Flavio Menezes

Poll 65

Panellists are unanimous in believing Australia’s housing market is in crisis.

Offered a choice of 14 measures identified by the Economic Society of Australia as likely to restrain prices for buyers and renters, none of the 49 leading economists polled picked: “do nothing, the market will determine appropriate prices”.

The focus ought to be on increasing supply.

Ease planning restrictions, Provide more public housing, Remove barriers to building prefabricated homes

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 Although inflation pressures are easing and the budget measures will help mechanically reduce inflation, we live in a highly uncertain world. Factors such as climate change, geopolitical pressures, and unforeseen shocks continue to influence the economic landscape.

C

The budget entails a complex web of economics and politics. Its complexity reflects the challenges of striking a balance between fiscal responsibility, avoiding a resurgence of inflationary pressures, and addressing spending demands arising from the imperative to accelerate the energy transition, confront geopolitical priorities, and promote a fairer society. The budget acknowledges that these challenges are mounting, partly due to the increasing complexities of the world. However, the budget's effectiveness in addressing these challenges is limited. It represents a compromise solution ? a 'second best' approach. For instance, the provision of a $300 energy rebate to all Australian households, while mechanically reducing inflation according to how inflation is calculated, is unlikely to alleviate underlying inflationary pressures and may even exacerbate them. For households not experiencing financial strain, lower energy bills could simply lead to increased spending in other areas. The inclusion of production tax credits for green hydrogen and critical minerals refining and processing offers support to sectors where Australia likely holds comparative advantages, potentially increasing the nation's prosperity. However, a more comprehensive tax reform, such as the implementation of an allowance for corporate equity, [https://taxpolicy.crawford.anu.edu.au/sites/default/files/publication/taxstudies_crawford_anu_edu_au/2022-03/complete_ace_wp_2022.pdf] would encourage efficient investment across the entire economy rather than focusing solely on chosen industries.

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)"

Subsidies generate rent-seeking and are inefficient

Provide more grants to innovative firms across the entire economy

It is clear that attempting to replicate the Inflation Reduction Act would be both impractical and unwise. The size of our economy and our existing comparative advantages must be taken into account. A more fitting response involves adopting a combination of a carbon tax and research grants. Carbon taxes serve as a cost-effective tool for addressing direct externalities, while research grants offer strong incentives to direct research efforts toward the development of cleaner technologies.

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

Expand the safeguard mechanism to cover more facilities to mimic a broader carbon price | Expedite building new transmission lines to connect renewable energy

Many economists contend that implementing a carbon tax, one that accurately reflects the social cost of carbon emissions, is essential for the transition to net zero. This approach involves raising prices on products and services that produce high carbon emissions, thereby encouraging consumers and businesses to shift their preferences towards less carbon-intensive alternatives. Nevertheless, I have omitted the idea of a carbon tax from my selection for a couple of compelling reasons. Firstly, it faces significant political hurdles, making its implementation highly challenging. Secondly, a carbon tax alone is insufficient to address the multifaceted issue of carbon emissions. When applied on a broad scale, it necessitates complementary measures due to the inherent imperfections and incompleteness of markets, the costs involved in adjusting, and the presence of equity concerns. Consequently, it becomes clear that relying solely on unfettered market forces is not viable. Instead, we must accept a greater role for direct government intervention, recognising that it comes with its own imperfections and inefficiencies. This expanded role encompasses not only financing and underwriting investments but also entails a substantive rethinking of existing market governance and regulatory frameworks for the energy transition. For instance, one significant aspect missing from the list provided above is the integration of consumer resources into the grid. This will be more crucial as rooftop solar becomes even more preponderant and as the adoption of electric vehicles accelerates.

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%.

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

3

The NAIRU serves as a theoretical framework, offering a macroeconomic perspective for assessing potential trade-offs. However, its policy relevance appears unconvincing, largely derived, as far as I know, from a singular instance of inflation acceleration spanning the late 1960s to the mid-1970s. Consequently, my attention has shifted towards addressing the root causes of structural unemployment, arising from a misalignment between available job opportunities and the labour force. My emphasis on education aims to guarantee that job seekers possess the necessary skills for both present and upcoming employment prospects, leaving no one behind in the pursuit of reducing unemployment. In line with the Haig-Simons income principle, I propose the deduction of childcare expenses from labour income, with a possible cap, to foster increased labour market participation. The potential necessity for a cap arises if childcare providers have significant market power.

Poll 59

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

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

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

B

OVERALL COMMENTS: The 2023 federal budget includes measures to help households and businesses struggling with inflation. Electricity and gas prices have risen by 34% in the past two years. Immediate relief measures include $500 electricity rebates for low-income households and $650 rebates for eligible small businesses. Other measures, such as increased payments for JobSeeker, Youth Allowance, Rent Assistance, and Austudy, will have a more permanent impact. There are also energy-transition measures, like tax incentives for businesses to become more energy efficient and low-cost electrification package loans for households. The debate about whether these cost-of-living relief measures will contribute to inflation is misguided. Electricity rebates and JobSeeker increases are inflationary in the same way as wage increases, yet no one suggests that we should not increase wages at all to alleviate inflation. We should also dismiss the idea that we should not help those who are most disadvantaged in society to avoid putting pressure on inflation. To address inflation, the government has two options: 1. Wait for supply responses and higher interest rates to take effect 2. Reduce expenses and increase taxes elsewhere. The budget attempts the latter with measures like a superannuation tax for balances over $3 million, a $2.4 billion rise in the petroleum resource rent tax over four years, a $3.3 billion increase in tobacco excise, and multinational tax measures. However, these efforts are modest and represent less than 1% of total government spending over the next four years.

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: Increase the GST Introduce or increase land taxes (possibly with cut in stamp duty) Tax windfall profits Equity picks: Introduce inheritance taxes Introduce or increase land taxes (possibly with cut in stamp duty) Tax windfall profits

Efficiency comments: Taxes on land and windfall profits are less likely to result in tax-induced reductions in economic efficiency compared to other types of taxes. This is because land is an immobile resource, meaning that its supply cannot be easily increased or decreased in response to changes in tax rates. Therefore, a tax on land does not significantly affect the quantity of land available for use, nor does it influence the incentives of landowners to use their land productively. Similarly, windfall profits are typically unexpected gains that arise from factors outside of a business's control. As such, a tax on windfall profits is unlikely to deter businesses from investing or engaging in productive activities, as these profits are not considered part of their normal profit expectations. Consumption taxes are less distortionary than other types of taxes, such as income or corporate taxes, as they do not directly discourage individuals or businesses from engaging in productive activities. Equity comments: There are obvious equity issues with increasing the GST ? consumption as a share of income decreases with income. Inheritance taxes are clearly distortionary , but are more equitable ? for example they could fund the costs associated with meeting the needs of an ageing population.

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

.

Targeted subsidies for low income consumers

Retail electricity prices are increasing for at least two key reasons. First and foremost, due to the increase in gas and coal prices resulting from the brutal invasion of Ukraine by Russia and from increased demand arising from more extreme weather patterns due to climate change. While we do share some responsibility for climate change, gas and coal prices are not under the government?s control. In contrast, the second reason for higher retail electricity prices is entirely under our control. The energy transition will be messier, and result in higher prices, than necessary due to the convoluted mix of climate change and energy policies that we had over the last decade. This includes the abolition of the carbon price, the ramping up of the Renewable Energy Target but a lack of coordination between investment in renewables and transmission expansion, half of the NEG (the national energy guarantee), which is yet to be tested, and so on and so for. Clearly, this incremental, piecemeal approach has not been successful and the states and territories, not the market, are now doing the heavy lifting for the transition. The big challenge is to pull together all the large, ambitious energy plans put forward by the states and territories into a consistent set of market and regulatory arrangements that promote the long-term interest of consumers in a net zero economy. This should be the main focus of the government. An important step is to manage the exit of coal to ensure the security of supply and to reduce emissions, but at the same time ensuring that prices do not increase more than what they need to.

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

Education and skills Workforce participation Broader reforms to promote productivity

Broader reforms to promote productivity We need to look again at whether our competition policy framework (our competition law and enforcement efforts) can deal effectively with any challenges arising from the increase in ownership concentration and the digital economy. Competition (or the lack of) affects productivity ? firms that face less competitive pressures have less incentive to innovate. The reform of the tax and welfare systems is also key to increase labour productivity and workforce participation, which in turn will play an important role in overcoming labour shortages. Taxation efficiency - and the way the tax system interacts with the welfare system ? impacts on productivity because taxes impose economic costs by changing the behaviour of individuals and businesses. We need to finish the job that we started in 2010, with very little progress since then.

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

Increase immigration Boost childcare subsidies Cancel Stage 3 tax cuts Tax reform RBA to target nominal GDP rather than inflation

3%

Consider supply side interventions, ensure that there is no unnecessary increase in demand, and let monetary policy do its thing, but the RBA needs to target nominal GDP, not inflation. Focusing on the supply side, and the energy transition, will require more long-term public investment, not less. This means that we cannot afford the Stage 3 tax cuts, and we need to urgently improve the overall efficiency of how we raise taxes.

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

.

We face a highly uncertain world. Climate change means more bushfires, more floods, and rising sea levels, which will lead to higher government expenditure both in mitigation and recovery. The necessary energy transition is a massive undertaking. To achieve net zero by 2050, we will need an 800% increase in large-scale wind, solar and hydro generation, as well as a corresponding increase in the transmission network to accommodate this additional capacity. The current government's motto of "technology not taxes" is nothing but an empty slogan. States and the federal government have made significant financial commitments through a myriad of mostly uncoordinated initiatives. All of these expenditures must be funded by taxes. The invasion of Ukraine by Russia, with its terrible human toll and global economic consequences, has highlighted the geopolitical risks associated with authoritarian regimes. This wake-up call will certainly result in increased defence expenditures. These expenditures too must be funded by taxes. Unfortunately, we are awfully unprepared to fund the additional expenditures required to address the colossal challenges of climate change and geopolitical instability. The federal budget has been, and will remain, in structural deficit for some time to come. A structural deficit refers to fiscal imbalances that are caused by fundamental shifts in the economy, such as changes in demographics. Our aging population means more spending on aged care, health, and social security. Our aspirations for a more equitable, progressive society require government spending on education and on the National Disability Insurance Scheme. It also requires a more generous social support system that allows young people to overcome poverty traps. While we will likely have more government reviews and inquires, which will undoubtedly come up with ways to do things better, these will lead to even more, not less, expenditures. These too must be funded by taxes. The bottom line is that regardless of what will be said during the forthcoming May election campaign, taxes will need to rise. It follows that we need to fix our inefficient tax system as a matter of urgency. The sources of the inefficiencies are well known. We need to simplify and reduce our reliance on income tax. A complex system leads to perverse incentives including welfare-reducing tax minimisation efforts by taxpayers. Rather than simply reducing the corporate tax rate, which is lazy reform, we need a business tax that promotes innovation and entrepreneurship rather than rewarding monopoly power. The unequal tax treatment of returns from rent, interest and capital gains also needs to be addressed. If we don't fix our tax system, it will be much more costly to raise the additional revenue to address the budget's structural deficit and to meet the challenges of climate change and increased global geopolitical risks. Inaction will mean that we won't be able to afford some of the things we aspire to achieve.

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"

.

190,000 is about right

Poll 51

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

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

Question 4

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

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

Uncertain

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

9

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"

.

7

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"

Disagree

8

The notion of an independent (from politics) central bank became universally accepted as good economics about three decades ago. The global financial crisis and more recently the response to the COVID-19 pandemic made it clear that central banks, in practice, operate in a way that shares many characteristics with other government functions. While there is merit in considering alternative governance arrangements for the RBA that recognise its broader role, I am uncertain about what an independent review of the RBA can accomplish given that a ?better central bank model? is yet to be developed.

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)

Agree

The question assumes that we have the option of not transitioning to net-zero and free ride on other countries. The significant negative consequences of not transitioning to net zero (by 2050 or somewhat later) makes the question somewhat irrelevant. For example, research that looked at the impact of climate change on the US economy suggested that annual GDP per capita reductions (as opposed to economic costs more broadly) could be between 1.0 and 2.8 percent under the Intergovernmental Panel on Climate Change representative concentration pathway 2.6 (under this scenario emissions peak in 2020 and then decline through 2100), and under pathway 8.5 (emissions rise continually through 2100) the range of losses could be between 6.7 and 14.3 percent. For context, a 5 percent U.S. GDP loss would be roughly $1 trillion. We have a small, very open economy, which is much more subject to the vagaries of the global economy than the US economy, and Australia's changing climate constitutes a very significant challenge. We have already experienced increases in average temperatures over the past 60 years, with more frequent hot weather, fewer cold days, shifting rainfall patterns and rising sea levels. More of the same is expected in the future. On the second question, of course I would like to see an economy-wide carbon price, which we know is the most appropriate instrument. A more relevant question, however, is which of the inferior alternatives would be preferable. A combination of direct action and targeted R&D subsidies would likely get us there, albeit at a higher cost.

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);Mandatory vaccination for higher risk occupations

Vaccine passports and mandatory vaccination are a no-brainer. These are standard responses to externalities. For example, travelers arriving in Australia from countries where there is yellow fever need to be vaccinated or face quarantine. There may be benefits in introducing targeted financial incentives, but passports and mandatory vaccination will go a long way in ensuring a higher vaccination take-up.

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

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"

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

10

A carbon tax ? with lump sum compensation to low income earners ? is the appropriate instrument to internalise the externalities (emissions) generated by conventional vehicles. In its absence, quantity regulation (i.e., a ban on importation and setting standards) can achieve the same goal of reducing emissions, but at a higher cost. It makes little sense to subsidise electric vehicles as standard arguments in support of a subsidy (i.e., to promote industry development through increased scale) do not apply as we don?t manufacture electric cars, and there are equity issues.

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

Delivering a federal budget with a focus on economic growth was the right call. It recognises that: (i) there is still too much uncertainty to start the budget consolidation process, (ii) the economic recovery has been fast, but unequal, and (iii) it fits with the bipartisan support for an expanded role of government as provider of social insurance (NDIS, Aged Care). This is where my praise for the budget ends. There is no long-term vision, and it is difficult to see a rationale for some of the (significant) expenditures beyond short-term politics.

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 budget delivers on supporting the economy (jobs and investment) in the short-run, but it lacks a vision for the post-pandemic world. In particular, it lacks a more ambitious reform of business taxation (e.g., moving to an Allowance for Corporate Equity system) and a a commitment to climate action through green stimulus.

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

There are both ethical and economic reasons for supporting a higher JobSeeker payment. Here I focus on the economic rationale: current empirical literature suggests that unemployment insurance may have a very high value for society (by protecting workers against adverse shocks that they have no control over). This high insurance value justifies setting unemployment benefits at a generous level, even when the moral hazard cost (in the form of reduced incentives for job searching) is high. The reason for the high value of unemployment benefits as insurance is that the marginal propensity to consume of the unemployed may be much higher than that of the employed ? the higher the difference the higher the value of the consumption smoothing afforded by the unemployment benefits.

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 

Expanded investment allowance, Wage subsidies or hiring bonuses (beyond JobKeeper), Permanently boosting JobSeeker (Newstart) beyond December 31, 2020, Infrastructure projects

Sustaining incomes and jobs has been and will continue to be key to avoiding a deeper downturn. In terms of the economic recovery, government funding should focus in areas where it will not crowd out private investment: some infrastructure (e.g., broadband in particular areas, transport), health, aged care, social housing and education. Picking ?winners? to subsidise is to be avoided ? a superior approach for achieving an appropriate emissions reduction goal is to establish a carbon price. Such a price will incentivise investment in lower emissions electricity generation. Finally, the time is right for tax reform that promotes private investment. However, reducing the corporate tax rate is not the right approach. Instead a cash flow tax is the way to promote equity investment and innovation.

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 increase in compulsory super is good policy ? with positive long-term implications for individuals, public finances and the sustainability of our safety net for the aged. The only issue is timing. The economic incidence of the increase in compulsory super will be shared by employers and employees. This will mean lower take-home pay for employees at a time when it is crucial to sustain incomes (and, therefore, aggregate demand). It also means a higher cost of employment at the time of high unemployment. Regardless of whether the increase in compulsory policy ?will be paid for? mostly by employees via slower growth in wages or by employers, postponing it is, to use the language of game theory, a dominant strategy.

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

10

The government?s response to the COVID-19 crisis highlighted that providing social insurance is one of the key roles for government in a modern, democratic society, with an independent central bank tasked with monetary stability. I have no doubt that the timely and substantive income support provided by the government prevented a much deeper economic downturn.

Poll 39

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

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

Strongly disagree

8

My reading of recent research from a number of developed countries, including the USA and UK, suggests that raising the minimum wage has a small negative effect on employment. However, raising the minimum wage significantly increases the earnings of low paid workers in employment. Of course, these studies were not undertaken during a pandemic! Given the need for economic stimulus as we recover from the COVID-19 pandemic -- with restrictions being eased, and that low wage workers spend a larger share of their income, the macroeconomic benefits of increasing the minimum wage are very likely to outweigh the costs. The JobSeeker payment, however, should continue to include the Coronavirus Supplement to minimise the impact of any reduction in employment.

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 key is to consider what might have happened if we had not acted early on closing borders, introducing social distance rules and the lockdown. Absent these measures, the rapid spread of the virus would have likely caused as much if not more economic damage, in addition to significant loss of life. The experience of countries that were late, or that proceeded in a disorganised fashion, in their suppression efforts illustrate what might have happened in Australia absent the restrictions that were imposed. While some commentators point to Sweden as an example involving less restrictive (or voluntary) measures, their approach has entailed significant loss of life (over 3,000 deaths as of the 8th of May) and it is unclear whether their economy is faring/will fare better than ours.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

Poll 13

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

Strongly agree

10

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.

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.

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.

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.

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.

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.

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.

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.

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.

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'.

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.