Lisa Magnani

Poll 67

Poll finds support for aligning net zero, reliability and price,

Peter Martin

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WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 0-5
Gas: 3
Renewables: 95
Nuclear: 0
COMMENT:
The ongoing energy transition is a challenging process and requires the mobilization of public and government sectors, the private sector and all communities across Australia. Clear and consistent policies and appropriate enforcement mechanisms will be fundamental for this ongoing process.
Government investments in the form of subsidies for preferred (renewable) forms of energy and direct funding to support our energy transition are essential policy mix. We have already achieved good results in terms of the transition to electrifying Australia through the use of renewable energy sources. This process needs to be supported to achieve states? targets.
The consistency of policymaking in this respect is particularly important now as major economies in the world aim to undo years of effort. Australia's policies in terms of energy transition and the underlying commitments to target have now a major international significance.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Investment subsidies for preferred forms of energy generation/transmission, Direct government funding of preferred forms of energy generations and/or transmission

Poll 66

Top economists say Trump’s policies will hit Australian economic growth and push up inflation and interest rates in the US.

Slower progress towards global net zero emissions

Trump?s policies are likely to have large effects on the world, economy, politics and society. Limiting an analysis of any future US policy to its economic impact, may not be in Australia?s best interest, particularly in the face of political and cultural challenges to climate change abatement, the future of bilateralism and the declining US hegemony in the Asia Pacific. It might be worth to consider Ross Garnaut?s reflections on how to minimize the damage. Events may force us to rethink our foreign policy, having in mind the need to find broader coalitions in our region and globally to counteract US declining relevance. From a strictly economic viewpoint, tariffs of 10-20% (and much higher in the case of China), even temporarily adopted, will negatively impact US inflation, wages, employment and growth prospects. These effects are likely to be only partially offset by the aggressive pro-business policies of the Trump administration, particularly its deregulation of fossil-fuel production activities. Whether these effects will amount to a US stagflation or rather not, they will likely produce considerable uncertainty globally and possibly upward pressures on the US interest rate, further slowing other economies? return to investment-friendly interest rates. Australian trade with the US is limited, but protectionist policies can trigger trade wars and may indirectly impact Australia via the global production networks it participates in. Australia will need to exercise initiative and leadership to prevent trade wars escalating. Australia will need to continue its renewed commitment to regional development, by supporting a robust dialogue with regional partners to ensure that trade policies are designed to widely share the commitment to decarbonize and reduce the impact of climate change. A renewed commitment to regional development and cooperation in the Asia-Pacific region and other parts of the world would ensure that any negative impact of Trump?s tariffs is balanced out by positive outcomes resulting from such a commitment to regional development. Commitment to regional partnerships and development would lessen Australia?s need to invest in defense and enable wise investment to address domestic challenges including housing, education, industrial diversification and climate change.

Poll 64

Panelists were asked to comment on two questions: 

Is the budget likely to achieve its aim of getting inflation back within the RBA target band by the end of this year and back to 2.75% by mid next year?

And

On May 14, the government delivered a budget designed, in the Treasurer's words, to "focus on fighting inflation in the near term and then growth in the medium term " - 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/

NOT SURE The budget has clearly addressed some of the most evident effects of inflation, including those related to a malfunctioning and largely unequal rental market and the inadequacy of wages to cover subsistence consumption. These measures will not force inflation upward or slow down its return to 2-3%. However, the budget appears to respond to the effects rather than to the root causes of these problems. This is evident in the case of the housing and rental markets. Reflecting on the contribution of the budget to getting inflation back on track, it is worth noting that supply-side factors have contributed at least as much to inflation as demand-side factors. In so far as regards the supply-side factors fueled by war-triggered energy crises in Europe, investment in Australian renewable energy sources should contribute to the resilience of the economy. However, there is little in the budget that systematically recalibrates other supply-side factors, including those that flow from the market power wielded by large corporations.

C

The budget hints at some important transformations of the Australian economy future policies will need to embrace courageously. Inflation has revealed the over-exposure of many groups in our societies to energy and supply side shocks, from low-income families to young people to participants in the rental market. This acknowledgment is important. The budget proposes a set of well-calibrated reactive measures to respond to the challenge. However, there is little that suggests a more proactive stance to persistent problems from real estate prices to the funding of public schools to the poor performance of Australian firms in terms of research and development investments. This is concerning, particularly because the budget framers say it is intended to create growth opportunities in the medium term.

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)"

The payoff to clean-energy innovation has increased | Support to firms that demonstrate innovation and employment creation in a global context pays off.

Provide more grants to innovative firms across the entire economy

An Australian industrial transformation process as ambitious as the one the current government has to undertake requires a commitment to an energy transition and to employment creation. This commitment has to play out with a view on the specific features of the current economic interdependence, across firms often located in different countries and displayed through global production networks. Integration in global production networks requires a network focus, often at a regional level, rather than a focus on country-level comparative advantages as in the classic trade theory. This is the context where industrial policy and government support need to be seen (see Liu and Ma, NBER Working Paper 29607). In this context R&D allocation and industrial support require an understanding of how downstream and upstream linkages impact the entire network and its evolution. Great efforts should be spent to make the existing private-public partnerships work more effectively towards industrial transformation goals. Forms of support the Australian government may consider are incentives to reinvest profits into energy innovation (as opposed to shares buyback), support to small firms who are willing to adopt renewable energy sources, and penalties to free-riding behaviors.

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

Phase out non-electric vehicles | Expedite building new transmission lines to connect renewable energy | Increase the carbon price presently paid by big polluting facilities via the safeguard mechanism

The climate emergency should be treated as such by any responsible government. The Climate Council has drawn from studies by the Australian Conservation Foundation to emphasize that "in Australia, just 10 companies account for more than half of all the harmful emissions produced under the safeguard mechanism". The diffusion of the use of renewable energy requires investments in all infrastructures, particularly those related to new transmission lines. These investments are pivotal for the success of any fight against climate change within the time left to act seriously. The involvement of the general public through measures that target the phasing out of fossil fuel engines is deemed to be essential to successfully address this emergency. A final word against any proposal to further develop nuclear energy sourcing. Science and engineering studies indicate that renewable energy, particularly from wind and solar sources, are preferable to nuclear energy from a cost-benefit analysis. I would add that national and international debates have strongly discouraged nuclear energy developments on the grounds that the management of nuclear waste is extremely difficult and the risk of nuclear proliferation in our fragile international setting is very high (among other reasons). I would endorse this strong opposition.

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%.

improving the quality of primary and secondary education, increasing enrolments in tertiary education, reducing out-of-pocket costs of childcare for families

4

Inflation is "fundamentally the outcome of the distributional conflict, between firms, workers, and taxpayers" (Blanchard, 2022). Our understanding of these distributional conflict need to better guide the discussion on the NAIRU. To make this concept relevant in the face of current forms of inflationary processes, three features of the Australian economy are important, namely the composition of its unemployment, the composition of its employment and the sources of inflation. The current unemployment at 3.5% goes hand in hand with a higher and increasing underemployment rate, currently at 6.4%, but much higher for selected groups, particularly women and young people. About 44.5% of the current 790,000 people who were underemployed in June 2023 were involuntarily so. Contrast these facts with the rise in multiple job holders (about 950,000 individuals currently), many of whom are employed in relatively low wage sectors, such as hospitality, community services and education. Output could better respond to increases in aggregate demand if the Australian economy could more efficiently utilize its labour force and pay it better. Finally, historically high corporate profits have been recognized as leading factors in explaining the post-pandemic inflationary process. Policies that aim to reduce the NAIRU would need to directly address the relatively high underemployment rate by contributing to the further inclusion of those many of would like to work fully time rather than part time. I suggest policies to properly fund public education and policies that increase enrolment in higher education. Profit moderation and support to wages would help reduce the need for multiple job holdings.

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: C - Keeping inflationary pressures in check: B

C

OVERALL COMMENTS: The budget delivered a set of mesures to address the need to provide relief to disadvantaged groups, repair the budget suffering from the effects of the pandemic and from the effects of the current military/energy crisis, and restrain government spending to avoid further inflationary pressures. These fiscal imperatives have emerged in the last few years at the intersection of several complex crises at the international and global levels. Unfortunately, the budget does little to structurally address this complex situation made even more complex by decades of inaction. Long-term social and environmental sustainability requires a more ambitious plan for private-public partnerships in support of ecological sustainability. Changes in the tax revenue sources would allow an overall rethinking of strategies to address rampant inequality in housing, education, earnings, and opportunities. A budget that supports a long-term vision to enhance research and development in universities and in the private sector are missing or very timid. In this sense, the May budget lacks courage and long-term vision. INFLATION COMMENTS: There is nothing inflationary in this budget. The proposed relief for the least well off groups in society is not inflationary. The main concern is that wage repression is going hand in hand with upward pressure on profits. Profits can be inflationary unless their increments are used to fund structural transitions such as a move away from fossil fuels or educational reforms, and university funding changes. We need a mature discussion on tax structure and tax reforms is part of the agenda, but also fiscal courage and vision.

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 Equity picks: Introduce inheritance taxes

Wealth inequality has been persistently high in Australia, and it has increased in recent times. Not surprisingly, inheritances are also unequally distributed across households and they contribute to the intergenerational transmission of wealth inequality. Across OECD countries wealth and inheritance taxations are rather unequal and some country-specific provisions have narrowed inheritance tax bases rather than enlarging them since the 1970s ("Inheritance Taxation in OECD Countries", 2021). In Australia, estate or inheritance taxes have been abolished since 1980. There is currently high intensity political resistance to reinstating those. The increasing pressure on public funds to address climate change, international military obligations and the recovery from the pandemic requires a mature consideration of wealth and inheritance taxation to increase tax revenues, efficiency and fairness. Because of the lack of popularity of these taxes, governments may need to work to enrich the public debate on the benefits of these changes and gain public acceptability of inheritance and wealth taxation.

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

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Increase taxation of resource rents for gas producers and use proceeds to reduce electricity and gas

High energy prices are not simply a sudden result of the Ukraine-Russia war. Rather they continue a trend dating back to the post-GFC period. As ABS data illustrate, from 2009 to 2015 the average weekly household spending on domestic fuel and power costs increased by 25 per cent. In 2017 and 2018, two ACCC reports expressed concerns about the effect of high electricity prices on low-income households. The recent spikes in electricity and gas prices significantly affect Australian households and firms and exacerbate the ongoing problem of energy poverty among the most vulnerable groups. The recent report by Aviel Verbruggen based on World Bank data has well documented the profits of the energy sector, particularly oil and gas, over the last 50 years. These profits continue to rise while firms and households face energy prices that challenge their savings and ability to cope in the face of ongoing inflationary pressures that affect the cost of housing and the cost of living. There is also another set of long-run considerations, those related to how to transform the Australian economy into a clean, fair and resilient one. As the IPCC?s recent report argues, transformational plans that aim to reach climate change targets must necessarily involve the private sector (households and businesses). Short-run and long-run policy choices should be implemented with this context in mind. At the least, these policy measures have to do more than simply provide incentives for consumers to exercise market freedom. As the OECD report of June 2022 illustrates, policy interventions that directly act to reduce the price of energy suffer from two major flaws; they are not targeted, and they risk weakening the incentives to reduce energy use. By impacting government expenditure, across-the-board subsidies may contribute to inflationary pressures and attract further interest rate rises, resulting in unintended consequences on stressed households? budgets. Instead, through increased taxation of resource rents for gas producers, governments could use the tax proceeds to reduce electricity and gas prices for consumers, particularly the vulnerable ones. In so doing, Australia could (i) send unequivocal messages about the need to contain energy consumption (let?s remember that in 2021 51% of electricity generation is still derived from coal according to government data) (ii) address the need to place equity and energy poverty at the centre of the policy agenda (iii) avoid an increase in government deficit and debt (iv) address the long-run dimensions of the climate crisis. This last aspect could be achieved if increased taxation of resource rents went towards needed private investments in net-zero strategies. If companies were asked to invest in net-zero strategies in return for a reduced resource rent tax, there would be the further advantage of firms having to demonstrate their willingness and ability to channel profits into net-zero investments.

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 Migration policy Green jobs Industrial relations Education and skills Equal opportunities and pay for women

Care jobs Care jobs, those jobs that nurture future workers, regenerate the current workforce, and maintain those who cannot work, are essential for the proper functioning of our society and to support Australia's productive sphere so it can achieve its full potential. Traditionally these care jobs are performed by women, often from racial and ethnic minority groups, who often receive low wages or no wages. Traditional measures of labour productivity fail to capture the impact of care jobs on wellbeing, thus leaving policy makers with ill-equipped economic indicators to measure performance of care sectors. The COVID-19 pandemic has put the crisis of care jobs in the spotlight. From nursing workers to teachers to parents caring for children in online learning modes, Australia has experienced an exacerbation of the crisis of care work, which manifested in the shortage of teachers, in overworked hospital workers, in exhausted parents. The jobs and skills summit could establish an agenda of policy actions to support care jobs' wages (both in absolute and in relative terms), improve career and skilling opportunities, further develop and apply economic indicators that capture the impact of these jobs on welfare, and implement overdue reforms to fund care jobs, particularly in the public sector, fairly and adequately.

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

Reserve a portion of gas and other commodities for domestic use Super profits tax on fossil fuel producers with revenue used to reduce cost of services Monitor price setting mechanism in less competitive industries to prevent prices to diverge from costs of production

3%

The current inflationary pressures started with an energy shock, related to the Ukraine-Russia war, and followed a long period of extraordinarily low interest rates combined with a aggressively expansionary fiscal policies in the first couple of years of the COVID-19 pandemic. The last AEMO report on the second quarter 2022 indicates that ?Q2 (2022) was an unparalleled period for Australia?s energy markets?, where the wholesale electricity price rose from $177/MWh in Q1 to $264/MWh in Q2. Presently stagflation ? a nasty combination of inflation and stagnation ? is only a theoretical possibility in Australia, given its 0.8% growth rate in the March 2022 quarter that followed a 3.6% growth rate in the December 2021 quarter (ABS, March 2022). However, reminiscence of the 1970s-style international crisis alerts us to this possibility particularly if larger economies, such as the US and China, struggle to recover. There are three additional features of the current inflationary environment that are specific to Australia. The first is the very peculiar features of the energy market, suffering from governments? inertia on renewable energy sources and the export orientation of the profit-hungry gas industry. The second is the long-lasting housing crisis involving high rental prices, limited (I should say almost nil) availability of affordable rental housing for low-income workers, and the recent wave of first homebuyers who have taken advantage of the low interest rate regimes of the last few years. With an increase in housing investors? activities in 2021, following a sharp increase in first-home buyers in 2020 (RBA Bulletin, March 2022) rising interest rates translate into a larger macroeconomic risk originating in the housing markets. The third feature is low wage growth rates, which have declined at least since 2012 (RBA, August 2022). Particularly if unemployment starts to climb, wages are not expected to grow much. In this context, rising interest rates will lead to reduced household purchasing power, potentially more so for low-income households. What Australia should be able to tolerate in terms of inflation depends on how serious the Australian community is in addressing the re-distributional effects that a regime of high interest rates will bring. The challenges stem from the tendency of rental prices to increase, combined with a surge in profits and stable or only slightly increasing wages. This largely depends on what Australian governments, at state and federal levels, are prepared to do to counter the redistribution effects of rampant interest rates. Whether these inflationary pressures should be tackled with a savvy combination of monetary and fiscal policy and a renewed attention to the supply-side of the economy is a no-brainer to many. Whether we are mature enough to talk seriously about profits and wages, income and wealth distribution and inequality, housing and rental crises, time will tell. What is at stake is Australia?s ability and willingness to tackle the real structural challenges we have faced (and largely ignored) for decades.

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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Housing availability (including rental housing and social housing), social support to vulnerable groups, health, the care economy and wage growth must be priority policy goals for the incoming government. If left unaddressed, these issues will continue to exacerbate social inequity and aggravate the social divide, particularly in the light of the wealth accumulation dynamics we have witnessed in the last few decades. For this reason, the government must find revenue to tackle these problems, independently of its ability to achieve tax reforms. However, tax reform is an efficient means to address equity considerations in a situation marked by over-reliance on income tax, under-reliance on wealth taxation, neglect of inheritance tax, and unnecessary complexity (such as taxation of subsidies for small and medium enterprise activities). A comprehensive tax reform is essential to support long-term policies (away from "band-aid" temporary policies) that convincingly address the national interest in education and training, industrial innovation, regional cooperation and foreign policy. The incoming government should prioritize climate and environmental policies. Addressing the climate change crisis at this stage and after decades of neglect will require the government to go past recent agreements designed to meet international obligations. Reframing and re-energizing climate and environmental policies will involve work with domestic and international stakeholders, including civil society groups, schools and students, business groups and families. The next government will need to exercise political and economic leadership in the introduction of an energy mix that works to make fossil fuel and "dirty" hydrogen obsolete.

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 not enough

Migration has important effects on the Australian economy, society and culture. By adding diversity to our local population along dimensions such as age, ethnicity, race and walks of life we enrich the quality of our living standards. In the face of economies of scale, as in the case of many infrastructure investments such as energy provision, transport and telecommunication, migration lowers the per capita costs of these projects. Factors such as skill and education are important in the context of capital-skill complementarities that drive economic growth. Diseconomies of scale that emerge in the presence of a fixed factor such as land can be reduced by savvy investments in urban planning, infrastructure and transport, and by designing appropriate incentive schemes for regional settlements. The potentially negative impact of a larger workforce on wages is estimated to be small. However, the perception that permanent migration may limit labour market opportunities of Australian workers, and depress wage growth, needs to be addressed with appropriate policies that support inclusive growth.

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"

Disagree

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"

Agree

7

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"

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6

2023

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

6

The various inflation measures, including CPI, producer price index, tradeable and non-tradeable inflation rates portrait a complex scenario where clear forecasts about future inflation are difficult. Supply side factors that will be important to consider are those related to disruptions to global value chains. Demand factors depend on both domestic and international scenarios including the troubles of the Chinese economy. Acting too quickly and too soon in response to this complexity is not productive particularly because the RBA is committed to full employment as well as inflation targets. The ASB September 2021 reports that the labour markets show enduring signs of weakness. There are also underlying structural and long-term challenges, including those that are necessary to address climate change, that are best tackled in a context of low interest rate, if Australia is to take advantage of this relatively positive condition.

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"

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

Despite having historically experienced very high vaccination rates, Australia is now facing a significant and growing anti-vax movement. These events, combined with the rapid spread of highly infectious variants of the virus threaten Australia's response to the COVID-19 pandemic. In addressing the need for a high vaccination rate, public health policies aim to strike a balance between individual rights and community needs. In some cases, achieving a high vaccination rate may need to rely on existing laws, which many States and Territories already have in place--for example, South Australia?s Work Health and Safety Act. These laws require staff in specific workplaces to be vaccinated against diseases like influenza, hepatitis A and B, and now COVID-19. More generally, addressing obstacles to achieving high vaccination rates requires an understanding and respect for various social and cultural perspectives on vaccination. The growth of the anti-vax movement in Australia has been explained by a variety of factors, including misinformation spread by social media as well as some TV stations and newspapers. In this sense, the growth of vaccination hesitancy and resistance forces an evaluation of the services provided by public/private information and media systems. The situation also highlights the need to regulate social media platforms and the media?s ability to spread misinformation. Importantly, misinformation breeds vaccination hesitancy and resistance. For some individuals and communities, suspicion and apprehension with respect to the COVID-19 vaccination may be best understood in a social and historical context of inequality and mistrust with respect to political leadership. Addressing these issues require more than paying people to get vaccinated. Rather it starts from a recognition of the problem and from reflection on how we got here and how to restore social cohesion by addressing the key sources of the problem. Vaccine hesitancy and resistance do not happen in a vacuum. We know from past campaigns encouraging vaccination for children, that vaccination hesitancy tends to cluster in regions. Furthermore, low vaccination rates are also associated with low confidence in the efficacy of the vaccine or its risk. Vaccine confidence is often a degree in a spectrum ranging from absolute to nil. A recent study by Edwards et al. (2021) based on a large nationally representative survey of Australians? vaccination intentions indicates that 13% of the Australian population may experience or be about to experience high levels of hesitancy or resistance to vaccination. Individuals who live in disadvantaged areas, those who tend to have more populist views or have higher levels of religiosity or lower levels of household income, and those individuals who display less confidence in their state or territory government, are less likely to get vaccinated. As pointed out in the study by Edwards et al., a targeted public health campaign directed to address these groups? beliefs and concerns is required. These groups need to receive the information they need, so to be reassured and confident of their decision to vaccinate. Any public communication campaign should emphasize that delaying vaccination is a threat to both individuals? and public health, and it may lead to extended lockdown, which threatens livelihoods. What we need to avoid is a public conversation that becomes aggressive and labels individuals and groups in false binary categories (e.g., responsible/irresponsible, pro/anti-social). In this context, measures aimed to increase the personal (monetary) advantage of vaccination decisions are unlikely to be effective. We already know about the limited effectiveness of monetary incentives from domestic and international research. In fact, I believe that given the broader challenges that the COVID-19 pandemic has unveiled, monetary incentives including lotteries, could be harmful. In displaying a lack of ability/willingness to properly address individuals? and communities? concerns, monetary incentives could validate mistrust with respect to collective institutions. Ultimately, crises don?t happen in a vacuum. The crisis triggered by this pandemic is an opportunity to start addressing the challenges that Australia is facing, primarily inequality, mistrust in our political system and erosion of the quality of our social fabric.

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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Reforming industrial relations to increase the use of enterprise bargaining;Reforming industrial rel

Wages support consumption, the largest component of aggregate demand. Consequently wage stagnation endangers one key economic channel for economic stability. Wage stagnation can also contribute to rising income inequality in Australia. Understandably, the RBA has recently emphasized the need to multiply efforts to support higher wage growth. We know that market factors have been the primary drivers of income inequality in Australia over the past few decades. Policy factors have the largest impact in reducing this inequality, especially for lower income earners (Li et al., 2021, Review of Income and Wealth, 67(1), 196-221). Labour supply measures such as those involving restraints on migration are not appropriate to support wage growth. As pointed out by numerous economists in Australia and overseas, migration operates at two levels, namely labour supply and aggregate demand. These two channels have divergent effects on the potential for wage growth, one negative and one positive. Economists tend to agree that in the aggregate the net effect of migration on a recipient economy is positive. Temporary migration, for example by international students, may affect the wage growth for specific groups, for example young people, females or senior labour market participants. However, these effects are likely to be small, as recently argued by Brell and Dustmann (2019). Furthermore, international students contribute to funding the university system, which is central to Australia?s research and innovation strategy. Given the labour market effects of temporary migration are likely to be small and limited to some groups, and recognising the importance of this type of migration for aggregate demand and for specific sectors such as tertiary education, the overall effect of temporary migration is large and positive. Wage growth measures that rely on restraining growth in labour supply by holding back growth in female and older worker participation would contradict the large and beneficial economic effects of female employment that have been experienced in the OECD. These measures would also run the risk of engendering discrimination in our labour markets and betray our commitments to workplace inclusion and diversity. The identification of the right set of policies to support wage growth requires an understanding of which wages are stagnant and which wages are growing (Coelli and Borland, 2015). The last few decades have seen the decline of wages received by the bottom deciles of the wage distribution and the rapid growth of the top deciles, relative to the median. Many labour economists have stressed the role of market factors including changes in the structure of trade and technology changes to explain these long term dynamics. Many advanced economies have experienced lower wage growth in the period since the global financial crisis (GFC) than in the years beforehand (Australian Government, the Treasury, 2017). Underemployment is a key feature of the Australian labour market and has been increasing since the GFC (Treasury, 2017). Support to wage growth also needs to identify the sectors and firms that pay low and stagnant wages and the reasons why this is the case. For example, labour productivity and Total Factor Productivity growth, the main drivers of labour demand, vary significantly across sectors (Productivity Commission 2019). Micro and small enterprises often address the challenges of market competition in way quite different to medium-size enterprises or large corporations. The Bank of England has recently suggested that trends towards self-employment and the prevalence of micro and small enterprises may affect wage growth. This includes employment in the growing gig economy. These considerations invite us to think of what targeted policy measures would be best to support wage growth. If government spending, tax cuts or business investment boost wages to highly skilled workers whose wages are already growing, policies targeting business investment would only affect wage growth in the aggregate, failing to boost wage growth prospects for those workers whose wages are stagnant. Policies designed to boost productivity growth might be effective only if there is a demand for what these workplaces produce. If there is a reasonable expectation that the market demand for such products is shrinking, there is little point to boost productivity growth in these sectors. Rather, this situation suggests the need to help workers? transition to sectors where their wages can grow, conditional on their finding employment in these sectors. Industrial relations reforms to boost workers? bargaining power can have the desired outcomes--e.g., by supporting trade union operations or the actions of state and federal industrial relations commissions. These measures can target the wages of specific groups of workers--e.g., unskilled workers, workers in declining industries, workers with low bargaining power, and those in industries with prevalent casual and underemployed workers.

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 only the purchase of non-luxury all-electric cars, 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

9

In Australia, transport is one of the largest sources of greenhouse gas emissions. Australia must formulate a plan to reduce cars? contribution to emissions if it is serious about meeting its commitments to the Paris agreement. In this sense, taking action to accelerate the take up of electric vehicles (EV) is a no-brainer. In 2019, only 0.6% of new sales were EV, but 56% of surveyed consumers would want to purchase an EV as their next car (Electric Vehicle Council, 2020). Given the presently large price gap between EVs and traditional cars, it is reasonable to expect that a subsidy to all-electric cars will lead to a higher take up of EVs. This will produce a sizeable change in cars? direct greenhouse emissions. To the extent that a subsidy to all EVs benefits households who possibly would purchase an EV without the subsidy, a subsidy to all all-electric cars would be ?regressive? (NBER Working paper 25771, Feb 2021). A subsidy to all non-luxury all-electric cars would avoid this problem and make the subsidy more cost-effective and less regressive. By including alternative subsidy design, for example a plan for the provision and location of charging points in both public and private places, Australia can prepare for the hopefully rapid take up of greener forms of private transportation. The real issue here is whether isolated policies, such as subsidies, can tackle the challenge of greenhouse gas emission reductions to meet international obligations. The answer to this question is not straightforward. EVs are not zero emission vehicles and their indirect contributions to greenhouse emissions depend heavily on how/where we build these EVs as well as how we fuel them. Firstly, the production of EVs requires highly polluting mining and refining activities to produce the rare metals needed for EVs? batteries and magnets. Rare earth refining produces radiation waste. Whether these activities take place in Australia or overseas, is not a minor issue. However, the fact that EVs? production indirectly contributes to a global public bad, namely greenhouse emissions, remains. Secondly, if EVs continue to be powered with energy generated from burning fossil fuels, they still indirectly contribute to greenhouse gas emissions. Coal accounts for about 75 per cent of Australia?s electricity generation, followed by gas (16 per cent), hydro (5 per cent) and wind around (2 per cent) [Geoscience Australia]. That is why a subsidy to support the purchase of EVs should go hand in hand with real efforts to support the phasing out of fossil fuel energy, to support the production of renewable energy and to set deadlines for phasing out conventional cars on our roads. In the end, given that three quarters of our population live in cities and this percentage is projected to grow to over 90% by 2030, meeting international obligations requires us to formulate a green transformation strategy that includes strong support to urban public transportation.

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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C

The government has abandoned the long-standing position of fiscal restraint and budget surplus. This is not surprising although it raises questions about the consistency between short-run and long-run effects of the 2021 Budget, and the vision underlying its long-run effects. The 2021 Budget shows the government's ability to listen to some social groups that have been hurt by the Covid-19 pandemic and by past policies. For example, measures go towards addressing the neglect in many past Budgets of social issues disproportionally impacting women (from child-care and female retirement incomes to adequate housing opportunities for women caught in domestic violence). Another example of the government?s sensitivity to social issues is the Aged Care package of $17.7billion, which addresses many issues raised by the Royal Commission on Australia's aged-care system. There are clear misses though, for example, a strategy to address issues such as the large gender wage gap and the gender-bias in post-retirement financial security. There is also little to address the low wages paid to the many women who work in Aged Care facilities (the Workplace Gender Equality Agency's data indicates that 83.3% of the 'aged care residential services' workforce is female). Australia has demonstrated a remarkable resilience and many indicators have returned to March 2020 levels; e.g., payroll jobs in Australia in March 2021 indexed to payroll jobs in March 2020 (Source ABS), national unemployment rate at 5.6% (although underemployment is still at 7.9%), and employment to population ratios at almost pre-Covid levels. This resilience could have been a springboard for a Budget that supports short-term recovery while also providing a long-run fiscal plan that supports Australia's economic development. A fiscal plan that aligns short-term and long-term strategy is not only desirable, but also needed in some key respects; e.g., tax reforms, climate change and sustainability, and industrial transformation (including the role of universities). Starting from tax reforms, the Australian government?s projected debt reaches $1trillion in 2024-2025. In this respect, the Budget's generosity lacks long-run dimensions as it is unclear what future budget repair measures will entail, the distributional effects of these future budget repair measures, and what current measures will be sustained. The retainment of Stage 3 tax cuts for high income earners, which was designed in a pre-Covid-19 world, adds an important dimension to the source of future budget deficits. There is little in the 2021 Budget about clean energy and green recovery. While the 2021 Budget includes a few entries to support ?low-emission? technology development, it is hard to see the overall strategy as these are embedded in an inconsistent and complex set of measures, some of which ignore the whole idea of green recovery. As for research and innovation, the Budget leaves little hope for the university sector. Industry-support to PhD students will be important, but there is little indication of how universities and industry can work together in a systematic way to support the country's future. Overall, this Budget has a set of good short run measures but lacks a vision and consistent strategy to address long-run challenges.