tag:blogger.com,1999:blog-37476032024-03-14T21:09:06.891+11:00Peter Martin EconomicsUnknownnoreply@blogger.comBlogger448125tag:blogger.com,1999:blog-3747603.post-50494892081566605822022-02-09T21:16:00.021+11:002022-12-24T21:22:40.519+11:00An investment in clean indoor air would do more than help us fight COVID – it would help us concentrate, with lasting benefits<p>Sometimes the best things you can do are invisible.</p>
<p>Such as fighting cholera by ensuring drinking water wasn’t contaminated by sewage, as happened in London in the <a href="https://www.sciencemuseum.org.uk/objects-and-stories/medicine/cholera-victorian-london">1840s</a>. </p>
<p>Or setting up an emissions trading scheme, which drove <a href="https://theconversation.com/vital-signs-marketing-is-getting-in-the-way-of-markets-that-could-get-us-to-net-zero-171602">emissions down</a>, despite former prime minister <a href="https://www.smh.com.au/politics/federal/emissions-scheme-a-trade-in-the-invisible-abbott-20130715-2pzdo.html">Tony Abbott</a> attacking it as a “so-called market in the non-delivery of an invisible substance to no one”.</p>
<p>Air free from contamination is as invisible as uncontaminated water, but the case for air isn’t yet as <a href="https://eprints.whiterose.ac.uk/177405/3/Paradigm%20Shift%20AAM.pdf">widely accepted</a> as it is for water.</p>
<p>Air pollution from motor vehicles kills about <a href="https://grattan.edu.au/wp-content/uploads/2021/10/Grattan-Car-Plan.pdf">280</a> Australians per year, yet Australian petrol is allowed to contain <a href="https://grattan.edu.au/wp-content/uploads/2021/10/Grattan-Car-Plan.pdf">15 times</a> as much sulphur as petrol sold in the US, the UK, Europe, Korea, Japan and New Zealand. Australia is planning to adopt in 2024 the standard adopted elsewhere in 2015.</p>
<p>And poor air quality harms us in ways that fall short of death.</p>
<h3>Poor air harms performance</h3>
<p>A new six-nation study of office workers in countries from China to the United States found that where ventilation is poor and levels of particulate matter are high, workers perform <a href="https://www.hsph.harvard.edu/news/press-releases/office-air-quality-may-affect-employees-cognition-productivity/">worse or more slowly</a> on tests involving adding and subtracting and colour-coding words.</p>
<p>Another study on the relationship between indoor air quality and competitive chess players found that when the concentration of fine particulate matter with a diameter smaller than 2.5 micrometres (0.0025mm, better known as PM2.5) climbs as much as it can, players are <a href="https://www.iza.org/publications/dp/12632/indoor-air-quality-and-cognitive-performance">26%</a> more likely to make mistakes.</p>
<p>The effect is worse if the players are running out of time. </p>
<p>Smart employers recognise this. When Google moved into a new headquarters in Mountain View, California, it was offered air filtration that cut pollutants to 0.0001 parts per billion. It opted for <a href="https://www.google.com.au/books/edition/In_the_Plex/V1u1f8sv3k8C?hl=en&gbpv=1&dq=%22in+the+plex%22&printsec=frontcover">zero parts per billion</a>, and paid more to get it.</p>
<p>If performance and education matter (and they do – on Monday the government launched a <a href="https://www.pc.gov.au/inquiries/current/productivity/terms-of-reference">new inquiry</a> into productivity) we ought to be treating clean air as an investment in productivity, over and above its <a href="https://academic.oup.com/cid/article/71/9/2311/5867798">undoubted benefit</a> in containing the spread of COVID.</p>
<p>Here’s my big idea. The A$14 billion <a href="https://www.anao.gov.au/work/performance-audit/building-education-revolution-primary-schools-21st-century">Building the Education Revolution</a> program Labor put in place during the global financial crisis both helped fight the crisis and left Australia with thousands of school halls.</p>
<p>As far as legacies go, this wasn’t bad. The halls have been used for assemblies and plays and before and after school care.</p>
<p>But a program designed to contain the spread of COVID that left Australia with schools and workplaces in which the occupants were able to think clearly, and rarely caught infections – that would deliver an enduring dividend.</p>
<p>Many schools have openable windows, as do some workplaces. But in winter and for security reasons they are often closed and not reopened. </p>
<p>Distinguished Professor Lidia Morawska, director of International Laboratory for Air Quality and Health at the Queensland University of Technology, says outside air typically contains about 420 parts per million of carbon dioxide.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="343" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=322&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=322&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=322&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=404&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=404&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444968/original/file-20220208-26-1uiwd44.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=404&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.science.org/doi/10.1126/science.abd9149">Science magazine</a></span></span>
</figcaption>
</figure>
<p>Beyond a few hundred parts per million indoors, the aerosols that carry viruses circulate rather than get blown away. In closed rooms and offices they can travel long distances and remain aloft for hours. Beyond 1,000 parts per million – and indoors, many times 1,000ppm is common – our ability to concentrate drops. </p>
<p>In order to fight COVID in classrooms, education authorities in <a href="https://www2.education.vic.gov.au/pal/ventilation-air-purification/resources">Victoria</a>, <a href="https://education.nsw.gov.au/news/latest-news/nsw-schools-to-receive-permanent-improvements-to-indoor-air-qual">NSW</a>, <a href="https://qed.qld.gov.au/covid19/covid-safe-for-education/creating-a-covid-safe-environment">Queensland</a>, <a href="https://www.mediastatements.wa.gov.au/Pages/McGowan/2022/01/Western-Australian-schools-to-safely-open-for-learning-in-Term-1.aspx">Western Australia</a>, <a href="https://www.education.sa.gov.au/department/media-centre/our-news/statement-ventilation-schools">South Australia</a>, <a href="https://www.premier.tas.gov.au/site_resources_2015/additional_releases/continuing_to_keep_students_safe">Tasmania</a> the <a href="https://www.education.act.gov.au/public-school-life/covid-school-arrangements/school-advice">ACT</a> and the <a href="https://coronavirus.nt.gov.au/stay-safe/living-with-covid-19/back-to-school">Northern Territory</a> say they are prepared to install air purifiers where needed. </p>
<p>The ACT is reusing those it bought to filter smoke during the 2020 bushfires. Victoria has gone the furthest – ordering <a href="https://news.samsung.com/au/the-department-of-education-and-training-victoria-selects-samsung-ax90t-air-purifiers-as-part-of-safe-return-to-school-plan">51,000</a> from Samsung.</p>
<p>These so-called high efficiency particulate air (HEPA) filters work by removing ultra-fine particles rather than bringing in air from the outside.</p>
<h3>Portable purifiers are a stopgap</h3>
<p>As a stop-gap for fighting COVID Professor Morawska thinks purifiers are okay. But she says as soon as COVID passes they are likely to be put in cupboards and not used til next time. They are unlikely to produce a lasting benefit.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="200" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444970/original/file-20220208-13-13e0mfm.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" width="200" /></a>
<p>A far, far cheaper and perhaps more enduring solution would be to buy or mandate cheap carbon dioxide (C0₂) meters (portable meters can cost <a href="https://www.abc.net.au/news/health/2021-09-11/covid-transmission-co2-carbon-dioxide-monitor-ventilation-school/100444884">less than $100</a>) for every classroom, office and shop. </p>
<p>Heavy duty meters can be mounted on walls and set to glow red when the air is bad. They are in schools throughout Germany.</p>
<p>C0₂ meters do more than monitor carbon dioxide. </p>
<p>By calculating how much of it is in rooms where humans have been, they measure ventilation. They are a good guide as to whether air is circulating and viruses and toxins are being diluted.</p>
<p>Installing meters and ensuring their output is displayed might just be one of the best-value interventions to fight COVID there is – leaving us with the lasting benefit of air that is safe in the same way as our water is safe.</p>
<h3>Meters make the invisible visible</h3>
<p>The initial cost would be low compared to the $14 billion spent on school halls.</p>
<p>The lasting benefit would be an awareness of when and where we needed to open windows and spend money installing better air flow systems, and when and where we did not.</p>
<p>The cost of poor indoor air can be measured not just in billions, but in billions per year. Back in the late 1990s the CSIRO calculated a cost of <a href="https://www.awe.gov.au/environment/protection/air-quality/indoor-air#fn5">$12 billion per year</a>. Two decades on, <a href="https://theconversation.com/we-should-install-air-purifiers-with-hepa-filters-in-every-classroom-it-could-help-with-covid-bushfire-smoke-and-asthma-166332">coronaviruses and bushfire smoke</a> would make it greater still.</p>
<p>We’ve been offered a cost-effective chance to make the invisible visible and extend our productivity and lifespans. I reckon we should grab it.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/an-investment-in-clean-indoor-air-would-do-more-than-help-us-fight-covid-it-would-help-us-concentrate-with-lasting-benefits-176547">original article</a>.</span></p>
</figure><div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-44917840844082450952022-02-02T23:03:00.020+11:002022-12-20T23:11:50.855+11:00Unemployment below 3% is possible – if Australia budgets for it<div class="separator"><figure style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;">
<img height="170" src="https://images.theconversation.com/files/443649/original/file-20220201-17-rhrte0.png?ixlib=rb-1.1.0&rect=419%2C110%2C1680%2C891&q=45&auto=format&w=754&fit=clip" width="320" />
<figcaption><br /></figcaption>
</figure></div><h1 class="legacy"></h1>
<p>What’s the boldest thing the Morrison government could do in next month’s budget?</p>
<p>It would be to forecast an unemployment rate below 4% (a rate of three-point-something), then to pledge to go further, to two-point-something.</p>
<p>Neither have happened for half a century; not since the long Coalition reign of Robert Menzies and his successors from the 1950s to the early 1970s, when unemployment was between 2 and 3%. </p>
<p>Astoundingly, both are now within Treasurer Josh Frydenberg’s reach in a way they weren’t mere weeks ago. </p>
<p>This time last year, the official budget strategy (its formal title is <a href="https://cdn.theconversation.com/static_files/files/1953/77bf.pdf">fiscal strategy</a>) pledged to maintain economic support until the unemployment rate was “<a href="https://archive.budget.gov.au/2020-21/bp1/download/bp1_w.pdf">comfortably below 6%</a>”.</p>
<p>Frydenberg ditched that target on the ground it was unambitious in the May budget, replacing it with a commitment to spend until the recovery was “secure and the unemployment rate is back to <a href="https://budget.gov.au/2021-22/content/bp1/download/bp1_bs3.pdf">pre-crisis levels or lower</a>”. </p>
<p>But – even projecting forward all the way out to 2025 – Frydenberg couldn’t promise an unemployment rate below 4%. There wasn’t the demand for workers to support it.</p>
<h3>Suddenly, below 4% is possible</h3>
<p>Even as late as December last year in the mid-year budget update, the best the treasury could forecast was an unemployment rate of <a href="https://budget.gov.au/2021-22/content/myefo/download/01_part_1.pdf">4.25%</a>, which wouldn’t be reached until mid-2023 and wouldn’t be bettered in forecasts stretching out to mid-2025.</p>
<p>Then in January, we learnt that in December itself the unemployment rate had dipped below the forecast to 4.2% a year and a half early.</p>
<p>And it was the real thing. The unemployment rate hadn’t been cut artificially by people withdrawing from the search for work because of lockdowns (as had happened temporarily earlier in the year). Unemployment fell by 62,200 in December because an extra <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/dec-2021">64,800</a> people found work.</p>
<hr />
<p><strong>Unemployment touching 4% once more</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444199/original/file-20220203-17727-11ln3wd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" /></a>
<figcaption>
<span class="caption">Unemployment rate, seasonally adjusted from 1978.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6204.0.55.0011966%20to%201984">ABS labour force, ABS labour force historical timeseries</a></span>
</figcaption>
</figure>
<hr />
<p>The proportion of the population aged 15 and over in work is the truest measure of employment, because it’s unaffected by whether or not someone calls themselves unemployed. In December last year, that had climbed to 63.3% – a record high.</p>
<p>Several countries, including <a href="https://data.worldbank.org/indicator/sl.emp.totl.sp.zs?most_recent_value_desc=true">Singapore, South Korea and New Zealand</a>, do even better, suggesting we can push employment higher still.</p>
<p>And the jobs have come with hours. All but a few of the extra jobs created over the past year have been full-time. In December the total number of hours worked hit an all-time high. The proportion of workers underemployed (not getting the hours they want) sank to a 13-year low.</p>
<h3>The 50-year low is closer than it seems</h3>
<p>The unemployment rate was better than it looked. Calculated to several decimal places rather than the usual single place, the December rate was 4.157% – within a hairsbreadth of the historic low of 3.981% achieved in February 2008 at the height of the mining boom; the only time in the modern era the rate slipped below 4%.</p>
<p>To get below 4% from here on, and to get below the previous long-term low, would only require an extra 25,000 people in jobs. </p>
<p>That’s what makes a budget forecast of an unemployment rate beginning with a “3” – the first since the 1970s – suddenly plausible. On Tuesday the Reserve Bank <a href="https://www.rba.gov.au/media-releases/2022/mr-22-02.html">governor</a> and the <a href="https://www.pm.gov.au/media/australias-economic-accelerator-propel-economy">prime minister</a> said they expected it this year.</p>
<hr />
<p><strong>Vacancies abound</strong></p>
<figure class="align-center">
<img alt="" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/443655/original/file-20220201-22-12o28a3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/443655/original/file-20220201-22-12o28a3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/443655/original/file-20220201-22-12o28a3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/443655/original/file-20220201-22-12o28a3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/443655/original/file-20220201-22-12o28a3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/443655/original/file-20220201-22-12o28a3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/443655/original/file-20220201-22-12o28a3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" />
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/job-vacancies-australia/nov-2021">ABS job vacancies, seasonally adjusted</a></span>
</figcaption>
</figure>
<hr />
<p>Making something much better plausible – what until recently was a barely imaginable unemployment rate beginning with “2” – is the number of vacant jobs on offer.</p>
<p>In November, the Bureau of Statistics survey found a record 396,100 jobs on offer, so many as to mean one job for every 1.7 people looking. The more usual ratio, back in the days before COVID, was one vacancy for every three unemployed people looking.</p>
<h3>Below 3% is within reach</h3>
<p>If half of those job vacancies (198,000) were filled by someone presently unemployed, the unemployment rate would fall to 2.7%.</p>
<p>Which is another way of saying an unemployment rate lower than 3% – an unemployment rate beginning with “2” – is within reach.</p>
<p>A budget that forecast a rate lower than 4%, but adopted as a target or stretch forecast an unemployment rate lower than 3%, would make history.</p>
<p>It would have to set out the means to achieve it, one of which would be to adopt a new fiscal strategy that committed the government to “invest in a stronger economy” (the words in the <a href="https://cdn.theconversation.com/static_files/files/1954/2021_fiscal_strategy.pdf">existing fiscal strategy</a>) until unemployment is between 2% and 3%.</p>
<p>The existing strategy commits the government to invest in a stronger economy until unemployment is down to “where it was prior to the pandemic or lower”.</p>
<h3>What’s missing? A target and more help for job-seekers</h3>
<p>The target would delay budget repair by only a few years, and it would make that repair quicker when it started because hundreds of thousands more Australians would be paying tax and no longer claiming JobSeeker.</p>
<p>And it would lock in an expectation of permanently lower unemployment, in the same way as the Reserve Bank’s success in crushing inflation in the 1990s locked in an expectation of <a href="https://theconversation.com/josh-frydenberg-has-the-opportunity-to-transform-australia-permanently-lowering-unemployment-156175">permanently low inflation</a>.</p>
<p>If the government articulated the target, the Reserve Bank would be likely to assist. <a href="https://www.rba.gov.au/publications/annual-reports/rba/2015/our-charter-core-functions-and-values.html">Full employment</a> is the second of the three goals spelled out in its charter.</p>
<p>The government would also have to do much more of what it started in its last budget, which is to set up <a href="https://theconversation.com/frydenberg-spends-the-bounty-to-drive-unemployment-to-new-lows-159229">programs</a> to make unemployed workers more job-ready and make employers more likely to hire them. </p>
<h3>It’s within reach for Labor, or the Coalition</h3>
<p>Some of that is already happening as the large number of vacancies and low number of unemployed forces employers to take on people they wouldn’t have before. Many will be glad.</p>
<p>Often the only thing that’s “wrong” about a worker who has been out of work for a long time is that they have been out of work for a long time. As employers discover that, they are likely to find it is easier to fill vacancies than they thought.</p>
<p>An unemployment target of 2-3% would be game-changing, and it’s within reach. The last side of politics to preside over ultra-low unemployment was the Coalition, making it natural that Morrison and Frydenberg should take up the mantle of Robert Menzies and his treasurer Harold Holt.</p>
<p>If they won’t, it’s an opening for Labor. There’s a chance to all but eliminate unnecessary unemployment in Australia. Not in 50 years have we been this close.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/unemployment-below-3-is-possible-if-australia-budgets-for-it-176025">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-58295051243892464592021-12-08T17:07:00.020+11:002021-12-29T17:13:07.829+11:00Greg Hunt is the unsung architect behind Labor’s climate plans<div class="separator"><a href="https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="400" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1298&fit=crop&dpr=1 600w, https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1298&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1298&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1631&fit=crop&dpr=1 754w, https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1631&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/436021/original/file-20211207-25-1pq73i3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1631&fit=crop&dpr=3 2262w" width="186" /></a></div><p>The architect of the ingenious mechanism at the heart of Labor’s plan to sharply cut carbon emissions is about to leave the parliament.</p>
<p>Throughout the pandemic, Greg Hunt has been best known as Australia’s health minister. But before that, when the Coalition was swept to office in 2013, he became Tony Abbott’s environment minister, charged with destroying Labor’s <a href="https://www.abc.net.au/pm/content/2013/s3849887.htm">carbon tax</a>.</p>
<p>(I’m calling it a “carbon tax” here to distinguish it from the mechanism Greg Hunt quietly slipped in to replace it, and also because the Bureau of Statistics decided it <a href="https://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/2F467985129CAEE6CA257A4800137831/%24File/5257055001_jul%202012.pdf">was a tax</a> when it recorded it as a tax in the national accounts.)</p>
<p>Labor’s scheme taxed (or “charged” if you must) each big emitter in the industries covered A$23 for each tonne of carbon dioxide or equivalent they pumped into the atmosphere. </p>
<p>There were all sorts of problems with Labor’s scheme, problems Hunt was keenly aware of, having co-authored a prize-winning <a href="http://thetypewriter.org/wp-content/uploads/2014/07/50162694-A-Tax-to-Make-the-Polluter-Pay.pdf">research paper</a> on carbon taxes at university and having been immersed in the topic when Labor was last in power, as the Coalition’s environment spokesman under leaders Nelson, Turnbull and Abbott.</p>
<p>One big problem was that Australian exporters (of products such as steel and aluminum) would be placed at a disadvantage by having to pay the tax, while their overseas competitors did not. </p>
<p>Steel and aluminium would still be sold to the eventual customers but from a country other than Australia that didn’t charge the tax, a phenomenon known as <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/0809/carbonleaking#_Toc217798735">carbon leakage</a>.</p>
<h3>Labor’s carbon tax had problems</h3>
<p>And not only exporters. Australian producers of products for local consumption stood to suffer in the same way, losing sales to foreign suppliers who weren’t charged the tax, a problem the European Union is trying to fix at the moment by imposing a so-called <a href="https://theconversation.com/australia-is-about-to-be-hit-by-a-carbon-tax-whether-the-prime-minister-likes-it-or-not-except-the-proceeds-will-go-overseas-170959">Carbon Border Adjustment Mechanism</a>, or “carbon tariff”.</p>
<p>Labor’s solution was to grant firms in “emissions-intensive trade-exposed” sectors <a href="https://archive.budget.gov.au/2012-13/ministerial_statements/ms_climate_change.pdf">free permits</a> to the tune of 94.5% of industry average carbon costs in the first year (and less exposed firms free permits to cover 66% of costs), a gift that would be wound back 1.3% each year.</p>
<p>Another solution, being pursued by Hunt as he took soundings while in opposition, was to limit Australian facilities to emitting no more than they are now. </p>
<p>Over time the entitlement could be wound back. </p>
<p>But the problem was it would stop firms expanding. </p>
<p>BHP, for instance, might get a big contract that required it to double its output of steel but be unable to fulfil it without halving its emissions intensity – the amount it emitted per unit of steel produced.</p>
<h3>Hitting on a baseline winner</h3>
<p>Hunt’s solution, the one he and independent senator Nick Xenophon slipped into legislation being drawn up to replace the carbon tax with <a href="https://www.aph.gov.au/parliamentary_business/committees/senate/environment_and_communications/direct_action_plan/report/c05">direct grants</a>, was to set up “<a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1819/Australias_climate_safeguard_mechanism">baselines</a>” for each large emitter.</p>
<p>To be determined by the <a href="http://www.cleanenergyregulator.gov.au/NGER/The-safeguard-mechanism/Baselines">Clean Energy Regulator</a> in accordance with rules set by the minister and <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id:%22chamber/hansards/e89a1618-fea8-466d-ab43-821cf296f483/0339%22">disallowable</a> by parliament, the baselines set the maximum amount each big plant can emit without being in breach and paying penalties.</p>
<p>Importantly, the baselines were to be calculated on the basis of previous emissions. Facilities were to be allowed to emit what they had, but no more.</p>
<p>More importantly, plants could have their baselines calculated on the basis of emissions intensity – the amount emitted per unit of production, which would mean they would be able to expand so long as they didn’t emit more per unit.</p>
<p>More importantly still, the Clean Energy Regulator is in the process of converting almost all baselines to <a href="http://www.cleanenergyregulator.gov.au/NGER/The-safeguard-mechanism/Baselines">emissions intensity baselines</a>.</p>
<p>All Labor has to do, and what intends to do, is to make use of the mechanism Hunt and Xenophon put in place.</p>
<h3>Business is backing baselines</h3>
<p>Each facility that emits more than 100,000 tonnes of carbon dioxide equivalent per year – 215 of them – is subject to a baseline.</p>
<p>What Labor has pledged to do, and it is backed by the <a href="https://www.bca.com.au/business_welcomes_a_workable_plan_to_reach_net_zero">Business Council</a>, is to get the Clean Energy Regulator to <a href="https://anthonyalbanese.com.au/our-policies/powering-australia">wind down</a> those baselines “predictably and gradually over time” to support the transition to net zero. </p>
<p>Businesses that are already reducing their emissions want this, because they want other firms to be made to do the same. </p>
<p>The beauty of the mechanism set up on Abbott’s watch is that each facility, each
“gas well, aluminium smelter and coal line” as Labor’s Chris Bowen puts it, will have its tightened baseline calculated individually. </p>
<p>Each will be asked to do no more than what is needed after considering what it can cope with.</p>
<p>Within minutes of Friday’s announcement, Energy Minister Angus Taylor labelled it “a sneaky new carbon tax on agriculture, mining and transport”, but it is better described as a system of guidelines and penalties, one legislated by Taylor’s side of politics.</p>
<p>Quite a lot will be needed. <a href="https://keystone-alp.s3-ap-southeast-2.amazonaws.com/prod/61a966013f3c53001f975016-REPUTEX_The%20economic%20impact%20of%20the%20ALP's%20Powering%20Australia%20Plan_Summary%20Report.pdf">Labor’s</a> modelling, released on Friday, didn’t spell out what would be needed to get emissions to net-zero by 2050, but the <a href="https://theconversation.com/how-government-modelling-found-net-zero-would-leave-us-better-off-171743">Coalition’s</a> modelling, released in November, did.</p>
<p>No matter what reasonable assumptions the model included, including “global technology trends”, it couldn’t get all the way to net-zero by 2050.</p>
<p>So the Coalition’s modellers added in something fanciful which they named “<a href="https://www.industry.gov.au/sites/default/files/November%202021/document/australias-long-term-emissions-reduction-plan-modelling.pdf">further technology breakthroughs</a>” to get the remaining 15%.</p>
<p>Greg Hunt retires as health minister and <a href="https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/interview-with-neil-mitchell-from-3aw-mornings-on-3-december-2021-on-covid-19-cases-update-on-the-novavax-rollout-and-retirement-from-federal-politics">retires from parliament</a> at the next election. He has set us on the path to getting where we will need to be.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/whos-the-unsung-architect-behind-labors-climate-plans-a-retiring-coalition-minister-173313">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-13311321245439433752021-12-01T17:01:00.012+11:002021-12-29T17:03:20.130+11:00GDP is like a heart rate monitor: it tells us about life, but not our lives<p>How much cash would you need to be paid to agree to live without a smartphone for a year? </p>
<p>If you are like the typical American, the answer is <a href="https://www.hoover.org/sites/default/files/research/docs/kane_webreadypdf.pdf">US$10,000</a> – which is far, far more than what we are actually charged for having and using smartphones.</p>
<p>How much would you need to be paid to live without a computer? </p>
<p>According to the same research, just published by Stanford University’s Hoover Institution, a typical American would want US$25,000 to live computer-free for a year.</p>
<p>For the GPS system that lets us map where we are on all our devices, the answer is US$3,000; for streaming services such as Netflix the answer is another US$3,000.</p>
<p>For refrigeration the answer is US$10,000; for air conditioning, another US$10,000; and for running water US$50,000.</p>
<p>The point of this study, by economist <a href="https://www.hoover.org/sites/default/files/research/docs/kane_webreadypdf.pdf">Tim Kane</a>, is that if we add up the worth to us of everything the economy produces each year, we get much, much more than the gross domestic product – even though GDP is meant to be a summation of the prices paid each year.</p>
<p>Not a day goes by when we don’t get astounding value for money: on Kane’s estimate, about 20 times what we pay.</p>
<h3>GDP monitors changes, not our lives</h3>
<p>It’s a useful perspective to bear in mind ahead of the latest Australian gross domestic product figures, being released <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">on Wednesday</a>. </p>
<p>Those figures will show Australia spent less, earned less and produced less in the lockdown-affected September quarter months of July, August and September than in the three months before – about 3% less on private estimates.</p>
<p>It won’t be a “recession” because in Australia that’s generally taken to mean two consecutive quarters of those things going backwards. And we already know spending, earning and production all started climbing as soon as the lockdowns ended at the beginning of the quarter we are in now.</p>
<p>The GDP has the same relationship to life as a heart rate monitor has to health.</p>
<h3>There’s more to GDP than you might think</h3>
<p>Behind the headline figure you hear about are actually three different measures.</p>
<p>GDP(P) is a measure of everything that’s <em>produced</em> in the quarter. The Bureau of Statistics has the unenviable job of adding up most things that are produced at market prices (and having a stab at trying to infer market prices where they are not apparent) in industries as diverse as mining, financial services and education.</p>
<p>It tries to count each thing only once, which is difficult because some things are used as inputs to others. Its work is made harder by relying partly on surveys and partly on complete sets of data from organisations such as the Tax Office.</p>
<p>Ask whether it uses guess work, you will be told it uses “<a href="https://unstats.un.org/unsd/economic_stat/china/pgdp/The%20Production%20Approach%20to%20Measuring%20GDP.pdf">informed judgement</a>”. </p>
<p>GDP(E) is a totalling of government and household <em>expenditure</em> to buy those products. After adjusting for imports and exports it ought to equal GDP(P), but imperfections in measurement mean it usually doesn’t. </p>
<p>Then there’s GDP(I), which is a measure of the <em>income</em> households and businesses get from working and selling those products. Again, it ought to equal the other two, but it usually doesn’t.</p>
<p>After trying to get the three measures nearer each other (perhaps there was something somebody missed) the technicians in the bureau simply average the three, producing GDP(A). That’s what goes up on the <a href="https://www.abs.gov.au/">ABS website</a> at 11:30am AEDT Wednesday, followed by a Treasurer’s press conference and loads of analysis.</p>
<h3>It needn’t indicate an underlying condition</h3>
<p>Just as a heart rate monitor needn’t tell us much about health, because even in healthy people hearts beat slower while sleeping and faster while awake, GDP needn’t tell us that much about the condition of our lives.</p>
<p>A lot of the economy went to sleep during this year’s and last year’s lockdowns and is now waking up. The GDP will show that, but at least on Wednesday it won’t tell us more than that.</p>
<p>As it happens, economic growth has been weakening over time. Annual GDP growth is no longer the 3-4% it typically was between the early 1990s recession and the 2008 financial crisis. In the decade leading up to COVID it has been much lower, rarely touching 3%.</p>
<hr />
<p><strong>Annual financial year GDP growth</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="263" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption">Financial year on financial year growth, 2002-03 to 2018-19.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-system-national-accounts/2020-21#data-download">ABS</a></span></span>
</figcaption>
</figure>
<hr />
<p>Put starkly, for little-understood reasons unrelated to quarterly fluctuations or COVID, we are getting better off more slowly than we were.</p>
<p>There are always people who say this doesn’t matter, we should be happy with what we had (and as I noted, much of what we’ve had isn’t counted in the GDP).</p>
<h3>There is an underlying condition nonetheless</h3>
<p>But it matters a good deal, because ever since economic growth took off in the 1870s we’ve grown used to things continually getting better, and have come to expect it. </p>
<p>US economic historian Brad Delong uses an 1880s science fiction book to illustrate how much we’ve come to regard improving living standards as a birthright.</p>
<p>In <a href="https://www.google.com.au/books/edition/Looking_Backward/xpHtvz4bNZ0C">Looking Backward</a>, Edward Bellamy purports to look back from the year 2000. </p>
<p>At one point a hostess asks if he would like to hear some music. Instead of playing the piano, she merely touched one or two screws and “immediately the room was filled with the music of a grand organ”, one of four she could dial up by landline.</p>
<p>It appeared to him that</p>
<blockquote>
<p>if we could have devised an arrangement for providing everybody with music in their homes, perfect in quality, unlimited in quantity, suited to every mood, and beginning and ceasing at will, we should have considered the limit of human felicity already attained, and ceased to strive for further improvements.</p>
</blockquote>
<p>He got it wrong.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/gdp-is-like-a-heart-rate-monitor-it-tells-us-about-life-but-not-our-lives-172762">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-22420041338067263762021-11-24T16:57:00.015+11:002021-12-29T17:00:48.897+11:00‘Can-do capitalism’ is delivering less than it used to: 3 reasons why<p>The good news is supposed to be that when the government gets out of the way “can-do capitalism” will have us roaring back to where we were before.</p>
<p>That’s the prime minister’s <a href="https://www.pm.gov.au/media/address-victorian-chamber-commerce-and-industry">newest slogan</a>, and we had better hope for more.</p>
<p>The unpleasant truth is that before the pandemic Australia’s economy was disturbingly and unusually weak. Can-do capitalism wasn’t doing what it should.</p>
<p>Reserve Bank chief economist <a href="https://www.rba.gov.au/speeches/2021/sp-ag-2021-11-18.html">Luci Ellis</a> put it this way a few days after Morrison talked about freeing the engines of the economy to do their work. </p>
<blockquote>
<p>In the decade or so leading up to the pandemic, there was a nagging sense that these engines of prosperity were running out of steam – investment was low, productivity growth was lagging, and many of the behaviours we associate with business dynamism were on the decline. </p>
</blockquote>
<p>Outside of mining, business investment had been shrinking as a share of the economy for more than a decade.</p>
<hr />
<p><strong>Private non-mining business investment, share of nominal GDP</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="328" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/433269/original/file-20211122-13-17tug6e.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption">Net of second-hand asset transfers.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/speeches/2021/sp-ag-2021-11-18.html">ABS, RBA</a></span></span>
</figcaption>
</figure>
<hr />
<p>Outside of the ride-share industry, fewer businesses were being created and fewer businesses destroyed.</p>
<p>“For all the talk of disruption, the overall sense one gets from the data is of a bit less dynamism or inclination to shake things up,” Ellis said.</p>
<p>And we were in the middle of a “<a href="https://theconversation.com/australias-great-resignation-is-a-myth-we-are-changing-jobs-less-than-ever-before-170784">great resignation</a>” of a different kind to the departures from jobs being seen in the United States. </p>
<p>Australians were increasingly resigned to staying in the jobs they had. Job switching had sunk to all-time lows.</p>
<hr />
<p><strong>Proportion of employed Australians who switched jobs during the year</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="328" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/433275/original/file-20211122-27-8aoims.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/job-mobility/feb-2021">Australian Bureau of Statistics</a></span></span>
</figcaption>
</figure>
<hr />
<p>In short, despite technological revolutions, despite a government saying it was getting out of the way, and despite record low interest rates that made it cheap to invest and expand, in the lead-up to COVID-19 businesses weren’t doing that. By the time the pandemic arrived, annual economic growth had slid to 2.1%.</p>
<h3>Government hasn’t been holding business back</h3>
<p>One thing Ellis says can’t explain the pre-pandemic reluctance of businesses to invest is government regulation pushing up costs. She says if costs had been rising, inflation wouldn’t have fallen to near record lows. </p>
<p>And if labour costs had been rising, wage growth wouldn’t have fallen to unprecedented lows, and firms would have been investing more in machines to replace workers.</p>
<h3>Businesses themselves have been unusually cautious</h3>
<p>There’s evidence to suggest that in the decade since the global financial crisis Australian (and other) firms have become more risk-averse.</p>
<p>Instead of falling with the falling cost of borrowing, the “<a href="https://www.rba.gov.au/speeches/2015/sp-so-2015-09-24.html">hurdle</a>” rates of return that businesses tell the Reserve Bank they require in order to justify investments have remained stubbornly high.</p>
<p>It’s a “won’t do” rather than a “can do” mindset, and Ellis says it might be because Australian managers don’t want to be associated with projects that fail, or because their firms have only limited management capacities and don’t want to commit to projects in case better ones come along.</p>
<h3>Except for some firms</h3>
<p>Her most intriguing suggestion is that some firms are market leaders at installing new technologies (especially those driven by artificial intelligence) – so much so that their competitors can’t catch up.</p>
<p>Tip Top Bakeries produces more than one million loaves of bread a day and delivers to more than 18,000 locations Australia-wide. </p>
<p>It used to send out its trucks in hub-and-spoke patterns using schedules drawn up by humans. </p>
<p>Since it began using <a href="https://research.csiro.au/data61/wp-content/uploads/sites/85/2015/02/ITL_Improving-Profitability_Brochure.pdf">artificial intelligence</a> and machine learning to route trucks in configurations no human would have thought of, it has cut its distribution costs <a href="https://research.csiro.au/data61/wp-content/uploads/sites/85/2015/02/ITL_Improving-Profitability_Brochure.pdf">14%</a> and lifted its gross profit after distribution 7%.</p>
<p>Ellis makes the point that earlier technological innovations such as laptops and spreadsheets were easy to use.</p>
<p>Artificial intelligence and machine learning might be the first new technologies to be actually harder to use and require a rarer set of skills than those they replace. </p>
<p>The few “superstar” firms that adopt these new technologies (such as <a href="https://www.woolworthsgroup.com.au/page/media/Latest_News/woolworths-to-partner-with-knapp-on-first-automated-online-fulfilment-centre-in-western-sydney">Woolworths</a> with its fully automated distribution centre) are becoming able to do things their smaller competitors cannot, locking those lesser firms into a “low-wage, low-investment groove”.</p>
<p>Ellis cites evidence that the spread of technological knowledge has slowed, leading to a “winner-takes-all world” of increasing industry concentration.</p>
<p>It might still be possible to convince a lender you’ll be Australia’s next big thing in an industry with a market leader, but it’s getting harder.</p>
<h3>‘Can-do capitalism’ needs help</h3>
<p>The third possible explanation advanced by Ellis for the growth of the “think carefully before attempting” mindset over the past decade is in sharp contrast to Morrison’s distinction between “can-do capitalism” and “don’t-do governments”.</p>
<p>It’s to do with long-term cycles.</p>
<p>When conditions are weak, Ellis says, firms focus on defending what they’ve got instead of pursuing new opportunities. </p>
<p>We’ve been in that cycle for a decade, possibly made worse by governments withdrawing support in order to get nearer to balancing their budgets. </p>
<p>Now that governments are spending big and abandoning caution to fight the pandemic there’s a chance the cycle will turn.</p>
<p>It would be great if she turns out to be right. </p>
<p>If she is, it won’t be because the prime minister was right. It’ll be because business needed a leg-up.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/can-do-capitalism-is-delivering-less-than-it-used-to-here-are-3-reasons-why-172376">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-29506168308042823722021-11-17T16:52:00.013+11:002021-12-29T16:56:59.781+11:00The embarrassingly easy way to cut the cost of electric cars
<p>Prime Minister Scott Morrison says he wants to <a href="https://www.pm.gov.au/media/press-conference-st-marys-nsw">keep prices down</a>. </p>
<p>Without his party in power, “you’re going to see petrol prices go up, you’re going to see electricity prices go up”. </p>
<p>There’s something practical he can do straight away to stop prices from rising.</p>
<p>Apart from a home, a car is the most important purchase most Australians make.</p>
<p>We typically hold on to our cars for <a href="https://www.canstarblue.com.au/vehicles/average-car-price/">six years</a>, and most last <a href="https://www.abs.gov.au/statistics/industry/tourism-and-transport/motor-vehicle-census-australia/latest-release#average-age">many years</a> longer.</p>
<p>This means that when we buy a car we have to have an eye on the future, on what it will make sense to drive half a decade down the track.</p>
<h3>Electric cars are cheaper overseas</h3>
<p>In almost every way, certainly when it comes to running and <a href="https://www.carsguide.com.au/ev/advice/do-electric-cars-actually-save-you-money-83060">maintenance costs</a>, electric vehicles are the best option.</p>
<p>And yet their price is set to come down far faster overseas than in Australia.</p>
<p>Here’s why. </p>
<p>Europe has imposed what it calls <a href="https://ec.europa.eu/clima/eu-action/transport-emissions/road-transport-reducing-co2-emissions-vehicles/co2-emission-performance-standards-cars-and-vans_en">CO₂ emission performance standards</a>.</p>
<p>They don’t relate to particular cars, as the term “performance standards” suggests, but to an <a href="https://ec.europa.eu/clima/eu-action/transport-emissions/road-transport-reducing-co2-emissions-vehicles/co2-emission-performance-standards-cars-and-vans_en">average</a> of what’s sold over each company’s entire range.</p>
<p>From 2020 each manufacturer’s cars are limited to an average emissions of 95 grams of carbon dioxide emitted per kilometre, and vans to an average of 147 grams emitted per kilometre.</p>
<p>It’s up to the companies how they achieve this. They could do it by selling more low-emission and fewer higher emission conventionally-powered cars, or they could do it by selling more electric cars. </p>
<p>If they haven’t sold enough electric cars to get under their brand’s emissions ceiling, they have to discount them to sell more in order to get average emissions down.</p>
<h3>In Europe, electric sales are valuable</h3>
<p>In the first year of the new European standard, average emissions from new passenger cars registered in Europe fell <a href="https://ec.europa.eu/clima/eu-action/transport-emissions/road-transport-reducing-co2-emissions-vehicles/co2-emission-performance-standards-cars-and-vans_en">12%</a>. The share of electric cars tripled.</p>
<p>In 2025 the standard will become tougher again, requiring a further 15% cut in average emissions, and then from 2030 (for cars) a further 35%.</p>
<p>The big car manufacturers are finding it <a href="https://www.forbes.com/sites/neilwinton/2019/04/04/eu-fuel-economy-rule-violations-could-cost-manufacturers-big/?sh=dfe005c7892e">hard</a>. It’ll make every electric car they sell valuable for them, valuable enough to sell cheaply, but only in Europe (and Canada, China, India, Japan, Korea, Mexico and the United States, which have similar standards, sometimes called <a href="https://iea.blob.core.windows.net/assets/66965fb0-87c9-4bc7-990d-a509a1646956/Fuel_Economy_in_Major_Car_Markets.pdf">fuel economy standards</a>).</p>
<p>The International Energy Agency says four in five of the cars sold worldwide are subject to such standards. </p>
<p>In places where they are not (such as Australia) there is no particular reason for an international manufacturer to go all out to sell an electric car. It won’t help them meet a standard.</p>
<h3>Australia has standards, sort-of</h3>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="320" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/432117/original/file-20211116-19-24p0bz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" width="198" /></a>
<p>Not that Australia doesn’t have standards, of a sort. Since 2008 all new cars sold in Australia have had to display a <a href="https://www.greenvehicleguide.gov.au/pages/Information/FuelConsumptionLabel">sticker</a> quoting fuel economy and emissions per kilometre.</p>
<p>The standards for actual CO₂ emissions are voluntary. The <a href="https://grattan.edu.au/report/grattan-car-plan/">Grattan Institute</a> kindly says they are “lacking in ambition and have often not been met”.</p>
<p>Faced with one of the few big markets in the world in which there is no particular imperative to sell electric cars, international manufacturers direct them elsewhere and sell <a href="https://grattan.edu.au/wp-content/uploads/2021/10/Grattan-Car-Plan.pdf">higher emission</a> cars here.</p>
<p>Their local arms want to sell better cars here, but are overruled.</p>
<p>The local head of <a href="https://www.abc.net.au/news/science/2021-04-20/australians-want-to-buy-electric-cars-what-is-stopping-us/100071550">Nissan</a> puts it this way:</p>
<blockquote>
<p>clear and consistent direction from governments is a critical signal to car makers to prioritise the importation of the latest low and zero-emissions vehicles</p>
</blockquote>
<p>The local head of <a href="https://www.smh.com.au/business/consumer-affairs/vw-boss-says-embarrassing-rules-stop-cheap-electric-car-imports-20210322-p57d85.html">Volkswagen</a> is more blunt.</p>
<blockquote>
<p>Every six months we do an update with a board meeting on the electric vehicle environment in Australia. They are sitting in waiting for something to change, you know, but nothing ever changes. I guess the way I would put it is that it is embarrassing</p>
</blockquote>
<p>It isn’t just that there is no particular incentive to discount an electric car sold in Australia. It is that there’s an incentive to charge more.</p>
<h3>Without standards, we are an unattractive market</h3>
<p>It harms a manufacturer’s profits to sell an electric car here that could be used to lower its average emissions profile in (say) Europe. It makes sense to do as much as is needed to keep it out of Australia.</p>
<p>Fixing the anomaly would be easy and would actually bring prices down, as well as increasing the limited range on offer. And it would help buyers of conventional vehicles worried about the price of petrol. New cars would use less.</p>
<p>Australians able to buy electric cars because of the change would find they used no petrol at all.</p>
<p>Introducing international-grade standards would not require a tax and would not require a tax concession. It would merely require regulations of the kind in place elsewhere.</p>
<p>Business won’t object. The Business Council asked for the change <a href="https://d3n8a8pro7vhmx.cloudfront.net/bca/pages/4196/attachments/original/1530766302/Model_Fuel_Efficiency_Standard_%28Business_Council_of_Australia_submission%29.pdf">four years ago</a>. Australian car makers won’t object. We no longer have any.</p>
<p>Petrol refiners won’t object. They are finding it hard to reduce the sulphur and other pollutants that kill <a href="https://grattan.edu.au/wp-content/uploads/2021/10/Grattan-Car-Plan.pdf">hundreds of Australians</a> each year. The government has advanced them up to <a href="https://www.world-energy.org/article/17871.html">A$250 million</a> to help.</p>
<p>But carbon dioxide is different. We don’t need good quality fuel to reduce it, merely good quality cars. We are able to put them in the hands of more Australians near-costlessly.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-embarrassingly-easy-tax-free-way-for-australia-to-cut-the-cost-of-electric-cars-171919">original article</a>.</span></p>
</figure><div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-578319406143226262021-11-10T16:41:00.008+11:002021-12-29T16:44:40.647+11:002022 looks like an ideal time for a government to land re-election<p>At the risk of being political – and politics is important, it will determine how we are governed for the next three years – economic conditions could scarcely be better for a government seeking re-election.</p>
<p>The economic things that matter most to most people are, in my view: </p>
<ul>
<li><p>jobs – if employment is climbing rather than falling, most people are not at much risk of losing their job</p></li>
<li><p>economic growth and wages growth – if things are getting better rather than worse, even in small ways, people feel better about the future</p></li>
<li><p>the ability to buy a home – if it is getting hard, even for other people or for their children, they are concerned about what the future will become </p></li>
<li><p>mortgage rates – as long as rates stay low they know their own personal budget won’t go out of whack</p></li>
</ul>
<p>Other things are said to matter, but I am less than convinced;
among them are the state of the federal budget (whether it is “<a href="https://static.ffx.io/images/$zoom_0.397%2C$multiply_0.7554%2C$ratio_1.776846%2C$width_1059%2C$x_0%2C$y_0/t_crop_custom/q_86%2Cf_auto/fd566c68c84ee157d46292c9ecf0800aa96b88ae">back in the black</a>”), tax cuts (once granted they are forgotten – Julia Gillard gave back more than the carbon tax and <a href="https://www.smh.com.au/environment/15-billion-in-tax-cuts-for-low-and-middle-income-earners-under-carbon-deal-20110710-1h8in.html">wasn’t thanked for it</a>) and esoteric concepts such as government debt.</p>
<h3>Jobs aplenty</h3>
<p>Earlier this year, just before the eastern states went into lockdown, more of Australia’s population was <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/sep-2021">employed</a> than ever before, more <a href="https://www.abs.gov.au/articles/insights-hours-worked-september-2021">hours</a> were worked than ever before and more jobs were <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/job-vacancies-australia/latest-release">on offer</a> than ever before.</p>
<p>Total hours worked fell during the lockdown months. But in those states without long lockdowns (those other than NSW, Victoria and the ACT) hours worked kept climbing to still-higher all-time highs. It’s an indication of what’s likely in NSW and Victoria now their lockdowns are over, something the Reserve Bank says it can <a href="https://www.rba.gov.au/publications/smp/2021/nov/overview.html">already see happening</a> in NSW.</p>
<p>The proportion of those working who say they’re underemployed (working fewer hours than they want) dived to an <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/sep-2021#data-downloads">eight-year low</a> before the mid-year lockdowns.</p>
<p>I haven’t mentioned the unemployment rate (officially 4.6%) because at the moment the rate can’t be taken seriously.</p>
<p>It is that low mainly because to be counted as unemployed you need to be actively looking for work, and many workers stood down during the lockdowns and available to work <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/sep-2021#data-downloads">were not searching</a>, and also because of an oddity in the way the Bureau of Statistics counts <a href="https://www.abc.net.au/news/2021-06-17/australian-low-unemployment-due-to-exodus-foreign-workers/100219006">non-resident workers</a>.</p>
<p>Regardless, absent any lockdowns, in practical terms it is set to be easier to keep and find a job than it has been for a long time going into an election.</p>
<h3>Wage growth climbing</h3>
<p>Last year’s recession brought with it a collapse in wage growth as employers froze or cut wages, something that’s now being <a href="https://www.rba.gov.au/publications/smp/2021/nov/economic-outlook.html">unwound</a> as the economy picks up, albeit, as the Reserve Bank notes with apparent disapproval, “weighed down by more muted public sector wages growth”.</p>
<p>The bank’s latest forecasts, released on Friday, have wage growth climbing from 1.7% to almost <a href="https://www.rba.gov.au/publications/smp/2021/nov/economic-outlook.html">3%</a> over the next two years, which will be the fastest growth in a decade.</p>
<hr />
<p><strong>Actual and forecast wages growth</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="328" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/430969/original/file-20211109-17-1f0fnuj.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption">Annual growth in ABS wage price index, excluding bonuses and commissions.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/publications/smp/2021/nov/economic-outlook.html">RBA, ABS</a></span>
</span></figcaption>
</figure>
<hr />
<p>Three per cent is still lower than the wage growth we had come to expect before it fell off a cliff with the end of the 2010s resources boom, and it’s still lower than the Reserve Bank needs to sustainably meet its inflation target.</p>
<p>But it holds out the prospect of an <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/jun-2021">improvement</a> at a time when private sector wages are already improving, which is what matters for the way people feel.</p>
<h3>Forecasts have consequences</h3>
<p>Economic growth – the catch-all measure for what’s happening in the economy – is set to climb out of the lockdown slump and <a href="https://www.rba.gov.au/publications/smp/2021/nov/economic-outlook.html">accelerate</a> throughout next year before settling back to the 2-3% that was common before the recession.</p>
<p>It also won’t be good enough, but it will be moving in the right direction, and accelerating strongly next May, at the time we are likely to be asked to vote.</p>
<p>These forecasts matter because similar ones (prepared by the Treasury instead of the Reserve Bank) will underpin the economic statement or budget released before the election and the <a href="https://www.finance.gov.au/publications/pre-election-economic-and-fiscal-outlook">Pre-election Economic and Fiscal Outlook</a> released by departmental secretaries without political input during the campaign.</p>
<p>They will become the accepted narrative.</p>
<h3>Easier home price growth</h3>
<p>After soaring a frightening 21% in the past year to barely affordable highs, there’s every chance home prices will ease off. On Melbourne Cup Tuesday, the Reserve Bank <a href="https://theconversation.com/australias-reserve-bank-signals-the-end-of-ultra-cheap-money-heres-what-it-will-mean-170928">withdrew</a> its support for the near-zero three year bond rate that banks had been using to fund ultra-cheap fixed rate mortgages.</p>
<p>It’s no longer possible to get a three-year fixed rate mortgage for less than 2%.</p>
<p>A few weeks earlier the Australian Prudential Regulation Authority instructed lenders to refuse mortgages to borrowers who couldn’t withstand an increase in mortgage rates of <a href="https://theconversation.com/thanks-to-apra-its-about-to-become-harder-to-get-a-mortgage-heres-why-169346">three percentage points</a> (such as an increase from 3% to 6%).</p>
<p>APRA expects the instruction to cut the maximum that can be borrowed by 5%. By election day price rises might have slowed or stopped.</p>
<h3>And low rates for some time yet</h3>
<p>Higher variable mortgage rates would unsettle Australians (even though many are finding it <a href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">easier</a> to make their payments than they have in years). </p>
<p>The good news is that on Friday the Reserve Bank nominated <a href="https://www.rba.gov.au/publications/smp/2021/nov/overview.html">2024</a> as the year it expects to begin to lift the record-low cash rate that sets the price of variable rate mortgages. </p>
<p>2024 is half a political cycle away.</p>
<p>Even if the first hike comes sooner (and financial markets <a href="https://theconversation.com/rba-says-its-a-w-shaped-recovery-with-housing-one-of-the-few-concerns-170716">expect</a> it to come sooner) it won’t be imminent at the time we will be asked to vote.</p>
<p>All sorts of things determine election outcomes. </p>
<p>The economy is only one. But right now, next year’s economy is looking good.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/economically-2022-looks-like-an-ideal-time-for-a-government-to-land-re-election-171406">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-35027904647990033982021-11-03T16:38:00.002+11:002021-12-29T16:40:36.022+11:00Australia is about to be hit by a carbon tax whether the prime minister likes it or not, except the proceeds will go overseas<p>Ten years ago, in the lead-up to Australia’s short-lived <a href="https://en.wikipedia.org/wiki/Carbon_pricing_in_Australia">carbon price</a> or “carbon tax” (<a href="https://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/2F467985129CAEE6CA257A4800137831/$File/5257055001_jul%202012.pdf">either</a> description is valid), the deepest fear on the part of businesses was that they would lose out to untaxed firms overseas.</p>
<p>Instead of buying Australian carbon-taxed products, Australian and export customers would buy untaxed (possibly dirtier) products from somewhere else.</p>
<p>It would give late-movers (countries that hadn’t yet adopted a carbon tax) a “<a href="https://www.theaustralian.com.au/opinion/from-rio-to-copenhagen-the-model-was-wrong/news-story/a5f8b72e0d685a0fd574059bc6e4ab07">free kick</a>” in industries from coal and steel to aluminium to liquefied natural gas to cement, to wine, to meat and dairy products, even to copy paper.</p>
<p>It’s why the Gillard government handed out free permits to so-called trade-exposed industries, so they wouldn’t face unfair competition.</p>
<p>As a band-aid, it sort of worked. The firms with the most to lose were bought off. </p>
<p>But it was hardly a solution. What if every country had done it? Then, wherever there was a carbon tax (and wherever there wasn’t), trade-exposed industries would be exempt. The tax wouldn’t do enough to bring down emissions.</p>
<h3>We are about to face carbon tariffs</h3>
<p>The European Union has cottoned on to the imperfect workarounds introduced by countries such as Australia, and is about to tackle things from the other direction.</p>
<p>Instead of treating foreign and local producers the same by letting them both off the hook, it’s going to place both on the hook.</p>
<p>It’s about to make sure producers in higher-emitting countries such as China (and Australia) can’t undercut producers who pay carbon prices.</p>
<hr />
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="417" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/429667/original/file-20211101-19-1q0v4ka.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://australiainstitute.org.au/wp-content/uploads/2021/06/P1031-Carbon-Border-AdjustmentsWEB.pdf">Australia Institute</a></span></span>
</figcaption>
</figure>
<hr />
<p>Unless foreign producers pay a carbon price like the one in Europe, the EU will impose a carbon price on their goods as they come in — a so-called <a href="https://economics.rabobank.com/publications/2021/july/cbam-carbon-border-adjustment-mechanism-eu-explained/">Carbon Border Adjustment Mechanism</a>, or “carbon tariff”.</p>
<p>Australia’s Energy Minister Angus Taylor says he is “<a href="https://www.smh.com.au/politics/federal/australia-dead-against-climate-tariffs-declares-taylor-20210211-p571iq.html">dead against</a>” carbon tariffs, a stance that isn’t likely to carry much weight in France or any of the other 26 EU nations.</p>
<h3>Australia is familiar with the arguments for them</h3>
<p>From <a href="https://www.climatecouncil.org.au/wp-content/uploads/2021/10/Markets-Are-Moving_V5-FA_High_Res_Single_Pages.pdf">2026</a>, Europe will apply the tariff to direct emissions from imported iron, steel, cement, fertiliser, aluminium and electricity, with other products (and possibly indirect emissions) to be added later.</p>
<p>That is, unless they come from a country with a carbon price.</p>
<p>Canada is also exploring the idea, as part of “<a href="https://budget.gc.ca/fes-eea/2020/report-rapport/FES-EEA-eng.pdf">levelling the playing field</a>”. So is US President Joe Biden, who wants to stop polluting countries “<a href="https://joebiden.com/made-in-america/">undermining our workers and manufacturers</a>”.</p>
<p>Their arguments line up with those heard in Australia in the lead-up to our carbon price: that unless there’s some sort of adjustment, a local carbon tax will push local employers towards “<a href="https://onlinelibrary.wiley.com/doi/10.1111/j.1467-8462.2011.00671.x">pollution havens</a>” where emissions are untaxed.</p>
<p>In practice, there’s little Australia can do to stop Europe and others imposing carbon tariffs.</p>
<p>As Australia discovered when China blocked its exports of wine and barley, there’s little a free trade agreement, or even the World Trade Organisation, can do. The WTO was neutered when former US President Donald Trump blocked every appointment to its appellate body, leaving it <a href="https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm">unstaffed</a>, a stance Biden hasn’t reversed. </p>
<p>Even so, the EU believes such action would be allowed under trade rules, pointing to a precedent established by Australia, among other countries.</p>
<h3>Legality isn’t the point</h3>
<p>When Australia introduced the Goods and Services Tax in 2000, it passed laws allowing it to tax imports in the same way as locally produced products, a move it has recently extended to small <a href="https://sellercentral.amazon.com.au/gp/help/external/help.html?itemID=4BBHW7XBNS2GMWU&language=en_AU&ref=efph_4BBHW7XBNS2GMWU_relt_5QUHUE75VHSWTAZ">parcels</a> and <a href="https://www.ato.gov.au/Business/International-tax-for-business/GST-on-imported-services-and-digital-products/">services purchased online</a>.</p>
<p>Trade expert and Nobel Prizewinning economist <a href="https://messaging-custom-newsletters.nytimes.com/template/oakv2?productCode=PK&te=1&nl=paul-krugman&emc=edit_pk_20211102&uri=nyt://newsletter/bfdee52e-e286-5cfe-8d11-9f6a5a5403c4">Paul Krugman</a> says he is prepared to argue the toss with politicians such as Australia’s trade minister about what’s legal and whether carbon tariffs would be “<a href="https://www.smh.com.au/politics/federal/new-protectionism-australia-to-fight-boris-johnson-s-green-tariff-bid-20210210-p5714j.html">protectionist</a>”.</p>
<p>But he says that’s beside the point:</p>
<blockquote>
<p>Yes, protectionism has costs, but these costs are often exaggerated, and they’re trivial compared with the risks of runaway climate change. I mean, the Pacific Northwest — the Pacific Northwest! — has been baking under triple-digit temperatures, and we’re going to worry about the interpretation of Article III of the General Agreement on Tariffs and Trade?</p>
<p>And some form of international sanctions against countries that don’t take steps to limit emissions is essential if we’re going to do anything about an existential environmental threat.</p>
</blockquote>
<p><a href="https://theconversation.com/australias-economy-can-withstand-the-proposed-eu-carbon-tariff-159062">Victoria University</a> calculations suggest Europe’s carbon tariffs will push up the price of imported Australian iron, steel and grains by about 9%, and drive up the price of every other Australian import by less, apart from coal whose imported price would soar by 53%.</p>
<p>The tariffs would be collected <a href="https://australiainstitute.org.au/wp-content/uploads/2021/06/P1031-Carbon-Border-AdjustmentsWEB.pdf">by Europe</a> rather than Australia. They could be escaped if Australian makers of iron, steel and other products can find ways to cut emissions.</p>
<hr />
<p><strong>Increase in price of exports to EU under carbon border adjustment mechanism</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="331" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=310&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=310&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=310&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=390&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=390&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396459/original/file-20210422-21-xjnbmq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=390&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span class="caption" style="font-size: x-small;">Assumes an EU carbon price of 60 euro per tonne, which is roughly today’s price; assumes the CBAM covers CO2 emissions including fugitive emissions involved in production other than direct combustion emissions that are priced already by the EU Emissions Trading Scheme.</span>
</figcaption>
</figure>
<hr />
<p>The tariffs could also be avoided if Australia were to introduce a carbon price or something similar, and collected the money itself.</p>
<p>This makes a compelling case for another look at an Australian carbon price. If Australian emissions are on the way down anyway, as Prime Minister Scott Morrison contends, it needn’t be set particularly high. If he is wrong, it would need to be set higher.</p>
<p>One thing the sad story of Australia’s on-again, off-again, now on-again (through carbon tariffs) history of carbon pricing has shown is that politicians aren’t the best people to set the rates.</p>
<p>In 2011, Prime Minister Julia Gillard set up an independent, Reserve Bank-like Climate Change Authority to advise on the carbon price and emissions targets, initially chaired by a former <a href="https://www.climatechangeauthority.gov.au/sites/default/files/2020-06/Climate%20Change%20Authority%20Annual%20Report%202012-13/CCA-Annual-Report-Text-Accessible-PDF-03.pdf">governor</a> of the Reserve Bank.</p>
<p>Astoundingly, despite attempts to <a href="https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5136">abolish it</a>, it still exists. It might yet have work to do.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/australia-is-about-to-be-hit-by-a-carbon-tax-whether-the-prime-minister-likes-it-or-not-except-the-proceeds-will-go-overseas-170959">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-9464191064809296622021-10-27T16:35:00.002+11:002021-12-29T16:38:01.731+11:00Now it’s Liberals telling us we are going to have to cut the capital gains tax concession if we want to get Australians into homes<p>NSW is doing what Labor’s Bill Shorten could not – explaining why Australia’s capital gains tax concession is knocking first home buyers out of homes.</p>
<p>Shorten went to the <a href="https://webarchive.nla.gov.au/awa/20160627043846/http://pandora.nla.gov.au/pan/158841/20160627-1111/www.100positivepolicies.org.au/positive_plan_on_housing_affordability_capital_gains_tax_reform.html">2016</a> and <a href="https://webarchive.nla.gov.au/awa/20190513154843/http://pandora.nla.gov.au/pan/175559/20190514-0131/www.alp.org.au/policies/reforming-negative-gearing-and-capital-gains-tax-arrangements/index.html">2019</a> elections with a plan – Labor would halve the capital gains tax concession used by landlords who buy and sell properties.</p>
<p>In much the same way as he was unable to sell his (now <a href="https://theconversation.com/going-electric-could-be-australias-next-big-light-bulb-moment-161431">modest</a> by international standards) plan to
make half of all new car sales electric by 2030, he was pilloried by Morrision and before him Malcolm Turnbull for a policy they said would <a href="https://www.theaustralian.com.au/nation/politics/pm-labors-negative-gearing-changes-would-smash-housing-market/news-story/6c11cecdea4aead50686a7a725af545f">smash</a> house prices.</p>
<p>All Shorten was proposing was to wind back the capital gains tax exemption (which exempts from tax half of each profit made from buying and sell real estate and other assets) for future transactions only. The exemption would stay in place for everything already bought.</p>
<p>In the face of an overblown debate about whether or not it would smash house prices (Morrison’s department had quietly warned such claims were “<a href="https://www.abc.net.au/news/2019-03-06/federal-treasury-scolds-coalition-labor-negative-gearing-changes/10873514">not consistent with our advice</a>”) the Labor leader found himself defending modelling about prices rather than outlining what his policy would actually do.</p>
<p>And he lost, twice.</p>
<p>Now, as we prepare for yet another election, the NSW Coalition government has done what Australia’s Labor opposition could not – make a cogent argument for winding back the capital gains tax concession, saying it “pushes first home buyers out of the market”.</p>
<h3>Elbowing first home buyers aside</h3>
<p>In a <a href="https://cdn.theconversation.com/static_files/files/1827/Sub142_-_NSW_Government.pdf">submission</a> placed quietly on the federal government’s housing inquiry website late last week the NSW government argued that if the concession was cut, housing would be used “more for accommodation needs than investment needs”.</p>
<p>Here’s the line of thinking it set out, the line Shorten was never able to get across.</p>
<p>The income made from capital gains – from buying something, holding it, then selling it at a profit – is taxed differently from the income made from work or running a business. Only half of it is taxed.</p>
<p>Prime Minister John Howard and his treasurer Peter Costello were responsible for the change, introduced in 1999 in the leadup to the introduction of the goods and services tax in 2000, but with less fanfare.</p>
<p>Before then capital gains were taxed in the same way as other income (what they are subject to <a href="https://www.ato.gov.au/Individuals/Capital-gains-tax">is</a> income tax, there is no such thing as a separate capital gains tax).</p>
<p>But before then only the portion of each gain over and above the rate of inflation was taxed, so that people weren’t taxed on a profit that would have no real value.</p>
<p>The change, introduced after an inquiry that found it would “encourage a greater level of investment, particularly in innovative, high-growth companies” was to instead tax only <a href="https://www.theage.com.au/opinion/revenge-bloodymindedness-and-gullibility-the-untaxing-of-capital-gains-20150810-giv8zg.html">half</a> of each capital gain.</p>
<p>It was sold as a small change. A few years earlier, inflation had been big, around 8% per year, meaning that after five or so years only half of each profit would have been taxed in any event.</p>
<p>But inflation had since dived to a barely-noticeable 2%, where it has stayed for most of the past 20 years, making a guaranteed exemption from tax of half of each capital gain made trading property way over the odds.</p>
<p>It was, as economist Rory Robertson told his clients at the time, “almost as though the Australian tax system has been screaming at taxpayers to gear up to earn increased capital gains rather than to work harder to earn increased wages”.</p>
<p>Instead of pouring into high-growth companies, as Howard’s inquiry said it expected, the money flooded into housing, which was easier to borrow for.</p>
<h3>Rushing into real estate rather than shares</h3>
<p>As Reserve Bank assistant governor Luci Ellis told a parliamentary inquiry, it was
“more profitable to negatively gear property, because you can gear it more”.</p>
<p>To buy properties quickly, real estate investors needed to buy properties that would have otherwise been bought to live in. </p>
<p>It pushed up prices, but that wasn’t all it did.</p>
<p>As the NSW submission to the current housing inquiry says, the most significant impact was “the <a href="https://cdn.theconversation.com/static_files/files/1827/Sub142_-_NSW_Government.pdf">displacement of owner occupiers</a> (including first home buyers) from home ownership by tax-advantaged investors, predominantly those already on higher incomes”.</p>
<p>In its words</p>
<blockquote>
<p>by encouraging investors to buy and hold property, the 50% capital gains discount increases investor demand for housing and pushes first home buyers out of the market</p>
</blockquote>
<p>Before capital gains tax was halved and Australians dived into becoming landlords,
more than 70% of Australian households owned the home in which they lived and one quarter rented. </p>
<p>At the latest count (itself four years old) only two thirds owned the place in which they lived and <a href="https://www.abs.gov.au/statistics/people/housing/housing-occupancy-and-costs/2017-18">one third</a> rented.</p>
<h3>Labor has new friends</h3>
<p>And properties are less well used. Because income from rent is no longer the chief motivation for holding property (these days most rental properties make a rental loss whereas before the capital gains tax change most made a profit) the NSW government believes more are remaining empty.</p>
<p>Now, when the capital gains from holding properties can be measured in <a href="https://theconversation.com/as-home-prices-soar-beyond-reach-we-have-a-government-inquiry-almost-designed-not-to-tell-us-why-168959">hundreds of dollars per day</a>, it would be an ideal time to wind back the capital gains tax discount. Its absence wouldn’t much hurt.</p>
<p>And it’s easy to forget that wasn’t what Labor was proposing. Shorten (twice) put forward something far more modest – leaving the tax discount for existing investments untouched and halving the discount for future investments.</p>
<p>It’s <a href="https://theconversation.com/view-from-the-hill-labor-wouldnt-disturb-tax-cuts-negative-gearing-in-small-target-strategy-165084">no longer</a> Labor policy, but it was backed by the head of the Coalition’s <a href="https://www.smh.com.au/politics/federal/pms-audit-chief-tony-shepherd-says-its-time-to-more-properly-tax-super-capital-gains-20150622-ghukru.html">Commission of Audit</a> and the head of its <a href="https://treasury.gov.au/review/financial-system-inquiry-murray">financial system inquiry</a>. </p>
<p>And it was of interest to the <a href="https://cdn.theconversation.com/static_files/files/1828/Business-Council-of-Australia.pdf">Business Council of Australia</a> which pointed out that the discount “can distort investor behaviour, particularly at a time of rapid capital gains, such as in a housing or equity boom”.</p>
<p>Morrison’s opposition to it was hard to justify at the time. It’s harder now.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/now-its-liberals-telling-us-we-are-going-to-have-to-cut-the-capital-gains-tax-concession-if-we-want-to-get-australians-into-homes-170555">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-51971479027274227882021-10-20T11:58:00.012+11:002021-12-29T12:02:59.242+11:00The easy way to rein in Facebook: stop it eating competitors<p>Few of us who have survived the last year aren’t grateful for technology.</p>
<p>Zoom, email, connected workplaces and solid internet connections at home have made it possible to work, shop, study and carry on our lives in a way that wouldn’t have been possible had the pandemic hit, say, 20 years earlier.</p>
<p>But parts of big tech — the parts that track us and drive us to think dangerous and antisocial things just so we keep clicking — are doing us enormous damage.</p>
<p>Although it might seem like we can’t have the best of both worlds — the connectivity without the damage — I reckon we can. But we are going to have to change the way we think about big tech.</p>
<p>The first thing is to recognise that big tech is intrinsically weak. Yes, weak. The second is that it has only become strong each time we have let it.</p>
<p>By “big tech” I mean Facebook and Google and related companies such as Instagram and YouTube (owned by Facebook and Google respectively).</p>
<p>The firms that came before them were indeed weak in the sense that they didn’t have a guaranteed future. Think back to <a href="https://en.wikipedia.org/wiki/Netscape_(web_browser)">Netscape</a>, <a href="https://en.wikipedia.org/wiki/Myspace">Myspace</a>, <a href="https://en.wikipedia.org/wiki/Windows_Live_Messenger">MSN</a> and all those other montholiths we were told at the time would become natural monopolies.</p>
<h3>Terrified of losing its edge</h3>
<p>Much of the behaviour revealed by Facebook whistle-blower <a href="https://www.wsj.com/articles/the-facebook-files-11631713039">Frances Haugen</a> this past month is that of a market leader terrified it is losing its edge.</p>
<p>It switched what it showed away from news towards posts that inflamed and enraged people in 2018, with “unhealthy side effects on important slices of public content” in part because users had <a href="https://www.wsj.com/articles/facebook-algorithm-change-zuckerberg-11631654215">begun to interact less with it</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="175" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=164&fit=crop&dpr=1 600w, https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=164&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=164&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=206&fit=crop&dpr=1 754w, https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=206&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/427118/original/file-20211019-28-1ugqg44.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=206&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption">Extract from internal Facebook report.</span>
<span class="attribution"><a class="source" href="https://s.wsj.net/public/resources/documents/teen-mental-health-deep-dive.pdf">Wall Street Journal, US Senate Commerce Committee</a></span></span>
</figcaption>
</figure>
<p>Facebook knew that “we make body image issues worse,” in the words of one of its <a href="https://www.wsj.com/articles/facebook-knows-instagram-is-toxic-for-teen-girls-company-documents-show-11631620739">memos</a>, but did little to change the way Instagram worked. In part this was because teens spent 50% more time on Instagram than Facebook. Instagram looked like the future.</p>
<p>When engagement on Instagram started flagging, Facebook developed plans for <a href="https://www.wsj.com/articles/facebook-instagram-kids-tweens-attract-11632849667">Instagram Kids</a>, seeing pre-teens as “a valuable but untapped audience”.</p>
<p>These don’t sound like the actions of a company confident of staying on top.</p>
<p>And nor does its initial <a href="https://gigaom.com/2012/04/09/here-is-why-did-facebook-bought-instagram/">purchase</a> of Instagram in 2012 when it could have started its own photo-sharing service on mobiles, leveraging all that it had.</p>
<p>Facebook also bought <a href="https://www.buzzfeednews.com/article/charliewarzel/why-facebook-bought-whatsapp">WhatsApp</a> in 2014 because its own messaging platform, Messenger, was losing ground.</p>
<p>It couldn’t grow anything like as big by itself, because when firms grow beyond a certain size they turn sluggish, bureaucratic. </p>
<p>Google got bigger by buying <a href="https://www.theguardian.com/technology/2012/apr/23/doubleclick-tracking-trackers-cookies-web-monitoring">DoubleClick</a> (the platform it uses to sell the advertisements that drive its income) and all manner of emerging platforms including <a href="https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Alphabet">Android, YouTube, Waze and Quickoffice</a>.</p>
<p>They are the actions of a hungry company, but not one supremely confident of staying at the top.</p>
<p>Australian academic <a href="https://theconversation.com/profiles/stephen-king-1374">Stephen King</a>, a former member of Australia’s Competition and Consumer Commission and a current commissioner with its Productivity Commission, says we need to apply special tougher rules to takeovers by companies such as Google and Facebook.</p>
<h3>Big tech grows bigger by takeovers</h3>
<p>Usually we only block takeovers where the target is big. Instagram and WhatsApp were small. Instagram reportedly had <a href="https://time.com/4299297/instagram-facebook-revenue/">13</a> full-time employees at the time of its takeover, WhatsApp reportedly had <a href="https://theconversation.com/whatsapp-bought-for-19-billion-what-do-its-employees-get-23496">55</a>. Yet Facebook paid billions for them.</p>
<p>In the US and the UK both takeovers were waived through.</p>
<p>Big tech companies can do things with tiny takeover targets others can’t. Takeovers can give them access to vast networks of existing users and their data.</p>
<p>As King puts it, Instagram is big <a href="https://theconversation.com/we-allowed-facebook-to-grow-big-by-worrying-about-the-wrong-thing-152190">because</a> it was acquired by Facebook, not because Instagram was necessarily the best target.</p>
<p>In Europe the authorities were on to this possibility and approved the takeover of WhatsApp only after Facebook informed them it would be “unable to establish reliable automated matching between Facebook users’ accounts and WhatsApp users’ accounts”.</p>
<p>This statement was incorrect, Facebook has done it, and paid the European Commission <a href="https://ec.europa.eu/commission/presscorner/detail/en/IP_17_1369">€110 million</a> for providing incorrect or misleading information.</p>
<p>Had Australia been tougher, had the US, the UK and the European Commission been tougher, Facebook and Google would be nothing like the behemoths they have become today. They might have peaked and be losing market share.</p>
<h3>We are able to say no</h3>
<p>Their future is largely in our hands. For big tech companies able to use the weight of their networks (and only for those companies) we could “just say no” to takeovers. It’s hard to think of a reason for one to proceed.</p>
<p>If needed, we could change the law to make “no” the default.</p>
<p>This wouldn’t shrink the companies in a hurry. Most of the users of Facebook, YouTube, Twitter and the like are locked in, because that’s where their friends are.</p>
<p>But where the friends are changes every generation. </p>
<p>Facebook and Google know this, which is why they are so keen to take over upstart competitors and emerging platforms in fields they haven’t thought of.</p>
<p>If we stopped them, we wouldn’t stop them growing straight away, but we would make it hard for them to fight the natural order in which the new and fashionable displace the old and predictable. It’s their deepest fear.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-easy-way-to-rein-in-facebook-and-google-stop-them-gobbling-up-competitors-170104">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-31893784789219467462021-10-13T11:42:00.010+11:002021-12-29T11:47:38.561+11:00As home prices soar beyond reach, we have a government inquiry almost designed not to tell us why
<p>Never has an inquiry into the skyrocketing price of homes been more urgent. </p>
<p>Rarely has one been as insultingly ill-suited as the one under way right now.</p>
<p>Midway through last year in the midst of COVID, the average forecast of the 22 leading economists who took part in The Conversation mid-year survey was for no increase in home prices whatsoever in the year ahead (actually for <a href="https://theconversation.com/no-big-bounce-2020-21-economic-survey-points-to-a-weak-recovery-getting-weaker-amid-declining-living-standards-141184">slight falls</a>).</p>
<p>At that time the typical (median) Sydney house price was A$1 million, where it stayed until the end of the year.</p>
<p>Then it took off. In the ten months to the start of this month the typical Sydney house price soared $300,000 to <a href="https://www.corelogic.com.au/sites/default/files/2021-09/211001_CoreLogic_HomeValueIndex_Oct21_FINAL.pdf">$1.3 million</a> – a breathtaking increase (and an awfully big penalty for delaying buying) of $1,000 each day.</p>
<p>For apartments, the increase isn’t as big, although still extraordinary. The cost of delaying buying a typical Sydney apartment has been $334 each day.</p>
<p>The cost of delaying buying a typical Melbourne house has been close to $600 per day, the cost of delaying buying a typical Melbourne apartment $150 per day.</p>
<p>In that time, in the year in which the typical Australian home price climbed 20.3%, the typical Australian wage climbed just 1.7%</p>
<p>What people stretched to the limit or now locked out of the housing market are desperate to know is</p>
<ul>
<li><p>why it is happening</p></li>
<li><p>when it is likely to stop</p></li>
<li><p>what (if anything) we can do about it.</p></li>
</ul>
<p>Instead, we have been given an inquiry into affordability in name only. Seriously. The parliamentary inquiry commissioned by the treasurer in July and chaired by backbencher Jason Falinski is called an inquiry into <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Tax_and_Revenue/Housingaffordability">affordability and supply</a>, but the word “affordability” appears in none of its three <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Tax_and_Revenue/Housingaffordability/Terms_of_Reference">terms of reference</a>.</p>
<h3>It’s an inquiry into ‘supply’</h3>
<p>Instead, the terms of reference refer to the impact of taxes, charges and other things settings on “housing supply”.</p>
<p>I guess the idea is that it is obvious that supply is the key to affordability, but it rather negates the idea of holding an inquiry, and it sits oddly with the explosion in prices we have seen in a year in which building approvals have surged by a near-record <a href="https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia/latest-release#data-download">224,000</a> and our population has as good as <a href="https://www.abs.gov.au/statistics/people/population/national-state-and-territory-population/mar-2020">stayed still</a>.</p>
<p>In its submission to the inquiry the <a href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">Reserve Bank</a> includes a graph showing the supply of housing (the stock of houses and apartments) <a href="https://images.theconversation.com/files/425801/original/file-20211011-23-1xzz029.PNG">outpacing</a> population growth for the best part of the decade leading up to the latest price explosion.</p>
<h3>Supply has been holding up</h3>
<p>But in a sense (and stay with me here) whoever drafted the restricted terms of reference is right. Housing affordability is linked to the supply of housing.</p>
<p>And housing affordability has been doing okay.</p>
<p>In evidence to the inquiry last month Treasury assistant secretary John Swieringa drew a <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/toc_pdf/Standing%20Committee%20on%20Tax%20and%20Revenue_2021_09_14_9113.pdf;fileType=application%2Fpdf#search=%22committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/0000%22">distinction</a> between housing affordability (best measured by the cost of renting housing) and the cost of buying a house, which was partly an investment.</p>
<blockquote>
<p>When you are a purchaser of a house you are partly investing in an asset and partly buying dwelling services; whereas when you are renting it’s probably a cleaner read on what cost dwelling services is.</p>
</blockquote>
<p>That clean read – rent as a proportion of income – hasn’t much changed in 20 years. For middle earners it has remained comfortably between <a href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">20% and 25%</a> of household disposable income.</p>
<p>The Reserve Bank says advertised rents for units in Sydney and Melbourne have drifted down by $30 to $50 per week over the past five years while rents in other places have mostly drifted higher.</p>
<p>As it happens, it says another measure of housing affordability is improving.</p>
<p>The cost of home loan payments as a proportion of income has been falling since the onset of COVID. Dramatically lower interest rates mean payments take up less household disposable income than they did five years ago, even with the much higher prices.</p>
<h3>The problem is accessibility</h3>
<p>What has worsened is what the Reserve Bank calls “housing accessibility”, to distinguish it from housing affordability. </p>
<p>Accessibility is the ability of a first time owner or renter to get into the market at all by finding the deposit or bond.</p>
<p>Astounding price growth and five years of weak income growth have pushed up the cost of an average first home deposit from 70% of income to more than 80%.</p>
<p>On average it now takes a 24-35 year old nine years of tucking away one fifth of their income each year to save for a typical Sydney deposit, up from five to six years a decade ago.</p>
<hr />
<p><strong>Average First Home Buyer Deposit</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="254" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=238&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=238&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=238&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=299&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=299&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=299&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption">Owner-occupier; estimated as a share of average annual household disposable income using average first home buyer commitment size and assuming 20 per cent deposit. Seasonally adjusted and break-adjusted.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">RBA, ABS</a></span></span>
</figcaption>
</figure>
<hr />
<p>It’s okay if you have a parent who can get their hands on money, almost impossible if you don’t. In the words of former Reserve Bank official Peter Tulip, it’s making home ownership <a href="https://www.afr.com/property/residential/why-apra-can-t-fix-the-housing-market-20210928-p58vgy">hereditary</a>.</p>
<p>He’s not the first person to have noticed.</p>
<p>Liberal backbencher John Alexander chaired the Coalition’s 2015 inquiry into <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Home_Ownership">home ownership</a>. He said then we were “on track to becoming a Kingdom where the Lords own all the land and the biggest Lord will be King and the enslaved serf tenant is paying rent to the Lord to become wealthier”.</p>
<h3>Ownership is becoming hereditary</h3>
<p>Prime Minister Turnbull and Treasurer Scott Morrison used the 2016 election (in which they attacked Labor’s plan to limit tax breaks for landlords) to <a href="https://www.smh.com.au/politics/federal/housing-crisis-not-just-about-supply-says-liberal-mp-who-wants-his-inquiry-back-20161025-gsafv6.html">shut down</a> Alexander’s inquiry, and only agreed to restart it with someone else as chair. It had considered 30 hours of evidence.</p>
<p>The chair of this current (limited) inquiry seems <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/toc_pdf/Standing%20Committee%20on%20Tax%20and%20Revenue_2021_09_14_9113.pdf;fileType=application%2Fpdf#search=%22committees/commrep/ba9cd69c-9f8e-477e-8842-584b158278d9/0000%22">unperturbed</a>.</p>
<p>He opened September’s hearings saying no question was off-limits, no idea too stupid, all forms of inquiry were worthwhile. It’d be great if that was true.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/as-home-prices-soar-beyond-reach-we-have-a-government-inquiry-almost-designed-not-to-tell-us-why-168959">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-89518613345296354782021-09-15T15:43:00.012+10:002021-09-26T15:47:21.563+10:00Delta is tempting us to trade lives for freedoms — a choice it had looked like we wouldn’t have to make<p>Last year COVID-19 seemed simple. It was horrific, but the arguments about what to do were fairly straightforward.</p>
<p>On one side were people rightly horrified by its rapid spread who wanted us to stay at home and stay away from school and work and socialising in order to save lives.</p>
<p>On the other side were people concerned about the costs of those measures — to jobs, to education, to freedom, to mental health, and to other lives (because if we used too much of our health system fighting COVID-19, other lives might fall through the cracks).</p>
<p>And through it all came a kind of <a href="https://theconversation.com/the-gfc-provided-the-secret-sauce-we-used-to-ward-off-the-covid-recession-160989">consensus</a>. </p>
<p>The concern about non-COVID deaths turned out to be overblown. Last year Australia recorded <a href="https://www.abs.gov.au/statistics/health/causes-death/provisional-mortality-statistics/jan-dec-2020">fewer than normal</a> doctor-certified deaths, in part because the COVID restrictions stopped deaths from <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Conten/03943F9CD20D2CCCCA2586410078F296/$File/National-Influenza-Season-Summary2020.pdf">influenza</a>, and in part because they snuffed out COVID-19 early, ensuring hospitals weren’t overwhelmed.</p>
<h3>Last year, we didn’t have to choose</h3>
<p>Concern about jobs also turned out to be overblown. By locking down hard and early, and paying employers to keep on staff (through JobKeeper) we ensured the lockdowns would be short-lived, with light at the end of the tunnel.</p>
<p>In <a href="https://www.aihw.gov.au/getmedia/a69ee08a-857f-412b-b617-a29acb66a475/aihw-phe-287.pdf">none</a> of the states for which there is data was there an increase in suicides. </p>
<p>The insurance company <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/commrep/8472be85-cc92-461d-83c6-5c0d844e5a5b/toc_pdf/Standing%20Committee%20on%20Economics_2021_06_25_8906_Official.pdf">ClearView</a> told a parliamentary committee this June its research found things were better than expected in part because of the universal nature of the pandemic. Everyone knew “everyone was in this together”.</p>
<p>Another reason was telehealth. It was easier to get help than before.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/7-lessons-for-australias-health-system-from-the-coronavirus-upheaval-141122">7 lessons for Australia's health system from the coronavirus upheaval</a>
</strong>
</em>
</p>
<hr />
<p>And students returned to school sooner than they would have had the lockdowns had been weaker or started later, leaving much of their education intact.</p>
<p>The consensus was that by locking down hard and early we got the best of both worlds — near-elimination of COVID-19 and a quick return to normal life. Anyone who remembers Christmas last year remembers how normal it felt.</p>
<p>Economics is called the <a href="https://www.investopedia.com/terms/d/dismalscience.asp">dismal science</a> in part because it is about hard choices — situations where we can’t have our cake and eat it too. Last year it seemed as if COVID wasn’t one of them. Starving the virus early gave us both one of the world’s lowest death tolls and one of its shortest recessions.</p>
<h3>Hard choices are back in sight</h3>
<p>And then came Delta. </p>
<p>Far more <a href="https://www.cdc.gov/coronavirus/2019-ncov/variants/delta-variant.html">contagious</a> than the original, and with <a href="https://theconversation.com/the-symptoms-of-the-delta-variant-appear-to-differ-from-traditional-covid-symptoms-heres-what-to-look-out-for-163487">fewer</a> immediate symptoms (making it harder to trace) the Delta variant became almost impossible to get on top of in the two big states where it took hold.</p>
<p>And without very high vaccination rates — in the view of the Grattan Institute <a href="https://grattan.edu.au/report/race-to-80/">significantly higher</a> than either the NSW, Victorian or Commonwealth governments are targeting — it became all but impossible to reopen without condemning Australians to COVID deaths.</p>
<p>The new reality is plunging us back toward the territory economists call their own — the world of hard choices. </p>
<p>If the lockdowns don’t end (and there is no sign they can end any time soon without costing lives) education and mental health and jobs will indeed suffer. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="400" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/420997/original/file-20210914-13-5aci1p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" width="248" /></a>
</figure>
<p>There’s only so long businesses can hang on without pulling the pin. </p>
<p>We are getting closer to having to trade off lives against freedoms; getting closer to having to decide how many COVID deaths and how much COVID illness we are prepared to live with in order to return to something more like normal living.</p>
<p>Last week’s NSW “<a href="https://www.nsw.gov.au/media-releases/roadmap-to-freedom-unveiled-for-fully-vaccinated">roadmap to freedom</a>” implicitly made those tradeoffs.</p>
<p>Calculations prepared by the <a href="https://treasury.gov.au/publication/p2021-196731">Treasury</a> and the <a href="https://grattan.edu.au/report/race-to-80/">Grattan Institute</a> make them more explicit.</p>
<p>There are few important things to note.</p>
<p>One is that we might yet be able to get the best of both worlds. We might yet be able to effectively eliminate the delta strand, restoring both health and freedoms (as we did with the earlier strand).</p>
<p>It won’t happen if we ease restrictions before transmission has stopped, as some states are planning to.</p>
<h3>Lockdowns without end are unsustainable</h3>
<p>Another is that unending lockdowns are untenable. While last year’s lockdowns didn’t do the psychological and health and educational damage that was feared, lockdowns without end would. </p>
<p>One type of damage clearly evident in the comprehensive report on last year’s lockdowns from the <a href="https://www.aihw.gov.au/getmedia/a69ee08a-857f-412b-b617-a29acb66a475/aihw-phe-287.pdf">Australian Institute of Health and Welfare</a> is family and domestic violence. The longer lockdowns continue, the longer elevated violence is likely to continue.</p>
<p>And another thing to note is that in a world where we have to make tradeoffs there are no particularly good options. Allowing the disease to spread in order to restore freedom of movement would itself curtail freedom of movement. </p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/economists-back-social-distancing-34-9-in-new-poll-138721">Economists back social distancing 34-9 in new poll</a>
</strong>
</em>
</p>
<hr />
<p>An analysis across US states suggests <a href="https://www.nber.org/system/files/working_papers/w27432/w27432.pdf">90%</a> of last year’s collapse in face-to-face shopping was due to fear of COVID rather than formal COVID restrictions. That fear will grow if we lift restrictions and COVID spreads.</p>
<p>The Grattan Institute would lift lockdowns only when <a href="https://grattan.edu.au/report/race-to-80/">80%</a> of the entire population has been double vaccinated (not 70-80% of people aged 16+ as the NSW and <a href="https://www.pm.gov.au/sites/default/files/media/national-plan-060821.pdf">national</a> plans envisage, which amounts to 56-64% of the population).</p>
<p>Grattan believes its plan would cost 2,000-3,000 lives per year; a cost it believes the public would accept because it is similar to the normal toll from flu.</p>
<p>The NSW and national plans (Victoria’s isn’t spelled out) would cost much more.</p>
<h3>No option is particularly good</h3>
<p>The Commonwealth Treasury finds, perhaps counter-intuitively, that an aggressive lockdown strategy that saved more lives would impose lower economic costs (about <a href="https://treasury.gov.au/sites/default/files/2021-08/PDF_Economic_Impacts_COVID-19_Response_196731.pdf">A$1 billion</a> per week lower) in part because it would end up producing fewer lockdowns.</p>
<p>They are the sort of calculations we hoped never to have to make. </p>
<p>There’s still a chance we might not. With a Herculean effort NSW and Victoria could yet join Taiwan, New Zealand and every other Australian state in being effectively COVID-free. But they are running out of time.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nsw-risks-a-second-larger-covid-peak-by-christmas-if-it-eases-restrictions-too-quickly-167877">NSW risks a second larger COVID peak by Christmas if it eases restrictions too quickly</a>
</strong>
</em>
</p>
<hr />
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/delta-is-tempting-us-to-trade-lives-for-freedoms-a-choice-it-had-looked-like-we-wouldnt-have-to-make-167762">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-52516399132427163452021-09-08T15:39:00.018+10:002021-09-26T15:42:57.780+10:00From October, it will be all but impossible for most Australians to vape — largely because of Canberra’s little-known ‘homework police’
<p>After a misstep, it’s about to become illegal to import e-cigarettes without a prescription, which means that, for most Australians, it’ll become all but impossible to vape from October 1.</p>
<p>The misstep tells us a lot about how the Australian government works behind the scenes — most of it good.</p>
<p>Mid last year, Health Minister Greg Hunt announced plans to <a href="https://www.odc.gov.au/news-media/news/australian-government-proposes-strengthening-its-stance-against-e-cigarettes">ban</a> the import of nicotine-containing e-cigarettes and refills without a doctor’s prescription. Border force would be checking parcels.</p>
<p>To Hunt, the decision made sense. It was already illegal to buy and sell such products without a prescription in every Australian state and territory, and it was illegal to possess them without a prescription in every state but South Australia. </p>
<p>All Hunt was doing was closing a (very wide) loophole.</p>
<p>Government backbenchers <a href="https://www.smh.com.au/politics/federal/greg-hunt-faces-backbench-revolt-over-vaping-import-ban-20200625-p5569k.html">revolted</a>, Hunt pointed to a doubling of nicotine poisonings over the past year and the death of a toddler, the prime minister offered less than complete support, saying he was keeping an “open mind”, and Hunt put the idea on the <a href="https://www.smh.com.au/politics/federal/health-minister-gives-into-backbench-pressure-on-vaping-ban-20200626-p556go.html">backburner</a>.</p>
<p>That’s the way it played out in public.</p>
<p>But beneath the surface, something impressive was swinging into gear. It’s called the Office of Best Practice Regulation, <a href="https://obpr.pmc.gov.au/">OBPR</a>, an apolitical body nestled within the prime minister’s department.</p>
<h3>Canberra’s ‘homework police’</h3>
<p>So what did this little-known entity do that will effectively stamp out vaping from next month? Its executive director, Jason Lange, revealed the back story at an Economic Society of Australia meeting in Canberra <a href="https://esaact.org.au/event/44493/esa-act-first-friday-economics-march-2021">earlier this year</a>.</p>
<p>Set up during the 1980s to ensure government decisions didn’t needlessly tie up business in red tape, the office gradually was given other things to consider, including the effect of government decisions on citizens, on the environment, and on the distribution of burdens throughout society.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/vaping-is-glamourised-on-social-media-putting-youth-in-harms-way-159436">Vaping is glamourised on social media, putting youth in harm's way</a>
</strong>
</em>
</p>
<hr />
<p>Then in 2013 Prime Minister Tony Abbott moved it out of the Department of Finance into his own department: Prime Minister and Cabinet. </p>
<p>Prime Minister and Cabinet is the traffic cop: it decides what gets put forward for cabinet to decide, and when. So suddenly the office was working at the centre of government decisions, getting to view every one of the 1,800 or so things put to senior ministers to decide each year.</p>
<h3>Seven questions shaping new decisions</h3>
<p>For the few hundred proposals it thinks might have significant unintended impacts, the office demands an <a href="https://obpr.pmc.gov.au/impact-analysis-process">impact statement</a>. </p>
<p>It doesn’t tell the department or authority putting forward the idea what to put in the statement. But as Lange explained, it “marks the homework”. The proposals behind statements that aren’t good enough find it hard to get to cabinet.</p>
<p>Hunt’s decision on e-cigarettes wasn’t accompanied by an impact statement the first time around. Lange’s office made sure it was on the second.</p>
<p>Each OBPR analysis has to address seven questions.</p>
<hr />
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="" height="310" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=290&fit=crop&dpr=1 600w, https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=290&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=290&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=365&fit=crop&dpr=1 754w, https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=365&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/419710/original/file-20210907-19-jpc17o.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=365&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://obpr.pmc.gov.au/impact-analysis-process">Office of Best Practice Regulation</a></span></span>
</figcaption>
</figure>
<hr />
<p>The first is what problem the agency is trying to solve. Maybe it’s not really a problem. Merely working that out puts what follows into focus.</p>
<p>The second is why government action is needed. Maybe the problem isn’t very big, or maybe it will solve itself. </p>
<p>The third is what options the agency is considering. The agency has to put forward at least three options, including one that isn’t a regulation. In the case of e-cigarettes, that option was a public awareness campaign.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/vaping-as-an-imaging-scientist-i-fear-the-deadly-impact-on-peoples-lungs-123435">Vaping: As an imaging scientist I fear the deadly impact on people’s lungs</a>
</strong>
</em>
</p>
<hr />
<p>Then it has to estimate the likely benefits and costs of each option, including the costs to people the option wasn’t intended to hit, such as under-the-counter retailers and people using vaping to give up smoking.</p>
<p>The fifth question is the range of people and organisations to be consulted (which is a way of making sure it happens). The sixth is to identify the best option from the list, which includes making no regulation whatsoever.</p>
<p>The seventh is the means by which the measure would be implemented and (importantly) later evaluated.</p>
<h3>Grading government ideas, from ‘insufficient’ to ‘exemplary’</h3>
<p>Once in, and usually after being sent back for further work, the analysis is graded on a scale from “insufficient” to “adequate” to “good practice” to “exemplary”.</p>
<p>Very few are graded exemplary, and very few that we know about are graded inadequate, because if such a proposal does get adopted by cabinet, the impact statement gets published along with the grade and a statement that describes its failings — a “nuclear option” Lange says can be deeply embarrassing.</p>
<p>All impact statements attached to proposals the government adopts get <a href="https://obpr.pmc.gov.au/published-impact-analyses-and-reports">published</a> along with its OBPR rating. It is often the best opportunity the public has to read about the thinking behind the proposal.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="400" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/419695/original/file-20210907-27-dgj0ul.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" width="248" /></a>
</figure>
<p>Tellingly, only about 80 of the hundreds of impact statements started each year get to decision makers, which means the process itself knocks out poorly thought out proposals.</p>
<p>But if an idea has merit, as did the ban on importing e-cigarettes without a prescription, the 180-page <a href="https://www.tga.gov.au/sites/default/files/nicotine-scheduling-regulation-impact-statement-ris.pdf">impact statement</a> can make all the difference. </p>
<p>It sets out the problem clearly, sets out a number of possible solutions and identifies the winners and losers from each, and shows how they were consulted.</p>
<p>It demonstrates someone in the government has thought it through clearly, and provides material for the government to use when selling its decision.</p>
<p>On the Office of Best Practice Regulation <a href="https://obpr.pmc.gov.au/published-impact-analyses-and-reports">website</a> are hundreds of impact analyses on topics as diverse as food standards, protection for car dealers, and the redress scheme for child sexual abuse.</p>
<h3>Vaping becomes harder on October 1</h3>
<p>That’s why from <a href="https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/preventing-nicotine-uptake-by-young-australians-with-prescription-based-vaping">October 1</a> it will become illegal to import without a prescription nicotine-containing e-cigarettes, and illegal to supply any liquid nicotine that isn’t in child-resistant packaging.</p>
<p>Behind the scenes, the government got it right.<!--Below is The Conversation's page counter tag. Please DO NOT REMOVE.--><img alt="The Conversation" height="1" src="https://counter.theconversation.com/content/167376/count.gif?distributor=republish-lightbox-basic" style="border: none; box-shadow: none; margin: 0px; max-height: 1px; max-width: 1px; min-height: 1px; min-width: 1px; opacity: 0; outline: none; padding: 0px; text-shadow: none;" width="1" /><!--End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines--></p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/from-october-it-will-be-all-but-impossible-for-most-australians-to-vape-largely-because-of-canberras-little-known-homework-police-167376">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-17298285877727528362021-09-01T15:32:00.012+10:002021-09-26T15:34:59.401+10:00My super fund just failed the APRA performance test. What’s next?
<p>Failure is only the beginning. </p>
<p>Thirteen of Australia’s 80 closely-regulated MySuper superannuation funds have failed the <a href="https://www.apra.gov.au/news-and-publications/apra-releases-inaugural-your-future-your-super-performance-test-results">APRA performance test</a>.</p>
<p>There’s a fair chance you are among the one million people in them.</p>
<p>The results were made public on Tuesday and handed to the funds on Monday. From here on — for the people who run those funds — it’s about to get worse.</p>
<p>APRA is the Australian Prudential Regulation Authority. Landmark reforms introduced in response to a devastating Productivity Commission report into the “<a href="https://www.smh.com.au/politics/federal/the-fix-for-australia-s-multibillion-dollar-superannuation-mess-20180528-p4zi05.html">mess</a>” that is much of Australia’s super industry require APRA to rate each MySuper fund (and from next year most other funds) with a pass or a fail according to how they have managed their members’ money.</p>
<p>To fail — as one in six funds have — would require the fund to have for seven or eight years managed its members’ funds so badly that when judged by its own <em>stated investment strategy</em>, those members would have been better off investing in the broad categories of assets themselves and paying the managers to stay away.</p>
<p>Under the rules, which go by the name <a href="https://www.apra.gov.au/your-future-your-super-frequently-asked-questions">Your Future, Your Super</a>, funds can only be given a “pass” or a “fail”. Those that fail are required to write to their members.</p>
<h3>Letters humbling</h3>
<p>The letters, which have to be delivered within 28 days, and which APRA will check, are <a href="https://www.legislation.gov.au/Details/F2021L01077">humiliating</a>.</p>
<p>“Hello [fund member],” they begin. “Your superannuation product has performed poorly under an annual performance test”.</p>
<blockquote>
<p>As a result, we are required to write to you and suggest that you consider moving your money into a different superannuation product.</p>
<p>By switching into a better performing product, you can potentially save thousands of dollars more for retirement. For example, by earning 1% higher net return over a 30‑year period, you could be 20% better off at retirement.</p>
</blockquote>
<p>At the bottom of each letter is a QR code members can use to go to <a href="https://www.ato.gov.au/Calculators-and-tools/YourSuper-comparison-tool/">ato.gov.au/yoursuper</a> to compare funds’ performance. If members log in with their MyGov account they will be told exactly what super they have and where it is (I’ve tried it and it works) and get a comparison tailored to their circumstances.</p>
<p>The 13 funds forced to send out these letters will be lucky to see out the year. Once a fund suffers withdrawals and has to pay out members it performs even worse. Within months, many will be taken over. </p>
<h3>Killing season</h3>
<p>Those that remain are unlikely to last a second year. Once a product fails for two consecutive years (<a href="https://www.smh.com.au/money/super-and-retirement/regulator-s-verdict-on-super-funds-to-spark-major-shake-up-20210826-p58m35.html">most</a> that fail in the first year are expected to fail in the second) it will be prohibited from accepting new members, which means it’ll be killed.</p>
<p>It may or may not be relevant, but the driving forces behind the revolution are women. Women typically do <a href="https://theconversation.com/yes-women-retire-with-less-than-men-but-boosting-compulsory-super-wont-help-157412">much worse</a> out of super than men. </p>
<p><a href="https://www.smh.com.au/politics/federal/the-appalling-truth-about-our-world-class-super-system-20180529-p4zi94.html">Karen Chester</a> chaired the Productivity Commission inquiry that quantified the hundreds of thousands of dollars lost in retirement by each worker who stays in a dud fund, and came up with the first draft of the performance test. </p>
<p>Kelly O'Dwyer, as financial services minister championed it, as did her successor Jane Hume. </p>
<p>In charge of policing the rules is APRA executive board member <a href="https://www.apra.gov.au/news-and-publications/apra-executive-board-member-margaret-cole-speech-to-women-banking-and-finance">Margaret Cole</a>, who was known as the “<a href="https://www.thetimes.co.uk/article/price-is-right-for-the-enforcer-who-brought-city-to-book-nqh679xr9v8">enforcer</a>” during her time as director of enforcement and financial crime at the UK Financial Services Authority.</p>
<p>On <a href="https://www.apra.gov.au/news-and-publications/apra-executive-board-member-margaret-cole-speech-to-women-banking-and-finance">Friday</a> she declared bluntly that Australia had too many funds, too many persistently underperforming funds and too many with fees that remain too high.</p>
<h3>Industry funds among those failed</h3>
<p>Among the chronic underperformers now facing a death spiral are five industry funds — two of them run by members of <a href="https://web.archive.org/web/20210815145414/https://www.industrysuper.com/choose-a-fund">Industry Super Australia</a>, the organisation that represents funds set up “only to benefit members”.</p>
<p>Rather, they were members. Maritime Super left just <a href="https://www.afr.com/politics/federal/maritime-super-dumps-industry-funds-lobby-group-20210827-p58mfe">ahead of the results</a>. LUCRF, originally set up by what is now the United Workers Union, was terminated on the release of the results. Industry Super <a href="https://web.archive.org/web/20210815145414/https://www.industrysuper.com/choose-a-fund">scrubbed it from its website</a>.</p>
<hr />
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="431" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=404&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=404&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=404&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=508&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=508&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418562/original/file-20210831-15-keorln.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=508&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.apra.gov.au/your-future-your-super-performance-test">Australian Prudential Regulation Authority</a></span></span>
</figcaption>
</figure>
<hr />
<p>The other industry funds that failed the performance test are run by the Australian Catholic Superannuation and Retirement Fund, Christian Super and the Victorian Independent Schools Super Fund.</p>
<p>Among the for-profit failures are funds run by Westpac (BT Super) and the Commonwealth Bank (Colonial First State). </p>
<p>The banking royal commission found that funds run by banks often pay money to <a href="https://www.smh.com.au/entertainment/books/how-the-banks-went-bad-and-what-can-be-done-about-it-20190819-p52igw.html">other parts of the bank</a> for services such as <a href="https://www.theklaxon.com.au/home/westpacgouge">buying and selling bonds</a>, rather than doing it themselves or through brokers who would get better prices.</p>
<h3>In the dark, until now</h3>
<p>Super customers needn’t know what happens. They don’t get bills.</p>
<p>Whereas electricity bills hurt when they are delivered and have to be paid, the bills for super fees (and hidden fees in the form of relentless underperformance) aren’t seen, and don’t have to be paid — the fees come out of the funds.</p>
<p>And the funds grow every year, even where they are squandered. Compulsory super throws in a fresh 10% of salary each year.</p>
<p>The aim of what’s happened this week is to make visible what is normally invisible, and to prod people into action.</p>
<h3>An act of faith… in competition</h3>
<p>The government could have gone down a different track. </p>
<p>Peter Costello, the long-serving Coalition Treasurer who now heads the Future Fund which manages government investments, wanted his successor to create a <a href="https://www.afr.com/wealth/superannuation/future-fund-chairman-peter-costello-wants-government-default-super-fund-20190211-h1b3e7">government super fund</a> (run by his Future Fund) which it would default new workers into.</p>
<p>The Future Fund would have protected workers, but to do it, would have played safe. As it became dominant it would have stifled competition and the promise of better returns. Or that was the thinking.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/super-funds-have-been-working-for-themselves-when-they-should-have-been-working-for-us-thats-about-to-change-157580">Super funds have been working for themselves when they should have been working for us. That's about to change</a>
</strong>
</em>
</p>
<hr />
<p>Chester, O'Dwyer, Hume and Treasurer Josh Frydneberg decided instead to supercharge competition — to make crystal clear which are the funds to run from and the funds to run to. They are making running as easy as two clicks.</p>
<p>One in every 11 dollars we earn is funneled into superannuation. Legislated increases mean it will soon be one in nine. </p>
<p>It’s important it’s looked after.<!--Below is The Conversation's page counter tag. Please DO NOT REMOVE.--><img alt="The Conversation" height="1" src="https://counter.theconversation.com/content/166956/count.gif?distributor=republish-lightbox-basic" style="border: none; box-shadow: none; margin: 0px; max-height: 1px; max-width: 1px; min-height: 1px; min-width: 1px; opacity: 0; outline: none; padding: 0px; text-shadow: none;" width="1" /><!--End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines--></p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/my-super-fund-just-failed-the-apra-performance-test-whats-next-166956">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-44221151581600252452021-08-25T15:26:00.014+10:002021-09-26T15:31:27.922+10:00The official figures say wages aren’t growing — here’s why they’re wrong<p>Have you heard about the latest wage figures? I hope not. They’re meaningless.</p>
<p>What the widely quoted measure of <a href="https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/average-weekly-earnings-australia/may-2021">average weekly earnings</a> purports to show is that wages grew a mere 0.1% over the year to May. It’s not true. It’s not what happened. For most of us, wages grew by much more.</p>
<p>That’s not to say wage growth has been high — the best estimate is that private sector wages have climbed 1.9% over the past year and public sector wages a record low 1.3% — but both are still well above nothing, and generally well above our near-record low rates of consumer price inflation.</p>
<p>A check-in with reality would tell you that mid last year the Fair Work Commission lifted award wages <a href="https://www.fairwork.gov.au/about-us/news-and-media-releases/2020-media-releases/july-2020/20200701-awr-media-release-1-july-2020">1.75%</a>. Mid this year it lifted them <a href="https://www.fairwork.gov.au/about-us/news-and-media-releases/2021-media-releases/july-2021/20210701-annual-wage-review-2021-media-release">2.5%</a>.</p>
<p>So how could it be that the official figures, published by a trusted organisation, the Australian Bureau of Statistics, show average earnings static, climbing just 0.1%?</p>
<p>The first thing to say is that the bureau is probably embarrassed by the figures.</p>
<p>They are “not designed to produce movement in earnings data” it says on its website, before acknowledging that’s <a href="https://www.abs.gov.au/methodologies/average-weekly-earnings-australia-methodology/may-2021">exactly what they are used for</a>.</p>
<h3>‘Not designed’ to measure wage growth</h3>
<p>Australia’s pensions are adjusted twice a year in accordance with a formula that includes average weekly earnings. </p>
<p>The figure is built into private contracts. If it wasn’t published, many contracts wouldn’t work.</p>
<p>To create it, the bureau surveys about 5,130 employers every six months, asks what they are paying their workers, and uses the answers to calculate an average female wage, an average male wage, an average part-time wage, an average full-time wage, and a lot of other averages besides.</p>
<h3>The ‘average wage’ isn’t typical</h3>
<p>One problem is that averages are not representative. The survey suggests the average full-time wage is <a href="https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/average-weekly-earnings-australia/may-2021#methodology">A$90,330</a>, whereas in reality six in ten earn less. </p>
<p>The mid-way (median) full-time worker earns <a href="https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/employee-earnings-and-hours-australia/latest-release">$10,000 less</a>. The average is boosted by a few enormously high earners and can’t be taken seriously.</p>
<p>An entirely separate problem arises when you try to use averages to calculate growth. The average is only an average of what’s averaged, and that can change.</p>
<h3>When low-wage workers lose jobs…</h3>
<p>Here’s an example. What would happen if a recession caused everyone working only four hours per week to lose two hours? It would push their earnings down and push down average weekly earnings, which would be about right.</p>
<p>But what if each of those people lost a further two hours, taking their hours down to zero. Their low hours would no longer be included in the total to be averaged, and (without them in it) average earnings would climb.</p>
<h3>…the average wage goes up</h3>
<p>That’s what happened a bit over a year ago. The bureau says COVID restrictions “led to a large decrease in the number of jobs, people employed and hours worked, with lower-paid jobs and industries particularly impacted, including jobs in accommodation and food services, arts and recreation services”.</p>
<p>The loss of those lower-paid and low hours jobs in catering, the arts and other industries “had the effect of increasing the value of average weekly earnings”.</p>
<p>Layoffs pushed the average wage up.</p>
<p>Fortunately, the bureau says by November many of the low-wage workers laid off got some hours back, depressing growth in the average wage (but not growth in any actual wages) resulting in recorded growth of just 0.1% in the year to May.</p>
<p>Many have probably since lost hours with this year’s renewed lockdowns, pushing average wages (but not actual wages) higher again.</p>
<p>It’s enough to make you think the legislation and contracts should switch from a measure that’s close to worthless to one that actually measures wage growth.</p>
<p>The bureau offers such a measure. It’s called the <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">wage price index</a>, and the bureau has been trying to encourage people to switch to it since 1998.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/other-australians-dont-earn-what-you-think-59-538-is-typical-162251">Other Australians don't earn what you think. $59,538, is typical</a>
</strong>
</em>
</p>
<hr />
<p>It is also built around a survey of employers, but rather than asking how much they pay each worker, it asks how much they pay for each job title and classification. The bureau calculates growth by comparing like with like, regardless of how many people were employed in each classification at the time.</p>
<hr />
<p><strong>Wage Price Index</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="263" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/417531/original/file-20210824-23-6h1qw8.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption">Annual growth in total hourly rates of pay excluding bonuses, public sector and private sector.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/methodologies/wage-price-index-australia-methodology/jun-2021">ABS</a></span></span>
</figcaption>
</figure>
<hr />
<p>The results are believable: private sector like-for-like wages climbed 1.9% over the past year, and public sector wages 1.3%.</p>
<p>But even they are not right when it comes to the wage growth of individuals.</p>
<p>Individuals get promoted, and (much less often) demoted. They change jobs, usually for better ones.</p>
<h3>People aren’t positions</h3>
<p>So if you were trying to use the recent like-for-like wage growth of around 2% per year as a guide to what will happen to your own wage (in order, for instance, to work out whether you could afford a mortgage) you would probably guess too low.</p>
<p>It’s why many Australians — those who’ve got not only regular pay rises but also promotions — wonder what the fuss about low wage growth is about.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/top-economists-say-cutting-immigration-is-no-way-to-boost-wages-165394">Top economists say cutting immigration is no way to boost wages</a>
</strong>
</em>
</p>
<hr />
<p>A good measure of the actual wage growth of Australians doesn’t yet exist, although it might soon. The bureau is working on tracking individuals through the use of payroll data reported to the tax office.</p>
<p>In the meantime the (<a href="https://melbourneinstitute.unimelb.edu.au/hilda">HILDA</a>) Household, Income and Labour Dynamics in Australia survey that tracks 17,000 Australians over time finds that the actual wage growth of full-time workers is indeed higher than the like-for-like figure suggests (which might help explain soaring home prices) although it too is weakening.</p>
<p>Part time workers don’t seem to get the same benefit. </p>
<p>As <a href="https://pursuit.unimelb.edu.au/articles/is-wages-growth-really-as-weak-as-we-think">Mark Wooden</a>, director of the HILDA survey puts it, “Australians in full-time work are doing pretty well – provided they remain in employment”.<!--Below is The Conversation's page counter tag. Please DO NOT REMOVE.--><img alt="The Conversation" height="1" src="https://counter.theconversation.com/content/166566/count.gif?distributor=republish-lightbox-basic" style="border: none; box-shadow: none; margin: 0px; max-height: 1px; max-width: 1px; min-height: 1px; min-width: 1px; opacity: 0; outline: none; padding: 0px; text-shadow: none;" width="1" /><!--End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines--></p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-official-figures-say-wages-arent-growing-heres-why-theyre-wrong-166566">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-92192532717620894882021-08-11T10:56:00.015+10:002021-09-26T15:05:45.375+10:00Casino operator Crown plays an old business trick: using workers as human shields<p>Casino operator Crown Resorts must be desperate or think we’re dumb.</p>
<p>Last week, before the <a href="https://www.rccol.vic.gov.au/hearing-transcripts">royal commission</a> into its right to hold a casino licence in Victoria, Crown resorted to one of the oldest, most discredited, tricks in the book. It used its workers as shields.</p>
<p>“More than 20,000 people work across Crown’s resorts. Over 11,600 of those work in Melbourne. The vast majority of them were of course not complicit in the misconduct,” its lawyer Michael Borsky told the commission.</p>
<p>Revoking Crown’s licence would sentence Crown’s employees to “enormous disruption and possibly financial hardship” at a time when many were already “living through great uncertainty and hardship”.</p>
<p>And not only Crown’s employees. Among Crown’s shareholders were “tens of thousands of small shareholders and, indeed, superannuation funds”. </p>
<p>Removing Crown’s licence would not only endanger Crown’s workers, it would have “a significant impact on the Victorian tourism industry”.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="400" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/415357/original/file-20210810-13-1st4svk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" width="248" /></a>
</figure>
<p>Crown provided 10% of Melbourne’s hotel rooms. Before COVID-19 hit, it contributed A$1.2 billion per year to Victoria’s economy.</p>
<p>It’s a logically flawed defence of the kind I first heard from Alan Bond’s Bond Corporation in the late 1980s, several years before he was imprisoned for fraud.</p>
<p>Trying to fend off an attempt to have his breweries placed in receivership, the company said Bond had 20,000 employees. They might not “have a job to go to on Tuesday”.</p>
<p>The logical flaw was the suggestion that if Bond didn’t own the breweries, the breweries wouldn’t exist.</p>
<p>The beers made by those breweries — Tooheys, Swan and XXXX — are still being made today. </p>
<p>Similarly, if Crown loses its casino licence, its 10% of Melbourne hotel rooms will still be there, most likely run by someone else. Its casino (or one like it) will also still be there, also run by someone else.</p>
<h3>Clive Palmer tried it as well</h3>
<p>The use of this flawed argument reached its peak early last decade during the battle over Labor’s proposed <a href="http://docshare04.docshare.tips/files/15261/152611398.pdf">resource super profits tax</a>. </p>
<p>Despite its name, the tax was designed as a <a href="https://www.theage.com.au/business/has-the-government-blown-its-chance-to-explain-the-tax-20100524-w82u.html">profit-sharing arrangement</a>. The government would be on the hook for 40% of the cost of each project and would take 40% of the profit. </p>
<p>If a project was profitable for a mining company, then 60% of the project would also be profitable, meaning the tax ought to make no difference to its willingness to invest.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/mineral-wealth-clive-palmer-and-the-corruption-of-australian-politics-117248">Mineral wealth, Clive Palmer, and the corruption of Australian politics</a>
</strong>
</em>
</p>
<hr />
<p>Yet mining magnates such as Clive Palmer and Andrew Forrest threatened to abandon Australia and take their money elsewhere, to Africa or to China. </p>
<p>Their threats were no more a threat to Australian mining than Alan Bond’s was to Australian brewing. </p>
<p>If Forrest and Palmer had walked away (or even BHP and Rio Tinto, which talked along similar lines), someone else would have walked in.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="400" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/415360/original/file-20210810-13-13xotla.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" width="248" /></a>
</figure>
<p>The arrangement might not be to their liking, but it would be to the liking of someone else prepared to take the profit in their place.</p>
<p>Crown, as Royal Commissioner Ray Finkelstein pointed out on August 3, is profitable. Its casino operation is <a href="https://www.rccol.vic.gov.au/hearing-transcripts">very profitable</a>: “maybe on the decline a little bit, but very profitable”. </p>
<p>“The way industry works is somebody will always step in, so I don’t treat 12,000 employees [as] at risk. ” Finkelstein said. </p>
<p>“They might change their employer, but they are not at risk of losing their jobs. </p>
<p>Nor were suppliers or tourists at risk. </p>
<p>"When we have a profitable operating business, there will be an operator there out in the world, a suitable one.”</p>
<h3>A line that used to work — on television</h3>
<p>That Crown thought it could spin this line might have something to do with the experience of its largest shareholder, from whom Crown is now distancing itself. </p>
<p>James Packer used to own Channel Nine (as in an earlier era did Alan Bond).</p>
<p>For most of its life, Australia’s television owners have played chicken with the bodies meant to be policing them — the Australian Broadcasting Tribunal and then the Australian Communications and Media Authority. </p>
<p>Each body was given enormous power: the power to suspend or cancel a licence, but with a catch. It lacked lesser powers.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-tv-networks-holding-back-the-future-155220">The TV networks holding back the future</a>
</strong>
</em>
</p>
<hr />
<p>If it suspended or cancelled an operator’s licence, the station would go off the air (at least for a while). The authority would be deluged with complaints.</p>
<p>Packer, Bond and the other owners could use their viewers as human shields.</p>
<p>Time after time (11 times in five years) the authority found Nine had breached the industry code of practice. Time after time it failed to invoke the ultimate sanction. </p>
<p>In a 2005 report for the authority, <a href="https://law.unimelb.edu.au/__data/assets/pdf_file/0005/1709915/93-Reform_of_the_broadcasting_regulator_s_enforcement_powers11.pdf">Professor Ian Ramsay</a> said this meant that in effect it had “less enforcement powers” than other authorities.</p>
<h3>Crown’s workers don’t place it beyond the law</h3>
<p>Blessedly, in 2006 (as Packer was selling out of Nine) the government acted on Ramsay’s report. The authority can now issue <a href="https://www.unswlawjournal.unsw.edu.au/wp-content/uploads/2017/09/30-1-8.pdf">fines</a> and seek enforceable undertakings, without fear of blow-back.</p>
<p>For Finkelstein to accept that if Crown’s licence was revoked its workers or the tourist industry would suffer would be to accept that, like the television industry was for many decades, Crown is beyond the practical reach of the law.</p>
<p>He is giving every indication he thinks no such thing.<!--Below is The Conversation's page counter tag. Please DO NOT REMOVE.--><img alt="The Conversation" height="1" src="https://counter.theconversation.com/content/165815/count.gif?distributor=republish-lightbox-basic" style="border: none; box-shadow: none; margin: 0px; max-height: 1px; max-width: 1px; min-height: 1px; min-width: 1px; opacity: 0; outline: none; padding: 0px; text-shadow: none;" width="1" /><!--End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines--></p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/casino-operator-crown-plays-an-old-business-trick-using-workers-as-human-shields-165815">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-47832825144107649172021-08-04T18:54:00.015+10:002021-09-25T16:16:16.786+10:00Paying Australians $300 to get vaccinated would be value for money
<img height="385" src="https://images.theconversation.com/files/414262/original/file-20210803-15-1ht086o.jpg?ixlib=rb-1.1.0&rect=338%2C173%2C2292%2C1381&q=45&auto=format&w=754&fit=clip" width="640" />
<p>I reckon Albo’s on the right track. The opposition leader wants to pay <a href="https://anthonyalbanese.com.au/media-centre/vaccination-incentive">A$300</a> to every Australian who is fully vaccinated by December 1. </p>
<p>The <a href="https://grattan.edu.au/report/race-to-80/">Grattan Institute</a> is on a similar theme. It has proposed a $10 million per week lottery, paying out ten $1 million prizes per week from Melbourne Cup day. One vaccination gets you get one ticket. Two gets you two tickets.</p>
<p>The costs are tiny compared to what’s at stake. Treasury modelling released on Tuesday puts the cost of Australia-wide lockdown at <a href="https://treasury.gov.au/publication/p2021-196731">$3.2 billion per week</a>.</p>
<p>Paying people to get vaccinated fits the government’s criteria of a response that’s “<a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/economic-stimulus-package">temporary, targeted and proportionate</a>”.</p>
<p>And the published research on small payments shows they are extraordinarily effective, often more effective than big ones.</p>
<p>A few years back, Ulrike Malmendier and Klaus Schmidt of US National Bureau of Economic Research discovered that a small gift persuaded the subject of an experiment to award contracts to one of two fictional companies <a href="https://www.nber.org/system/files/working_papers/w18543/w18543.pdf">68%</a> of the time instead of the expected 50%.</p>
<h3>Small payments can be more effective than big ones</h3>
<p>A gift three times as big cut that response to 50%, which was no better than if there had been no gift at all.</p>
<p>The effect of small payments to pregnant British smokers has been dramatic.</p>
<p>Offered £50 in vouchers for setting a quit date, plus £50 if carbon monoxide tests confirmed cessation after four weeks, £100 after 12 weeks and £200 in late pregnancy in addition to the counselling and free nicotine replacement therapy given to the other pregnant smokers, those offered the payment were more than twice as likely to quit — <a href="https://www.thelancet.com/pdfs/journals/lancet/PIIS0140-6736(14)62130-9.pdf">22.5%</a> compared with 8.6%.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/albanese-calls-for-300-vaccination-incentive-as-rollout-extended-to-vulnerable-children-165383">Albanese calls for $300 vaccination incentive, as rollout extended to vulnerable children</a>
</strong>
</em>
</p>
<hr />
<p>Never mind that these small sums ought to have made no financial sense. </p>
<p>The gifts were minuscule compared with the money the recipients would have saved anyway by not smoking, yet they worked so well that the researchers estimated the cost of the lives saved at just £482 per quality-adjusted year.</p>
<p>Around 5,000 British miscarriages each year are attributable to smoking during pregnancy. The participants randomly assigned the offer of a payment not to smoke gave birth to babies that were on average <a href="https://www.bmj.com/content/bmj/350/bmj.h134.full.pdf">20 grams heavier</a>.</p>
<p>The incentives can be even smaller. </p>
<p><a href="https://www.abc.net.au/news/2019-06-21/pay-to-quit-smoking-scheme-to-expand/11235524">Mai Frandsen</a> at the University of Tasmania has trialled offering smokers half as much — a A$10 voucher on signing up, then $50 per checkup in addition to support from a pharmacist. The results are <a href="https://onlinelibrary.wiley.com/doi/10.1111/ajr.12724">encouraging</a>.</p>
<p>Lotteries are cheaper still. The Grattan Institute’s suggestion of a $10 million per week payout sounds like a lot, but it isn’t when divided by Australia’s population.</p>
<p>A preliminary analysis of Ohio’s <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3875021">Vax-a-Million</a> lottery found it increased takeup by 50,000-80,000 in its first two weeks at a cost of US$85 per dose. </p>
<h3>Beer, doughnuts, dope</h3>
<p>Other incentives offered with apparent success in the US include free beer, donuts and (in Washington state) <a href="https://www.scientificamerican.com/article/from-1-million-lotteries-to-free-beer-do-covid-vaccination-incentives-work1/">free cannabis</a>.</p>
<p>They needn’t work for everyone. A survey conducted by the Melbourne Institute in June found that of those who were willing to get vaccinated but hadn’t got around to it, 54% would respond to a cash incentive. </p>
<p>Of those who weren’t willing or weren’t sure, only <a href="https://melbourneinstitute.unimelb.edu.au/publications/research-insights/ttpn/wave-34">10%</a> would respond to cash.</p>
<hr />
<p><strong>If you were paid a cash incentive, would you get vaccinated as soon as possible?</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=310&fit=crop&dpr=1 600w, https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=310&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=310&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=389&fit=crop&dpr=1 754w, https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=389&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/414254/original/file-20210803-21-161msyx.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=389&fit=crop&dpr=3 2262w" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://melbourneinstitute.unimelb.edu.au/publications/research-insights/ttpn/wave-34">Melbourne Institute Pulse of the Nation survey</a></span></span>
</figcaption>
</figure>
<hr />
<p>But the important thing about vaccination is that not everyone needs to do it. </p>
<p>The Grattan Institute believes <a href="https://theconversation.com/australia-shouldnt-open-up-before-we-vaccinate-at-least-80-of-the-population-heres-why-165073">80%</a> of the population needs to be vaccinated before we can reopen borders. </p>
<p>The national cabinet has adopted a lower target: <a href="https://cdn.theconversation.com/static_files/files/1740/Revised_National_Plan_30_July_final.pdf?1627955030">80% of Australians over 16</a>, which is <a href="https://theconversation.com/national-cabinets-plan-out-of-covid-aims-too-low-on-vaccinations-and-leaves-crucial-questions-unanswered-165447">65%</a> of the population.</p>
<p>Vaccination expert <a href="https://www.abc.net.au/news/2019-10-19/vaccine-hesitant-parents-understanding-more-likely-to-work/11604040">Julie Leask</a> says when it comes to child vaccines, most non-vaccinating parents are simply “trying to get on with the job of parenting”. If it’s made easy for them, they’ll do it.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-will-we-reach-herd-immunity-here-are-3-reasons-thats-a-hard-question-to-answer-164560">When will we reach herd immunity? Here are 3 reasons that's a hard question to answer</a>
</strong>
</em>
</p>
<hr />
<p>There’s not a lot to be gained by trying to reach these who actually don’t want to be vaccinated. Try too hard, and you’ll get their backs up. </p>
<p>The tragedy of the government’s COVID vaccine rollout (aside from the difficulties with assuring supply) is that the government hasn’t made it easy.</p>
<h3>Vaccination ought to be easy</h3>
<p>The government could have made it easy. When it sought advice last year from departments including the treasury, it was told to do what’s done for the flu vaccine — to distribute it through employers and pharmacies as well as general practitioners, so as to make it almost automatic.</p>
<p>The best part of a year later, it’s a view the prime minister is <a href="https://www.smh.com.au/politics/federal/i-m-sorry-former-cabinet-minister-apologises-for-sluggish-vaccine-rollout-20210722-p58bzu.html">coming round to</a>. Most of us don’t go to the doctor very often — it’s out of our way. </p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/over-18-and-considering-astrazeneca-this-may-help-you-decide-165085">Over 18 and considering AstraZeneca? This may help you decide</a>
</strong>
</em>
</p>
<hr />
<p>For a government that came to office promising to slash <a href="https://www.themandarin.com.au/7630-cutting-red-tape-public-servants-come/">red tape</a>
for business and offered businesses <a href="https://treasury.gov.au/national-innovation-and-science-agenda/tax-incentives-for-early-stage-investors">incentives</a> to invest, this government appears not to have fully grasped the importance of red tape and incentives when it comes to health.</p>
<p>It might yet. Prime Minister Scott Morrison said yesterday he had investigated something along the lines put forward by Albanese. General Frewen, in charge of the COVID taskforce, said it wasn’t needed “right now”. </p>
<p>When the time comes, if we remain under-vaccinated, Morrison can reach for it.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/paying-australians-300-to-get-vaccinated-would-be-value-for-money-165520">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-71123964320535568502021-07-28T19:22:00.012+10:002021-09-24T19:32:55.408+10:00What’s in the CPI and what does it actually measure?<p>So you don’t believe the official inflation figures. Why would you? They show prices climbing at an annual rate of <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">1.1%</a></p>
<p>On Wednesday the update for June quarter is likely to show prices climbing at an annual rate three times as high — somewhere between 3% and 4%, which will probably be another reason you won’t believe them.</p>
<p>(As it happens, most of the “jump” will be because of a different starting point. The 1.1% figure reports what happened after the three months to March 2020. The update will report what’s happened since the three months to June 2020, when coronavirus restrictions triggered a plunge in petrol prices and a temporary childcare subsidy cut the price of most care to <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2020/April/Coronavirus_response-Free_child_care">zero</a>.) </p>
<p>Most of us don’t believe 1.1% or anything like it because it doesn’t accord with our experience. We see petrol prices climbing. We are presented with bills for electricity, gas and rates we find hard to pay.</p>
<p>But here’s the thing. As hard to believe as we find it, electricity, gas and petrol don’t cost us that much over the course of a year.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="320" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413241/original/file-20210727-23-wdsk04.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" width="198" /></a> </figure>
<p>We notice petrol prices because they are displayed clearly on well-lit signs of a specified size, as is required by law. We notice electricity bills because they are large and usually arrive only four times each year.</p>
<p>And because we don’t like them. We pay less attention to spending we like.</p>
<p>Every few years the Bureau of Statistics surveys 10,000 households to determine what they spent over the course of a <a href="https://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/A192ADE3ACB05BE5CA2581B4000E490A/$File/hes%20diary.pdf">fortnight</a>, and for less frequent expenses over the course of a <a href="https://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/7E4BD0330493AFA9CA2581B4000E48CC/$File/hes%20and%20sih%20prompt%20cards.pdf">year</a>.</p>
<p>It uses what results to create a “<a href="https://www.abs.gov.au/statistics/economy/finance/household-expenditure-survey-australia-summary-results/latest-release">basket</a>” of representative goods and services, weighted according to actual expenditure. </p>
<p>Food accounts for the bulk of the basket — 17.3%. Alcohol accounts for another 5.3%. That’s right, 5.3%. </p>
<p>Compare the 5.3% of the basket we spend on alcohol to the 3.2% of it we spend on petrol, or the 3.8% on electricity and gas taken together.</p>
<h3>Alcohol and food big ticket items</h3>
<p>We spend almost as much on alcohol as on health, and more than on clothes.</p>
<p>If you reckon that’s not your household, fair enough. The basket represents the average household, as does the consumer price index <a href="https://www.abs.gov.au/websitedbs/D3310114.nsf/home/Consumer+Price+Index+FAQs">(CPI)</a> which measures the prices of the goods and services in the basket in the proportions they are in the basket. </p>
<p>And if your reckon you’d never admit to spending that much on alcohol, you’re also right. Alcohol and tobacco are two of the rare instances where the bureau <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Previousproducts/6461.0Main%20Features62016">nudges up</a> what people report to take account of what’s actually sold.</p>
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<iframe class="flourish-embed-iframe" frameborder="0" height="400" sandbox="allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation" scrolling="no" src="https://flo.uri.sh/visualisation/6827820/embed" style="height: 800px; width: 100%;" title="Interactive or visual content" width="100%"></iframe>
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<p>Contrary to a widely-believed myth, the cost of housing is in the index, both in the form of rents and in the cost of building houses, rather than the cost of land (that’s regarded as an investment, as is the ownership of shares which are also not included in the index).</p>
<h3>Most things included, though not illegal drugs</h3>
<p>Some things aren’t the index but should be — superannuation management fees (the bureau is working on it) and recreational drugs and prostitution, which are excluded <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Products/6461.0%7E2011%7EMain+Features%7EChapter+5,Coverage+and+classifications">because</a> it is “very difficult and indeed dangerous to obtain estimates of prices and expenditures, or to measure quality change”.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="320" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413273/original/file-20210727-22-1hql7ni.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" width="198" /></a> </figure>
<p>Quality matters. When Cadbury shrank its large blocks of chocolate from 250g to 200g a few years back and then to 180g, it wouldn’t have been right to merely record the price change.</p>
<p>The bureau adjusted up the recorded price to take account of the fact that people were getting less chocolate. But other changes are less straightforward. What do you do when VB reduces the strength of its beers (as it did) or the new model laptop has twice as much memory as the one it replaced?</p>
<p>For computers the bureau adjusts down the recorded prices of new models in line with a US formula.</p>
<p>For cars — which these days have features not previously dreamed of — it consults a <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Products/6461.0%7E2011%7EMain+Features%7EChapter+9,Quality+change+and+new+products">panel of experts</a>.</p>
<p>For other changes it lets improvements go through to the keeper, leaving recorded prices unadjusted even though the are getting better.</p>
<h3>Beneath the hood, the CPI is changing</h3>
<p>The bureau used to record prices using handheld devices in supermarkets and by ringing up suppliers and getting quotes. In the last few years it has moved to getting almost everything electronically — stores hand over data from checkout scanners, petrol stations report when prices have changed and upload sales data, and the bureau “scrapes” advertised prices from the web.</p>
<p>With those changes has come a revolution in what it is able to do. It used to collect prices in only a small number of representative outlets (which is why the index was limited to capital cities) and it used to record only the prices of “<a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6403.0.55.001June%202011?OpenDocument">representative</a>” items. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="320" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=967&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=967&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=967&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1215&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1215&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413244/original/file-20210727-17-1pihi03.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1215&fit=crop&dpr=3 2262w" width="199" /></a>
</figure>
<p>The stand-in for bread was the average price of a sliced white 650-750g loaf.</p>
<p>Better still, for the first time the bureau has information on how much is bought of each product at each price each quarter. This enables it make real-time adjustments to weightings in accordance with actual behaviour.</p>
<p>In 2011 when Cyclone Yasi destroyed banana crops in Queensland, the price of “fruit” recorded in the consumer price index surged to an unprecedented high. But the prices actually paid for fruit didn’t surge. Shoppers bought other fruits or canned fruit instead.</p>
<p>Next time that happens the CPI will scarcely move.</p>
<p>It’s making the index more of a cost of living index and less of a “cost of a fixed basket” index. It is happening for petrol too. The bureau is reporting the prices people actually pay, instead of the prices on offer.</p>
<p>None of this is to say that the CPI is perfect, but it would be wise to take the figure to be released on Wednesday seriously. It probably does a better job of recording changes in our cost of living than we’d do ourselves.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/whats-in-the-cpi-and-what-does-it-actually-measure-165162">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-80429853717946743312021-07-21T16:20:00.001+10:002021-07-21T16:20:00.242+10:00When COVID is behind us, we're going to have to pay more tax<p>The biggest unstated message from the <a href="https://treasury.gov.au/publication/2021-intergenerational-report">intergenerational report</a> released during the lull between lockdowns is that we will need more tax.</p>
<p>Not now. At the moment it’s a matter of throwing everything we’ve got at getting on top of the COVID outbreaks and worrying about how to (and the extent to which we will need to) pay for it later.</p>
<p>But when the economy is healthy again, taxes are going to have to rise, big time. </p>
<p>That the intergenerational report doesn’t say so explicitly might be because the government is sticking with its arbitrary and implausible guarantee that tax collections will never climb above <a href="https://www.afr.com/policy/tax-and-super/scott-morrisons-tax-cap-straitjacket-starts-to-bite-20180502-h0zj9t">23.9% of GDP</a>, which is the average between the introduction of the goods and services tax and the global financial crisis.</p>
<p>Or it might be because what’s needed sits oddly with legislated high-end tax cuts likely to cost <a href="https://www.smh.com.au/politics/federal/pandemic-will-help-make-stage-3-tax-cuts-cheaper-20210507-p57pzg.html">$17 billion</a> per year from 2024-25.</p>
<p>Among the drivers of increased government spending identified by the report is spending on health, at present 4.6% of gross domestic product, and on the report’s projections set to climb to 6.2% over the next 40 years.</p>
<h3>We’ll want better health</h3>
<p>To fund that alone the government will need to collect 6% more tax in 2061 than had spending on health stayed where it was as a proportion of GDP.</p>
<p>Perhaps surprisingly, most of the extra spending on health won’t be a direct result of the population ageing. It’ll be because health technologies are getting better and becoming much, much more expensive (à la the COVID vaccines). And because incomes are rising. </p>
<p>Rising incomes, the report explains, are the largest driver of government spending on health internationally. </p>
<p>That’s because for some things, including the provision of hospitals, private spending can’t cut it, no matter how well off you are. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="320" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=975&fit=crop&dpr=1 600w, https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=975&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=975&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1226&fit=crop&dpr=1 754w, https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1226&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/412054/original/file-20210720-19-tbn5yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1226&fit=crop&dpr=3 2262w" width="197" /></a> </figure>
<p>After billionaire Kerry Packer suffered a massive heart attack while playing polo in 1990, he was rushed to Sydney’s Liverpool Hospital.</p>
<p>When the ANU election survey began in 1990, 54% of Australians surveyed regarded health as “extremely important” in determining their vote. It’s now 70%. In 1990 11% regarded health as “not very important”. It’s now just <a href="https://australianelectionstudy.org/wp-content/uploads/Trends-in-Australian-Political-Opinion-1987-2019.pdf">2%</a>.</p>
<p>The intergenerational report has spending on aged care climbing from 1.2% to 2.1% of GDP, which by itself means the tax take will have to be 4% higher than otherwise, but it was prepared ahead of the government’s final response to the aged care royal commission. </p>
<p>The interim response had 14 (mostly expensive) recommendations subject to “<a href="https://www.health.gov.au/sites/default/files/documents/2021/05/australian-government-response-to-the-final-report-of-the-royal-commission-into-aged-care-quality-and-safety.pdf">further consideration</a>”.</p>
<p>The National Disability Insurance Scheme already accounts for one in 20 tax dollars collected and is set to overtake Medicare. </p>
<p>The report says the government’s response to the royal commission into disability care presently underway is likely to place “additional pressure” on costs.</p>
<h3>We’ll need to spend more than projected</h3>
<p>None of this extra spending is bad if it delivers value for money, and it’s what the public wants. But it is hard to reconcile with official projections in the report showing government spending climbing only 2.5% per year in real terms over the next 40 years, compared to 3.4% per year in the past 40.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/intergenerational-report-to-show-australia-older-smaller-in-debt-163474">Intergenerational report to show Australia older, smaller, in debt</a>
</strong>
</em>
</p>
<hr />
<p>The report gets there in part by an outrageous sleight of hand. It says JobSeeker and other payments will become tiny as a proportion of GDP because they will only climb with inflation (which is typically low) rather than wage growth or GDP growth (which is typically higher, and lines up with how the pension grows).</p>
<p>A moment’s reflection would show that if that actually happened for 40 years — which is what the treasury’s report assumes — JobSeeker would fall from 70% of the single age pension to a hard-to-justify 40%.</p>
<hr />
<p><strong>JobSeeker and age pension as projected in intergenerational report</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="263" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span class="caption" style="font-size: x-small;">Payment for a single, dollars per fortnight. JobSeeker indexed to IGR inflation projections, pension indexed to IGR wage projections.</span>
</figcaption>
</figure>
<hr />
<p>We know it won’t happen because it hasn’t happened. </p>
<p>JobSeeker was boosted this year after only <a href="https://theconversation.com/the-50-boost-to-jobseeker-will-take-australias-payment-from-the-lowest-in-the-oecd-to-the-second-lowest-after-greece-155739">20 years</a> rather than 40 in order to make sure that sort of thing wouldn’t happen.</p>
<p>And we know there’s nothing to stop an intergenerational report using more realistic assumptions. </p>
<p>The 2015 report, released at a time when the Abbott government planned to adjust the pension in line with the more miserly JobSeeker formula, relaxed the assumption after <a href="https://treasury.gov.au/publication/2015-igr">13 years</a> because if it left it in place the pension would slide untenably below community expectations.</p>
<h3>We’ll easily be able to afford more tax</h3>
<p>There’s nothing wrong with paying more tax if it’s for things we want, like better health care, better aged care, better disability care and benefits we can live on.</p>
<p>The intergenerational report has government spending climbing by four percentage points of GDP between now and 2061. But it also has real GDP per person almost doubling, climbing 80%.</p>
<p>Even if that’s an overestimate and GDP per person grows by, say, 50%, and the need for tax grows by more than four points, we’ll easily be able to afford the extra tax, and we’ll want what that tax will buy. Expectations climb with income.</p>
<p>The present government will be long gone by the time the tax to GDP ratio reaches its “cap” of 23.9% of GDP (which the report expects in 2035).</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="320" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=967&fit=crop&dpr=1 600w, https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=967&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=967&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1215&fit=crop&dpr=1 754w, https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1215&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/412057/original/file-20210720-15-13zncps.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1215&fit=crop&dpr=3 2262w" width="199" /></a> </figure>
<p>The finance minister who came up with the cap, <a href="https://www.skynews.com.au/australia-news/politics/finance-minister-mathias-cormann-has-announced-a-tax-rule-for-the-turnbull-governments-budget-limiting-it-from-exceeding-a-threshold-of-239-per-cent-of-gpd/video/8d378e1aa4e3ca862a0c438d69484500">Mathias Cormann</a>, is now head of the Organisation for Economic Co-operation and Development, in which the average tax take is <a href="https://data.oecd.org/tax/tax-revenue.htm">34%</a> of GDP.</p>
<p>An obvious place to look for the tax is high-income senior citizens, at present enjoying tax-free super, <a href="https://theconversation.com/words-that-matter-whats-a-franking-credit-whats-dividend-imputation-and-whats-retiree-tax-111423">refundable franking credits</a> and special tax offsets. </p>
<p>Grattan Institute calculations suggest an older household earning $100,000 pays <a href="https://theconversation.com/intergenerational-reports-ought-to-do-more-than-scare-us-they-ought-to-spark-action-163505">less than half</a> the tax of a working-age household on the same amount.</p>
<p>Like the households of less well-off seniors, those households are highly likely to use the services tax provides.</p>
<p>To say we’ll need more tax is not to say the government needs to fund all of its spending with tax. </p>
<p>It is projecting budget deficits for the next <a href="https://theconversation.com/intergenerational-report-to-show-australia-older-smaller-and-more-in-debt-163474">40 years</a>. Budgets have been in deficit for all but a few of the <a href="https://theconversation.com/memories-in-1961-labor-promised-to-boost-the-deficit-to-fight-unemployment-the-promise-won-115376">past 100 years</a>.</p>
<p>But it will need to cover much of it with tax to keep the economy in check. If we want what tax provides, we’ll be prepared to pay it.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/when-covid-is-behind-us-australians-are-going-to-have-to-pay-more-tax-164707">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-78352674895053034162021-06-23T14:41:00.008+10:002021-07-17T14:46:12.316+10:00No Barnaby, 2050 isn’t far away. The IGR deals with 2061
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgV7QFX2aq6fyNW9Nnxl5aHqc0ev51wvOqT5usVOW-7zHaOjdunCqOjzKHN7u4ncCIcXFgCnOAJ-FeWji9VhyCTd6XV17RCoDjCanFajxQgyua07fp3XSTsp6kOZbEUyZm8p_WM9g/s2569/clock.jpg" style="display: block; padding: 1em 0px; text-align: center;"><img alt="" border="0" data-original-height="1224" data-original-width="2569" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgV7QFX2aq6fyNW9Nnxl5aHqc0ev51wvOqT5usVOW-7zHaOjdunCqOjzKHN7u4ncCIcXFgCnOAJ-FeWji9VhyCTd6XV17RCoDjCanFajxQgyua07fp3XSTsp6kOZbEUyZm8p_WM9g/s600/clock.jpg" width="600" /></a></div>
<p>Barnaby Joyce has an answer to those who say Australia should commit to net zero carbon emissions by 2050. He says 2050 is <a href="https://www.theaustralian.com.au/commentary/nationals-would-betray-farmers-if-it-waved-through-netzero/news-story/1351e19ca227fa126ec0be88714437e3">too far away</a> to be sure of anything.</p>
<p>As he put it in February while a backbencher, “many of the politicians and commentators talking about a 2050 aspiration will be dead by then”.</p>
<p>The man he replaced as deputy prime minister, Michael McCormack, said much the <a href="https://www.michaelmccormack.com.au/media-releases/2021/2/7/transcript-interview-with-kieran-gilbert-sky-news-am-agenda-sunday-7-february-2021">same thing</a> at about the same time. </p>
<p>He was “not worried about what might happen in 30 years’ time”.</p>
<p>While edging Australia ever closer to endorsing a target for 2050, Prime Minister Scott Morrison used the same line of reasoning.</p>
<p>Australia’s <a href="https://www.pm.gov.au/media/address-national-press-club-barton-act">goal</a> was to reach net zero emissions as soon as possible, and preferably by 2050.</p>
<h3>Near enough to forecast</h3>
<p>“But when we get there, when we get there, whether in Australia or anywhere else, that will depend on the advances made in science and technology needed to commercially transform not just advanced economies and countries, but the developing world as well.”</p>
<p>For all of these leaders, 2050 was simply too far into the future to have a sensible view about.</p>
<p>So what are we to make of what will happen next Monday?</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/infographic-the-language-of-intergenerational-reports-37975">Infographic: the language of Intergenerational Reports</a>
</strong>
</em>
</p>
<hr />
<p>Shortly after <a href="https://events.ceda.com.au/Events/Library/LS210628">10am</a> Treasurer Josh Frydenberg will release a set of official projections that will go way out into the future, to 2061 rather than 2050.</p>
<p>It’ll be the fifth set of official projections going out 40 years — the fifth so-called <a href="https://treasury.gov.au/publication/2010-igr">intergenerational report</a>.</p>
<p>The first, produced by Prime Minister John Howard and his treasurer Peter Costello in 2002, set out projections to 2042.</p>
<p>The Howard government mandated the five-yearly intergenerational reports as part of its Charter of Budget Honesty. </p>
<p>The idea was that it wasn’t good enough to examine the impact of government policies just a handful of years into the future, as happened each budget night. If problems were set to build up over time — say over 40 years — budgets wouldn’t give you a handle on them until it was too late.</p>
<p>The Charter of Budget Honest Act made clear that the intergenerational reports were to deal with more than demographic change. </p>
<p>The <a href="https://treasury.gov.au/node/1609">first</a> identified increasing spending on new health care technologies unrelated to demographic change as the greatest threat to government finances.</p>
<h3>Climate change feeds into the IGR</h3>
<p>And that first John Howard and Peter Costello report included a sharp warning about climate change, noting that “early action to prevent environmental damage, rather than later action to remedy it, is likely to reduce long-term costs”.</p>
<p>In 2010 the third intergenerational report had an entire chapter on climate change. The report was entitled <a href="https://treasury.gov.au/sites/default/files/2019-03/IGR_2010.pdf">Australia to 2050</a>.</p>
<p>The fourth (Abbott government) intergenerational report in 2015 was prescient in its warning about the Great Barrier Reef, describing protection of it as a “significant challenge over coming decades”.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/severely-threatened-and-deteriorating-global-authority-on-nature-lists-the-great-barrier-reef-as-critical-151275">'Severely threatened and deteriorating': global authority on nature lists the Great Barrier Reef as critical</a>
</strong>
</em>
</p>
<hr />
<p>Frydenberg’s 180-page report will also include a chapter on climate change, one that looks beyond 2050.</p>
<p>It will doubtless include the sort of disclaimers all intergenerational reports have had — that projections on the basis of unchanged settings aren’t forecasts. Part of their purpose is to warn what will happen if settings aren’t changed.</p>
<p>The first warned that steadily-rising spending on new medical technologies along with a rapidly ageing population would boost the need for tax by 5% of GDP.</p>
<p>As governments took measures to wind back the growth in spending (including lifting the pension age) those needs shrank in future intergenerational reports, to about 3% of GDP.</p>
<h3>Challenges manageable…</h3>
<p>To date, each report has found we will have no difficulty finding the money.</p>
<p>The first pointed to living standards 90% higher in 40 years time. </p>
<p>The fourth, using the same metric of real GDP per person but assuming lower productivity growth, pointed to living standards 80% higher.</p>
<p>With so much uncertain, the assumptions in Frydenberg’s report will tell us a lot about where the treasury thinks we are going and what might need to change.</p>
<p>A big concern in the first report was that as the population of older Australians grew, the number of people of traditional working age available to serve each one would shrink, roughly halving.</p>
<h3>…if we’re given notice</h3>
<p>That concern was overstated somewhat because at the same time the number of young people who needed serving would shrink.</p>
<p>Twenty years on, it is clear that our population isn’t ageing nearly as quickly as had been expected, in part because we’ve been importing many more (relatively young) migrants than expected. </p>
<p>In the year before COVID net overseas migration reached 241,300 per year. The first intergenerational report had expected only 90,000 per year.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-productivity-growth-stalled-in-2005-and-isnt-about-to-improve-159706">Why productivity growth stalled in 2005 (and isn't about to improve)</a>
</strong>
</em>
</p>
<hr />
<p>On the other hand our productivity growth — the amount produced per hour of work — has been abysmal. Before COVID it fell to 0.4% per year. The first intergenerational report assumed 1.75% per year. </p>
<p>And the first assumptions about wage growth seem positively quaint. The first intergenerational report expected 4.25% per year. Before COVID we got 2.1%</p>
<p>There’s no doubt that the assumptions and projections in Monday’s intergenerational report will also seem quaint several decades down the track. But it’s important to make them. The future arrives more quickly than we think.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/no-barnaby-2050-isnt-far-away-the-igr-deals-with-2061-163083">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-11270720097825066112021-06-09T15:52:00.016+10:002021-06-09T15:52:00.271+10:00Other Australians earn nothing like what you think. If you're on $59,538, you're typical<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgb7N6LAxa7NaEOG88pSODwIsp6OhD-zw_MFTdl-5BX7aBBHs-z3tQ4NzKvjbQ3K7fFoG_ASyArJXwg1UkyjOhLL66MgyR5xI1vrjRE-VqDFSvmYs9w2dL33j6eFwnh8zCYgEmLcQ/s1187/minitt5.PNG" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="793" data-original-width="1187" height="214" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgb7N6LAxa7NaEOG88pSODwIsp6OhD-zw_MFTdl-5BX7aBBHs-z3tQ4NzKvjbQ3K7fFoG_ASyArJXwg1UkyjOhLL66MgyR5xI1vrjRE-VqDFSvmYs9w2dL33j6eFwnh8zCYgEmLcQ/w320-h214/minitt5.PNG" width="320" /></a></div><p>I’m guessing you earn less than A$200,000.</p>
<p>And I’m guessing you think you’re missing out. People keep telling you so.</p>
<p>On one side of politics Labor leader <a href="https://anthonyalbanese.com.au/media-centre/transcript-of-radio-interview-2-gb-money-news-monday-24-june-2019">Anthony Albanese</a> says anyone earning $200,000 dollars a year “can’t be described as being in the top end of town”.</p>
<p>On the other, Prime Minister <a href="https://www.pm.gov.au/media/doorstop-parkhurst-qld">Scott Morrison</a> parries with interviewers when asked whether people on $180,000 to $200,000 (the biggest beneficiaries of his planned 2024 Stage 3 tax cut) are “high income”.</p>
<p>“They’re hardworking people working out on mines and difficult parts of the country,” he says. “They deserve a tax cut.”</p>
<p>Hardworking or not, Australians on more than $200,000 are rare. And an awful lot of them don’t work at all.</p>
<h3>$200,000 is unusual</h3>
<p>I’ve never quite understood why politicians are so keen to tell us such incomes are normal. It might be because they are on them. Each backbencher gets <a href="https://www.remtribunal.gov.au/sites/default/files/2021-01/Remuneration%20Tribunal%20%28Members%20of%20Parliament%29%20Determination%202020%20DOE%2001-07-2020.pdf">$211,250</a> plus a $32,000 electorate allowance (boosted by $19,500 if they turn down the use of a private-plated vehicle) plus home internet and travel allowances.</p>
<p>Very detailed tax office figures (<a href="https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2018-19/?page=2#Navigating_Taxation_statistics">updated on Monday</a>) tell us what the rest of us earn, all 14.3 million of us.</p>
<p>Only 2% of those required to pay tax earned more than $211,365. Only 3% earned more than $188,667.</p>
<p>Everyone else — the other 97% — earned less than $188,667, most of them a good deal less, and many more earned even less and weren’t required to pay tax.</p>
<a href="https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="200" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/404989/original/file-20210608-28202-o41jp1.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" width="123" /></a>
<p>The typical taxable income (typical in the sense that half earned more than it, half less) was $59,538. If that’s what you’re on, you’re more likely to find people who earn close to what you do than anyone who earns more or less.</p>
<p>We can get an idea of how lonely it is at the top by examining the top 1%, those Australians with a taxable income of greater than $350,134.</p>
<p>There aren’t many of them, just 110,613 — 82,258 men and 28,355 women. </p>
<p>Only 39,209 have taxable incomes of more than $500,000, and of these only 14,467 have taxable incomes of more than $1 million.</p>
<h3>Life at the top needn’t be taxed</h3>
<p>You’re probably thinking there’s a difference between taxable incomes and actual incomes, and the tax office figures show you’re right. </p>
<p>15,358 Australians reported total incomes of more than $1 million. By the time they had applied legitimate tax deductions, the number had shrunk to 14,467.</p>
<p>Some of these million-dollar earners were able to shrink their taxable incomes very low indeed. 45 cut their taxable incomes to less than the tax-free threshold of $18,200 — meaning they didn’t have to pay anything, not even the Medicare levy.</p>
<p>Another eight managed to escape the Medicare levy even though their taxable incomes were above $18,200, and another 21 escaped income tax while paying the Medicare levy.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/yes-some-millionaires-pay-no-tax-but-crimping-deductions-mightnt-help-139279">Yes, some millionaires pay no tax, but crimping deductions mightn't help</a>
</strong>
</em>
</p>
<hr />
<p>Many of these millionaires weren’t “hardworking” in the sense Morrison meant. Only 9,144 of the 14,467 Australians on taxable incomes of more than $1 million worked. Only 17,883 of the 57,120 Australians on more than $250,000 worked.</p>
<p>Only nine of the 45 million-dollar earners who cut their taxable incomes to less than the tax-free threshold worked. 27 received so-called <a href="https://theconversation.com/words-that-matter-whats-a-franking-credit-whats-dividend-imputation-and-whats-retiree-tax-111423">franked dividends</a> from companies that had paid tax, enabling them to cut their own tax bills or receive rebates from the tax office. On average, each received dividends of $2.25 million.</p>
<h3>Many who aren’t taxed are generous</h3>
<p>Seventeen of the 45 million-dollar earners received capital gains, on average $6.4 million each. 38 received interest, averaging $290,000 each.</p>
<p>Against that were set expenses, small and large. Three claimed for work-related car expenses averaging $27,340 each, 13 claimed expenses averaging $57,200 for assistance with tax affairs, eight claimed for previous losses from farms averaging $684,000 each, and eight for losses from other businesses averaging $408,000.</p>
<p>But by far their biggest expense was donations. 14 gave away a total of $161 million in gifts or tax-deductible donations — an extraordinary average of $11.5 million each.</p>
<p>Most of us aren’t like these people. </p>
<h3>Most of us claim more modest deductions</h3>
<p>Three-quarters of Australians in the tax system earn less than $89,173. </p>
<p>Those on that income typically claim between $1,500 and $1,900 in deductions (men claim more than women) and, thanks to negative gearing, claim losses on properties of between $1,800 and $2,600 (again, men claim more than women). </p>
<p>Such Australians typically report between $1,200 and $2,100 in capital gains (more for women than for men).</p>
<p>If higher-earning Australians are unaware of how most of us live, it’s understandable. Surgeons mix with other surgeons. On average each of Australia’s 4150 surgeons earns $394,303, making surgery our highest-paying occupation.</p>
<h3>We mix with, and marry, people like us</h3>
<p>And they increasingly marry each other. In 2010 the Productivity Commission found that 68% of Australia’s high earners were <a href="https://www.pc.gov.au/research/supporting/income-distribution-trends/income-distribution-trends.pdf">married to other high earners</a>. A decade earlier it was 49%.</p>
<p>And high earners live near each other. The average income in Sydney’s Double Bay (Australia’s highest-earning suburb) is $202,598. The average income in Ruse in Sydney’s Campbelltown is $55,100.</p>
<p>People in Double Bay don’t drive through Ruse on their way to the city.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-low-and-middle-income-tax-offset-has-been-extended-yet-again-it-delivers-help-neither-when-nor-where-its-needed-160772">The Low and Middle Income Tax Offset has been extended yet again. It delivers help neither when nor where it's needed</a>
</strong>
</em>
</p>
<hr />
<p>In the United States it is often the other way around. There, low-income suburbs are more likely to be near the city, meaning that high-income Americans at least see them as they go in to town.</p>
<p>That most of us have little idea of what others earn suits those in charge when they propose tax cuts <a href="https://theconversation.com/the-low-and-middle-income-tax-offset-has-been-extended-yet-again-it-delivers-help-neither-when-nor-where-its-needed-160772">skewed to high earners</a>.</p>
<p>They can con us that most of us will be better off, and those on high incomes can con themselves they are not already better off.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/other-australians-earn-nothing-like-what-you-think-if-youre-on-59-538-youre-typical-162251">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-12260109963254755732021-06-02T15:25:00.016+10:002021-06-08T15:50:43.263+10:00Paying off a home loan used to be easier than it looked. It's now harder. Here's why<p>So you think it’s the right time to dive in and buy a home.</p>
<p>I can’t tell you you’re wrong. I can tell you it would have been better to do it before prices began soaring, and that if they keep soaring it will get worse still.</p>
<p>When the year began, the typical Sydney price was <a href="https://www.corelogic.com.au/news/corelogic-december-home-value-indices">$872,000</a>. Five months later at the start of June it is <a href="https://www.corelogic.com.au/news/australias-housing-boom-rolls-national-home-values-lifting-another-22-may">$970,000</a>. </p>
<p>That’s a jump of almost $100,000 in a matter of months — an awfully big price for procrastinating.</p>
<p>In Melbourne the typical price has climbed from $682,000 to $740,500. In Perth it has climbed from $471,000 to $521,500, and so on.</p>
<p>And banks are beginning to withdraw the cheapest of their still-very-cheap mortgage rates, at this stage mainly the fixed four-year rates which had been below <a href="https://www.domain.com.au/news/house-hunters-facing-rising-fixed-mortgage-rates-with-further-hikes-expected-1054965/">2%</a>.</p>
<p>So why on earth wouldn’t you dive in, cut your living expenses to the bare minimum and try and buy a home while it’s the least bit possible?</p>
<p>One (slight) reason to relax is mortgage rates. Despite the increases in fixed four-year rates, three-year rates have barely moved. That’s because the Reserve Bank has promised to hold the three-year bond rate <a href="https://www.rba.gov.au/media-releases/2021/mr-21-09.html">constant</a> at 0.1%.</p>
<h3>Buying has become a bigger commitment</h3>
<p>The three-year bond rate determines the cost to banks of their three-year fixed rate mortgages.</p>
<p>The Reserve Bank has said it does not expect to lift its 0.1% cash rate until “2024 at the earliest”. Movements in the cash rate determine movements in variable mortgage rates.</p>
<p>But there is another reason for proceeding with caution and taking stock.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/home-prices-are-climbing-alright-but-not-for-the-reason-you-might-think-158776">Home prices are climbing alright, but not for the reason you might think</a>
</strong>
</em>
</p>
<hr />
<p>For our parents, buying a home was an exceptionally good deal, not only because homes were cheaper — until the end of the 1990s homes typically cost between two and three times household after-tax income, they now cost closer to five — but also because over time the loan became easier to pay off.</p>
<hr />
<p><strong>Housing prices as proportion of household disposable income</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="256" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=240&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=240&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=240&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=302&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=302&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=302&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption">Household disposable income after tax, before the deduction of interest payments, including income of unincorporated enterprises.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/chart-pack/pdf/chart-pack.pdf">Core Logic, ABS, RBA</a></span></span>
</figcaption>
</figure>
<hr />
<p>That isn’t because mortgage rates were coming down — at times they were going up — it’s because during our parents’ times wages (and prices) were climbing.</p>
<p>It meant that even if someone of our parents’ generation just squeaked through one of the bank’s tests about their ability to make payments on a mortgage, a few years and lots of inflation and several big wage rises down the track those mortgage payments shrank compared to everything else.</p>
<h3>Once, wage rises took care of repayments</h3>
<p>Many of our parents paid off their mortgages early.</p>
<p>One way to look at this is that the bank’s ability-to-repay calculators were set too harshly. They failed to account for future hefty wage rises and inflation. </p>
<p>It’s probably also true that they were set more generously than they might have been in an implicit acknowledgement of what the assistant governor in charge of the Reserve Bank’s economic branch Luci Ellis calls “<a href="https://www.rba.gov.au/publications/rdp/2006/2006-12/global-trends.html">mortgage tilt</a>”.</p>
<p>The former governor, Glenn Stevens, used another term, “<a href="https://www.rba.gov.au/speeches/1997/sp-ag-081097.html">front-end loading</a>”.</p>
<h3>Mortgages were ‘front-end loaded’</h3>
<p>When inflation was high, and as a consequence interest rates were high, wages that climbed rapidly with high inflation made the servicing burden “most acute in the very early phase of a loan, falling over time”. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="200" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=679&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=679&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=679&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=853&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=853&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403719/original/file-20210601-21-11ru9r3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=853&fit=crop&dpr=3 2262w" width="177" /></a>
</figure>
<p>On a graph (and the former governor presented a graph) the line showing payments as a portion of income tilts down over time.</p>
<p>In a world of lower inflation and interest rates, the tilt becomes flatter. </p>
<p>By now (Stevens published the graph in 1997) the line must be near horizontal.</p>
<p>If wage growth remains near the <a href="https://twitter.com/1petermartin/status/1399520798734389250/photo/1">record lows</a> the treasury is forecasting it will become scarcely any easier to make payments on a home loan over time.</p>
<p>Yet the banks are still handing out loans using the sort of formulas they used to.</p>
<p>If you get a loan you’ll be assessed as being able to (just) make the payments as always, but you’ll be denied the near certainty of being able to more easily meet the payments as time goes on.</p>
<h3>Now, we retire mortgaged</h3>
<p>This is a different from the risk you’ll also run of today’s ultra-low mortgage rates climbing (which banks do take into account in deciding whether to give you a loan).</p>
<p>The proportion of homeowners reaching retirement age while still paying off their mortgage has doubled in 20 years. Which might be why some banks ask for details of your super before granting you a loan. It isn’t an idle inquiry.</p>
<p>Might things get better? Maybe, if we can get wages moving again.</p>
<p>Evidence given to Tuesday’s post-budget Senate estimate hearing provides cause for hope, and despair.</p>
<h3>Super hikes will make things worse</h3>
<p>The budget forecasts for wage growth over the next four financial years are incredibly low — 1.5%, 2.25%, 2.5% and 2.75%</p>
<p>On Tuesday Treasury Secretary Steven Kennedy revealed that each would have been higher — 0.4 points higher — had the government not persisted with the five scheduled annual increases in compulsory superannuation contributions of 0.5% of salary starting in July.</p>
<p>The treasury believes each increase will slice 0.4 percentage points from wage growth, on the basis that employers, who are legally required to pay the contributions, will have to find the money somewhere. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="284" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=266&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=266&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=266&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=334&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=334&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403717/original/file-20210601-17-qwhi6.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=334&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://budget.gov.au/2021-22/content/bp1/download/bp1_bs1.pdf">Commonwealth budget, 2021-22</a></span></span>
</figcaption>
</figure>
<p>It’s the same conclusion reached by the government’s <a href="https://theconversation.com/that-extra-youre-about-to-get-in-super-most-of-it-will-come-from-you-but-dont-expect-the-ads-to-tell-you-that-154723">retirement incomes review</a>.</p>
<p>It’s cause for hope because it means that when those five increases stop (in mid-2026, or sooner if the government stops them mid-track) wages might be able to grow more strongly.</p>
<p>It’s cause for despair because if the treasury is right, we are denying ourselves wage rises we could use in return for super we will increasingly use to pay down our mortgages.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/paying-off-a-home-loan-used-to-be-easier-than-it-looked-its-now-harder-heres-why-161873">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-60040466540503734012021-05-26T11:12:00.027+10:002021-05-28T11:26:33.406+10:00Going electric and banning new petrol-powered cars could be Australia’s next big light bulb moment<p>In 2007 Malcolm Turnbull turned off an industry’s life support without blinking.</p>
<p>The industry made <a href="https://webarchive.nla.gov.au/awa/20080720043010/http://www.malcolmturnbull.com.au/Pages/article.aspx?ID=661">light bulbs</a>, of the traditional kind; so energy-inefficient they lost most of it as heat. </p>
<p>“A normal light bulb is too hot to hold — that heat is wasted, and globally represents millions of tonnes of carbon dioxide that needn’t have been emitted,” he explained.</p>
<p>From February 2009 it became <a href="https://www.energyrating.gov.au/products/lighting/phaseout">illegal</a> to import the traditional pear-shaped globes, while from November that year it became illegal to sell them.</p>
<p>It was a <a href="https://www.theage.com.au/national/canberra-sees-the-light-on-energy-saving-globes-20070220-ge49dv.html">world-first</a>, announced by Turnbull as environment minister and sanctioned by his prime minister <a href="https://www.nytimes.com/2007/02/20/world/asia/20cnd-light.html">John Howard</a>.</p>
<p>The <a href="https://ec.europa.eu/commission/presscorner/detail/en/IP_08_1909">European Union</a> followed, and then, some years later, <a href="https://investorplace.com/2016/09/incandescent-bulbs-china/#.WlNYhFVl-Uk">China</a>.</p>
<p>Globally, electric lighting generated emissions equal to 70% of those from cars. Australia’s switch cut emissions by an estimated 4 million tonnes per year. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="320" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/402510/original/file-20210525-24-4v3aw8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" width="198" /></a></figure>
<p>Turnbull was able to do it because Australia <a href="https://parlinfo.aph.gov.au/parlInfo/download/media/pressrel/HPR09003711/upload_binary/HPR09003711.pdf">no longer made</a> light globes. </p>
<p>There was no domestic industry — and no jobs — to protect.</p>
<p>Australia stopped making cars in 2017. The thousands of workers who used to assemble cars in Australia no longer have those jobs.</p>
<p>Which means there’s no car industry to protect.</p>
<p>We have the opportunity to do to traditionally-powered cars what we did to incandescent light bulbs.</p>
<p>And the need. We’ve <a href="https://www.pm.gov.au/media/address-business-council-australia-annual-dinner-sydney-nsw">all but committed ourselves</a> to net-zero emissions by 2050.</p>
<p>In a landmark report released last Tuesday, the <a href="https://www.iea.org/reports/net-zero-by-2050">International Energy Agency</a> said the path to net-zero by 2050 was narrow and extremely challenging, requiring governments to “take action this year and every year after so that the goal does not slip out of reach”.</p>
<p>Many of the 400 or so milestones it set out are challenging for Australia, among them no new coal mines or mine expansions from this year, and the closure of almost all of Australia’s coal-fired power stations by the end of this decade.</p>
<p>But one of the milestones ought to be easy.</p>
<p>It’s no new sales of internal combustion cars by 2035.</p>
<h3>The rest of the world is racing ahead</h3>
<p>As a step along the way, the agency wants two-thirds of all new cars sold to be petrol-free by 2030. Australia, with no vehicle production industry to care about, ought to get there sooner.</p>
<p>Norway has promised no new petrol car sales by <a href="https://iea.blob.core.windows.net/assets/af46e012-18c2-44d6-becd-bad21fa844fd/Global_EV_Outlook_2020.pdf">2025</a>; Denmark, the Netherlands, Ireland and Israel by 2030; and California and the United Kingdom by 2035,
a target the UK has brought forward from 2040.</p>
<p>In addition, the European Union is imposing manufacturer-specific emissions targets, which will force each one to either sell a greater proportion of non-petrol vehicles or make the ones they do sell much more efficient.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/costly-toxic-and-slow-to-charge-busting-electric-car-myths-21321">Costly, toxic and slow to charge? Busting electric car myths</a>
</strong>
</em>
</p>
<hr />
<p>Manufacturers are getting in early. Honda says it will sell only electric and hybrid vehicles in Europe starting in 2022, three years earlier than previously planned. Volvo says 50% of its worldwide sales will be fully electric by 2025 and the rest hybrids.</p>
<p>Like the transitions to colour TV, automatic car windows, automatic transmissions and transistor radios, the shift will be one way. When production lines are retooled, there will be no turning back. </p>
<p>Moving quickly would do more than help Prime Minister Scott Morrison produce a credible roadmap to take to <a href="https://theconversation.com/grattan-on-friday-as-morrison-struggles-with-2050-the-climate-leaders-up-the-ante-for-2030-159559">Glasgow climate talks</a> in November. </p>
<p>It would enable us to avoid becoming a <a href="https://www.smh.com.au/politics/federal/dumping-ground-australia-charged-with-discouraging-electric-vehicles-20201113-p56efr.html">dumping ground</a> for the dirtier, more polluting vehicles that can’t be sold elsewhere while the changeover is underway.</p>
<h3>Switching soon would save us money</h3>
<p>And it would save the government money. It has just committed to pay up to <a href="https://www.minister.industry.gov.au/ministers/taylor/media-releases/locking-australias-fuel-security">A$2 billion</a> to keep Australia’s two remaining oil refineries open until 2027.</p>
<p>Without the payments, Ampol might have closed Lytton in Queensland (it was <a href="https://www.theaustralian.com.au/business/ampol-nears-decision-on-future-of-lytton-refinery/news-story/aa5b25db4ad1bdff24881b5ed3bae705">weighing up</a> doing so) and Viva Energy refinery might have closed its loss-making refinery at <a href="https://www.abc.net.au/news/2021-02-24/geelongs-viva-energy-records-95-million-loss-for-oil-refinery/13187410">Geelong</a>.</p>
<p>While both have accepted the money, Ampol has unveiled plans to test the production of solar-powered <a href="https://www.drive.com.au/news/ampol-partners-with-tesla-as-it-eyes-electric-hydrogen-future/">hydrogen</a> on its site at Lytton and Viva Energy is planning a <a href="https://www.vivaenergy.com.au/energy-hub/solar-energy-farm">solar farm</a> on its site at Geelong.</p>
<p>Most of Australia’s petrol is imported, much of it from <a href="https://www.aip.com.au/sites/default/files/download-files/2020-04/Downstream%20Petroleum.pdf">Singapore</a>, meaning little would be lost if Australia’s refineries closed.</p>
<p>The Australian-produced fuel is dirtier than the imported fuel, something the Australian government promised to fix this month by paying Australia’s plants to make the <a href="https://www.minister.industry.gov.au/ministers/taylor/media-releases/locking-australias-fuel-security">ultra-low sulphur</a> petrol the rest of the world switched to years ago.</p>
<p>If a ban on imports of petrol-powered cars wouldn’t much hurt Australia’s reluctant refiners, it might hurt petrol stations, but not much.</p>
<p>Australia’s service stations are in large measure retail convenience stores. They try to maximise “<a href="https://www.ampol.com.au/about-ampol/investor-centre/annual-reports/2020">basket size</a>”. Ampol plans to turn the petrol side of the business into a recharge and refuelling network for <a href="https://www.drive.com.au/news/ampol-partners-with-tesla-as-it-eyes-electric-hydrogen-future/">electric and hydrogen</a> vehicles.</p>
<h3>Mechanics would lose jobs</h3>
<p>The much-larger industry at risk from a switch to electric vehicles is car maintenance. The Bureau of Statistics counts <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia-detailed/latest-release#industry-occupation-and-sector">352,200</a> automotive and engineering trades workers, almost all of them male and full time.</p>
<p>That a switch to low-maintenance electric vehicles would shrink their industry is unfortunate for them, but inevitable. Propping up their industry by delaying the transition would only encourage more young people into jobs with limited futures.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img alt="" height="200" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=640&fit=crop&dpr=1 600w, https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=640&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=640&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=804&fit=crop&dpr=1 754w, https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=804&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/402522/original/file-20210525-23-rv5w37.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=804&fit=crop&dpr=3 2262w" width="188" /></a>
</figure>
<p>When Australia switched from valve to transistor-operated TV sets in the 1970s, an army of “<a href="https://trove.nla.gov.au/newspaper/article/104285666?searchTerm=hills%20telefix">television repair men</a>” was thrown out of business, along with their vans and two-way radios.</p>
<p>Most of them stayed in the workforce doing things we needed. </p>
<p>To have kept using sets requiring maintenance just to have kept them in work would have been an insult to them and us.</p>
<p>And while Australia’s switch away from incandescent globes was problematic (many of us liked the yellowish glow we’d become used to) the switch to electric cars is looking positively joyous.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="347" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=325&fit=crop&dpr=1 600w, https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=325&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=325&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=409&fit=crop&dpr=1 754w, https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=409&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/402526/original/file-20210525-21-kv8vfd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=409&fit=crop&dpr=3 2262w" width="640" /></a>
<figcaption>
<span style="font-size: x-small;"><span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.crikey.com.au/2021/05/24/climate-activist-converting-miners-green-tech-tesla/">Crikey/Coal Miners Driving Teslas</a></span></span>
</figcaption>
</figure>
<p>This week <a href="https://www.crikey.com.au/2021/05/24/climate-activist-converting-miners-green-tech-tesla/">Crikey</a> pointed to a video in which the Queensland MP Bob Katter gets his first taste of a Tesla as it accelerates from zero to 100 kilometres per hour in just over three seconds.</p>
<p>“<a href="https://www.youtube.com/watch?v=_mXzElYO8gE">Yeehaw!</a>” he yells. “This is so exciting.”</p>
<p>Australians usually embrace the future. At times we’ve been ahead of it.</p>
<hr />
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/international-energy-agency-warns-against-new-fossil-fuel-projects-guess-what-australia-did-next-161178">International Energy Agency warns against new fossil fuel projects. Guess what Australia did next?</a>
</strong>
</em>
</p>
<hr />
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/going-electric-and-banning-new-petrol-powered-cars-could-be-australias-next-big-light-bulb-moment-161431">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-85541854734547509782021-05-19T10:57:00.006+10:002021-05-28T11:26:48.703+10:00The GFC provided the secret sauce we used to ward off the COVID recession<p>We got an awful lot right during the COVID crisis — an awful lot that we couldn’t have got right just a few years earlier.</p>
<p>Which is another way of saying we were incredibly lucky.</p>
<p>Had COVID attacked during the 1980s there would have been no way to make a <a href="https://www.nature.com/articles/nrd.2017.243.pdf">messenger RNA vaccine</a>, not even for animals.</p>
<p>The national broadband network wouldn’t have been thought of. It wasn’t complete until <a href="https://www.nbnco.com.au/corporate-information/about-nbn-co/updates/dashboard-march-2021">2020</a>. </p>
<p>Even three years earlier, in 2017, the NBN reached only <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/National_Broadband_Network/NBN/First%20report/c02">half</a> of Australia’s 10 million households. </p>
<p>Had COVID struck then, before the broadband network was complete, working from home, telehealth and home schooling might have been impossible for many Australians, with devastating educational and other consequences.</p>
<p>And had it struck just a few years earlier still, we wouldn’t have learnt from the global financial crisis.</p>
<h3>War Games</h3>
<p>Australia’s handling of the GFC was exemplary, as evidenced by the fact that in much of the rest of the world it isn’t called the GFC, but <a href="https://www.history.com/topics/21st-century/recession">The Great Recession</a>.</p>
<p>Getting that crisis right owed something to a happy accident, as Ken Henry, head of the treasury at the time, explained on Monday at a seminar organised by the <a href="https://www.act.ipaa.org.au/pastevent_2021_GFC">Institute of Public Administration</a>.</p>
<p>A few years before the crisis in 2004 he was sitting in a room with senior officials discussing “some macroeconomic topic” when his deputy Martin Parkinson, sitting on his right, poked him with his left elbow.</p>
<p>“Martin said: you know it’s just occurred to me that you and I are probably the only people in this room who have ever experienced a recession — maybe we should have a workshop on that, what we would do if there was another crisis”.</p>
<h3>The early 1990s recession was handled badly</h3>
<p>Parkinson and treasury secretary Henry had worked for the Hawke and Keating governments during the early 1990s recession which scarred the Australians who it threw out of work for a <a href="https://www.theguardian.com/business/2019/nov/17/remembering-the-recession-the-1990s-experience-changed-my-view-of-the-world">decade</a>.</p>
<p>In a series of “war games” held away from the treasury building, they and other officials determined that next time they should advise the government to quickly <a href="https://vs286790.blob.core.windows.net/docs/2021%20Events/Fiscal%20response%20to%20the%20Global%20Financial%20Crisis%20of%202008%20(Henry).pdf">abandon budget discipline</a> and fight what was coming with overwhelming force.</p>
<p>As Henry put it: “no matter how great the importance of fiscal discipline in establishing policy credibility, it is nothing compared to the loss of credibility associated with a recession”.</p>
<p>If the treasury didn’t tell the government this, the government would catch on anyway and sideline it for advisers who would.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" height="297" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" src="https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=278&fit=crop&dpr=1 600w, https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=278&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=278&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=350&fit=crop&dpr=1 754w, https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=350&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/401142/original/file-20210518-17-3h28by.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=350&fit=crop&dpr=3 2262w" width="640" /></a>
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<span style="font-size: x-small;"><span class="caption">Megan Aponte-Payne, Steven Kennedy, David Gruen, Ken Henry, Malcolm Edey, Meghan Quinn and David Tune at the GFC seminar.</span>
<span class="attribution"><span class="source">Isabelle Franklin</span></span></span>
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</figure>
<p>“I came out of those discussions determined that if Australia were to confront a large negative shock during my tenure as secretary, the treasury would seek to put itself front and centre in advising the government,” Henry said.</p>
<p>“We would not be taking seats in the back row by counselling a government to rely on monetary policy, the exchange rate, or <a href="https://www.brookings.edu/blog/up-front/2019/07/02/what-are-automatic-stabilizers/">automatic stabilisers</a>.”</p>
<p>As for the idea of “proportionate response”, which was still being counselled by some in the early stages of COVID last year, Henry said the word “proportionate” could be applied to a response, but never to preemption.</p>
<h3>Preemption is not proportionate</h3>
<p>“If you want to preempt something, you don’t talk about being proportionate,” he said. “I remember some commentators saying you should wait until you see the ‘whites of the eyes’ before taking action. "I wouldn’t know what action to take at that stage, presumably it would be to run as fast as you could, I just don’t know.”</p>
<p>The key thing was to get money into Australian’s hands immediately. Spending on infrastructure (spending on almost anything other than households) would take too long.</p>
<p>During the financial crisis Labor got money into households’ hands by handing out cheques. During COVID the Coalition did it by doubling benefits and routing payments through employers and calling them JobKeeper.</p>
<h3>Bandwidth matters</h3>
<p>Henry, and David Tune who was in the department of prime minister and cabinet at the time and later headed the department of finance, told the conference that attempting to do other things while getting money out the door got in the way, among them <a href="https://www.abc.net.au/news/2014-05-21/parker-lessons-to-be-learnt-from-the-pink-batts-disaster/5466762">insulating homes</a> and <a href="https://www.anao.gov.au/work/performance-audit/building-education-revolution-primary-schools-21st-century">building school halls</a>.</p>
<p>Governments have limited “<a href="https://vs286790.blob.core.windows.net/docs/2021%20Events/LESSON%7E1.PDF">bandwidth</a>” or “thinking space”, and during the GFC the Rudd government was also considering taking over hospitals, taxing carbon, reforming the tax system and building the NBN.</p>
<p>The Morrison government seems to have learnt that lesson, but it doesn’t seem to have learnt another, which is that the Commonwealth isn’t good at managing projects.</p>
<h3>The Commonwealth can’t run projects…</h3>
<p>Whether it’s vaccinations or quarantine or insulating homes, projects are best managed by state governments who have actual experience of running things.</p>
<p>Another important lesson, reinforced during COVID is that in practical terms the ability of the Reserve Bank to support the government in keeping a recession at bay might be unlimited.</p>
<p>The Reserve Bank deputy governor at the time Malcolm Edey told the conference that the next step after low interest rates and buying government bonds is direct “<a href="https://vs286790.blob.core.windows.net/docs/2021%20Events/The%20role%20of%20the%20RBA%20in%20Australia%E2%80%99s%20crisis%20response%20(Edey)%20with%20Postscript.pdf">money-financed fiscal expansion</a>”, where the bank creates money for the government to spend.</p>
<h3>…but its financial power is unlimited</h3>
<p>With all of the government’s borrowing now in Australian dollars, and most private overseas borrowing effectively in Australian dollars because it has been hedged against exchange rate movements, and with the <a href="https://www.abc.net.au/news/2013-12-04/government-strikes-deal-with-greens-to-scrap-debt-ceiling/5134972?nw=0">debt ceiling gone</a>, there’s no limit to the force and speed with which the government can stave off a recession.</p>
<p>The current treasury secretary <a href="https://cdn.theconversation.com/static_files/files/1577/210518-drkennedy-abeaddress.pdf">Steven Kennedy</a> conceded that in one way fighting the COVID recession had been easier than fighting the GFC. </p>
<p>COVID had a clear start date. The GFC had a rolling series of starts that made it hard to be sure the worst hadn’t passed.</p>
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<strong>
Read more:
<a href="https://theconversation.com/frydenberg-spends-the-bounty-to-drive-unemployment-to-new-lows-159229">Frydenberg spends the bounty to drive unemployment to new lows</a>
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<p>And perhaps because of that, we discovered what Australians can do. </p>
<p>Treasury Deputy Secretary Meghan Quinn praised the banks for deferring payments on $250 billion of loans, Coles and Woolworths for working together to stock each other’s stores and the private and public health systems for working together in a way that wouldn’t have been thought possible before the pandemic.</p>
<p>We read the GFC playbook, then went further.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-gfc-provided-the-secret-sauce-we-used-to-ward-off-the-covid-recession-160989">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-3747603.post-82752611738686871682021-05-05T19:57:00.035+10:002021-05-28T11:30:57.566+10:00The budget is a window into the treasurer’s soul. Here’s what to look for Tuesday night<p>As surprising as it may seem, Australian budgets aren’t really about money — they’re about values.</p><p>What in America they call the <a href="https://en.wikipedia.org/wiki/State_of_the_Union">State of the Union</a>, in Australia we call the federal budget.</p>
<p>As a case in point, a key part of next week’s budget will be an announcement about <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/making-child-care-more-affordable-and-boosting">childcare</a>, but the childcare measures won’t start until <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/making-child-care-more-affordable-and-boosting">2022-23</a>.</p>
<p>It’s not clear that they’ll need to be in the 2021-22 budget in order to get approved.</p>
<p>Indeed, the budget’s formal title is <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/budget-speech-2020-21">Appropriation bill (No. 1) 2021-22</a>. The budget bill will deal only with appropriations for 2021-22.</p>
<p>But the theatre that has built up around the presentation of that bill — the budget speech — has given it the space to deal with so much more.</p>
<h3>Legally, the budget needn’t deal with much</h3>
<p>Last year’s speech mentioned <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/budget-speech-2020-21">values</a>, twice. It spoke of our “cherished way of life”, of the courage, commitment, and compassion of healthcare workers and volunteer firefighters, of our “invisible strength”.</p>
<p>And it extended the low and middle income tax offset for another year.</p>
<p>Legally, the budget bill can’t include tax measures. That’s <a href="https://www.aph.gov.au/About_Parliament/Senate/Powers_practice_n_procedures/%7E/link.aspx?_id=AFF6CA564BC3465AA325E73053DED4AA&_z=z#chapter-01_part-05_54">outlawed</a> by the Constitution.</p><div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3_lb3bCdTtMmzl-lDAbdn2K0HA807kBPXr4imxyLDzIw52mIFQWaBnKOHALby9XC_yotbnehkGilmO26e6MZNgASU2dqMpHQx_8t_G-qAOrHek185kemA3N0DP14c5DixgQInCA/s525/minitreas.PNG" style="clear: left; display: block; float: left; padding: 1em 0px; text-align: center;"><img alt="" border="0" data-original-height="505" data-original-width="525" height="193" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3_lb3bCdTtMmzl-lDAbdn2K0HA807kBPXr4imxyLDzIw52mIFQWaBnKOHALby9XC_yotbnehkGilmO26e6MZNgASU2dqMpHQx_8t_G-qAOrHek185kemA3N0DP14c5DixgQInCA/w200-h193/minitreas.PNG" width="200" /></a></div>
<p>Tax measures have to be introduced in separate legislation, measure by measure — or not be introduced at all. Our government can continue to collect tax at the existing rates for as long as it likes, unlike in Britain where tax collections form the core of the budget bill and need to be <a href="https://www.legislation.gov.uk/ukpga/2020/14/contents/enacted">re-authorised every year</a>.</p>
<p>In Australia, government spending does need to be re-authorised every year, but only spending which is for the “ordinary annual services” of government.</p>
<p>Everything else — the vast bulk of government spending, everything from Medicare to pensions to grants to the states to family support to support for private schools and private health insurance — is ongoing, approved on a never-ending basis under so-called “standing appropriations” or “special appropriations”.</p>
<p>At the last count there were <a href="https://www.finance.gov.au/sites/default/files/2021-03/chart-of-special-approps-1-march-2021.pdf">240</a> such special appropriations, covering everything from the funding of universities to paid parental leave. </p>
<p>The Department of Finance says 167 of them are unlimited, meaning there is “no defined ceiling on total expenditure”.</p>
<p>What’s left, what actually needs to be re-approved in the budget each year, is little more than the payment of rent and public service wages, suggesting that if the Senate had rejected “supply” (the budget appropriation bill) during the 1975 constitutional crisis as it had threatened to do, the Whitlam government could have taxed and spent much as before, although it would have had to get private banks to advance public servants’ wages, something it was <a href="https://www.naa.gov.au/sites/default/files/2020-05/fs-240-the-dismissal-1975.pdf">investigating doing</a>.</p>
<h3>Practically, it deals with most things</h3>
<p>It might be because it needs to do so little that the budget has come to do so much.</p>
<p>These days we look to it as a source of official economic forecasts, but that’s a recent development. Up until the late 1980s the forecasts weren’t really forecasts — they covered only the <a href="https://archive.budget.gov.au/1984-85/downloads/Budget_1984-85.pdf">financial year ahead</a>, which, because the budget was delivered in August after the financial year had started, covered not much at all.</p>
<p>Now the “forward estimates” for spending and revenue and the state of the economy go out for four years, and some of them for ten.</p>
<p>The budget has become a statement of the government’s values in part because it puts numbers on those values — how much it is prepared to spend on health compared to defence, how much it plans to spend on superannuation tax concessions for high earners compared to pensions for low earners.</p>
<h3>Which makes it a statement of values</h3>
<p>As with the US President’s State of the Union speech, it’s the only night of the year in which the government sets out clearly what it stands for and what it plans to do.</p>
<p>An accident of history means it’s the treasurer rather than the prime minister who delivers the statement of values, although the treasurer speaks for the prime minister, as Joe Hockey spoke for Tony Abbott in 2014 when he infamously declared his budget to be for “<a href="https://archive.budget.gov.au/2014-15/speech/Budget_speech.pdf">lifters, not leaners</a>”.</p>
<p>Josh Frydenberg’s values will be apparent in how he responds to a surging iron ore price (last year’s budget assumed US$55 a tonne and on a <a href="https://www.linkedin.com/pulse/iron-ore-you-care-fob-cif-benjamin-cox/">slightly different</a> measure it’s currently north of US$180) and much stronger than expected recoveries in jobs and the share market.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/exclusive-top-economists-back-budget-push-for-an-unemployment-rate-beginning-with-4-159989">Exclusive. Top economists back budget push for an unemployment rate beginning with '4'</a>
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<p>It would be tempting to wind back spending and push up taxes in order to close the budget deficit without seeing how far the recovery can run.</p>
<p>That Frydenberg says he won’t, not until he gets the unemployment rate <a href="https://theconversation.com/exclusive-top-economists-back-budget-push-for-an-unemployment-rate-beginning-with-4-159989">below 5%</a> and hundreds of thousands more Australians are in jobs, is a statement of values.</p>
<p>That he is reportedly planning to spend an extra $10 billion (over the four-year “forward estimates”, not per year) on responding to the findings of the aged-care royal commission when the commission identified much greater needs might also be a statement of values.</p>
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Read more:
<a href="https://theconversation.com/josh-frydenberg-has-the-opportunity-to-transform-australia-permanently-lowering-unemployment-156175">Josh Frydenberg has the opportunity to transform Australia, permanently lowering unemployment</a>
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<p>As might the forecasts he makes for immigration, for the spending on mental health promised in response to the Productivity Commission inquiry, for the rollout of vaccines for Australians and vaccines for countries that need them more than Australia.</p>
<p>They’ll all be part of a program that makes clear what the government stands for and against which it can be judged. <a href="https://budget.gov.au/index.htm">Tuesday night</a> will matter.</p>
<p><span style="font-size: x-small;"><a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p>
<p><span style="font-size: x-small;">This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-budget-is-a-window-into-the-treasurers-soul-heres-what-to-look-for-tuesday-night-160086">original article</a>.</span></p>
<div class="blogger-post-footer"><a href="http://www.peter%20martin.com.au/">Peter Martin</a> is economics correspondent for <a href="http://www.theage.com.au/">The Age</a> and the <a href="http://www.smh.com.au/">Sydney Morning Herald</a>.
<i></i>
He blogs at <a href="http://www.petermartin.com.au/">petermartin.com.au</a> and tweets at <a href="http://twitter.com/1petermartin">@1petermartin</a>.
<i></i></div>Unknownnoreply@blogger.com