Author's Name: RICHARD HOLDEN Date: Wed 06 May 2020 |
Richard Holden
Professor Richard Holden
Richard Holden is professor of economics at UNSW Business School. Professor Holden received a PhD from Harvard University and was a faculty member at MIT and the University of Chicago before returning to Australia.
He has published in the leading economics journals such as the Quarterly Journal of Economics, American Economic Review and Review of Economic Studies. His popular writings have appeared in outlets such as the New York Times, New Republic, American Affairs, Australian Financial Review, The Australian, The Sydney Morning Herald and The Conversation.
He is a fellow of the Econometric Society, and of the Academy of Social Sciences in Australia.
Subject Area Expertise
TBC
Website
Company website: http://research.economics.unsw.edu.au/richardholden
Responses (27)
Housing Reform
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”.
We need to push on both the supply side and the demand side. That includes lowering construction costs, and stopping throwing demand-side fuel on the fire like negative gearing and allowing people to access super for home purchases.
Home affordability
Remove barriers to building prefabricated homes, Fast-track training of home builders, Tighten the negative gearing and capital gains tax concessions
Western Australian GST deal
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 - It provides weak incentives for revenue raising, but it is important for a form of horizontal equalization.
Scrapped
Transition to net zero - ape the US Inflation Reduction Act?
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 access to credit for firms in industries that will supply the US projects, such as nickel an
We should support activities at which we have a comparative advantage and where there is a market failure. And we should not go one inch further than that or be prepared for taxpayer money to be flushed down an expensive, rent-seeking toilet.
We can and should keep unemployment below 4%, says our survey of top economists
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%.
improving the quality of primary and secondary education, relaxing industrial relations regulation to allow for greater "flexibility" (as defined by employers), reducing taxes and regulations facing businesses
4.25
Reducing the NAIRU requires big changes to human capital and investment/employment incentives--and those things are complements. We need to educate people better, and we need to provide fewer disincentives for business to invest and employ.
Budget 2023
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: D
C
OVERALL COMMENTS: The budget takes meaningful steps to help the least-advantaged members of the community without going (nearly) as far as various groups and committees advocated. It does so at some inflationary cost. INFLATION COMMENTS: Next year expenditures increase by 1.7% of GDP while receipts increase by 0.9%. Anyone who says a 0.8% of GDP net expansion is not inflationary is off their rocker. There is a question of the magnitude of the inflationary effect, but it is hard to believe that it doesn't lead to interest rates being at least 0.25 percentage points higher than they would otherwise have been.
How economists would raise $20 billion per year
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 Equity picks: Wind back the capital gains exemptions on the family home
Other than increasing the GST, every other option on the list is somewhere between very and extremely inefficient. The GST base could be broadened and the rate raised and not be regressive by using the Dixon-Holden "Progressive GST" plan (Dixon and Holden, "From Free to Fair Markets", Oxford University Press, 2022).
Leading economists back Federal Government action to curb rising gas and electricity prices
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
.
Domestic gas reservation in conjunction with increased supply as part of a deal with gas companies
These are all bad options. Cutting a deal for gas reservation plus increased supply is the least bad option.
Is education or immigration the answer to our skills shortage? We asked 50 economists
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
Workforce participation Migration policy Education and skills
Industrial relations The enterprise bargaining system is not working well and the Fair Work Commission's better off overall test needs to be reformed. It is currently far too rigid and it's preventing win-win deals being struck.
'It’s important not to overreact’: Australia’s top economists on how to fix high inflation
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
Wind back government spending Reserve a portion of gas and other commodities for domestic use Increase immigration
4%
I don't really know what is meant by "be prepared to tolerate" in the main question. We could have inflation never get above 3% by being in a permanently deflationary spiral but that would be terrible. It seems to me the real question is what actions we are prepared to take to stop it getting above 4,5,6,7,8,9,10,... %
Prioritising issues for the incoming Government
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
.
Intake of permanent migrants
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
Top Economists see no prolonged high inflation, no rate hike next year (Q4)
Poll 51
Our panellists were asked whether rate hikes would be necessitated in the United States, Britain and Australia.
Despite appearances – especially in the United States – the era of high inflation isn’t set for a comeback in the view of Australia’s leading economists, and most see no need for the Reserve Bank to lift interest rates next year.
Question 4
"Following the next Federal election, the incoming Federal Government should commission an independent Review of the Reserve Bank of Australia."
Photo credit "Wes Mountain/The Conversation, CC BY-ND"
Agree
Top Economists see no prolonged high inflation, no rate hike next year (Q3)
Poll 51
Our panellists were asked whether rate hikes would be necessitated in the United States, Britain and Australia.
Despite appearances – especially in the United States – the era of high inflation isn’t set for a comeback in the view of Australia’s leading economists, and most see no need for the Reserve Bank to lift interest rates next year.
Question 3
"The Reserve Bank has, over the past 5 years, effectively used the tools available to it to achieve its goals of "maintaining the stability of the currency, ensuring full employment and furthering the 'economic prosperity and welfare of the people of Australia'."
Photo credit "Wes Mountain/The Conversation, CC BY-ND"
Disagree
10
Top Economists see no prolonged high inflation, no rate hike next year (Q2)
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"
.
8
2024
Top Economists see no prolonged high inflation, no rate hike next year (Q1)
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 RBA was too slow to cut rates in 2018-19. They stubbornly refuse to announce their policy reaction function. The governor sends horribly mixed messages that seem clumsy rather than strategic. The estimate of the NAIRU having dropped markedly was announced in a minor speech by Assistant Governor Luci Ellis. And the bank never accepts they could ever do anything even a little bit better. All this and more should be the subject of an independent review.
Australia’s top economists back carbon price, say benefits of net-zero outweigh cost
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 mantra of "technology not taxes" is a false dichotomy. Technological solutions (marine net emission technologiess, green energy, and others) and a price on carbon are complements not substitutes. We need a price on carbon to drive development and adoption of technologies, and we need technological innovation. Ultimately, decarbonising the economy is about internalizing a negative externality. And, just like with COVID-19 vaccinations, externalities require government action...as every sensible economist knows.
Promoting vaccination uptake in Australia
Poll 49
"What measures should Australian governments adopt to promote demand for vaccination once supply is no longer a constraint?"
Photo credit "Wes Mountain/The Conversation, CC BY-ND"
Mandatory vaccination for higher risk occupations;Vaccine passports for higher-risk settings (eg. flights, restaurants, major events);Cash incentives for vaccination;Lotteries with cash or prizes for the vaccinated;National advertising campaigns
We only have one effective tool to make life as close to what it was pre pandemic long term ? vaccinations. There is a large and clear negative externality to folks not being vaccinated. Business and government internalize such externalities all the time. For vaccinations we have no-jab-no-pay, vaccination requirements for school attendance and more. We need to think creatively to get vaccination rates as high as possible.
Policies to deliver higher wage growth
Poll 48
Our panellists were asked
"Higher wages growth is now a top priority of the RBA in its efforts to sustain stronger economic growth. Please identify the three of these government policies you think would best help deliver higher wages growth".
Photo credit "Wes Mountain/The Conversation, CC BY-ND"
.
Measures to boost productivity growth;Measures to boost business investment;Maintaining high governm
Immigration affects both labor supply and labor demand. And arguments that immigration of the composition in Australia?s recent pre-pandemic years systematically reduces wages is contrary to the best available evidence, and basic economic theory.
Transition to electric cars
Poll 47
This month, our panellists were asked whether Australia should take action to speed the transition to electric cars.
"As part of efforts to reduce carbon emissions, Australian governments should take action to accelerate the take up, or take no action to accelerate the take up of electric cars"
Photo credit "Wes Mountain/The Conversation, CC BY-ND"
Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars
10
EVs are a classic example of where there are network externalities that hinder adoption. That is why I support subsidizing charging stations. This intervention operates directly on the network externality. In addition, removing the luxury car is a no-brainer. It's a profoundly silly tax in any case. EV adoption is about internalizing an externality, NOT about income redistribution. So subsidizing only the purchase of non-luxury EVs is misguided. Making charging points compulsory in new homes is a mistake because it effectively requires three-phase power and only a handful of houses in any street can have that without making the grid unstable.
The Federal Budget May 2021
Poll 46
"On May 11, the government delivered a budget designed, in the Treasurer's words, to 'secure Australia's economic recovery and build for the future'. What grade would you give the budget given that objective, A, B, C, D, E, F?"
Photo credit Wes Mountain/The Conversation, CC BY-ND
.
A
This budget is a watershed. It marks a shift in Libera Party fiscal philosophy away from an austerity-driven "debt and deficits" mantra to a focus on economic and employment growth. In due course there should be increased attention paid to the structure and quality of spending, but for now we should all just applaud the "Frydenberg Pivot".
Does the budget rebuild our economy and create jobs?
Poll 43
"On 6 October, the Government delivered a budget designed, in the Treasurer's words, to 'rebuild our economy and create jobs'. What grade would you give the budget given the objective? A, B, C, D, E, F"
Photo Credit: Wes Mountain/The Conversation, CC BY-ND
B
The budget largely failed to address the economic issues we had before COVID-19. The tax measures were half-hearted, there was no childcare plan, and even infrastructure spending was more-or-less "business as usual".
Top economists want JobSeeker boosted by $100+ per week and tied to wages
Poll 44
"Ahead of a decision about any permanent increase expected early next year, The Conversation and the Economic Society of Australia asked 45 of Australia’s leading economists where they thought JobSeeker should settle."
Remain indexed in line with the CPI
October Budget 2020 - preferred four programs
Poll 42
"The October budget will see the government announce additional policies to support recovery. Please nominate the four programs you think would be the most effective (for an intervention of a given size) over the next two years"
Photo Credit: Wes Mountain/The Conversation, CC BY-ND
Bring forward legislated personal income tax cuts, Corporate tax cuts, Wage subsidies or hiring bonuses (beyond JobKeeper), More funding for education and training
We need to be working on both the demand side and supply side as the virus comes under control. It would be a mistake to underspend on fiscal measures, but also a mistake not to use this moment to make our tax rates more competitive.
The legislated increases in compulsory super contributions should...
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
10
An increase in the superannuation guarantee trades current consumption (wages) for future consumption (retirement savings). Now is a very bad time to do more of that. In addition, the current system is extremely costly in terms of tax concessions but still results in around 70% of Australians retiring on the aged pension. As the Grattan Institute and others have pointed out, the "bang for the buck" of the current system is completely unclear. I favor reforming the system through having low-cost index funds (rather than high cost stock pickers) and taxing on the way out (at the marginal rate including capital gains discounts) not the way in. But absent that we should not be increasing mandatory contributions.
Government Debt during the COVID19 Crisis
Poll 40
"Governments should provide ongoing fiscal support to boost aggregate demand during the economic crisis and recovery, even if it means a substantial increase in public debt"
Photo Credit: Wes Mountain/The Conversation, CC BY-ND
Strongly agree
10
The carrying cost of long-term debt is less than 1% pa and net debt/GDP is around 20%.
Wage freeze for economic recovery
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
In current economic conditions the employment-destroying effects of a higher minimum wage outweigh the benefits to minimum wage workers have slightly more spending power.
Social Distancing Measures, May 2020
Poll 38
"The benefits to Australian society of maintaining social distancing measures sufficient to keep R<1 for COVID-19 are likely to exceed the costs"
Strongly agree
10
If R>1 then the virus grows exponentially, eventually killing tens to hundreds of thousands of Australians.