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Author's Name: Leonora Risse
Date: Tue 04 May 2021

Leonora Risse

Dr Leonora Risse

Dr Leonora Risse is a Lecturer in Economics at RMIT University, a Research Fellow with the Women and Public Policy Program at Harvard University, and a Research Fellow with the Women's Leadership Institute Australia.

She holds a PhD in Economics from the University of Queensland and has previously served as a Senior Research Economist for the Australian Government Productivity Commission.

Dr Risse is a co-founder of the Women in Economics Network (WEN) in Australia and currently serves as the National Chair of WEN. She is a member of the Central Council of the Economic Society of Australia. She is an affiliate of the Life Course Centre, the Global Labor Organization, the National Foundation for Australia Women, and Gender Equity Victoria. In 2021 she was named among Apolitical's 100 Most Influential People on Gender Policy.

Subject area expertise

Labour economics; behavioural economics; gender equality; disadvantage and wellbeing; diversity and inclusion; demographic economics; public policy

Website

https://leonorarisse.com/


Responses (13)


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

 

Equal opportunities and pay for women Industrial relations Care jobs

Equal opportunities and pay for women The fact that the issue of gender inequality has been so neglected and poorly understood by the outgoing government means there is now deep scope for changes to government policy to have a big impact. We need to invest in ways to more accurately measure the society-wide benefits that the care sector generates, in the same way that we compute the cost/benefit dividend of many other government investments such as physical infrastructure. The recurrent benefits of investing in care can then be factored into the budget and fiscal outlook. Properly measuring the economy-wide value of the care sector will then provide a mechanism to lift the wages and status of care workers. Industrial relations reform will play a role. Instilling the principle of gender equity into the objectives of the Fair Work Act will be an important mechanism for addressing the shortcomings in current wage-setting processes that perpetuate gender inequities. Broader reforms to productivity matter for fuelling economic prosperity, but we also need to re-evaluate how the benefits of productivity growth are distributed across the economy. There is no guarantee that productivity gains will translate into higher real wages for workers. As a potential policy lever, government subsidies for businesses to invest in capital and technology could be made conditional on proving that these investments are translating into higher labour productivity and flowing through to higher wages for workers. Facilitating Australia's transition to a green economy should also be high on the agenda. As well as take us a step towards tackling the destructive effects of climate change, this will open up opportunities for new high-value industries.


'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

 

Push for below-inflation wage rises in the Fair Work Commission Boost childcare subsidies Reverse recent increases in tertiary education feesMore subsidies for public transport; Wind back government spending and subsidies in construction and infrastructure (where supply is already at capacity); Temporary subsidies for essential purchases for low-income groups e.g. school uniforms;

3%

One potential way to judge what is the highest level of inflation the economy can tolerate is to consider how inflation correlates with other economic indicators. When inflation started rising above 3% (the upper bound of the existing target range) in June 2021, we saw unemployment start to drop below 4.5%, while the job vacancy rate started to climb above its long-run average, reaching 2.5%. As inflation climbed further to 5% by March 2022, unemployment dropped below 4%, while the job vacancy rate rose above 3%. Great for jobseekers but also a sign of worker shortages. So one practical way to answer this question is: what level of job vacancies would be considered dysfunctional for the economy? Anyone who's tried to catch a flight in recent months would probably attest that a job vacancy rate of over 3% is biting into our everyday functionality and productivity. At the same time, achieving an unemployment rate below 4% (and without a fall in labour force participation rates) has been significant for jobseekers. It's proven that they are employable when given the chance. If we had achieved the 2-3% inflation target range during the past 10 years, possibly we could have seen sub-4% unemployment rather than the 5%+ rate that we experienced. But then we would have needed to ensure that we had sufficient suitably-skilled workers, as well as efficient job-matching mechanisms, to fill these vacancies. The exact correlations between these economic indicators depend, of course, on various other factors, including reopening our borders to migration flows, and the extent to which working-from-home arrangements are retained, as this has been a big enabler of participation. To put a lid on inflation, we need to understand that inflation is a sign of excess demand and/or shortage in supply. It's a signal that we need to switch to more cost-effective choices, or risk running out of that product completely. Responding with broad-based subsidies (such as the petrol excise cut) can have the effect of propping up demand and paradoxically keeping prices higher than they would be otherwise. An alternative policy, in response to global fuel shortages, would have been to subsidise people to switch to public transport and more economical options. If cost of living relief is offered, it needs to be carefully targeted to lower income groups, for whom the higher costs of essential items takes up a larger fraction of their household budget. We want to avoid inflation expectations sparking a wage-price spiral, but we don't see any evidence of this happening. The ABS Producer Price Index shows the largest cost drivers for businesses are non-labour inputs like fuel, timber and freight costs, not wages. (When assessing the inflation target, we need to consider that the target is based on "average inflation over time". For the three years before the pandemic, inflation was constantly below the 2-3% target range. During the early months of the pandemic, inflation actually fell into negative territory. If we stretch out our time horizon over the past two years (June 2020 to June 2022), average inflation is 2.7%, well within the range).


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

 

.

This list is missing two big issues - childcare and aged care. These issues continue to be sidelined and deprioritised as less important than other portfolios, despite being essential to an optimally functioning economy. These areas do not fall under the category of "social support" - they need to be treated as standalone economic issues. Getting the economic settings right in our childcare and aged care systems (including wage structures and working conditions) will factor into wider economic outcomes including labour force participation and wage growth. Addressing the economic challenges of climate change and housing affordability/ accessibility and homelessness requires long-term foresight, investment and commitment at federalgovernment level. Currently market forces are not steering us towards the most economically effective, efficient and equitable directions on these issues. But government intervention also needs to be intelligently informed by thorough evidence-based economic analysis of the alternative forms of government intervention. Despite tight labour market conditions, wages growth is not yet evident. Partly this is because the conditions that have given rise to a tight labour market have come from supply-side constraints (that have pushed up production costs), moreso than booming demand (that would theoretically generate higher revenue enabling employers to pay their workers more). Wage growth requires productivity-enhancing investments on the supply side of the economy (think skills, innovation, research, digital infrastructure, dismantling barriers to workforce participation), but it also requires a system where improvements in labour productivity flow through to wages. Even before the pandemic, this productivity-wage transmission mechanism had been weakening over time, with a larger share of productivity gains being channelled towards capital owners (shareholders, investors, employers) instead of workers. This is where institutional settings, such as the role of industrial relations tribunal and mechanisms for wage determination, matter. Many economists are likely to agree tax reform is needed, for efficiency and equity purposes, and in the interest of future fiscal sustainability. But tax reform is a "tool" or mechanism, rather than an end goal in itself - each political party is going to have a different idea of what tax reform should look like. Addressing violence against women is an issue that many voters want to see dedicated action on. The Women's Budget Statement this year included a strong focus on women's safety, but total expenditure was a drop in the ocean compared to other government priorities. The budget announced a total of $2.1 billion for initiatives to support for women and girls (covering safety, health, parental leave, and all other relevant initiatives). By comparison, defence received an extra $2.3 billion, taking total defence spending to $38.2 billion. Roads received an extra $3.6 billion, taking total spending on roads to $12.3 billion.


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"

 

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190,000 is not enough

It is not possible to make a recommendation on Australia's permanent migration policy with a single number. It doesn't matter what amount we nominate - what matters is that the migration intake is accompanied by an appropriate set of well-designed and supportive policies that enable migrants to best achieve their potential. This involves providing adequate infrastructure and services as our population grows, as well as ensuring fair and inclusive economic opportunities for new migrants, in relation to education, employment, access to business opportunities and other essential services such as safe and affordable housing, and ensuring new migrants have a voice and representation in decision-making. Australia's current demographic circumstances also strongly warrant investment in migration. Australia's birth rate (1.58 babies per woman as at 2020) is well below replacement-rate levels, meaning migration is the key mechanism for replenishing the country's workforce as older generations age. https://www.abs.gov.au/statistics/people/population/births-australia/latest-release I have indicated 190,000 as a minimum, on the basis that higher population growth has the potential to foster greater economic prosperity and wellbeing for all. Migration has brought wide-ranging benefits to our country, including through innovation as well as cultural benefits. https://www.abs.gov.au/statistics/people/population/births-australia/latest-release When considering an upper limit on migration caps, keep in mind that 30% of all Australians were born overseas. For 20% of Australians, one or both of our parents were born overseas. Most of us wouldn't be here in Australia if it weren't for migration. https://www.abs.gov.au/statistics/people/population/migration-australia/latest-release Clearly any population growth policy also needs to be accompanied by well-informed resource sustainability policies, so that higher population growth and economic development does not come at a cost to our natural resources, environment and ecosystem. These dual goals are achievable if we take a holistic approach to policy design and recognise the mix of policies that are required, aiming for "inclusive" and "sustainable" economic prosperity, not just economic growth at any cost.


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"

 

Uncertain


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"

 

Agree

8


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"

 

.

3

2023


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 has made it clear that its monetary policy decisions are based on the state of economy, not the calendar. The question of when to expect the RBA to lift the cash rate is therefore a question about when we can expect to see inflation move into the 2-3% target range. And for this to be reflective of a strengthening economy, rather than due to the transitory supply shocks that we are currently experiencing. A small dose of inflation is generally considered a sign of a healthy and dynamic economy, as long as wages are keep up with price rises, to preserve consumers' purchasing power. The RBA has highlighted that it is also monitoring wage growth as the other key sign of strengthening economic conditions. It is forecasting for this to pick up over the next 6 to 12 months. The challenge for the Australian economy is that, despite high job vacancy numbers, these expansionary signs might not flow through to higher wages all that quickly, especially given the uncertainty and cost pressures that many employers are facing. Also more employers and employees are likely to negotiating non-wage factors, such as retaining flexible working-from-home arrangements, and this won't show up in wage growth data. On the question of whether the combination of fiscal and monetary policy poses are risk of over-shooting the inflation target range, we have to acknowledge that monetary policy, determined by the RBA, is a blunt instrument that influences aggregate consumption and investment activity very broadly. In contrast, fiscal settings, determined by the government, can be more targeted. To avoid prolonged inflation, fiscal policy needs to avoid stimulating demand in areas that cannot be matched by higher supply (i.e. don't keep incentivising building when there is shortage of construction supplies). Stability, integrity, and trust in our economic and governing institutions are core to a well-functioning and thriving economy. Conducting regular reviews of our economic institutions, as has been done for Central Banks in other countries, can be a healthy way of maintaining this public trust as well as assessing whether their mandates and decision-making frameworks are still fit for purpose as high-level priorities, such as climate risks, emerge or change over time. For example, as an outcome of a recent review, the European Central Bank has decided to incorporate a climate change action plan into its policy framework. The recent review of the US Fed included a focus on improving public communication strategies. The Bank of England was subject to reviews that scrutinised its handling of the GFC. In relation to Australia, I don't know enough about this issue to be able to say whether a review of the RBA is warranted, and whether there has been sufficient groundwork to justify the government commissioning a review at the present time. However I would emphasise the importance of ensuring that the issue does not become politicised and that the process of undertaking a review does not, in itself, destabilise public confidence and trust in an institution that is fundamental to the stability of the Australian economy.


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

An economy-wide price on carbon is a ?market mechanism? approach that will steer the economy towards a reduction in emissions in the most economically efficient way. This approach places the ?costs? of pollution onto the businesses that are least effective at reducing emissions. This provides the incentive for all businesses to look towards the most efficient and effective technologies that will, over time, lead to a reduction in overall emissions. It has been proven to work: https://theconversation.com/carbon-pricing-its-a-proven-way-to-reduce-emissions-but-everyones-too-scared-to-mention-it-132342 The other policy options listed here have the potential to reduce emissions but come with risks. We need to apply a critical lens to the types of technologies that the government is proposing to support, and scrutinise where is the evidence that they will lead to a reduction in emissions, and on the scale required? Direct action policies come with the risk of the government simply ?picking winners?, and backing policies that are not necessarily the most effective way to reduce emissions, but are instead influenced by business lobbying. Government support to develop and roll out emissions-reducing technologies can spur on the innovation process, but does not guarantee that businesses will be incentivised to adopt these technologies and that emissions will actually fall. The benefits of the government support might simply be privately reaped as commercial subsidies by the companies involved. Government support to develop and roll out emissions-reducing technologies (Carbon Capture and Storage (CCS)) sounds promising and has been endorsed by the World Economic Forum https://www.weforum.org/agenda/2020/12/carbon-capture-and-storage-can-help-us-beat-climate-change/ But we need to be wary about the technologies that the Australian Government is proposing to support. The Climate Council has raised concerns about the expensiveness of CCS compared to investing in renewable energy sources, and has identified that CCS could never deliver a zero-emissions solution because it doesn?t deter fossil fuel industries from continue to burn these fuels. Their emissions just get buried underground, with a non-zero change of leakage. Furthermore, the Climate Council has also reported that the processes of capturing, storing and transporting emissions involves using more fossil fuels, meaning that CCS is currently a net positive emission technology https://www.climatecouncil.org.au/resources/what-is-carbon-capture-and-storage/ Even though we have economic and scientific evidence on what works to reduce carbon emissions, policy choices and implementation will inevitably become a political issue. In the debate between ?technology vs. taxes?, a clear communication strategy is required to explain to the public how a market mechanism approach works, so that rational discussions do not get derailed by political scare tactics over ?a great big new tax?. Better levels of economic literacy among the general public would help too. Scrutiny also needs to be applied to the proven effectiveness of the technologies that the government is proposing to support. It needs to be asked: which businesses and industries in particular stand to gain from the government?s choice of which technologies to back. The suite of technologies in our economy's future needs to include not just those that reduce the carbon emissions of carbon-intensive industries, but also technologies that facilitate the use of renewable energy sources to replace dependence on fossil fuels. Market mechanisms can contribute towards this process.


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"

 

National advertising campaigns;Vaccine passports for higher-risk settings (eg. flights, restaurants, major events)

Behavioural economics shows us that the design of the decision-making environment ("choice architecture") can steer people towards choices that would be best for society overall (in this case, having a vaccination), with necessarily resorting to mandates or overt enticements like cash incentives. Lotteries and cash incentives have appeal, but can come with potential costs. For a start, an element of good public policy is that you shouldn't be paying people for something they were planning to do anyway. Secondly, lotteries and cash incentives are a popular feature of US culture, but it's not clear that this resonates well in Australian culture. Unlike in the US, we don't pay people for their blood or organ donations. Instead, we have nurtured a culture where such acts are done out of goodwill, altruism, moral duty and other intrinsic values. There is a risk that attaching a financial payoff to a vaccination will distort this sense of intrinsic value and potentially deter this innately-motivated cohort. Activating intrinsic motivation is important long-term sustainability for the vaccination program ? cash rewards will condition people to keep expecting a payment each time we need to roll out booster shots. Also the concept of lotteries is also precariously linked to the issue of gambling, and could be considered insensitive to the harm and suffering that gambling causes many Australian households. Moreover, there is weak evidence that financial incentives will change the minds of Australians who are vaccine hesitant/resistant. Research by the Melbourne Institute found that, at most, 16% of people who were currently unwilling or unsure about getting vaccinated could be swayed by a cash payment (https://findanexpert.unimelb.edu.au/news/25780-our-survey-results-show-incentives-aren't-enough-to-reach-a-80-vaccination-rate) Vaccination passports could conceivably work as an incentive as well as an information device. However, the Melbourne Institute research also found that placing social restrictions of non-vaccinated people (such as banning attendance at large events and travel) would still not be enough to sway up to 56% of those who were unwilling or unsure about getting vaccinated. There is also an equity issue here. Vaccination passports can't come into effect until all members of the community have been offered their opportunity to be fully vaccinated, otherwise we are unfairly allowing freedoms to some while denying them to others. Nevertheless, vaccination passports could have their strongest impact by setting the "social norm" - the default behaviour that is expected for a well-functioning society, which might incentivise people to shift their behaviour over time once they see this as the norm. The 'No Jab, No Play' vaccination scheme for children is an example of a successful vaccination program that has helped set childhood vaccinations as the norm. Mandatory vaccinations for high risk occupations is an important factor for consideration, but it should not be used for the purpose of boosting demand for vaccinations. If mandates are enacted, it should be for genuine public health and safety reasons. National advertising campaigns have the potential to activate intrinsic motivations, such as a patriotic spirit. However, this government's track record on advertising campaigns is not convincing (especially after the tacos and milkshakes debacle). Outsourcing the advertising mission to community groups, who have greater capacity to tailor the messaging to their particular demographic, cultural, industry or geographical cohort, is likely be more effective. Research shows that the interventions that have been found to be successful in shifting people's intrinsic attitudes and behaviours are those where the message is delivered by someone that they genuinely trust, admire, respect and relate to. A tailored advertising approach can make better use of the power of local role models, ambassadors, leaders of the local communities and social peers to convey the vaccination message in a more meaningful way across different cohorts of society. Behavioural economics tells us that, to nudge people's choices, policy needs to be designed in a way that makes it easier to opt-in, and more onerous to opt-out. Once a sufficient supply of vaccines is secured, vaccination take-up can be improved by making "opting in" the default. This means that everyone is automatically registered for a vaccination, saving people the time and effort of chasing information. While we keep hearing that "vaccinations are our ticket out of the pandemic", we must not lose sight of the other critical investments that are needed to contain the spread of the virus, namely the construction, operation and staffing of purpose-built quarantine facilities. If your tap is dripping, you don't just let it keep dripping and mop up the puddles - the more efficient solution is go to the source of the leakage and tighten the tap. Proper quarantine facilities targets the source of the virus upstream.


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"

 

.

Reforming industrial relations to support higher wage decisions by state and federal industrial rela

One key reason for low wage growth is the weakening link between productivity and wages that we have observed over time. The OECD describes this as a "decoupling" of wages from productivity (https://www.oecd.org/economy/decoupling-of-wages-from-productivity/) It is reflected in labour's decreasing share of total income over time. An increasing share of income is going to the owners of capital in the form of profits. This has been reported on by the RBA (https://www.rba.gov.au/publications/bulletin/2019/mar/the-labour-and-capital-shares-of-income-in-australia.html) It's not clear that any of the policies on this menu would adequately target this issue, but it implies that the solution is more complex than simply trying to manipulate labour demand or labour supply. It's about refining the mechanism through which workers' output is valued and imparted to them. Even though our focus here is on aggregate wage growth, our insights on gender gaps in earnings highlights the way that the society-wide value of particular jobs (healthcare, childcare, aged care, community services, cleaning) is not reflected in the wage paid to the worker. Mechanisms for improving wage growth will need to encompass a more accurate assessment of the society-wide value of a job. This is especially relevant as our workforce composition becomes increasingly oriented towards human services. It's not guaranteed that IR reforms will be able to steer improvements along these lines, but it probably has the best chance of doing so, out of all the policies on this menu. Economists generally would advocate for investment in productivity (via investment in skills, technology, innovation etc) as a driver of wage growth, but there is no point in pushing for productivity improvements if the mechanism for converting productivity improvements into wage growth is not working. The RBA has attributed labour low wage growth to excess capacity in the labour market, indicated by unemployment and under-employment. The paradox is that this excess supply of worker capability exists alongside job vacancies, which indicates that it is a job-matching, re-skilling and mobility issue. Policy attempts to boost AD won't necessarily help and could instead exacerbate skill shortages. It's shameful and disillusioning that some of the policy options suggested on this list - "Holding back growth in female and older worker labour force participation" - are outright discrimination and a contravention of UN human rights (UN Convention on the Elimination of All Forms of Discrimination against Women) and Australian legislation (Sex Discrimination Act 1984; Age Discrimination Act 2004). Proposing that migration numbers should be manipulated for the purpose of domestic wage growth is also insensitive to the rich evidence on the economic, cultural and society-wide gains of migration (https://www.pc.gov.au/inquiries/completed/migrant-intake/report).


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"

 

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Make charging points compulsory in new homes and new carparks

9

The government can play a role in incentivising the uptake of electric vehicles by reducing the relative costs for a consumer to purchase and operate an EV, relative to a non-electric vehicle. The justification for allocating public funding towards such policies would be on the grounds of public interest: encouraging the use of EVs contributes to a reduction in carbon emissions, which is for the benefit of society and wellbeing overall. However, it would not be an efficient use of public funding to subsidise consumer behaviours that are likely to occur anyway. Subsidising the EV purchases of wealthier consumers, for instance, is likely to have less payoff compared to subsidising purchases among lower- and mid-income consumers, for whom cost is likely to be an actual barrier to their capacity to opt for cleaner energy choices. Targeting support for consumers at the lower end of the income/wealth spectrum could also be regarded as an equitable approach, reflective of individual capacity to pay. This list of potential government interventions is largely focused on end-user, private household activity. There is scope for public policy to do more to incentivise a shift in behaviour among businesses and in the provision of government services, including facilitating the uptake of EV in public transport service and government vehicle fleets. There is also scope for governments to support and incentivise investments in the technological innovations, R&D and manufacturing activity that would support the development of EV infrastructure, such as global battery supply chains, which the World Economic Forum has identified as a critical component of the global shift towards cleaner energies.


The Federal Budget May 2021

Poll 46

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

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

 

.

C

The budget fulfils the need to spend big as the way to keep the economy on the road to recovery. Where there is scope for improvement is in terms of how this money is spent. The government is mainly relying on conventional sources of growth (eg. physical infrastructure and manufacturing) and could do more to adopt a more strategic, forward-thinking approach, better tailored to the pandemic environment. Building a strong, inclusive, sustainable economic future for Australia requires more attention on long-run drivers of growth: (1) investment in the university sector as generator of productivity-enhancing skills, knowledge and research (2) incentives for R&D and innovation across all industries (3) investment in the workforce capabilities, resourcing, and wages and working conditions of high-need, high-growth sectors (eg. aged care, mental health services)4) strategies to combat the fact that closed borders have currently turned the tap off two key sources of economic growth ? migration and export-oriented services. (4) strategies to combat the fact that closed borders have currently turned the tap off two key sources of economic growth ? migration and export-oriented services $17.7 billion for aged care is aimed at lifting the quality of a sub-standard system. While a critical mission in its own right, the budget misses the opportunity to transform the aged care sector into a driver of growth. Along with childcare, disability care and mental health services, investments in care infrastructure facilitate stronger workforce involvement and the more efficient use of skills among those who currently give their time towards unpaid care (predominantly women). Plus these are labour-intensive industries which - with adequate resourcing - generate jobs. A more comprehensive budget response would make stronger provisions for not just expanding places, but also supporting the workforces responsible for delivering these care services. Modelling commissioned by the National Foundation for Australian Women quantifies the clear growth dividend, and shows that this form of public investment (which includes lifting the wages of care workers) largely pays for itself by activating higher workforce participation and hence tax revenue (See: https://nfaw.org/wp-content/uploads/2020/10/Appendix-A.pdf). Assessment by the Grattan Institute suggests that the 33,800 aged care training places earmarked in the budget is in sufficient to secure a pipeline of qualified staff (See: https://theconversation.com/budget-package-doesnt-guarantee-aged-care-residents-will-get-better-care-160611). Similarly, while the budget trims the cost of childcare for some families, it does not contribute to expanding the childcare workforce's capacity to respond to this higher demand. Federal leadership is missing in construction of quarantine stations to host returning citizens, skilled migrants, international students, business travellers, and others whose contributions matter for long-term economic growth, as well as enabling Australians to reconnect with family members as a matter of wellbeing. Besides generating jobs, this seemingly essential component of our plan towards economic recovery - and re-integration with the global economy - was a missed opportunity.