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Author's Name: Mala Raghavan
Date: Tue 04 May 2021

Mala Raghavan

Mala Raghaven

Mala Raghavan is a Senior Lecturer in Macroeconomics and the Head of Discipline (Economics and Finance) at the University of Tasmania, and a Research Associate of CAMA, ANU. She was a Visiting Research Fellow of the Bank Negara Malaysia (BNM) until 2017 and has been a Visiting scholar to World Bank (Malaysian Hub). 

 

Mala's research and teaching interests are in the areas of Macroeconomic Policies, Monetary Economics, International Economics and Development Economics, with a particular focus on Asian and Emerging economies. Her research agenda is mainly to understand the dynamics of global economic and financial integration, the effects of various international shocks on small open economies, and the effectiveness of macroeconomic policies in mitigating these shocks. She holds a PhD in Econometrics from Monash University and has published several articles on international economics and macroeconomic policy issues and has recently co-authored a book titled "China and ASEAN: Pivoting Trade and Shock Transmission".


Responses (19)


Transition to net zero - ape the US Inflation Reduction Act?

Poll 62

Panellists were asked "Which of the options set out below best describes the kind of approach the Australian government should take to the US Inflation Reduction Act? (Pick 1)"

 

To support homegrown emerging green technologies | To combat unfair competition from the US and countries with similar programs | To ensure Australia can be part of newly-developing US-linked supply chains

Provide more grants to innovative firms across the entire economy

I have chosen "provide more grants to innovative firms across the entire economy" as a pragmatic means of supporting local innovators and businesses, even those in competition with US manufacturers. It is crucial to adopt a grand-scale vision, especially considering Australia's wealth in nickel and lithium resources. I firmly believe that the "mine and make" strategy supersedes the "dig and ship" approach, as the former significantly adds value to the Australian economy in the long term. While I am not inherently favourable to the notion of a "subsidy," I recognize that some form of support for battery manufacturers is essential during the initial stages to innovate and compete effectively in the global market. As the global economy shifts towards green energy, the rising demand for battery storage reinforces the necessity of this strategic choice.


Reintroduction of the Carbon Price

Poll 61

Worried economists call for a carbon price, a tax on coal exports, and ‘green tariffs’ to get Australia on the path to net zero

 

Introduce an economy-wide cap and trade carbon price | Expedite building new transmission lines to connect renewable energy | Increase the carbon price presently paid by big polluting facilities via the safeguard mechanism

Carbon pricing (tax) and investments in renewable energy are two broad priority areas that serve as the foundation for a broader strategy to combat climate change effectively. Australia, with substantial greenhouse gas emissions primarily from electricity generators, must consider specific measures to address this challenge. These measures encompass imposing higher taxes on carbon-emitting entities while simultaneously incentivising businesses to transition to cleaner energy sources. Additionally, promoting energy efficiency is vital through providing financial incentives, rebates, and tax benefits, encouraging the adoption of energy-efficient technologies and practices. However, it is also essential to recognise that the effectiveness of carbon pricing extends beyond national borders. While stricter emission standards and enforcement regulations are crucial for industries, transportation, and energy production, there is a pressing need for global cooperation in implementing carbon pricing mechanisms. A harmonised approach ensures that a disparity in carbon pricing between countries does not create "carbon havens" that corporations can exploit to mask their environmental impact, undermining the decarbonisation efforts.


We can and should keep unemployment below 4%, says our survey of top economists

Poll 60

Australia’s leading economists believe Australia can sustain an unemployment rate as low as 3.75% – much lower than the latest Reserve Bank estimate of 4.25% and the Treasury’s latest estimate of 4.5%.

 

creating more incentives for business R&D, reducing out-of-pocket costs of childcare for families, improving the quality of employment services

4

In today's economic climate, the NAIRU could be lower than the rate (4.5%) indicated by the RBA or Treasury. This observation is supported by the latest ABS labour market figures. Though the unemployment figure for June 2023 shows a rate of 3.5%, it is essential to consider other labour market indicators, such as the underemployment rate of approximately 6.4% and the underutilisation rate of 9.8%. These figures suggest that there is still spare capacity in the labour force. Therefore, the risk of inflationary pressure from the labour market is relatively low compared to pressure from other sources, such as those driven by supply-side factors. Implementing measures that enhance workers' welfare and encourage productivity and labour force participation could be beneficial. By improving workers' welfare, firms might witness increased productivity and efficiency. At the same time, initiatives incentivising labour force participation could lead to a larger pool of available talent and reduce skill shortages in specific sectors. Focusing on policies that support workers and encourage productivity could lead to lower NAIRU.


Budget 2023

Poll 59

Our panellists were asked the following 2023 budget question: "On May 9, the government delivered a budget designed, in the Treasurer's words, to strike a balance between relief, repair and restraint'.  What grade would you give the budget, given that objective: A, B, C, D, E or F?"

Wes Mountain/The Conversation, CC BY-ND - https://creativecommons.org/licenses/by-nd/4.0/

 

Overall rating: B - Keeping inflationary pressures in check: D

B

OVERALL COMMENTS: Overall, the government deserves a B grade. Great to note that the focus of the budget was to support the vulnerable communities in Australia by providing cost-of-living relief. However, is the support offered sufficient and or appropriate for these communities to deal with their day-to-day financial stresses in an uncertain environment? For example, will increasing the commonwealth rent assistance by 15% help solve Australia's acute rental crisis? Overall, the budget dealt with short-term demand-driven measures rather than providing a clear pathway for building supply capacity, which is much needed to contain inflation pressure. INFLATION COMMENTS: The budget could put upward pressure on inflation if not met with easing supply-side pressure, making the RBA's job of containing inflation more challenging.


How economists would raise $20 billion per year

Poll 58

When panellests were asked to find an extra A$20 billion per year to fund government priorities like building nuclear submarines and responding to climate change, Australia’s top economists overwhelmingly back land tax, increased resource taxes, an attack on negative gearing and extending the scope of the goods and services tax.

Photo credit by Joshua Hoehne on Unsplash

 

Efficiency picks: Introduce inheritance taxes Increase resource taxes Tax windfall profits Equity picks: Tax windfall profits Increase resource taxes Introduce inheritance taxes

Efficiency comments: Given the purpose of the fund is to support net zero emissions and pay for the acquisition of the submarines, my choice is to increase the resource tax, tax on windfall profits and introduce an inheritance tax. Based on the ASIC's environmental criteria, multinational corporations and mining companies contributing to greenhouse gas emissions should be held more responsible for achieving the net zero goals. Australia could reintroduce the inheritance tax to increase the government's revenue. Like in the UK, the inheritance tax could be charged on the part of that estate above a specified threshold. Equity comments: My choices are similar for both "efficiency" and "equity". Generally, broadening the tax base and taxing all forms of income would help increase tax efficiency, while appropriately targeted tax expenditures would assist in achieving equity. Most importantly, "tax expenditures" should not be an easy target for exploitation, attracting loopholes and creating unnecessary revenue leakages for the government.


Leading economists back Federal Government action to curb rising gas and electricity prices

Poll 57

Australia’s top economists have overwhelmingly endorsed intervention to restrain gas and electricity prices, with only three of the 47 leading economists surveyed believing the best thing the government can do is to leave things to the market.

Photo credit: Wes Mountain/The Conversation, CC BY-ND

 

.

Regulate retail prices of electricity

I have selected "regulating retail prices of electricity" as my first choice, as the government must closely monitor the prices set by retailers. However, as a long-term solution, there needs to be more pressure on energy providers to move towards green energy. Consumers must also be educated and incentivised to make green choices and use energy-efficient products.


Is education or immigration the answer to our skills shortage? We asked 50 economists

Poll 56

Investing in Australians’ education is far more important than immigration in resolving the nation’s skills shortages, according to leading economists surveyed in the lead-up to this week’s jobs and skills summit.

The 50 top Australian economists polled by the Economic Society of Australia and The Conversation are recognised by their peers as leaders in their fields, including economic modelling, labour markets and public policy.

Wes Mountain/The Conversation, CC BY-ND

 

Care jobs Digital jobs Green jobs

Care jobs Care jobs broadly cover three areas: health care, community care, and childcare are currently facing significant labour shortages. These shortages need to be immediately addressed to help improve people's well-being, which in turn helps to improve workforce participation and productivity. Regarding digital jobs, digitalization is a technological platform for all businesses to be competitive. Digital jobs are the backbone for building domestic manufacturing capabilities and promoting productivity. A focus on green jobs is essential in the long term to fulfil Australia's commitment to achieving the net-zero target by 2050. Education and skills need retooling in green jobs and policies.


'It’s important not to overreact’: Australia’s top economists on how to fix high inflation

Poll 55

Australia’s top economists are divided about how to tackle ballooning inflation of 6.1% that’s forecast to climb to a three-decade high of 7.75% by the end of the year.

Wes Mountain/The Conversation, CC BY-ND

 

Wind back government spending Super profits tax on fossil fuel producers with revenue used to reduce cost of services Increase immigration Strengthen the supply chain

2.5%

Australia should continue to adopt 2-3%. The challenge is for the RBA to have the "will" to steer the inflation towards these targets in the medium term. Supply-driven shocks mainly cause the current inflationary pressure. In the present scenario, appropriate fiscal measures are needed. The government should delay spending on infrastructure projects to reduce the crowding effects, easing supply chain pressure and labour market issues in private sectors. To minimise the supply disruptions, the government should support the domestic production capabilities and help to address the labour shortages.


Prioritising issues for the incoming Government

Poll 54

Panellists were asked: 

"From this list, please pick the three issues you think will be the most important for the incoming government and should be the most important in the election".

Wes Mountain/The Conversation, CC BY-ND

 

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Two critical areas that need attention are climate change and the inefficient Australian tax system. The creeping climate crises and the costly yet ineffective tax systems affect the Australian economy. We need tax reforms designed to increase workforce participation and boost productivity and climate policies to reduce carbon emissions. However, will the government of the day be blinded by their motive for political survival and prepare to put Australia's future at risk?


Intake of permanent migrants

Poll 52

"What do you think the intake of permanent migrants should be in coming years"

Australia’s leading economists have overwhelmingly endorsed a return to the highest immigration intake on record, saying Australia should aim for at least 190,000 migrants per year as it opens its borders, up from the target of 160,000 per year set ahead of COVID.

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

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190,000 is about right

According to the MYEFO, the Treasurer expects around one million jobs to be created in Australia between October 2021 and mid-2025. Therefore, Australia needs to attract permanent migration to achieve this target, especially young skilled migrants who can find jobs appropriate to their qualifications and skills. At the same time, the local employers need to recognise the migrants? skills. For this, a targeted employer-sponsored migration should be prioritised. More importantly, to achieve population growth, labour force participation and productivity, the attracted skilled migrants should be retained through better career opportunities, work-life balance, quality of life and social capital network.


Top Economists see no prolonged high inflation, no rate hike next year (Q4)

Poll 51

Our panellists were asked whether rate hikes would be necessitated in the United States, Britain and Australia.

Despite appearances – especially in the United States – the era of high inflation isn’t set for a comeback in the view of Australia’s leading economists, and most see no need for the Reserve Bank to lift interest rates next year.

Question 4

"Following the next Federal election, the incoming Federal Government should commission an independent Review of the Reserve Bank of Australia."

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

Uncertain


Top Economists see no prolonged high inflation, no rate hike next year (Q3)

Poll 51

Our panellists were asked whether rate hikes would be necessitated in the United States, Britain and Australia.

Despite appearances – especially in the United States – the era of high inflation isn’t set for a comeback in the view of Australia’s leading economists, and most see no need for the Reserve Bank to lift interest rates next year.

Question 3 

"The Reserve Bank has, over the past 5 years, effectively used the tools available to it to achieve its goals of "maintaining the stability of the currency, ensuring full employment and furthering the 'economic prosperity and welfare of the people of Australia'."

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

Uncertain

8


Top Economists see no prolonged high inflation, no rate hike next year (Q2)

Poll 51

Our panellists were asked whether rate hikes would be necessitated in the United States, Britain and Australia.

Despite appearances – especially in the United States – the era of high inflation isn’t set for a comeback in the view of Australia’s leading economists, and most see no need for the Reserve Bank to lift interest rates next year.

Question 2

"When do you expect the Reserve Bank of Australia to next lift its cash rate?"

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

.

8

2024


Top Economists see no prolonged high inflation, no rate hike next year (Q1)

Poll 51

Our panellists were asked whether rate hikes would be necessitated in the United States, Britain and Australia.

Despite appearances – especially in the United States – the era of high inflation isn’t set for a comeback in the view of Australia’s leading economists, and most see no need for the Reserve Bank to lift interest rates next year.

Question 1

"The current combination of Australian fiscal and monetary policy poses a serious risk of prolonged above-target inflation."

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

Disagree

8

There is a possibility the RBA will start increasing the cash rate either in late 2023 or early 2024. I trust the RBA tried its best to achieve price stability and low unemployment. However, I am not sure if the continuous accommodative monetary policy measures implemented in the last five years provided equitable economic prosperity and welfare outcomes for many Australians. It is probably a reasonable idea to commission an independent review, to objectively scrutinize the decisions made by the RBA board. However, the challenge is finding the right mix of reviewers, who are independent and free from any political and commercial/industrial baggage.


Australia’s top economists back carbon price, say benefits of net-zero outweigh cost

Poll 50

Ahead of November’s Glasgow climate talks, our panellists were asked

"Australia would likely benefit overall from the national economy transitioning to net-zero emissions by 2050"

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

Government support to develop and roll out emissions-reducing technologies

Agree

It is frustrating to watch Premier Morrison and his government not firming up their commitment to achieving net-zero emission by 2050 and even more frustrating to note their assertion that Australia will continue to mine and sell the fossil fuel overseas well beyond 2030. Australia has the means, resources, and expertise to move closer to the net-zero emission target. What is lacking is the ?political will?. In some areas, Australia is attempting to take the appropriate actions, such as the move towards cleaner energy and take-up of electric motor vehicles. However, we are moving at a snail phase, and we are nowhere near closing the net-zero emission gap by 2030 or even 2050. Political decision-makers need to understand and educate the general public that we need not compromise on economic growth to solve the climate problem. Economic and environmental performances can go hand in hand where the environmental policies and the progress towards investing in negative emission technologies can be important drivers of economic growth for Australia. Taking a strong stand on emission reduction by 2030 is not sufficient. Government should play a significant role in the continued innovation of emissions-reducing technologies to secure investment for their development and market uptake. Though the measures to develop and roll out these technologies seems like a massive challenge, the costs of not acting can be way more expensive in the long run. Environmental scientists are continuously warning us, and in the past few years, Australia did experience many catastrophic events.


Promoting vaccination uptake in Australia

Poll 49

"What measures should Australian governments adopt to promote demand for vaccination once supply is no longer a constraint?"

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

Vaccine passports for higher-risk settings (eg. flights, restaurants, major events);Mandatory vaccination for higher risk occupations;National advertising campaigns

I believe mandatory vaccination is needed for high-risk occupations such as the health care and hospitality sectors. For the matter, people in any occupation that has direct contact or exposure with the masses should vaccinate. It is essential, the workers are protected and do not pose risks especially to the vulnerable members of society. Resistance to vaccinating is generally due to lack of information and misinformation, or due to the tedious nature of the vaccination process. To achieve sufficient vaccination coverage, it is, therefore, necessary to understand the reasons for the lackadaisical behaviour. A clear national advertising campaign should be complemented with some softer advertising campaigns and actions targeted at specific groups. For example, in areas or communities of high resistance, we need to identify: (i) a respected local hero as ?vaccine ambassador? (ii) popular local businesses and or community groups as ?influencers? who can promote and spread the benefits of vaccinating as opposed to not vaccinating.


Policies to deliver higher wage growth

Poll 48

Our panellists were asked

"Higher wages growth is now a top priority of the RBA in its efforts to sustain stronger economic growth. Please identify the three of these government policies you think would best help deliver higher wages growth".  

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

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Measures to boost productivity growth;Measures to boost business investment;Reforming industrial rel

To maintain sustainable growth in wage rates in Australia, we need to address the structural issues related to wages and salaries. Over the years, we have been observing uneven development in the salary scheme of people in different income groups and levels in the organization. The huge expansion in wage growth is observed for those at the top end (usually a small group) of the organization, while the wage growth for some others is only inching slowly and for many others hardly moving. he upward trend in the casualization of the workforce, mainly in the service-related sectors, is another crucial factor contributing to the sluggish wage rate. In addition, sectors that are major employers, such as healthcare, education, child care, construction, to name a few, are not great paymasters. These trends appear to have significant spillover effects on wage rates in other sectors. Therefore, Australia needs reform in the employment and wage structure.


Transition to electric cars

Poll 47

This month, our panellists were asked whether Australia should take action to speed the transition to electric cars.

"As part of efforts to reduce carbon emissions, Australian governments should take action to accelerate the take up, or take no action to accelerate the take up of electric cars"

Photo credit "Wes Mountain/The Conversation, CC BY-ND"

 

Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

7

Electric cars do reduce harmful exhaust emission and improve air quality, which can help to decrease our exposure to adverse health outcomes. Though electric cars help to reduce air pollution, they still create greenhouse gas emissions if the source of energy to power these cars come from the electricity grid generated from fossil fuels. Further, all vehicles (irrespective of conventional or electric) produce substantial life cycle emissions such as vehicle production, processing, and distribution. Therefore, to reduce Australia?s carbon emissions and to realize the long-term benefit, the push to take up electric vehicles should be complemented with the push to switch to renewable energy such as solar panels, wind turbines or hydroelectric. These moves are essential for Australia to keep its greenhouse emissions below the ?carbon budget?.


The Federal Budget May 2021

Poll 46

"On May 11, the government delivered a budget designed, in the Treasurer's words, to 'secure Australia's economic recovery and build for the future'.  What grade would you give the budget given that objective, A, B, C, D, E, F?"

Photo credit Wes Mountain/The Conversation, CC BY-ND

 

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B

The government?s focus on supporting the service sectors such as aged care, childcare, mental health, and women?s health and safety; and the provision of JobTrainer funds to these areas are commendable. A big tick for that. However, the government failed miserably on other key areas such as funding for the environment and renewable energy. These are vital sectors to achieve Australia's long-term sustainable development goals. Government shows no mercy to the bleeding higher education sector and there are also not many other attractive schemes in the budget for the development of young people. Youth upskilling and reskilling are crucial as they are important human capital pillars of this nation. The government is criticized for not supporting international tourism. Given the uncertain environment, it is wise to restrict international travel to Australia, until the majority of the population are vaccinated. Australia?s recent economic performance is admirable, and it demonstrates the importance of containing the spread of the virus to achieve health and economic benefits. To ensure the survival of the tourism sector, the government could work with tourism operators to create international travel bubbles from low-risk countries while the state governments could continue to provide incentives such as travel vouchers to encourage domestic tourism across states.