficit should be below 1 per cent of GDP by 2017-18.

But wait, there’s more. Australian government debt is currently about 20 per cent of GDP. It has been around this ratio, varying with the business cycle, for many years. Since GDP grows at around 5 per cent a year in nominal terms, the debt/GDP ratio stays unchanged if debt also grows by 5 per cent, that is, if deficits are equal to 1 per cent of GDP (that is, 5 per cent of 20 per cent).

Simply put, the budget is so close to balance that it doesn’t matter. In the absence of the terms of trade shock from coal and iron ore, it would have made good sense to aim for a surplus. As it is, the sensible short-term macro strategy is to take a modest hit to the deficit and cushion the economy from contraction, a point that has been made by the OECD.

As always, there are long term problems that need to be addressed. But absurd panics about whether a (necessarily arbitrary) budget measure is a little above or a little below zero don’t help.

The strengthening economic case for fossil fuel divestment

That’s the title of my latest piece in The Conversation. The bottom line

Leaving aside the ethics of divestment and pursuing a purely rational economic analysis, the cold hard numbers of putting money into fossil fuels don’t look good.

Unless universities are willing to bet on the destruction of the planet they have committed themselves to understanding and preserving, divestment from fossil fuels is the only choice they can make. Forward-thinking investors of all kinds would be wise to follow suit.