Michael Knox

Poll 66

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

Stronger US economic growth; Lower US inflation

John Cochrane has recently commented that only "The Vibe" of Trump's Program can be gained from Trump's Campaign rhetoric. I think the best simplest policy guide is in Peter Navarro's book "The New Maga Deal'" which was released at the Republican convention. I refer to pages 26 to 29 of that book. It is apparent that Trump's remark about "Big Beautiful Tariffs is merely the opening bid in a bargaining strategy conducted under a foreshadowed 'US Reciprocal Trade ACT' (USRTA)". Navarro says that 132 countries have higher tariffs on American products than America charges them for the same product. The strategy is to cajole other countries to lower their higher nonreciprocal tariffs to US levels. Should they refuse to do so then the US will raise American tariffs on their products to the same level that they charge on American products. Navarro notes "Either way, far more fair, reciprocal, and balanced trade under the USRTA would create hundreds of thousands of new jobs while strengthening or manufacturing and defence industrial base" Navarro says that analysis done in the Trump Whitehouse by the Office of Trade and Manufacturing Policy "if all 132 countries were to lower their higher nonreciprocal tariffs to US levels, this would reduce the overall US trade deficit by almost 10 per cent." In contrast, if these countries were to refuse to reciprocate and the United States were to raise its tariffs to mirror those countries level, the reduction in the US trade deficit would be of similar magnitude."

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 problem of house prices in Australia is aggravated by our concentration in large port capital cities. State governments could help by subsidising urban development projects in provincial cities. This was done successfully in Queensland from the 1970s until 2008.

Home affordability

Fast-track training of home builders, Ease planning restrictions, Fast-track immigration of home-builders

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/

NO This budget was not about fighting inflation. It was a budget with an election in mind. The budget seemed to be produced with detailed election polling in mind. There is a handout for every identifiable voting group. It gives the government the flexibility to launch an election campaign almost any time in the next year. This is important because the major economic parameters shown in Budget Paper Number 1 tell us the economy is softening. The projected GDP growth for 2023-24 is only 1.75%. This is down from 3.1% in 2022/23. As a result, unemployment is expected to climb to 4% in the middle of 2024 and 4.5% by the middle of 2025. It is forecast to stay at that level for three consecutive years to the middle of 2027. This extended period of higher unemployment may eventually reduce inflation. Still, the government will want to call an election before this period of higher unemployment sets in.

C

A federal budget surplus of only 0.3% of GDP in 2023-24 followed by a deficit of 1.0% in 2024-25 provides little fiscal support to the RBA in its task of putting downward pressure on inflation. Hence we don't believe the RBA will be able to begin lowering rates until the first half of 2025.

Poll 63

April Poll - panellists were asked about the GST deal with Western Australia.  The following two questions were posed: 

"Is the long-standing arrangement broadly the best method of distributing the nationally-collected GST revenue?" and "Should the 2018 changes be kept or scrapped?"

YES - When examining this issue, it is best to stand back and look at the national interest rather than individual state interests. The national interest would not be served by pouring relatively more resources into highly-congested areas such as Sydney or Melbourne. This would be the case if a higher share of GST was given to NSW or Victoria. The current arrangements efficiently provide a flow of resources to the most rapidly growing part of the Australian economy, which is WA.

Kept

The post-2018 arrangements minimize national congestion costs and maximise efficient growth of the Australian economy as a whole.

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

Expedite the development of nuclear energy

The recently released International Energy Agency roadmap to net zero by 2050 tells us that this task is not just very difficult. It is Herculean. Specifically, the IEA suggests that nuclear energy production needs to be doubled by 2050. Further by 2050, there needs to be installed carbon capture and storage capacity sufficient to remove 1.7 gigatonnes of CO2 from the atmosphere every year. Electricity transmission and distribution grids need to expand by around 2 million kilometres a year each year until 2030 to meet the net zero target. Also, by 2030, there needs to be an increase of critical minerals production by 20 million tonnes per year to 3 times the current level of production. All this requires spending $US4.5 trillion each and every year by 2030. This is not just Hercules as an engineer; this is also Hercules as a tax collector!

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%.

better targeting immigration, reducing taxes and regulations facing businesses, relaxing industrial relations regulation to allow for greater "flexibility" (as defined by employers)

4.5

The less regulated a national labour market is ,the lower the level of unemployment that is achieved . The simplest side by side comparison in March /April this year is France and the UK . France with its famously high level of regulation and provisions against dismissal had a March unemployment rate of 7.1% . The UK with a more deregulated labor market had an April unemployment rate in April 3.8% . The greater the level of labour market regulation ,the greater the disincentive for employers to provide jobs. Separately is the issue of immigration . The Australian bi - partisan skilled migration program remains one of the most successful structural supports of continuing growth that Australia has.

Poll 59

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

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

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

C

OVERALL COMMENTS: The historical context is that we have recently experienced the highest terms of trade in Australia's history. Indeed the terms of trade is now higher than it was during the 2000's resources boom, and higher than in the boom following World War 2. During the boom after World War 2, the historical record shows that the treasurer Arthur Fadden ran major budget surpluses which brought down inflation. This was followed by smaller surplus budgets for the next two decades. These kept both inflation and interest rates down. On this occasion we have one year in which we have a balanced budget by the narrow margin of 0.17% of GDP. We then revert to small deficits. INFLATION COMMENTS: The treasurer appears to believe inflation is an accounting problem and not an economic one. Spending to reduce power bills might make one or two quarters of the CPI look better, but it also adds to demand, leading prices to spring up elsewhere. The treasurer seems be following the Biden administration approach of leaving the problem of inflation entirely to the central bank. This led the US central bank to lift rates higher than they might otherwise be. This budget will have the same result. The test will be if the RBA continues to raise rates. Further RBA rate rises will now follow.

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: Broaden the set of goods and services captured by the GST Increase the GST Equity picks: Increase the GST

Equity comments: GST is the more efficient way to raise government revenue than taxes on savings or investment. Governments over many years have learned the hard way that taxes on saving and or investment inevitably lead to a fall in investment. This fall in investment leads to a fall in employment growth and output growth. This then leads to an endless cycle of declines in revenue. The best way to avoid this damaging long term decline is to directly tax consumption . This is most efficiently done by raising or broadening GST Equity comments: The alternatives to GST outlined above are really a series of false short term choices. In the short term they provide revenue but in the medium and long term they reduce revenue which might otherwise be available for welfare spending.

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

.

Lift supply

Victoria and other southern states should follow Queensland's lead in allowing exploration and drilling for gas for domestic production. Page 43 of the International Energy Association's World Energy Outlook appears to show that although coal use will decline by 2050, the use of both natural gas and oil will remain strong through to mid-century. https://www.iea.org/reports/world-energy-outlook-2022 Renewable use will expand to allow for growth in energy use. What will result is an "all of the above " strategy will emerge, including all forms of energy, including natural gas, to supply future energy needs.

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

Migration policy Education and skills Broader reforms to promote productivity

Migration policy The intake of skilled migrants needs to be rapidly increased.

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

No need, inflation will fall back to an acceptable level without the need for any government action to back up the RBA

4%

The Australian data suggests that sustained rates of Australian inflation above 4% tend to result in falls in investment and rising inflation . This is the condition called "stagflation" High interest rates proved sufficient to bring down high inflation in the 1980s and should prove enough again.

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

.

1. Esteemed historian Niall Ferguson has said that China may begin an invasion of Taiwan as early as 2023. Taiwan has a strategic position in the South China Sea which would allow China the control the seas lanes that supply Japan, our new ally in "The Quad". All of this suggests that Australia is entering a period of enhanced risk which makes national security and defense the number one matter of political concern. 2. Australia has maintained a long term position as having the highest immigration rate in the OECD. This has been mixed with a skills based selection system . These factors plus the import of capital ,has allowed our economy to growth faster than the US and faster than Europe. Our immigration program has paused but will now resume providing structural support 3. As luck would have it ,Australia is now enjoying the second commodities boom this century with export prices now even higher that in the previous event . History show us that these periods of high commodity prices allow us to sustain high immigration and rising living standards at the same time. However , this time we should also be aware that ,when our terms of trade does eventually begin to fall , our demand for immigrant labor may slow as well.

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"

.

160,000 is about right

The RBA has suggested that it wishes to maintain a relatively low rate of unemployment around 4% in order to generate a steady growth in real wages over consecutive years . Maintaining a regular rate of permanent settlement of 160,00 new migrants (still a high number relative to our population) seems a sensible way of allowing growth in the labor force yet growth in real wages at the same time.

Poll 51

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

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

Question 4

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

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

Disagree

Poll 51

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

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

Question 3 

"The Reserve Bank has, over the past 5 years, effectively used the tools available to it to achieve its goals of "maintaining the stability of the currency, ensuring full employment and furthering the 'economic prosperity and welfare of the people of Australia'."

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

Agree

10

Poll 51

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

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

Question 2

"When do you expect the Reserve Bank of Australia to next lift its cash rate?"

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

.

10

2023

Poll 51

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

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

Question 1

"The current combination of Australian fiscal and monetary policy poses a serious risk of prolonged above-target inflation."

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

Disagree

10

The RBA is still providing an expansive monetary policy through Quantiative Easing. The RBA is is still buying $4 billion of bonds per week . We believe that in February it will announce a reduction in purchases to $3 billion per week and then reduce the rate of purchase each quarter through 2022. This puts the RBA in a position where it can lift the cash rate from 10 basis points to 25 basis points in the first quarter of 2023. We believe that inflation in Australia will be contained as import prices fall in Australian dollar terms as the Australian Dollar gradually rises supported by strong export commodity prices.

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)

Uncertain

There has not been sufficient national debate to ensure we know exactly what is involved in Australia transitioning to net zero by 2050 . I support a national market in carbon prices as long as next generation nuclear energy is available as a potential generator of Australian electric power .

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

Australia appears to have the target of of having 80% of the population fully vaccinated. For this to be achieved it is necessary to develop a high degree of national trust in the vaccine . This would best be done by a national advertising campaign through doctors and chemists as well as media . Mandating vaccinations or requiring domestic Australian passports would imply that there is some thing wrong with the vaccine that people have to be forced to take it. The public must trust the Covid vaccine at least as much as it now trusts the Flu vaccine or the other vaccines that many travellers already receive when they are going overseas.

Poll 48

Our panellists were asked

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

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

.

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

What the RBA in the person of Phillip Lowe has actually said is that it will allow unemployment to fall to a level low enough for wages to grow one percent faster than inflation . They will do this to lift inflation to a level where it consistently hits its target . My judgement is that they will be successful in lifting real wages. The data this century shows that rises in real wages have happened when during times of rising export commodity prices and hence improving term of trade . We are seeing dramatic improvements in the terms of trade during the current recovery this should in turn to a period of rising real wages . All we really have to do is allow time for the good people of the RBA to do their work . In the longer term though we need to encourage business to invest to generate further employment . A good way to do this would be to reduce the corporate tax rate from the current level of 30% to the OECD average rate of 25% . This would reduce the tendency of Australian real wage growth to stall in periods when commodity prices are not rising and a the terms of trade is not improving.

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"

.

10

Most of the work on electric cars show that the reduction in carbon emissions happens because of more efficient operation of electric vehicle is large metropolitan areas. Electric vehicles actually create more emissions in rural areas because of the decreased efficiency and the higher emissions expended in the generation of relatively more electric power than the conventional energy required by conventional vehicles. Add this to the very large spaces in Australia between major cities and one very quickly comes to the conclusion that electric cars are not an efficient technology for Australia, A far more effective policy might be to continue our success in reducing emissions in electric power generation while focusing on greater fuel efficiency for conventional vehicles.

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

.

A

The first thing we can see is that the Australian turnaround has been achieved with much smaller budget deficits than in other major OECD countries. Yet in spite of relatively small deficits, we have a strong recovery in which those budget deficits move to even smaller levels. These better than anticipated budget deficits support bigger social programs in the years ahead. Still some very conservative estimates on future iron ore prices allow the government the chance of further happy surprises over coming years.

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 

A

This was not just an annual budget . Perhaps for the first time since Chifley's plan for post war recovery, this was a multi year economic plan. The government has used the extra half a year since May to build this cohesive plan . The components are mutually supportive . Fortunately the government also avoided multi-year social welfare entitlements which after 2008,so hampered the the eventual return to fiscal balance.

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 

Bring forward legislated personal income tax cuts, Corporate tax cuts, Expanded investment allowance, More funding for education and training

We accept the view of New York Fed economists Bram and Dietz (April 2020) that this is a global natural disaster not a global recession . There has been enormous addition to demand through fiscal deficits from Government and quantitative easing from Central Banks. The problem is to restore supply . Expanded investment allowances ,corporate tax cuts and bringing forward higher income tax cuts will all act to increase investment. This restores aggregate supply. Additional training expenditure for technical and vocational training also does the same. When comes the time that China imports its mineral resources from newly developed provinces in West Africa, then a lower corporate tax rate will be essential to attract international business to locate in Australia rather than the many other countries with lower corporates tax rates.

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 abandoned

9

Unless one lives in an unreal world , increases in superannuation guarantees are funded by employers out of the total wage the worker might otherwise receive. Thus higher superannuation guarantees mean either lower wages than would other wise be the case OR lower employment than would otherwise be the case. This then worsens the ability of workers to save for housing purchases and repayments of loans. We can actually see this in action in practice where refunds in superannuation during the pandemic appear to have almost all been directed to repaying of loans such as mortgages. A higher superannuation guarantee where met by the employer would increase real wages and reduce employment . A higher superannuation guarantee where met by the the worker would reduce take home wages and worsen the ability of workers to save in other ways including through housing.

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 

Agree

9

The Cash rate is at the Zero bound. The Reserve bank is buying bonds .

Poll 39

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

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

Strongly agree

9

The severity of the current slump will the greatest since the the National Accounts began to be published following World War Two. The potential for job losses is the greatest in that period. At best the economy is not expected to fully recover before 2022. In the private sector very many senior staff and business managers have taken pay cuts of twenty percent or more to maintain employment. The government is doing its best to provide adequate demand through fiscal stimulus. An increase in minimum wages during this period would only serve to reduce employment for the lowest paid.

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 disagree

8

It is hard to argue with this proposition. We want to continue saving lives and preventing hospitals from becoming overloaded. By the same token we now need to reopen industries, progressively, and conditional at each stage on R remaining less than 1. "A very good place to start when disussing this issue is the New York Fed piece by Correia, Luck and Verner of March 27, 2020. The piece is called "[Fight the Pandemic, Save the Economy: Lessons from the 1918 Flu](https://libertystreeteconomics.newyorkfed.org/2020/03/fight-the-pandemic-save-the-economy-lessons-from-the-1918-flu.html)". The authors look at the effect of Non Pharmaceutical Interventions (NPIs) in a large number of US cities in the Pandemic of 1918. NPIs include social distancing and other strategies currently in place. They find that the cities that that had the most substantial NPI program and maintained it the longest had the best growth in employment after the pandemic. This suggested that that our own program of NPIs should have substantial economic rewards in the years that follow.

Poll 27

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

Strongly disagree

9

In a paper we published for our clients last year on 26 October we suggested that the cut in US corporate tax cuts would "result in a shift back to the US of some 34% of US corporate income."Our paper was based on an extensive literature published as a reference list to the "Corporate Tax Reform and Wages: Theory and evidence," published by the Council of Economic Advisers of the US President in October 2017. A shift of corporate income of this side back to the US will not just effect Australia but many other countries as well.

Poll 28

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

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

1 - Agree

2 - Strongly disagree

1 - Australia is a capital importing economy. We constantly need to raise funds on the international wholesale capital market. We currently still enjoy a AAA rating
which allows us to raise funds at a reduced rate.

A relatively low public debt to GDP ratio is one of a number of indicators which
have to be maintained at a healthy level to allow us to continue to enjoy that reduced rate.

2 - The actual cost of corporate tax cuts is very small relative to GDP. In a debate on Tax policy in Philadelphia in January, Kevin Hassett, the Chair to the Presidents council of Economic Advisors noted that the net costs of US corporate tax cuts was only $US300 billion dollars. This is small compared to a US GDP of almost $US20 Trillion .

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

9

The underlying problem in the availability of homes in Australia is under investment in Urban Transport Infrastructure. Increased investment in Urban Transport infrastructure will allow the development of land for an increased number of home sites. This in turn will allow the building of an increased number of homes. This increase in supply will put downward pressure on real home prices.

Poll 30

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

Strongly agree

9

Holland et al (2016) do a nation wide US survey of the contribution  of electric vehicles to greenhouse gases in different US locations. They note that in the overwhelming majority of locations the greenhouse gases from generating electricity to charge electric vehicles is GREATER than if the vehicles had been powered by internal combustion engines. Electric vehicles only decrease greenhouse gases in net in very congested major city locations. This suggests than any net environmental benefit  from electric vehicles is vastly overstated.  Hence the pricing of road use for electric vehicles should be the same as fossil powered vehicle.

Poll 33

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

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

1 - Agree

2 - Uncertain (neither agree nor disagree)

1 - I have been surprised at the number of business and individual investors who
have asked me if the decrease in business and home lending that they observe is caused by the Banking Royal Commission.  That the two are related to each other seems  to be commonly believed by many members of the Australian public.

This may simply be because the public sees house prices moving down at the same time as the Banking Royal Commission is in session. The increase in bank reserves that have been implemented under supervision of the RBA since January 2015  do have the effect of a moderate tightening of monetary policy even though the cash rate has remained unchanged. This may be a better explanation for the tightening of lending since  that time.


Could the advent of the Royal Commission result in banks becoming more risk averse? It would be reasonable to expect that it might.

2 - This depends upon the RBA reaction.  Should the RBA react to a reduction in bank lending by further cuts in the cash rate, then the two effects might be expected to cancel each other out.

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."

Strongly disagree

9

Let us take the case of UBER drivers. UBER generates increased productivity by allowing drivers and passengers to find each other more quickly and efficiently. On a trip to the USA in January I witnessed the results. In the three cities I was in Los Angeles, Philadelphia and New York, UBER was MORE EXPENSIVE than Taxis. Because of the income sharing system of UBER this suggests that UBER drivers were better paid than ordinary Taxi drivers. UBER drivers were benefiting from the higher demand for a more productive service.

Poll 25

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

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

1 - Agree

2 -

1 - Fake news is really opinion repacked as reporting. This  arises in internet published news because of the way the google search  algorithm selects controversial items to a more prominent level. The same  publication in print form will appear much more moderate.

Sure, we need public support to good journalism but this  should be in the form of better training for journalists rather than spending  on public broadcasting.

2 - There is no evidence that public broadcasters are less  biased than private broadcasters. Hence, more public spending does not address  the issue.

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

Like previous expansions of the capital base, we might reasonably expect that the jobs that robots fit will be replaced by others jobs that may not yet exist. We also expect that just like previous cycles of job replacements, the process will be far from seamless. 

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."

Agree

7

The question is wrong. The choice is between the Finkel System and the current highly disfuntional state based renewable energy target.  The alternative of an internationally functioning Cap and Trade system including China and India might be better in theory. However repeated attempts over more than 20 years have been unable to construct such a market in practise.

Poll 16

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

Strongly disagree

8

The proposal to increase capital gains tax on housing investment is part of a proposal to increase capital gains tax generally. Increasing capital gains tax reduces the return from investing. This would result in a reduction in the rate of private fixed capital investment. This in turn would decrease employment growth.While superficially aimed at" the big end of town" this proposal in the end would damage ordinary workers jobs.

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

8

A better comparison would be the US example of the Congressional Budget Office. This takes its forcasts from a sample of Private Sector Forecasters. In Australia the forecasters provide very good aggregate forecasts but they do not provide the granular detail that is required for budget preparation.

Poll 13

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

Disagree

8

We should recall that both candidates reject the Trans Pacific Partnership, so to make a comparison of the candidates we should look at there fiscal programs. A non partisan analysis can be found on the website of The Committee for a Responsible Federal budget.In a newsletter published for our clients on 5 November. We find that the Republican program expands the US budget deficit expands the US budget deficit from 3.3 % of GDP now to 4.5 % in 2018. This compared to a Democrat budget deficit of 3.5% of GDP in 2018. Hence the Republican budget provides more stimulus to world trade and hence the Australian economy. The most important feature of the Republican program seems to be the reduction in the headline corporate tax rate from 35% to 15% together with the elimination of almost all corporate tax deductions. We note that the effective US corporate is now only 18 %. We estimate that this corporate tax reform would increase after tax corporate earnings by 20% This should increase US private fixed capital investment both in the US and in Australia. Our news letter is on our website

Poll 17

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

Disagree

8

The problem seems to be the supporting legislation for the Renewable Energy Target. This subsidises wind and solar energy but not gas or coal.The renewable energy target nationally needs to be frozen in place. Other wise the current crisis  will get worse and worse.The moratorium for gas exploration in some states needs to be lifted.Farmers need to be  rewarded for gas found on their farms in all states as they are in Queensland.Gas needs to be treated as the low emission fuel source that it is.

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

Agree

8

Behavioural Economics provides useful insights into individual and collective behaviour . Many of these insights build upon those already gained in the discipline of Marketing.

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

8

A "Nudge " may merely simplify  choices and enable clients to understand the options available within public programs.

PART 2 - Disagree

8

A "Nudge " may merely simplify  choices and enable clients to understand the options available within public programs.

Poll 10

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

Strongly disagree

9

Central Banks appear to be quite good at targeting inflation. They seem to be really bad at targeting real GDP. The illusion that some central banks have been  achieving  steady results in nominal GDP(implicit targeting nominal GDP) may just be a result of their success with the inflation component of nominal GDP. Inflation targeting has been a success. The period of inflation targeting since the early 1990's has given Australia its longest period without recession .At the current rate of decline, unemployment should fall below the natural rate of around 5.3% no later than 2017. Notably,  Australia has avoided the severe recession after  the resources boom that befell  Brazil  and some other resource rich countries. '"This wheel ain't broke". We have no reason to fix it.

Poll 8

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

Disagree

9

We tested the hypothesis that tax cuts would generate a large increase to GDP by testing data for real corporate after tax earnings of listed companies against Real GDP. We found than a five percent cut in company tax rate would increase GDP by 1.1 percent. The P statistic of the relationship was 13 chances in 1000.

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."

Agree

8

We know in theory that we do not require fiscal stimulus when monetary policy is above the zero bound. Even with a cash rate at 1.75% we are still above that point.      The problem though is that rent seeking lobby groups continue to support spending for this or for that. This is usually dressed up as "good for growth".         In practice even the zero bound has not proved a barrier to further monetary stimulus. Quantitive easing in the US, in the UK and now in Europe has taken up the task of stimulus at the zero bound previously reserved for  fiscal stimulus.      With growth then adequately supported by monetary policy we may the safely approach the issue of narrowing the fiscal deficit in order to preserve the high rating of our national debt.

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

9

Many of the opportunities available in the healthcare and aged care sectors are so large they will require consortiums of companies which in Australia are competitors.

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 ability of locations to capture the benefits of major events  depends on the bargain they can do on reaping the considerable income available from television rights.If they are indeed receiving enough of television right income to balance the costs of the event then the a positive promotional effect of the event will put the total benefits over the line into the positive.

Poll 4

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

Disagree

8

These tax incentive have the objective of constructing an entirely new industry in Australia. Start Up Funds only exit now in tiny enclaves and only in Sydney.We need to build a new area of financial intermediation in this sector from the ground up. The incentives appear to be aimed at building a broad base of participation in funding start ups and an increased pool of expertise as well as an increased volume of start up funds.

Poll 3

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

Disagree

8

The real question is whose needs are being satisfied. Is it the gift recipient or the gift giver? I suggest it is the gift giver. The gift giver creates or supports social cohesion by giving the gift.Part of the act of giving a gift is to ask the recipient what they want for Christmas. This act opens an exchange between the giver and the recipient.Amongst the responses that a recipient might give is that they wish a cash gift or voucher. In this case and only this case should the giver provide a cash gift.The act of gift giving is an exchange that creates a social bond. Creating this social bond is of benefit to the giver.

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

10

Penalty rates actually penalise the unemployed by reducing the demand for service employees.Aligning Sunday rates with Saturday rates would increase output in the services sector as well as increasing employment.The Australian services sector need all the help it can get to help it to grow while Australia continues to suffer from the slump in non residential construction at the end of the mining construction boom.