What people in other forums are saying about public policy
The Australian economy
A return to mediocrity: the post-pandemic economy
Nicki Huntley and Alan Kohler discuss Australia’s economic performance with Geraldine Doogue on last week’s Saturday Extra: How strong is the Australian economy?. (19 minutes)
The Covid-induced recession has been unlike other recessions, in that it has been extremely tough on some sectors such as tertiary education and tourism, while providing opportunities for some others such as supermarkets and hardware stores and it coincides with a boom in iron ore prices and bumper conditions in most of our agricultural industries. The pandemic has been targeted in its effects, while the government’s fiscal response, rather than being directed to particular needs, was based on broadly-based handouts to firms and individuals – including “Jobkeeper” payments passing through to shareholders in firms such as Harvey Norman.
As we slowly pull out of pandemic conditions we will be heading back to the pre-pandemic conditions of secular stagnation with low labour productivity and a business sector that is unresponsive to the lure of low interest rates. Huntley regrets that the Commonwealth has missed an opportunity to shift to a green economy, but she notes that the New South Wales Government is making sound progress with the its renewable energy zone in the Dubbo region (map).
The Reserve Bank’s view
There was no surprise from the Reserve Bank’s meeting on monetary policy on Tuesday – the first for this year – when it left the cash rate at 0.1 per cent. At this stage of the recovery it is far too early to raise rates, and with a housing bubble inflating dangerously it cannot lower rates. So nothing happened.
In its accompanying statement the Bank asserted that “the economic recovery is well under way and has been stronger than was earlier expected”, but it goes on to state that “wage and price pressures are subdued and are expected to remain so for some years”.
In other words, that strange entity called “the economy” is recovering from the recession, but the Australian people – wage and salary earners – aren’t.
National Accounts: Oh what a lovely recession!
The ABS has released National Accounts for the December 2020 quarter, showing an impressive 3.1 per cent GDP growth over the quarter and a 1.1 decline in GDP over the year.
Of that 3.1 per cent rise 0.5 per cent was in the “agriculture, fishery and fishing” sector.
Although Treasurer Frydenberg is celebrating the upturn, it may simply be the sugar hit of delayed purchasing after Covid-19 restrictions. Once people have replaced their car or dishwasher it will be some years before they buy another.
In the June and September quarters wages fell below 50 per cent of GDP for the first time since the ABS has been keeping detailed national accounts, before clawing their way back to 50.1 per cent in the December quarter. Usually in a recession counter-cyclical spending sees some boost in wages, but not in this one. It has been a good recession for corporations: the 45-year trend for profits to rise at the expense of wages is unbroken.
We can do better on unemployment
The unemployment rate is now 6.4 per cent. The Commonwealth’s Mid-year economic and fiscal outlookexpects unemployment to fall to 6.25 per cent over 2021-22,and then down to 5.75 per cent in the following two years.
Writing in The Conversation, Peter Martin urges Treasurer Frydenberg to push the unemployment rate down to 4.5 per cent or lower – Josh Frydenberg has the opportunity to transform Australia, permanently lowering unemployment.
Martin makes the point that the Reserve Bank has estimated that the unemployment rate can come down to 4.5 percent before there is any danger of inflation taking off. So Frydenberg should go for it. (Martin is referring to the construct known as the Phillips Curve, which posits an inverse relationship between inflation and unemployment.)
In fact, because we now have the problem of inflation being too low, it would be a good idea to try to go for an even lower rate, in an attempt to give the economy a mild dose of inflation.
A modest boost in inflation would require a corresponding rise in nominal interest rates, which may discourage borrowers from getting over-committed with debt, and therefore ease the demand-induced forces that are inflating a housing bubble.
It is doubtful if Frydenberg will follow Martin’s well-considered advice, however. The Morrison Government appears to hold a feudal view that a high unemployment rate keeps workers disciplined by the fear of unemployment. Politically it believes that people who own or are paying off houses see a rising house price as a rise in personal wealth, and in gratitude (for what is really an illusion) react by voting for the Coalition (under the illusion that the Coalition is competent in managing the economy).
How to secure a wage rise – individually and nationally
On Saturday Extra last week Geraldine Doogue interviewed Richard Denniss of the Australia Institute about wage growth and enterprise bargaining. (9 minutes)
They started by discussing the way workers who are supposed to negotiate their own pay, rather than relying on unions or institutions of arbitration, are in a weak bargaining position: no one likes going to the boss and asking for a pay rise.
Then they moved on to macroeconomic issues to do with wages. Because wages flow into demand, low wages are holding back Australia’s economic performance. We are seeing the consequences of governments, particularly Coalition governments, successfully pushing through “reforms” designed to suppress wages. As Denniss says “We’ve changed the industrial relations system deliberately, systematically and patiently to reduce the bargaining power of workers”.
Now we’re paying for the consequences, and the Morrison Government has no proposals that would fix the situation.
The renewable transition that isn’t occurring
What are Australia’s prospects on green trade and climate diplomacy?
There is a great deal of action around the world on low-carbon investment, green trade, and climate diplomacy. But without a significant recalibration there is every chance that Australia will miss out, “stuck behind the pack in the global economy”.
That’s the main message in the Centre for Policy Development’s discussion paper Chasing the pack: Australia’s prospects on green trade and climate diplomacy. Most of our trading partners have made realistic commitments to reaching zero greenhouse gas emissions, and are already re-shaping their trade and foreign policies in line with the global transition to a low carbon future. Will Australia miss out on the opportunity to be part of this movement?
What value do we put on reducing greenhouse gases?
The Biden Administration has set up an interagency working group on the social cost of greenhouse gases.
Writing in Project Syndicate – Getting the Social Cost of Carbon Right – Nicholas Stern and Joseph Stiglitz point out some of the problems in earlier attempts in such valuations, and urge Biden’s group to use a low discount rate in bringing future costs and benefits back to present-day values. The Obama Administration used a discount rate of three per cent, but Stern and Stiglitz argue for a much lower rate. Stern, in his Report on the economics of climate change, (the Stern Review), used a discount rate of one per cent.
The discount rate may appear to be a minor and arcane issue, but in evaluating costs and benefits over a long period the choice of a discount rate is crucial. The discount rate is probably the most crucial variable in assessing how we value today things that are going to happen in the future. Anyone who is familiar with compounding realises that there is a huge difference in value between a one per cent and three percent discount rate for costs and benefits over a long period.
Some would say we shouldn’t discount at all – that is, we should act as if the full consequences of a two or three degree increase in temperature are going to be with us tomorrow rather than stretched out over the future.
Teachers and schools
Schoolteachers are underpaid and overworked
Teachers endure 55-hour work weeks and are paid salaries that are falling behind other professions. That’s the condensed summary of a report Valuing the teaching profession, prepared for the New South Wales Teachers’ Federation by a panel chaired by former Western Australia Premier, Geoff Gallop.
Because of changes to the curriculum and governments’ devolution of responsibilities to schools, teachers’ jobs have become more demanding and more complex, but their pay has fallen behind the pay of other professions. The report goes well beyond a call for more pay: it also calls for structural reforms that would lessen teachers’ workload, allowing them to better attend to their responsibilities as professional educators.
Jordana Hunter and Julie Sonnemann of the Grattan Institute support the report’s findings – Why teachers need better pay and career paths. They add a call for increases in top-end teacher pay, particularly for specialist teachers.
A poor report card for our school system
“Check out what most schools say about themselves and you’ll be deluged with words like excellence, quality, caring and standards.” That’s how Chris Bonnor introduces his Inside Story contribution Promoting equity is one thing, achieving it is another.
Our schools are not living up to those lofty aspirations. The rhetoric is about inclusion but the reality is about discrimination and exclusion because of school fees and entry tests. As a result, our overall standards in school education are falling.
Bonnor’s article summarises the report Structural failure: Why Australia keeps falling short of our educational goals by the Gonski Institute for Education, which finds that “indicators of equity, inclusivity, and accessibility to excellent learning opportunities continue to deteriorate”. Our school system “is concentrating disadvantaged students in disadvantaged schools, with serious implications for overall student achievement”.
Other public institutions
Aged Care – neglect stretching back to the Howard years
The Grattan Institute has four key takeaways from the Commission into Aged Care Quality and Safety’s final report:
- we need a rights-based system (i.e. the rights of residents, not of corporate owners);
- the system needs strong governance (i.e. better and properly-enforced regulation);
- we need to improve workforce conditions and capability, including better wages;
- we need to spend more on aged care.
Ross Gittins sums up the report even more succinctly:
All the specific problems stem from a single cause: we’ve gone for decades – under federal governments of both colours – trying to do aged care on the cheap, and it’s been a disaster.
All the Commission’s findings and recommendations confront the Liberal Party’s core beliefs in the unfettered rights of corporations to make profits, the need to keep workers poorly paid, and the unquestioned virtue of “small government”.
The Commission’s report is a formidable document: even the summary (called for some reason an “executive” summary) runs to 115 pages. Its findings on substandard care – assaults, restraint, understaffing – are on Pages 71 -72. Systemic shortcomings, mainly to do with government neglect – wilful neglect in many situations – are on Pages 72 – 78.
Other Australian politics
A voice from a distant past
Tuesday marked 25 years since John Howard’s election in 1996. On the ABC’s Between the lines program Tom Switzer invited him to reflect on his 12 years as prime minister. (41 minutes)
Howard gives an insight to his, and the Coalition’s successful political strategy – acknowledging people’s legitimate interests and “traditional Australian values”, accusing Labor and other “elites” of class warfare – and then governing in the interests of the already privileged, although that’s not exactly the way he put it. Think Trump with better table manners.
This was an opportunity for Howard to acknowledge his good fortune in enjoying the dividends of the Hawke-Keating reforms, but he didn’t take that opportunity. In fact he claimed credit for supporting the Hawke-Keating reforms, which does not align with the recollections of those who were engaged in pushing through tariff cuts and structural adjustment plans. Nor does he acknowledge how he squandered those dividends and the benefits of a minerals boom by handing out tax cuts, rather than strengthening the Australian economy for challenges to come. And for someone who has shown unwavering support for a foreign monarch, his claim to embrace Australian values is thin: because of the way he manipulated the 1999 republic referendum Malcolm Turnbull described him as “the prime minister who broke a nation’s heart”.
Strangely, Howard did not claim credit for what many people in Australia and in America consider to be his greatest achievement – an effective system of controls on firearms. Is it possible that he now regrets this departure from right-wing orthodoxy?
Crispin Hull provides a more accurate account of those years: 1996: the seeds of change for the worse. Rather than bringing Australians together as Howard claims in the Switzer interview “he favoured the well-off, the strong and big business over the vulnerable, the less wealthy and wage and salary earners. He divided rather than united.” Hull goes on to summarise those 12 years of lost opportunity – damage to our health and education systems, neglected infrastructure, weakened support for democratic institutions, and contempt for the human rights of refugees.
People say Billy McMahon was Australia’s worst Prime Minister. Not so. At least he did nothing. Howard, on the other hand, did lots of things that made Australia worse.
Sexual assault allegations – a linguist’s view
There are terabytes written about allegations of sexual assault involving parliamentarians and their staff. We don’t want to go over ground already well-covered by mainstream media, but we believe it may be informative to provide a link to the way a linguist, Annabelle Lukin of Macquarie University, analyses the way Morrison has evaded giving clear answers to questions around these allegations – or for that matter, to almost all questions that have difficult answers: Can Scott Morrison’s rhetorical style cut through the rising tide of anger?, published in The Conversation.
She provides a clear description of the politicians’ and advertisers’ dark art of sophistry – the use of language intended to deceive, but steering clear of actually lying.
Casinos – a security risk
Official history records state that Australia received its last shipment of criminals in 1868, but Peter Hartcher, writing for the Sydney Morning Herald and the Centre for Public Integrity, points that our casino industry has resurrected the practice: casinos are a funpark for felons. Our casinos provide a platform for money-laundering, offering cover for hostile foreign powers “to subvert and corrupt Australia’s political system”.
He points out how, at the request of Huang Xiangmo, Senator Sam Dastyari advocated that Labor change its policy on the South China Sea to align with Beijing’s position – remember that Aldi bag stuffed with $100 000 in cash? Because our political donation laws are so weak, there could be a lot more going on that we don’t know about.
China
Making China great again
Stan Grant writes on the ABC website The West’s leadership failure on coronavirus is only helping China usurp it. Drawing in part on Herbert Marcuse’s prophecy of the moral failure of the “west”, Grant describes what the world must look like to people living in China, a country that has hauled itself out of abject poverty to become a global economic power – when they observe what is happening in America, a country gripped by class and race divisions, violence, and with a half million dead from coronavirus. While western countries are hoarding vaccines for themselves, it’s not hard for China to step into the moral vacuum and exercise its soft power by distributing vaccines to poor countries.
Grant has also been heavily involved in a Four Corners program Chairman for life – a sketch of Xi Jinping’s background and the ideas that have influenced his political development. This is followed by comments from various experts about where they see Xi is taking China. Its trajectory of economic growth will see its economy become larger that America’s within a few years, but how will it exercise its political and military power?
Is China really so great?
Ryan Hass of the Brookings Institution, suggests that China may not be quite as powerful on the world stage as it presents itself and as governments in the US and other countries perceive it: China is not ten feet tall: How alarmism undermines American strategy in Foreign Affairs. “Authoritarian systems excel at showcasing their strengths and concealing their weaknesses” he writes. “Policymakers in Washington must be able to distinguish between the image Beijing presents and the realities it confronts”.
Those realities are demographic (China is ageing quickly), geographic, and a limited capacity to extend military power beyond its immediate periphery. Also its system of government “is growing increasingly sclerotic as power becomes more concentrated around Xi”.
Public ideas
The economics of biodiversity
In 2019 the UK Treasury commissioned a review “to assess the economic value of biodiversity and to identify actions that will simultaneously enhance biodiversity and deliver economic prosperity”.
The review, led by Partha Dasgupta, of Cambridge University, has been published – The economics of biodiversity – but anyone expecting to see a clear benefit-cost evaluation, in the language of contingent valuation and discounting, will find that Dasgupta has gone well beyond the usual consideration of environmental sustainability.
Even though we have become aware of our negative impact on ecosystems, we have falsely tended to believe that human ingenuity can overcome nature’s scarcity. We are concerned to see that our human-made capital is allocated efficiently, and we take great care to keep track of labour productivity with metrics such as GDP per person employed or per hour worked. But he asks where and how we account for natural resource productivity?
He notes a difference between the way we make business decisions, in which we apply certain rational decision-criteria, and decisions relating to preservation of environmental resources in which often make decisions on a more emotional basis.
Some may see his attempt to reconcile these viewpoints as an abandonment of economics, but it should more accurately be seen as a belated expansion of economics, a discipline which to date has been concerned with labour, capital and finance, while missing the most important assets and systems that sustain our wellbeing.
The pandemic’s progress
Australia
It is now almost seven weeks since our last clearly-identified case of community transmission. Vaccination has started, although at a slow pace.
It seems that a degree of complacency has set in, along with a false belief that all can return to normal once we have had the jab. But in fact we are at a dangerous point, because after a lull associated with tight reductions in arrivals from overseas, the number of cases being detected in quarantine is now rising, as shown in the graph below.
Not only are those numbers rising, but also any outbreak now is more likely to be of the faster-spreading UK variant and hard to suppress among a restriction-weary community. And in a few weeks as the weather gets colder we will be congregating inside more.
Norman Swan criticises our approach to border protection. We have correctly prioritised quarantine workers for vaccination, but we have not prioritised them for our limited supplies of the Pfizer vaccine, which probably gives better protection against transmission than the Astra vaccine, and which has a follow-up second shot in 3 weeks rather than 12 weeks for the Astra vaccine. Also the families and regular associates of quarantine workers are not prioritised.
The rest of the world
In early January it appeared that the rate of infection was falling quite significantly, but that fall seems to have stopped. Cases in the UK and the USA have continued to fall, but they are rising strongly in eastern Europe. Germany and Italy have imposed very tough movement restrictions.
In our part of the world Japan and South Korea seem to be getting their recent outbreaks under control: in those countries there are now about 7 cases a day per million people.
The coming generation – lost schooling
UNICEF reports that schools for more than 168 million children have been completely closed for almost an entire year due to Covid-19 lockdowns. Around two-thirds of these children are in central and South America.
To quote UNICEF:
School closures have devastating consequences for children’s learning and wellbeing. The most vulnerable children and those unable to access remote learning are at an increased risk of never returning to the classroom, and even being forced into child marriage or child labor.
Sources
See our separate web page of generally reliable information and analysis about Covid-19. The Harvard Gazette reports that although viruses may be able to mutate to get around the primary defences provided by vaccines, vaccines promote more general immune system responses. On Coronacast Norman Swan discusses the possibility of a corona-passport. Older Australians will recall that we used to have to carry a yellow vaccination certificate when we travelled. The Economist records that Gibraltar, The Seychelles and Israel have now administered at least a first dose of vaccine to more than half of their populations, but worldwide only 2.6 per cent of the world’s population has received a first dose.
Polls and surveys
The Essential omnibus
Essential has published its two-weekly poll. Some of the more significant results:
We still think states, particularly Western Australia and South Australia, are doing a good job in handling Covid-19, but ratings for Victoria and the Commonwealth are down.
Most of us (90 per cent) want to get vaccinated, but only 50 per cent of us want it straight away. Older people are more enthusiastic about vaccination than younger people. We think vaccination will be efficient (68 per cent) and safe (73 per cent), but only 64 per cent think vaccination will be effective in stopping Covid-19. Men are generally more positive about vaccination than women.
People have mixed views about Morrison’s “leader” attributes. Exactly 50 percent rate him as “more honest than most politicians”, suggesting we have very low expectations about politicians’ honesty.
A clear majority of us (76 per cent) believe that “although there has been significant progress on gender equality there is still a long way to go”, but 52 per cent of Coalition voters believe that “gender equality has come far enough already”. There are predictable differences between men’s and women’s views.
Out of institutions covered (public service, private companies, political offices, sporting clubs and the entertainment industry), none score better than 50 per cent as a safe work place for women. Women rate all these institutions more poorly than men. On sexual assault of women in Parliament, 65 per cent of us believe “The government has been more interested in protecting itself than the interests of those who have been assaulted”.
Just on 90 per cent of us read news on technology platforms – half of us “at least daily”. We remind readers once again that reputable and reliable news media, and the Murdoch media, have their own sites.
Attitudes to vaccination
The ABC reports on a survey by Vox Pop Labs, fimding that 72 per cent of Australians are “very likely” and a further 11 per cent are “somewhat likely” to get a Covid-19 vaccine. This aggregate 83 per cent is significantly lower than found in the Essential poll. (See the previous item). This difference may appear to be minor, but herd immunity is crucially dependent on the percentage of people who are vaccinated: the difference between a 10 per cent refusal (Essential) and a 17 per cent refusal (ABC) can be the difference between effective suppression and ongoing serious outbreaks.
It also reports that 19 per cent of those identifying themselves as “on the right side of politics” say they are “very unlikely” to take the vaccine, compared with 8 per cent of those on the “centre” and 4 per cent of those on the “left”.
Unfortunately, instead of providing a link to the survey, with information on methodology and sample size, the ABC has published only selective extracts – poor practice for an otherwise reputable organisation. These figures must be interpreted with caution.
Lowy Institute surveys Chinese Australians
The Lowy Institute has done an in-depth survey of people identified as Chinese-Australian – a diverse group, of whom about half were born in China, the rest born in Australia and other east Asian countries.
The media has given a fair deal of coverage to their experience of racial discrimination: the finding that 18 per cent have been physically threatened or attacked because of their Chinese heritage reveals a sickness in parts of Australian society.
The survey covers many other aspects of Chinese-Australians’ attitudes and experiences, which seem to be fairly representative of any immigrant group. A few things we noticed in the survey that stood out about Chinese-Australians:
- they are well-educated, with 46 per cent holding university degrees compared with 26 per cent for Australians as a whole;
- politically they feel closer to the Liberal/National parties and have little attraction to the Labor Party;
- they are less concerned about the influence of China on Australia’s political processes than Australians as a whole – a finding well-covered in the media. Less well-covered is that they are also less concerned about US influence on Australia’s political processes.
A date for your diary
For those who are in the Sydney region, Geoffrey Watson will be speaking at the Balmain Town Hall on Thursday 25 March on the case for a national integrity commission.
The event is sponsored by the Balmain Institute. Registration is essential.
Classified ads – services
Where to go if you want to sand your wooden floors and a scrabble challenge.
See Michael West Media for more analysis of these and other economic and political issues, and watch out tomorrow, Sunday, for Peter Sainsbury’s Sunday environment round up.
Ian McAuley is a retired lecturer in public finance at the University of Canberra. He can be contacted at “ian" at the domain “ianmcauley.com” .
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