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Author's Name: Warwick McKibbin
Date: Tue 12 Feb 2019

Warwick McKibbin AO

Professor Warwick McKibbin AO

Professor Warwick J. McKibbin has a Vice Chancellor’s Chair in Public Policy and is Director of the Centre for Applied Macroeconomic Analysis (CAMA) in the Crawford School of Public Policy at the Australian National University (ANU). He is also an ANU Public Policy Fellow; a Fellow of the Australian Academy of Social Sciences; a Distinguished Fellow of the Asia and Pacific Policy Society; a non-resident Senior Fellow at the Brookings Institution in Washington D.C (where he is co-Director of the Climate and Energy Economics Project) and President of McKibbin Software Group Inc.

He was awarded the Centenary medal in 2003 “For Service to Australian Society through Economic Policy and Tertiary Education”.  Professor McKibbin is internationally renowned for his contributions to global economic modeling and has published more than 200 peer reviewed academic papers and 5 books as well as being a regular commentator in the popular press.

Subject Area Expertise

Economic Modeling, Global economic scenarios, Macroeconomic policy, Climate change policy, Climate change modeling, Pandemics, Demographics, Productivity and growth.

Area specialties - Australia, Japan, China, USA, Europe, Asia, India, New Zealand.

Website

https://crawford.anu.edu.au/people/academic/warwick-mckibbin

 


Responses (21)


Promoting vaccination uptake in Australia

Poll 49

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

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

 

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

While individuals currently have the right not to be vaccinated, they do not have the right to infect others. If a person does not want to be vaccinated (apart from because of legitimate health issues) then they should be excluded from any social interaction that will spread the virus. If high levels of vaccination are not achieved then there is a case for cash incentives that are income contingent.


Policies to deliver higher wage growth

Poll 48

Our panellists were asked

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

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

 

.

Measures to boost productivity growth;Measures to boost business investment;Maintaining high governm

The government spending should be on high return infrastructure investment.


October Budget 2020 - preferred four programs

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 

 

Permanently boosting JobSeeker (Newstart) beyond December 31, 2020, Infrastructure projects, More funding for education and training, Increasing subsidies for child care

It is difficult to choose between the multiple choice questions because how they are funded and how the policies are designed is critical. For example funding childcare through income contingent loans rather than subsidies is important but it is not listed. I don't support blanket subsidies for childcare but I have selected half of the choice (i.e. a policy for childcare). Income support payments through income and revenue contingent loans to households and small business is important but it is not listed.


Government Debt during the COVID19 Crisis

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 

 

Strongly agree

9

The nature of the fiscal support matters. I assume the question is focused on a set of good policy options rather than wasteful and distorting policies. I also assume that the support is temporary until there is a recovery.


Transition to electric cars

Poll 47

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

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

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

 

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars

8

If the generation of electricity is not shifted quickly to low carbon emissions then we should not move to electric cars because emissions will rise as we drive with coal rather than oil. I assume the intention of the question is prefaces with the statement "If Australia's electricity system decarbonizes '.... if the question is actually as stated then given current policies I would answer no to every question.


Wage freeze for economic recovery

Poll 39

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

Photo credit: Wes Mountain/The ConversationCC BY-ND 

 

Disagree

5


The Federal Budget May 2021

Poll 46

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

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

 

.

C

The Australian federal government budget should have been focused on three broad goals. First, to tackle the covid-19 pandemic by maintaining income flows in the economy and encouraging investment in vaccine production and quarantine facilities. Maintaining economic activity and investing in reopening the economy are critical as the Australian economy recovers from the pandemic. Secondly, to reverse the decline in productivity growth that Australia has been experiencing over recent decades to create the conditions for strong economic growth in the future. Thirdly, to lay the groundwork to respond to the challenge of climate change, as the global community is likely to take serious action that has long-term implications for the Australian economy. The demand stimulus in the budget is significant. This stimulus is funded by increases in borrowing which is not necessarily a bad thing. Still, it does become problematic if borrowing is used to finance consumption rather than investment and if global interest rates rise. That part of the spending that focussed on infrastructure is positive as long as that spending is independently assessed as having a high economic return. However, most of that infrastructure should have been green infrastructure spending to support the adjustment away from fossil fuels to a low carbon economy. A key ingredient in productivity growth is an investment in human capital, which is achieved through funding university research. With the collapse of foreign student income, which was subsidizing university research, the university sector is vulnerable. This problem was substantially ignored in the budget. University funding has been cut in nominal terms over the coming years. The world is likely to be taking significant action on climate change which will substantially impact Australia?s fossil fuel exports and the future structure of the Australian economy. These external forces are more important than any particular domestic action on climate change but are ignored in the budget. This budget is a lost opportunity for enhancing innovation and productivity growth and addressing climate change. The budget relies on assumptions that hopefully will be proven correct. Still, if the premises are wrong, it leaves Australia vulnerable in a highly uncertain world.


Social Distancing Measures, May 2020

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"

 

Strongly agree

9

The balance between costs and benefits depends very much on the way in which social distancing is implemented and what other policies are implemented as well. There is clear evidence that in countries where R>1 there has been large economic and human costs so there are clear benefits from containing the pandemic. Social distancing alone will probably not be effective unless there is a strong and transparent system of testing for COVID-19, tracing contacts of anyone who tests positive and quickly isolating cases.


Top economists want JobSeeker boosted by $100+ per week and tied to wages

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."

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

 

Be indexed in line with wages

My answers are contingent on the current state of the economic slowdown. Raising JobSeeker helps under current circumstances. The dilemma is to balance the tradeoff between maintaining incentives for the unemployed to find work with the need to have minimum livable income during a severe economic slowdown. Indexing to consumer price index maintains the living standard, while indexing to wages maintains a living standard relative to society as a whole. During a pandemic it is important to raise support for the unemployed. My answers would be different if the Australian economy was close to full employment.


Does the budget rebuild our economy and create jobs?

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 

 

C

The scale of the deficit was appropriate given the needed response of fiscal policy to the COVID-19 recession (I would give an A for scale). The composition could have been much better designed. There was an opportunity to invest in green infrastructure as part of a fiscal response and a climate/energy policy response that would have longer-term economic and environmental payoffs. For spending support, transfers to low income households rather than income tax cuts would have given a bigger bang for the buck. Greater support of childcare would support incomes and labour supply. Also a greater use of income contingent loans for households and revenue contingent loans for small businesses would have given a much bigger stimulus for less long term fiscal deterioration. Job keeper should have been universally applied but through a revenue contingent loan.


Sugar sweetened beverage tax for Australia - July 2018

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 - Disagree

2 - Uncertain (neither agree nor disagree)


Australian Federal Budget 2017 - Outsourcing Economic Forecasting - May 2017

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."

 

Disagree

7

The problem is not with Treasury's ability to forecast. A range of forecasts should be used to make it clear how uncertain the future projections are. A mix of Treasury and external forecasts would provide a more accurate picture of risks in the budget outlays and revenue assumptions.


The Finkel Review - August 2017

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."

 

Strongly disagree

9

I assume that the question is about a Clean Energy Standard (CES) in electricity generation versus an economy wide tax or cap and trade system. An economy wide approach will get the same emissions reductions at a much lower price or much larger reductions in emissions at the same price. If the question is actually about A CES in electricity versus and cap and trade in electricity then our research on the US shows that there is not much difference in the cost or effectiveness. This is likely true in Australia as well.


2016 US Election - November 2016

Poll 13

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

 

Strongly agree

9

"Superior" is the key word. She may not be a good President for Australia's interests especially if the Democrats in the Congress swing her even further to the left particularly in damaging trade policy and further threatening the fragile global economy.


Economics teaching - micro before macro - February 2017

Poll 15

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

 

Agree

6


RBA economic growth targets - August 2016

Poll 10

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

 

Strongly agree

10

There is a large theoretical and empirical literature going back over five decades that supports this proposition. The problem is that the best monetary regime depends on the nature of the economic shocks impacting an economy. Thus no monetary regime is always best for all shocks. However nominal GDP targeting has been found to be best in most cases and particularly relative to inflation targeting when responding to supply shocks (i.e. productivity shocks) and changes in country risk. More information here.


The Brexit - impact on UK citizens - July 2016

Poll 9

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

 

Strongly disagree

9


Budget 2016-17 - Returning to surplus - May 2016

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

9


China services boom for Australia? - April 2016

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."

 

Strongly agree

10


Efficiency of tax Government investments in major sporting events - February/March 2016

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)

6

The question is ambiguous. Does the "gain to the city or region" include the cost to the taxpayers who don't live in the city or region? It could be that economic output of a city rises but the tax payers in other parts of the State pay higher taxes which leads to lower overall utility. It also depends very much on how the event is supported and how it is funded. It also depends on the nature of capital investments that might be made as part of the hosting. Are capital investments sustainable after the event or do they become white elephants like the Olympic stadiums in Greece?. Does "usually" mean the number of events that lead to gain or the total value of events that lead to gain?


Penalty Rates Reform - November 2015

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."

 

Strongly agree

9