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.
I’m now using Substack as a blogging platform, and for my monthly email newsletter. For the moment, I’ll post both at this blog and on Substack. You can also follow me on Mastodon here.
John Quiggin 
Australian Commonwealth elections—Next election dates:
Easter Sunday 2025 is on Apr 20.
Anyone want to hazard a guess when the next Australian Commonwealth elections will be, before or after Easter 2025? And more precisely, on what date?
The economics of inflation is poorly understood by most Australian consumers. They may observe price gouging at supermarkets and other retail outlets.They might notice that their wage rises are not protecting their standard of living. They may see historically high house prices, rents and airfares. But none of this will tell them why the Reserve Bank raised the official interests rates too high and too fast for too long.
Their answers lie in the root cause of the current inflationary cycle. It is NOT a wage-price spiral like it was back in the late 1980s. And nor is not imported inflation as it was back during the Sydney Olympics when one Aussie dollar only cost US tourists fifty US cents ( the Yanks swanked around claiming they were getting a half price discount on everything).
No the root cause is deeper. The main culprit is NOT the supermarkets, petrol stations or even airlines. They are complicate but merely following their profit motive unhindered by any buyer backlash.
No the root cause is the crowding out effect of all three levels of government overspending on the wrong things at the wrong time. Let’s start with the local councils. They have been crying poor for decades. But today they are the spendthrifts. With unprecedented rate hikes behind them, some local councils are wasting their windfall gain. Some are even building elaborate council chambers. Where is the cost-benefit analysis on this type of spending? What benefits do ratepayers get from elaborate council chambers? Would it not be best if local councils used this windfall to pay down their debts in a time of high interest rates?
Going one level up is the state governments. Now ever since the lockdown periods during the Covid pandemic, state governments have been reminded that they are a sovereign power unto themselves. That means that they don’t have to wait cap in hand for federally sourced funds. Not now that the GST revenue stream flows their way. But they do not even let that revenue limit stop them. Most state and territory governments borrow money in their own right. And this money is often wasted on unnecessary main road extensions ( usually a functioning rail line runs parallel to these new main roads); overambitious tramway developments ( for dubious returns to taxpayers); and exorbitant consultancy fees ( used to get suspect approval for even more overspending). All this state government activity crowds out private sector projects. The state governments are forcing up prices because they have little or no cost control over their projects. Contracts are signed without escape clauses to cover the likelihood of incompetent project managers. Bail outs from the taxpayers purse are common. This takes away any price discipline for project managers running state funded infrastructure projects.
Not only does all this increase the overspending by state governments, it puts upward pressure on the general price level. State governments are overspending at the wrong time. In boom cycles where there is high inflation, governments should be running surplus budgets and paying down debts. If they don’t they just make inflation last longer.
Now we come to federal government projects. The federal government makes a lot of noise about its surplus budgets. What it does not reveal is that these are due to revenue windfalls and not due to tight fiscal discipline. In fact the higher revenue streams from mining royalties cover up any overspending on their projects. And there is a lot of that going on in Canberra. One project alone, the pumped Hydro Snowy Mountains project is way over its original budget. But it is not alone. In the service provision area there are overspending issues with the NDIS, and with the funding to private schools, as well as the ridiculous training of nuclear submarine personnel for non existent subs, plus the overuse of consultantsFinally there is the overuse of naval personnel for border exclusion of refugees.
All this overspending by the federal government drives up the general price level. To just blandly say that the federal budget is in surplus is no escape clause. Overspending on infrastructure projects and service staff drives up inflation. Service inflation has been stated as one of the sticking points for our currently high inflation rate.
The crowding out of private sector projects and employment, forces cost pressures to rise and this adds to inflationary pressures. The culprits in today’s inflationary cycle are not the supermarkets, or the airlines, or even the petrol stations. No it’s the local governments that overspend, the state governments that cannot control the budgets of their big ticket projects and the federal government’s inability to keep their spending revenue neutral.
Let the blame lie where it should and let’s get the Reserve Bank out of its bunker. Taxpayers must demand that their governments stop overspending and cancel any projects that look like radically going over budget allocations. A budget is there for a reason.Its not meant to be just the starting point for extravagant spending. Governments must be forced to rein in all the projects that cannot meet their financial targets. Only in this way can we as a nation get back to a low inflation environment.
”The economics of inflation is poorly understood by most Australian consumers”
I don’t know how you have determined this and would be grateful for any further information.
What about the property markets impact on inflation? There seems to be no sign of slowing of growth in residential rents in Australia (corelogic stats)
But the US has seen some slowing / flattening on rent prices (rent.com stats)
I wonder one factor is that ~89% of US mortgages are on fixed interest rates for 10-30 years (bankrate stats) whereas in Australia many second home owners would pass interest rate increased onto their tenants.
The Guardian published on 8 May 2024 a piece by Damian Carrington headlined World’s top climate scientists expect global heating to blast past 1.5C target. The article began with:
The survey sample size response was 380 (out of of 843 contacted).
For the question: How high will global heating go?
Below +1.5 °C: _ _ _ _6
At least +1.5 °C: _ _16
At least +2.0 °C: _ _68
At least +2.5 °C: _132
At least +3.0 °C: _100
At least +3.5 °C: _ _33
At least +4.0 °C: _ _14
At least +4.5 °C: _ _ _7
+5.0 °C or more: _ _ _4
Broadcast on ABC RN Breakfast yesterday (May 9), host Patricia Karvelas interviewed guest Professor Mark Howden, Director of the Institute for Climate, Energy & Disaster Solutions at The ANU and a lead IPCC author. He spelled out what happens on a planet that’s more than +1.5 °C hotter & explains why Labor’s future gas strategy doesn’t stack up. From time intervals:
0:01:18 PK: “What temperature rise are we on track for?“
0:01:21 MH: “Well, at the moment ah, the assessments under existing policies are around three degrees Celsius.“
0:01:28 PK: “What does that look like? We talk about these figures, and I want to make them meaningful for people listening that aren’t climate scientists. What, what scenarios can we expect with that trajectory?“
0:01:43 MH: “Well, one of the things is that when we say something like three degrees Celsius, that means very little to most people. Is that big, or is that small? And the answer is: It’s absolutely huge, in terms of the Earth System. So, if we look at the last ice age, last glaciation, the temperature during that glaciation was roughly five degrees lower than our historical temperatures. So, at five degrees is a glaciation that fundamentally changes the face of the world. Our sea levels were 120 metres below where they currently are. That’s what five degrees does. So, if we go three degrees up, it’s like two-thirds of, of the same sort of temperature change, but obviously in the other direction. We can’t have that temperature change without changing the face of the Earth.“
Hans Joachim Schellnhuber suggests if the Earth System gets much above +2 °C then we will likely get to +4 °C because of tipping points and feedbacks which would likely spell the end of human civilisation.