Truth in Labelling: Universities Australia edition

John Quiggin25 Comments

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

John Quiggin39 Comments

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

John Quiggin23 Comments

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.

Coal and China

John Quiggin32 Comments

Among the sceptical reactions to China’s part of the joint announcement on climate policy made by the US and China, two were particularly prominent

* The statement didn’t require China to do anything until 2030
* The statement simply reflected “business as usual”

These arguments were almost immediately refuted when China announced, in its http://thediplomat.com/2014/11/in-new-plan-china-eyes-2020-energy-cap/ that it would cap coal consumption at 4.2 billion tonnes by 2020, with total primary energy consumption (including oil and gas) held below 4.8 billion tonnes of coal equivalent. By contrast, in 2013, the estimate was for 4.8 billion tonnes of coal alone. Back in 2010, the US Energy Information Administration was predicting continued growth in Chinese coal assumption to 2035 and beyond.
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50 years later

John Quiggin15 Comments

I once read a remark about the kind of bank advertisement that shows a proud young couple outside their first home, to the effect that it would be better to show them middle-aged, making the final payment on their 25-year mortgage, at which point the home would truly be theirs.

I have the same kind of reaction to the Queensland government’s (publicly funded, I believe) ads showing “ordinary Queenslanders” celebrating the fact that our public assets are going to be leased rather than sold under the government’s plan. Most of those in the ads are young (20s and 30s, I’d say). Even so, many of them will have passed on by the time the lease first comes up for renewal in 2064.
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Subsidising coal

John Quiggin41 Comments

I was going to post on the Newman government’s announcement of subsidies to development of new coal mines in the Galilee Basin, but this piece by Michael West says it all. Key observation

The very day after the G20 concluded, with its recommendations about ending government subsidies to fossil fuels, it appears the Queensland government is poised to ramp up its subsidies for the humungous Galilee Basin coal project.

Read more: http://www.smh.com.au/business/mining-and-resources/wise-investment-or-fossil-fools-queensland-backs-coal-as-g20-moves-the-game-on-20141117-11odkq.html#ixzz3JM8yeHsw