Tony Makin

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"

Agree

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"

Disagree

8

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"

.

10

2022

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"

Agree

10

The RBA needs to justify why Australia has a 2-3 % inflation target. Why not 1-2 % or simply 2 % as in the UK, the US and Europe? The RBA's goal of achieving higher inflation by stoking aggregate demand to reduce unemployment and increase nominal wages, consistent with the Philips Curve, is also ill-founded. Milton Friedman and Edmund Phelps argued that any trade-off between unemployment and inflation would only be short-term because ultimately unemployment cannot be artificially lowered below the ?natural" rate, probably closer to 5 per cent than 4 percent. If inflation rises due to aggregate demand-induced wage pressures, this will further worsen international competitiveness and not improve real wages. Real wage growth stems from productivity improvement, a supply-side phenomenon. In recent years, the RBA has also been encouraging substantial fiscal stimulus beyond its remit. Mimicking other central banks, the RBA has boosted the money supply excessively via ?quantitative easing? effectively funding the big increase in government spending. This has caused highly inequitable and unsustainable asset price inflation, reflected in high share and property prices. The lessons from economic history on the money supply-inflation link have apparently been forgotten. With inflation running at over 6 % in the United States, over 3 % in Europe, and expected inflation here close to 5 %, a repeat of the high inflation of the 1970s seems inevitable on current monetary policy settings.

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"

An economy-wide carbon price (either via a cap-and-trade scheme or an emissions tax)

Disagree

I am presuming the question is whether there will be a net macroeconomic benefit in terms of GDP and employment. The answer to this empirical question should be based on credible modelling. Previous studies of the impact of significant emissions reduction (eg Brian Fisher 2019) show future GDP and employment losses to varying degrees, depending on the modelling assumptions. However, given the time frame and great uncertainties involved, even a rough estimate may well be unpredictable, so I'm borderline uncertain on this. Surprise technological breakthroughs and/or adoption of nuclear power in the next three decades would likely minimise previously estimated losses. Other studies (eg Deloitte 2021) suggest the macroeconomic cost to Australia of not doing enough to address climate change could be catastrophic because climate change will impose very high economic costs in the future. But this is a separate issue. Estimates of the future macroeconomic cost of (i) reducing emissions to net zero and (ii) of climate change itself, should not be conflated in formulating policy. Just as we assume Australia is a small open economy unable to influence global economic conditions, so it is with climate change. If Australia eliminated its under 2% contribution to global emissions, it would make next to no difference to the future climate, whatever that may be. Significant global reductions will obviously depend on what the major emitters do, including China and India, not what happens here.

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

Cash incentives are inequitable, as those already vaccinated would miss out. They would also add hundreds of millions more to the budget deficit and hence to already historically high public debt, worsening future economic 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"

.

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

Productivity improvement, a supply-side phenomenon, should be the driver of sustainable real wage growth. Increased investment in technology-intensive capital equipment, along with a more flexible labour market, would deliver this. Ramping up aggregate demand may well increase nominal wages in the short term, but consistent with the Friedman-Phelps critique of the Phillips curve, this would yield no lasting macroeconomic benefits. Real wage growth and unemployment would ultimately be unaffected due to the rise in the price level. Meanwhile, measures that restrict labour force growth via reduced immigration or workforce participation may also drive up nominal wages in the short term. But if highly skilled workers are precluded from potential output generation, this would dampen long term economic growth.

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"

.

7

As mentioned in an earlier poll on this theme, if the rationale for subsidising electric cars is to limit emissions, it doesn't make much sense subsidising them if charging their batteries depends heavily on coal generated power. It would be interesting to know the average quantum of emissions per vehicle for running electric versus petrol/diesel. And if electric cars are to subsidised, what about hydrogen-powered? Honda in Japan is already making these.

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

.

F

The 2021/22 budget sits incongruously with the sharp post-lockdown rebound of the economy and ignores future risks the spending splurge has created. True to form there has been a knee-jerk primitive Keynesian reaction to last year's COVID recession. But why remains a mystery in the absence of robust theoretical and empirical evidence to support the effectiveness of fiscal policy in open economies. See Makin (2018) The Limits of Fiscal Policy, Palgrave, for related discussion. As happened with the GFC, treasury's initial forecasts of the impact of the COVID crisis were wildly astray and far too pessimistic. And as with the GFC, this primed an unduly excessive fiscal response. The recession was treated as a conventional business cycle contraction when it was not. Unlike a standard collapse in private sector aggregate demand, the COVID recession was due to government-imposed lockdowns primarily affecting aggregate supply with side-effects for aggregate demand. As I wrote at the time it was as if the federal and state governments depressed a coiled spring that would naturally spring back of its own accord without the need for fiscal "stimulus", except for JobKeeper (better considered a supply side, not demand side measure). The unemployment that remains is not cyclical, but mainly structural in specific industries (eg travel and tourism). Ongoing budget deficits will put upward pressure on bond yields, appreciate the exchange rate and worsen competitiveness, putting expansionary fiscal policy at odds with monetary policy. The escalation of public debt will also seriously jeopardise Australia's credit rating. A credit downgrade would dent business confidence and deter domestic and foreign investment. It may not have great impact if domestic interest rates remain low, but this is increasingly unlikely as global/US interest rates rise due to higher bond yields and higher inflation abroad.

Poll 43

"On 6 October, the Government delivered a budget designed, in the Treasurer's words, to 'rebuild our economy and create jobs'.  What grade would you give the budget given the objective?  A, B, C, D, E, F"

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

B

The private sector has overwhelmingly shouldered the economic burden of the COVID19 crisis. My grade of B therefore reflects endorsement of the predominant supply-side focus of the budget via investment incentives and direct temporary assistance for private sector employment. The direct government spend on infrastructure was thankfully less than it could have been because more direct government spending to create jobs would have been counterproductive for micro and macro reasons. On the micro front because (i) as restrictions are lifted and international travel resumes (hopefully sooner rather than later) private sector jobs will eventually return, possibly before any temporary infrastructure jobs are actually created, given the lags associated with infrastructure (ii) infrastructure spending is less labour-intensive than in industries most affected (tourism, hospitality etc) (iii) the skills of workers who lost their jobs in locked-down industries would not match skills required. On the macro front, more government spending would (i) push up the dollar according to the GFC precedent (Makin 2019) (ii) require even more unconventional monetary policy to prevent exchange rate appreciation (ie quantitative easing, negative interest rates perhaps) which is already inequitably fuelling asset price inflation and will likely lead to a surprise spike in inflation down the track (iii) draw inputs away from the tradable sector, further worsening Australia's competitiveness. See Makin and Ratnasiri (2015). Another plus from the budget was deferral of income tax cuts for high income earners. This would have been (i) unaffordable given the already huge budget deficit and escalation of public debt and (ii) inequitable because it would have mostly benefitted those largely unaffected by the crisis, including well paid public sector employees, who would have saved the cuts in any case. Finally, although not a popular option, company tax cuts should have been included in the budget as they would have made now-waning foreign investment in Australia more attractive. Foreign investment has traditionally been a driver of Australia's economic growth and given the right tax incentives could play a significant role in building niche manufacturing as proposed in the budget.

Poll 44

"Ahead of a decision about any permanent increase expected early next year, The Conversation and the Economic Society of Australia asked 45 of Australia’s leading economists where they thought JobSeeker should settle."

Be indexed in line with wages

By international standards an increase in unemployment benefits seems warranted and could be fixed as a proportion of the minimum wage, with increases indexed to rises in that wage. The proportion chosen (say 50%) would actually understate the true income benefit relative to the minimum wage as the unemployed incur lower expenses than the employed, such as travel to and from the workplace, carparking and income tax. A key question is the extent to which a higher benefit payment for unchanged mutual obligations requirements would, at the margin, discourage some unemployed from actively seeking employment where vacancies exist (thereby worsening ?the fruit picker problem?). This is an empirical question worth examining in depth, perhaps motivated by principles from behavioural economics. In addition to increasing the benefit amount, labour mobility could be improved and unemployment lowered if those currently unemployed were paid a rent assistance-type relocation allowance should they take jobs distant from their current place of residence.

Poll 42 

"The October budget will see the government announce additional policies to support recovery.  Please nominate the four programs you think would be the most effective (for an intervention of a given size) over the next two years"

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

Corporate tax cuts, Expanded investment allowance, Wage subsidies or hiring bonuses (beyond JobKeeper), More funding for education and training

Standard textbook theory (see Mankiw's Macroeconomics for instance) correctly teaches us that any attempt to 'stimulate' aggregate demand via additional government spending for a given monetary stance is ineffective in an open economy like Australia as it only acts to induce capital inflow, appreciate the real exchange rate and crowd out net exports, implying a zero short term multiplier. Backed by empirical evidence (Ilzetski, Mendoza and Vegh, JME 2013, Makin and Narayan, EE 2013, Makin and Ratnasiri, EM 2015), this approach explains the behaviour of the economy after the GFC fiscal 'stimulus' very well - when the $A subsequently peaked at over $1.10, crippling manufacturing. Numerous other empirical studies show government spending multipliers turn negative after 2-4 years (Boskin AER 2020). The corollary is that cutting government consumption spending improves international competitiveness, which is what tradable industries like tourism will desperately need during the recovery phase, and which is a necessary condition for reviving manufacturing. Meanwhile, company tax cuts and investment allowances would have both aggregate demand, and more importantly, aggregate supply effects. They would attract new foreign investment, and act to deter Australian based companies investing abroad. To assert company tax cuts would be a handout or subsidy to multinationals presumes capital is internationally immobile which is obviously untrue. Meanwhile, income tax cuts would be inequitable insofar as those unaffected by the crisis, including high income public sector employees, would benefit the most, whereas those most hurt by the crisis, private sector employees in a range of service industries, would benefit least. In any case, given ongoing uncertainty about the future and the wealth losses caused by the pandemic restrictions, income tax cuts are also more likely to be saved, or used to pay down mortgages, than spent. Furthermore, income tax cuts and/or cash transfers are simply unaffordable, given the size of the budget deficit and the prospective doubling of public debt as a proportion of GDP in a few years, which will act as a future drag on economic growth (Boskin AER 2020). Instead, a case can be made for a budget repair levy (as occurred post GFC) on high income earners unaffected by the crisis.

Poll 41

"The legislated increases in compulsory super contributions, which are set to climb from 9.5% of wages to 12% over the next five years should...."

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

Be deferred

9

The original rationale for introducing superannuation was to minise the cost of the old age pension to future federal government budgets. Paradoxically however, previous studies, including the Henry Tax Review, have shown that the cost to the budget of increasing mandatory super contributions exceeds the savings in age pensions because of the associated tax concessions. On top of that there are the huge fees paid to super fund managers. Hopefully the yet-to-be released retirement income review will quantify the net cost of the current super arrangements. Until it is definitively shown that the benefits of super to the budget exceed its costs, there is no strong case for increasing contributions that could otherwise be paid as higher wages, the state of the economy permitting. Should super contributions increase, many employees could be just as well off investing their saving themselves and/or using the extra money to pay off home loans sooner.

Poll 40

"Governments should provide ongoing fiscal support to boost aggregate demand during the economic crisis and recovery, even if it means a substantial increase in public debt"

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

Disagree

9

My response presumes that "ongoing fiscal support to boost aggregate demand" means increased government spending (G) to influence total spending (C+I+G). Ongoing fiscal support provided directly to firms and employees (eg JobKeeper) is presumed to be a supply side, not a demand side fiscal measure. Tapered fiscal support of this kind may continue to be necessary, along with retraining assistance for the worst hit sectors (eg travel and tourism) in concert with continued monetary and banking sector support. However, further fiscal measures to 'stimulate' demand, such as direct spending on unproductive infrastructure, cash splashes, increased transfer payments etc should not be countenanced as they ultimately prove counterproductive in an open economy according to standard textbook theory, backed by empirical evidence.?

Poll 39

"A freeze in the minimum wage will support Australia's economic recovery"

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

Agree

9

The government-instigated COVID19 lockdowns were aimed at protecting the whole community. Yet the economic cost has been borne mainly by private enterprises (without compensation) and their employees in certain sectors. A revival of activity in these sectors is therefore central to economic recovery and a minimum wage freeze for firms most affected by the lockdown would help. Increasing the minimum wage (already the highest in the world) for the insiders already in employment would come at the expense of jobs for the currently unemployed outsiders. With the RBA forecasting deflation in the June quarter, real wages could rise in any case.

Poll 38

"The benefits to Australian society of maintaining social distancing measures sufficient to keep R<1 for COVID-19 are likely to exceed the costs"

Disagree

5

This question assumes there is a trade-off between saving lives and maintaining employment and general economic well-being. An empirical answer to the question would depend on whether the total benefit of saving lives through social distancing, valued by number of lives saved, exceeded the total costs incurred, directly and indirectly (including budget outlays on extra health spending, income support, wage subsidies, lost income, lost wealth, mental health, depression, domestic violence, lost human capital from missed schooling, and suicide). Estimating precise monetary values for some of these social cost variables and appropriately aggregating would be very challenging to say the least. The number of lives social distancing measures has saved is also highly uncertain, with estimates likely to vary greatly according to different epidemiology modelling approaches. Then there is the thorny question of how to value lives by age cohort. Nonetheless, in battles, lives are not infinitely valued, as any armed services officer could attest. What degree of social distancing is required to keep R<1 is also uncertain. It's conceivable that social distancing could deliver a net benefit on this basis by preventing a very high morbidity, though this seems unlikely in the current context.

Poll 37

Proposition 1: "Without changes to existing public policy or private sector practice in Australia, motherhood will always negatively affect a woman's career."

Proposition 2: "In Australia, fathers are more restricted than mothers in fulfilling a caring role while in employment."

Part 1 - Uncertain (neither agree nor disagree)

8

Probably generally true, but motherhood wouldn't necessarily negatively affect a woman's career if the father is the principal carer, which seems increasingly more common. However, data required on that.

Part 2 - Agree

8

Poll 31

Proposition 1: "The best economic policy instrument available to policy makers seeking to address obesity and related health issues in Australia is the introduction of a tax on sugar sweetened beverages (SSBs)."

Proposition 2: "The health and non-health benefits from a tax on SSBs are likely to outweigh the possible costs felt elsewhere in the economy."

1 - Agree

2 - Agree

1 - A tax on sugar would be akin to excises levied on other specific goods that create negative externalities, notably alcohol (accidents), tobacco (lung cancer) and fuel (pollution).  In the case of sugar, the externalities are obesity, diabetes and related health problems that reduce individuals’ quality of life and impose huge burdens on taxpayers via the public health system.

2 - Compared to other countries, Australia’s tax system relies excessively on taxing income rather than expenditure, and taxing sugar would help redress the imbalance albeit in a small way.

Poll 36

Proposition 1: "Professional accreditation for the economics profession would attract more people to economics as a career."

Proposition 2: "The benefits of professional accreditation for current and prospective economists would exceed any possible costs"

Part 1 - Agree

8

Part 2 - Agree

8

There seems little doubt that more formal recognition of economics as a profession would bolster economics enrolments relative to, say, accounting. The ESA, as the leading economics association in Australia, should initiate an accreditation process after reviewing practices adopted in other disciplines eg accounting and law. Obviously tertiary qualifications in economics would be the prime requirement, combined perhaps with some post-university, short practical courses eg in applied cost benefit analysis, government budgeting, policy advising etc

Poll 34

"In general, using more congestion charges in crowded transportation networks — such as higher tolls during peak travel times in cities, and peak fees for airplane takeoff and landing slots — and using the proceeds to lower other taxes would make citizens on average better off."

Strongly agree

8

Congestion pricing effectively involves imposing a Pigovian-type tax on the negative externality of traffic jams, and seems to work well in reducing peak hour traffic flows for example in London, Singapore and Stockholm. The Bureau of Infrastructure, Transport and Regional Economics has estimated the social costs of metropolitan congestion in Australia will rise to around $30 billion by 2030 which suggests it should be adopted in all capital cities. Estimating how high the charges should be, and how much revenue would be raised, ultimately depends on estimating demand elasticities. On what to do with the revenue raised, it would depend on which level of government is responsible for implementing and administering the policy. For instance, if it's city councils, the extra revenue could offset public transport subsidies; if it's state governments, then the revenue could be used to lower motor vehicle registration.

Poll 27

"The recent US corporate tax cuts will have no impact on investments in and capital flows into Australia."

Strongly disagree

10

Foreign investment theory tells us that international capital flows are determined by relative, after tax, rates of return on capital. See International Money and Finance Ch 13. The sizeable US corporate tax cuts have effectively raised the rate of return on capital in the US, making investment there significantly more attractive. The US is easily the largest foreign investor in Australia, accounting for over a quarter of Australia's total foreign investment, so the US corporate tax cut will obviously mean less investment here. This bodes poorly for the future of the economy, given business investment has persistently been the weak link in the national accounts. It also clearly suggests Australian company tax has to be cut, other things equal, preferably as part of a larger fiscal package that includes offsetting savings.

Poll 28

Proposition 1: "Slowing the growth in the debt to GDP ratio should be a priority for Australian governments."

Proposition 2: "Slowing the growth in the debt to GDP ratio is a higher priority than income or corporate tax cuts."

1 - Strongly agree

2 - Agree

1 - Many say Australia's public debt to GDP ratio is relatively low by the standards of other advanced economies, and therefore not a concern. But at its highest level in over 50 years as a proportion of GDP, federal public debt is unlike other countries’ as it overwhelmingly reflects excess recurrent and social welfare spending (the States undertake most of the nation’s infrastructure spending), and is predominantly owed abroad. Federal public debt has also been one of the fastest growing in the world post GFC according to the latest IMF Fiscal Monitor.
The national income drain in the form of interest paid to foreign bondholders is currently around $9 billion per annum and rising, some four times the size of Australia’s foreign aid budget. Each percentage point rise in world interest rates would add another $2.5 billion to public debt interest paid abroad, more than the Opposition is likely to raise from ending cash refunds for retirees for dividend imputation credits.
Related discussion.

2 - Slowing the rise in public debt versus tax cuts isn’t necessarily an “either or” question. Both are possible with the never-mentioned option of substantial cuts to federal government spending. In the absence of spending cuts however, any GDP boost from income tax cuts on the supply-side is unlikely to outweigh the national income loss due to higher servicing costs on additional foreign public debt because income tax cuts are likely to be small for the average household. On the other hand, a stronger case exists for further company tax cuts, as these would encourage greater domestic and foreign investment.

Poll 29

"A sustained increase in the number of new homes constructed each year, all else equal, will make housing cheaper than otherwise."

Strongly agree

8

This statement borders on being an economic truism. Simple textbook demand-supply analysis suggests that if housing demand is rising continuously, house prices will be higher to the extent that demand is not being met by increased supply. Population increase, amongst other factors, is an important driver of housing demand, whereas zoning and other construction constraints limit housing supply. How much housing supply needs to increase to prevent house prices rising excessively depends on how much housing demand is likely to increase. In other words, both housing demand and supply are important. As Alfred Marshall said "We might as well reasonably dispute whether it is the upper or the under blade of a pair of scissors that cuts a piece of paper, as whether value is governed by demand or supply."

Poll 30

"Pricing of road-use for electric vehicles should be the same as fossil fuel-powered vehicles."

Agree

7

If the rationale for subsidising electric cars is to limit emissions, it doesn't make much sense if charging their batteries depends heavily on coal generated power. It would be interesting to know the average quantum of emissions per vehicle for running electric versus petrol/diesel.

Poll 35

"There is no way to significantly increase the degree to which Australian retail banks act in the interests of consumers."

Disagree

8

The Royal Commission's exposure of unacceptable banking practices has been a major wake-up call for commercial banks, and, hopefully, Commissioner Hayne's recommendations will significantly improve their treatment of consumers. If not, the RC was a major waste of time and money. Banks now face greater public scrutiny than before, and there's an incentive for them to repair their tarnished reputation.

Poll 32

"There are clear net benefits for Australians from (further) increasing the diversion of waste from Australian landfills."

Uncertain (neither agree nor disagree)

6

Whether there are clear net benefits or not ultimately depends on a thorough (though seemingly challenging) cost benefit analysis that weighs any commercial gains from waste recycling in whatever form and to wherever against costs arising from possible externalities and government subsidies.

Poll 33

Proposition 1: "There is a significant risk that, either as a result of the findings and recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry or as a result of the financial institutions' response to those findings, credit will become less readily available to Australian households or businesses."

Proposition 2: "Assuming credit becomes less readily available to Australian households or businesses, this will in turn have adverse consequences for the performance of the Australian economy."

1 - Agree

2 - Agree

1 - Credit availability has already tightened for property purchases in particular, especially for investors, which is contributing to the downward pressure on property prices in Sydney and Melbourne.

2 - Tighter bank credit will adversely affect private investment and hence the economy's rate of growth, other things equal. This is macroeconomically analogous to the classic risk-return trade-off from finance.  Lowering risk by tightening credit implies a lower, albeit safer, return in growth terms.  

The poorer than otherwise performance of big 4 bank shares, a key asset in superannuation portfolios, also has direct wealth effects.  This will likely raise the cost to the federal government of future age pensions, with negative budgetary implications.

Poll 26

"The wages and conditions of Australian workers providing services in sectors affected by the rapid growth of digital on-demand subcontracting platforms will, on average, be expected to fall without further government intervention."

Disagree

8

New job opportunities are sure to arise in applying new technologies. Think of Uber. During periods of significant structural change what is needed is a highly adaptable and flexible labour market. Governments are incapable of processing information like markets do, and intervention runs the risk of worsening overall working conditions and wages.

Poll 25

Proposition 1: "The modern phenomena of information overload and social-media-fuelled 'fake news' bring into focus the value of quality journalism. Quality journalism has a public-good dimension that warrants public support."

Proposition 2: "The Australian government presently provides funding for the ABC and SBS, Australia's independent public broadcasters. The Australian government should increase its financial support of quality journalism."

1 - Strongly disagree

2 - Strongly disagree

1 - Publicly supported journalism (eg at the ABC, SBS and to a much lesser extent the BBC) tends to be pro-big government, and pro-tax and pre-occupied with equity over efficiency issues.  Pro-market, pro-growth and non-Keynesian viewpoints are rarely, if ever, aired by public broadcasters.  Nonetheless, there may well be a case for enforcing truth in news across the spectrum, as with regulations governing truth in advertising.

2 - Public broadcasters in Australia are grossly overfunded when there is a plethora of alternative Australian and international news outlets on the internet and social media.  That so many different publicly funded channels keep recycling the same news with the same bias and agenda is testimony to poor budget management and lack of political courage at Federal level.

Poll 23

Question A: "Holding labor market institutions and job training fixed, rising use of robots and artificial intelligence is likely to increase substantially the number of workers in Australia who are unemployed for long periods."

Question B: "Rising use of robots and artificial intelligence in Australia is likely to create benefits large enough that they could be used to compensate those workers who are substantially negatively affected for their lost wages."

A - Uncertain

B - Uncertain 

It seems unrealistic to assume labour market institutions and job training would remain fixed as workers became displaced.  The IT revolution saw jobs lost (eg typists, clerical staff) but new ones were created in the services sector that required specialist skills.  Unlikely that as many service sector jobs be created with robotics however.

Poll 22

"As interest rates are at low levels by historical standards, federal and state governments, despite their public debt levels, should be borrowing more than they currently are to invest in infrastructure"

Disagree

8

Poll 21

"The Finkel Review has recommended a mandatory certificate scheme that obliges electricity retailers to purchase a certain proportion of the electricity they sell from sources of electricity whose emission intensity is below a defined level. This is preferable to conventional approaches to the pricing of externalities, such as an emission tax or cap and trade scheme."

Disagree

8

The original carbon tax was preferable to the proposed regulatory solution in the Finkel Review, although was set far too high in the first instance. As an excellent example of a Pigovian tax, it would have operated via the price system to alter production and consumption patterns, at the same time generating revenue that could have alleviated federal budgetary pressures.

Poll 20

"For-profit provision of human services like health and education leads to poor client outcomes and high costs to government."

Strongly disagree

8

The question could have been clearer. Under what circumstances, and by how much, does private sector provision of health and education - if substituting for government provided services - lead to higher costs to government? Isn't it the opposite? The correct answer has to be based on evidence not ideology.

Poll 16

"Capital gains tax deductions for housing investment should be removed because they overstimulate the housing market, contributing to rising house prices."

Disagree

8

Singling out housing investment for discriminatory tax treatment is at odds with the neutrality principle - that all sectors in the economy be treated the same. Higher capital gains tax would create distortions and induce existing investors to hold property assets for longer, thereby reducing available supply. A la Tobin's q theory, any tax related slowing of house prices would also limit growth of the housing stock.

Poll 19

"The recent Parliamentary Inquiry into "Gender segregation in the workplace and its impact on women's economic equality" was asked to examine measures to encourage women?s participation in male-dominated occupations and industries. Although there is growing awareness of the productivity gains of gender diversity, the private market alone is unlikely to steer the Australian labour market toward gender equality in male-dominated industries. Breaking down gender segregation in the labour market can only be achieved with some degree of government intervention."

Uncertain (neither agree nor disagree)

5

Economists usually only advocate government intervention if there's demonstrable market failure. The Inquiry's report does not clearly identify what and how the market failures arise.

Poll 15

"It is more effective to teach an introductory course in micro-economics first before an introductory course in macro-economics."

Disagree

7

Macroeconomic phenomena - financial crises, inflation, unemployment, government budgets, public debt, interest rates, asset prices, exchange rates, competitiveness, trade balances, economic growth, wages, and productivity  - affect households' livelihood, now and in the future.  For that reason macro issues are always in the news.  Because macro tends to be more topical - and controversial - than micro (as indispensable as it is) it has the potential to better engage students in the first instance, especially those who've not studied economics before.

Poll 14

"The social costs of gambling exceed the benefits (including consumer surplus from recreational gambling and tax revenue for governments)."

Uncertain (neither agree nor disagree)

7

It is difficult to answer this question definitively without knowing what comprises "social costs". Presumably they include foregone income, borrowing costs, bankruptcies, family and mental health problems etc, some of which would be hard to quantify in dollar terms.

Poll 18

"Given the Commonwealth Treasury?s ongoing difficulty in making accurate forecasts of some of the key economic variables underpinning the Budget ? in particular nominal GDP growth ? the Government should ?outsource? the economic forecasts used in framing the Budget to an independent agency (such as the Parliamentary Budget Office), as now happens in the United Kingdom."

Agree

8

There is a case for transferring ultimate responsibility for the Budget forecasts from Treasury to the Parliamentary Budget Office to avoid any suggestion of political interference.Post GFC, Treasury consistently over-predicted GDP growth reflecting its failure to appreciate how fiscal policy works in open economies like Australia.  Treasury failed to predict the negative impact of excessive fiscal stimulus and large budget deficits on the real exchange rate and competitiveness, which subsequently contributed to significant job losses in the tradable sector, especially manufacturing.  It also neglected the impact of fast-rising public debt on household and business confidence, which subsequently contributed to higher saving and lower private investment.That said, Treasury gathers valuable macroeconomic intelligence and should continue to provide key input to official Budget forecasts via the Joint Economic Forecasting Group (with the Parliamentary Budget Office as the new chair), along with the Reserve Bank of Australia, the Department of the Prime Minister and Cabinet, the Department of Finance and Administration, and the Australian Bureau of Statistics.

Poll 13

"Hillary Clinton is likely to be the superior US presidential candidate for the Australian economy and for Australia."

Uncertain (neither agree nor disagree)

7

On the basis of Donald Trump's attacks on international trade in particular, the statement is most likely true. But what he says and what he would do if elected could be quite different.

Poll 12

'The total benefit of current levels* of migration to Australia will outweigh the total costs to Australia's economy'.

Agree

8

The Productivity Commission (2016) has estimated that immigration on present settings will increase GDP per person by around 7% by 2060. This is a very small macroeconomic gain over a long period. Scope exists for boosting the economic gain by attracting relatively more young, highly skilled entrants in the mix, who are well matched to industries expected to flourish in the future.        The significant long term fiscal costs associated with the family reunion dimension of immigration policy, notably the contributory parent visa scheme, also has to be addressed via significantly increased entry fees.

Poll 17

"In response to energy shortages around Australia, government policies requiring gas producers to reserve some production for domestic consumption are a good way to ensure that Australian consumers have access to sufficient gas supplies while still allowing for gas exports."

Disagree

8

World gas prices have risen due to higher global demand for cleaner energy sources. Australian gas prices need to reflect this market reality. Higher world prices provide an incentive for greater exploration. This could lead to increased supply, which in turn would reduce upward pressure on gas prices.

The total benefit of current levels* of migration to Australia will outweigh the total costs to Australia's economy.

Agree

6

Behavioural economics provides useful insights but is insufficiently unified to rival homo economics.

Poll 11

Part 1: 'Behavioural economics provides new and useful insights into individual behaviour.'

Part 2: 'It is unethical for governments to use behavioural economics to "nudge" citizens.'

PART 1 - Uncertain (neither agree nor disagree)

5

PART 2 - Uncertain (neither agree nor disagree)

5

Poll 10

"The Reserve Bank of Australia should be tasked with targeting nominal economic growth rather than inflation."

Disagree

8

To the extent that targeting nominal GDP growth makes inflation more variable, and hence unpredictable, this would adversely affect inflation expectations. If under these circumstances nominal interest rates do not properly reflect future inflation, this would generate unwelcome arbitrary income redistribution between lenders and borrowers since real market interest rates would more likely be distorted. It would also obviously require forecasting both inflation and real GDP growth. In light of the poor record of official GDP forecasting, this would increase forecast risk and make implementing monetary policy far more challenging than under inflation targeting. The issue of which real GDP measure to use also arises ie whether it is the expenditure, output or income measure, the average of these, or real gross domestic income RGDI (terms of trade adjusted GDP) which is highly variable reflecting the inherent volatility of commodity export prices.

Poll 9

"Assuming it is implemented, Brexit will deliver net economic benefits, on average, to UK citizens within its first 5 years."

Agree

6

Whether net benefits will occur within 5 years for UK citizens is uncertain, but there are great opportunities long term for UK trade and investment with many other economies in the more dynamic Asia-Pacific region and the Americas. Trade and investment opportunities with Europe will still remain strong post-Brexit as these would be safeguarded by WTO rules.

Poll 8

"Australia will receive a bigger economic growth dividend in the long-run by spending on education than offering an equivalent amount of money on a tax cut to business."

Disagree

7

Cutting company tax is unequivocally expansionary in the long run. Lower company taxes, now high by international, especially Asian trading partner standards, would make domestic enterprises more globally competitive, encourage more domestic and foreign investment, and allow for higher wages and living standards. Presumably the increased education spending is for schools rather than universities. To the extent this extra spending improved literacy and numeracy, enhancing human capital this way would also yield higher long run growth. However simply increasing government spending on schools is not necessarily the best way to achieve this. Over past decades increased education spending has not correlated with better literacy and numeracy. Moreover, if the increased spending is to be funded by higher personal income taxes, the deadweight loss of the tax hike should be subtracted from future income gains attributable to that spending.

Poll 7

"The recently released 2016-17 Commonwealth Budget projects that the Australian Government's underlying cash balance will return to surplus by 2020?21*. Australian politicians should rebalance the budget with greater urgency."

Strongly agree

10

Balancing the federal budget is essential to stem Australia’s rising public debt. It is fallacious to assert Australia’s public debt is not a macroeconomic problem because it is lower than other OECD economies. Australia’s public debt has been one of the fastest growing in the world since the GFC, and unlike other advanced economies, is mostly owed to foreigners (two-thirds). Federal government borrowing, unlike the States’, mostly funds consumption, not investment-related expenditure and as a result, Australia is technically insolvent: the federal government’s negative net worth position is about 23 per cent of GDP. Public debt Interest paid abroad subtracts from national income and is three times Australia’s foreign aid budget. Australia’s public debt exceeds the level at the time of the 1986 credit rating downgrade from AAA status. The economy is at risk of another downgrade due to the failure of successive federal governments to rein in government spending since the GFC. A downgrade would raise interest costs across the board, including for state governments and the major banks. How the budget is balanced however is critically important. Tax rises are contractionary, whereas the impact of spending cuts depends in the medium term on whether they are in the nature of consumption (expansionary) or investment (contractionary).

Poll 6

"As the Chinese economy makes its transition from investment-led to consumption led growth, the Australian service sector which currently accounts for around 20% of total exports, will produce a second 'Chinese economic windfall' for Australians."

Agree

9

China is already Australia's largest single trading partner, accounting for around twenty per cent of its total trade on a two way basis. This share should increase as a result of the ground-breaking China Australia Free Trade Agreement that not only removes tariffs on agricultural and energy commodities, processed foods, pharmaceutical products and car engines, but promotes significantly increased trade in services, especially tourism, health services and financial services, including new market access in banking and securities. Private sector health and aged care providers will also be allowed to establish Chinese facilities. How much of a boom greater services trade will prove to be for the Australian economy will depend on whether China can sustain relatively strong growth under the weight of its post-GFC debt burden and whether we can prevent further deterioration of our poor international competitiveness. Refer to PDF document entitled 'Australia's competitiveness: Reversing the slide'.

Poll 5

"Government investments in major sporting events usually generate net benefits for the city or region where the investment is made."

Uncertain (neither agree nor disagree)

7

I doubt this is true, but it's ultimately an empirical question which depends on whether all of the inter-temporal benefits of the government investment (consumption?) outweigh the intertemporal costs. Sizeable cross-country samples of past sporting events (eg domestic vs international) would need to be examined to reach a definitive answer.

Poll 4

"New tax incentives for investments in technology and innovation businesses and start-ups are likely to be inefficient."

Disagree

7

Tax incentives to promote innovation can be justified as a form of industry assistance on market failure grounds. Technological improvement is also a key driver of economic growth. However, there is a risk that tax incentives will be 'hit and miss', resulting in a degree of government failure. The cost of the initiative should be fully offset by cuts to less efficient forms of industry assistance.

Poll 3

"Giving specific presents as holiday gifts is inefficient, because recipients could satisfy their preferences much better with cash."

Uncertain (neither agree nor disagree)

7

In theory, this is correct, ceteris paribus. But the ceteris are not paribus. If the donor feels the same way, she might expect cash of at least equivalent value from the recipient. If she receives same, joint economic welfare is unchanged in dollar terms. If everyone gave cash there would seem to be little point in "gift" giving save the utility it yields above the money values exchanged.

Poll 2

"Aligning Sunday penalty rates for hospitality, entertainment and retailing industries with the current levels for Saturday, as proposed in the Productivity Commission's draft report, will lead to more employment and greater availability of services in these industries on Sundays."

Agree

8

To the extent that penalty rates force hospitality, entertainment and retailing outlets to close, there is less choice for households to spend on and at leisure, and less employment for those Sunday suits to work.