National Economic Panel

 


 

ESA National Economic Panel Polls


 

About

Polls

Panellists

Got an Idea?

Author's Name: Flavio Menezes
Date: Tue 12 Feb 2019

Flavio Menezes

Professor Flavio Menezes

Flavio Menezes is Professor of Economics at the University of Queensland, the immediate past President of the Economic Society of Australia (QLD), and the Chair of the Queensland Competition Authority. He was the Chair of the Economics and Commerce Research Evaluation Committee for ERA 2018,  Deputy Chair of the Queensland Competition Authority from 2016 to 2018, Head of the School of Economics at UQ from 2009 to 2015, founding Director of the Australian Centre of Regulatory Economics at the ANU, and Vice President of Charles Rivers International. He has published extensively on the economics of auctions, competition, and regulation. He has also has been in the forefront of providing economic advice to governments and private organisations. He has advised the Federal and State Governments, and Federal and State agencies, on market design issues in regulatory environments, as well as various private and public organisations on mergers, competition policy and regulatory issues in defence, gambling, natural resources, energy, water, banking, health, transport, and telecommunications. Outside of Australia, he has provided advice on privatization of public utilities, reform of electricity regulation, competition issues in banking, health, telecommunications, and dairy industries and he has reviewed government procurement practices.

Subject Area Expertise

Competition and regulatory economics; public economics.

Website

https://ideas.repec.org/e/pme33.html


Responses (25)


Professional Accreditation of Economists - March 2019

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 - Uncertain (neither agree nor disagree)

7

Part 2 - Agree

7

While it is true that enrollments in economics at high school have declined considerably, there is no such evidence for university enrollments. The nature of training in economics at University, however, has changed considerably since I joined the ANU as a lecturer 25 years ago. In particular, the traditional way to teach economics at University through a single, well-designed bachelor of economics degree is much less relevant today. At UQ, for example, students mostly take economics as part of a double degree (along with commerce, law, or engineering) or as a major in another degree. More recently, the content of the traditional economics degree has been, at least partly, embedded in more specialist degrees, such as single advanced economics and finance undergraduate honours degrees, or in more general PPE-type degrees. In addition, there has been a remarkable increase in the number of economics postgraduate students enrolled in Masters degree programmes who do not have an economics undergraduate degree. And there has been an even more remarkable increase in enrollments in economics courses from the unprecedented increase in the number of students undertaking business degrees. The picture drawn above suggests that there are more university students exposed to economics now than there has ever been. Thus, while many, if not most, of these students will not pursue a career as economists, we have the responsibility to ensure that the economics training equips them well. I see the social benefits not in terms of an increase in the number of individuals attracted to a career in economics, but rather as a way to improve economic discourse, public policy and business practices. I am convinced that the social benefits of improving economics training through a well-thought out accreditation process is likely to far outweigh both direct and indirect (through an increase in barriers to entry) costs.


Royal Banking Commission (II) - February 2019

Poll 35

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

 

Strongly disagree

10

The tension between financial stability and competition is well-understood. More stringent prudential regulation, arising from the desire for greater financial stability post-GFC, raised barriers to entry, reducing competition. However, it is unclear that the type of behaviour displayed by banks, and uncovered by the Royal commission, can be explained by the reduction of competition alone. It follows then that measures to increase competition, such as those that reduce switching costs, may not be enough to protect consumers.


Will building more homes make housing cheaper? - May 2018

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

10

The proposition, as stated, has to be true – if demand doesn’t change (‘all else equal’), and supply increases (presumably above and beyond population growth), prices have to fall. The policy debate, however, is mostly about what levers (demand versus supply) would be most effective in improving house affordability. Resolving the policy debate ultimately requires sound empirical evidence.


Gig economy and worker welfare - February 2018

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."

 

Uncertain (neither agree nor disagree)

7

For some type of jobs or tasks (e.g., those requiring low or generic skills), new platforms may increase the supply of labour by increasing labour market participation. New platforms, however, are unlikely to increase overall demand for low or generic skills. Thus, new platforms may put downward pressure on wages and conditions for workers with low or generic skills. In contrast, for other types of jobs or tasks (e.g., those requiring high or specific skills), new digital platforms may improve the quality of the matching between labour demand and supply, and it may lead to an increase in wages and conditions, depending on specific conditions. Although is plausible that there may be more low or generic skills tasks/workers across all subcontracting platforms – and therefore it is plausible that wages may decrease on average, the average impact on wages from new digital platforms is ultimately an empirical question.


Same sex marriage - November 2017

Poll 24

"Assuming that the law will be changed to allow same-sex couples to marry in Australia, this will generate net economic benefits for the nation as a whole over the next 10 years."

 

Agree

8

This is about restoring a fundamental human right, and the net economic benefits are a second order consideration.


Robots, artificial intelligence and the 'future of work' - October 2017

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 - Disagree

B - Agree

The unparalleled technological innovation experienced since the industrial revolution has resulted in significant improvements in well-being and no great shifts in trends in the unemployment rate. Of course, technological innovation destroys particular jobs, and there may be high social adjustment costs, but there is no basis to suggest that rapid technological change will raise the unemployment rate in the long run.


Public borrowing for infrastructure investment - September 2017

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"

 

Agree

8

While government bond rates are low by historical standards, and the debt levels of Australian governments are low by international standards, these only suggest that governments may potentially borrow more and at a low cost. However, low rates and low debt levels by international standards do not say anything about how much governments should borrow and what they should borrow for.    This is because the opportunity cost of additional government borrowing to invest in infrastructure is not in general equal to the government bond rate, and it is likely to be higher when accounting for the alternative use of resources. The obvious implication is that governments should invest in infrastructure projects as long the projects have a sufficiently high return.


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."

 

Disagree

8

Cap and trade results in finer price signals. However, the gains of a cap and trade scheme over  a CET are of second order compared to inaction and the uncertainty around climate change policy.


Does privatisation of human services hurt outcomes? - July 2017

Poll 20

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

 

Disagree

7

This statement is too strong to be generally true. It is possible that under well-designed regulatory and institutional arrangements, for-profit health and education provision may lead to good outcomes.


Gender diversity in the workplace - role of government? - June 2017

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."

 

Agree

8


Energy shortages - reserving Australian gas - April 2017

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."

 

Strongly disagree

9

A gas reservation policy will tax gas exports and subsidise domestic consumption. While a small export tax may make sense if a country has 'market power', and subsidies may make sense if they are 'correcting' some distortion, this is not the case for gas exports. Such a policy would reduce welfare by penalising investment and distorting consumption.


CGT deductions - March 2017

Poll 16

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

 

Uncertain (neither agree nor disagree)

9

Removing the capital gain tax discount on the sale of investment properties will reduce the demand for housing and may lead to a decrease in price – the overall effect will depend on the impact of the removal on supply. I note that as long as taxpayers still benefit from the CGT discount on non-property investments, their investment decisions will be distorted away from property. Thus, I favour instead a complete overhaul of the individual (and corporate) tax system, with a simpler structure, and the elimination or capping of deductions, rather than changing only one aspect of the existing tax regime, which will create distortions elsewhere. Sadly, the Henry Tax Review covered many of these themes, but got nowhere.


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

10


Part 1: 'Behavioural economics provides new and useful insights into individual behaviour.' Part 2: 'It is unethical for governments to use behavioural economics to

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

 

Agree

9

Many of the insights from behavioural economics, arising mostly from better understanding individual decision making, have been useful in shaping economic theory, applied economics and economic policy.


Immigration - November 2016

Poll 12

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

 

Agree

9

About a decade ago the Productivity Commission looked at the impact of migration (and population growth) on economic growth. The modelling suggested that migrants made a large contribution to income levels in the long run. However, given their small numbers relative to Australia’s overall workforce and population size, the impact on per capita income was small.        The economic intuition underpinning this conclusion seems as clear now as it was then. Australia’s skilled migration program, accounting for the largest share of permanent visas, targets migrants that are well educated, have sound English language skills and relevant pre-migration labour market experiences. Education costs, including those associated with on-the-job training, have largely been incurred overseas, while the benefits are accrued in Australia.         The rationale for other types of permanent visas, such as family reunion and humanitarian, are of a non-economic nature, reflecting  societal values and our international obligations.


Behavioural economics - September 2016

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 - Disagree

9

The incentives embedded in the taxation and transfer system, and in many other government policies, already influences behaviour in intended (and often unintended) ways. We already face incentives, both financial and non-financial, in many economic and non-economic interactions. In this sense, citizens have always been ‘nudged’ by government policy. While one may argued that behaviour economics ‘nudging’ is different because the government may be using biases in decision making to pursue its policy goals, it is not clear to me that this is any different from governments using financial incentives to achieve particular goals ignoring (or being unaware of)  potential individual decision making biases.

PART 2 - Disagree

9

The incentives embedded in the taxation and transfer system, and in many other government policies, already influences behaviour in intended (and often unintended) ways. We already face incentives, both financial and non-financial, in many economic and non-economic interactions. In this sense, citizens have always been ‘nudged’ by government policy. While one may argued that behaviour economics ‘nudging’ is different because the government may be using biases in decision making to pursue its policy goals, it is not clear to me that this is any different from governments using financial incentives to achieve particular goals ignoring (or being unaware of)  potential individual decision making biases.


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."

 

Disagree

7

The answer  depends on the terms upon which the exit will take place. However, it is reasonable to assume that the EU will attempt to make the cost as high as possible to dissuade others from leaving. Thus, it is likely that while a few sectors may benefit from a weaker pound, many sectors will find it harder to access EU markets.  Under a number of assumptions, the OECD estimated that the UK GDP would be over 3% smaller than with continued EU membership by 2020.


Spend on education or business tax cut - June 2016

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."

 

Agree

7

It seems well-understood that the impact of reducing corporate tax rates on growth is likely to be small. Importantly, there are other corporate tax relief options (e.g., an allowance for corporate equity) that could potentially have a much higher impact on investment (and jobs) than a reduction in the corporate tax rate. I have written about this elsewhere and will not repeat the arguments here. The key mechanism through which education impacts on growth is also well-understood -- through improvements in human capital. The extent of such impact is, however, an empirical question and there is a wide range of estimates in the literature.


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."

 

Disagree

9

Generating budget surpluses cannot be an objective in itself. In the case of our economy, the key concern is that the budget deficit is structural – caused by declining government revenue and increasing expenditures (including tax concessions). That is, in the absence of structural reforms (raising taxes or decreasing expenditures or a mix of both), the deficit will continue to exist and public debt will continue to grow. Thus, the issue is not that the budget has to be returned to surplus by a particular date – after all our debt remains very low by international standards – but rather whether a credible path for returning to surplus has been set.


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."

 

Agree

5

Agree. While it is true that Australia can substantially benefit from an increase in the demand for services in China, there is a crucial distinction between the international market for iron ore, for example, and the international market for services such as education, health and tourism. Whereas three companies (BHP and Rio Tinto in Australia and Vale in Brazil) account for more than 60% of the exports of iron ore to China, the market for services is much more competitive. Australian universities, pharmaceutical companies, hotels and tourism operators have a small market share of a competitive worldwide market. Thus, while the economic stakes associated with an increase in demand for services in China are potentially much larger than the economic benefits that arose from the mining boom, the ability of Australian businesses to benefit from such an increase is less certain.


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."

 

Disagree

8

The question is not particularly well-posed. If the central government fully funds a major event in a particular city or region, then presumably the net benefit will always be positive. Thus, instead, I will answer the question in terms of the net benefit for the funding jurisdiction. In this case, I am not aware of any empirical study that supports the notion that sponsoring major events generates substantial net benefits to the host. While some infrastructure (e.g., transport) may bring substantial long-term benefits, it is less clear what will be the impact of expensive but specialised infrastructure such as stadiums or other sports venues.


Efficiency of tax incentives - February 2016

Poll 4

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

 

Uncertain (neither agree nor disagree)

10

The conventional wisdom that tax breaks, such as reductions in the capital gains tax for investors in innovative start-ups, distort behaviour and are inefficient is not necessarily the complete story. Problems of asymmetric information are pervasive in start-ups and have implications for tax policy. For example, consider the case where entrepreneurs' efforts towards developing a new idea or product are not (fully) verifiable. Similarly, venture capitalists' managerial efforts may not be observable either. (See, for example, Keuchnigg and Nielsen, Journal of Public Economics, 2004). This can create moral hazard with both parties undersupplying effort, with negative impact on innovation. In this context, a capital gain tax can be particularly harmful as it further reduces incentives for entrepreneurs and venture capitalist to provide effort. Thus, reducing the capital gains tax may increase welfare, compared to the status-quo. However, there may better policies so in this sense CGT exemptions are not 'efficient'.


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."

 

Uncertain (neither agree nor disagree)

9

While there is some empirical evidence that penalty rates may reduce demand for labour, the impact of the reduction of the Sunday penalty on employment will depend on both demand and supply responses, and it could in principle go either way. However, there is no empirical evidence that I am aware of that supports the proposition that the overall effect on employment will be positive although it is plausible proposition -- many workers will have a limited opportunity to choose between Sunday and Saturday or weekday work in the absence of a Sunday penalty rate. Moreover, there is also no empirical evidence to support the proposition that a reduction in the Sunday penalty rate will be sufficient to result in more businesses opening on Sundays. Again, this is a plausible proposition to the extent that wages constitute a high share of costs for hospitality, entertainment and retailing businesses.