Author's Name: Alison Preston Date: Tue 04 May 2021 |
Alison Preston
Alison Preston
Professor, BA (Hons) Strath., MBA Curtin, PhD W.Aust.
Alison joined UWA in 2013 as a Winthrop Professor of Economics in the UWA Business School. Her research interests are in gendered aspects of employment, pension savings and financial literacy. She teaches in the areas of micro-economics and public policy.
She’s a member of UWA’s Academic Board, an Associated Editor of the Economic Record, a member of the Industrial Relations editorial board, Vice-President of the WA Branch of the Economic Society of Australia and a member of the National Economic Panel. During her professional career she has held many senior leadership roles including as Deputy Dean of the UWA Faculty of Business, Director of the Curtin Graduate School of Business, Deputy Chair of Academic Board (at Curtin University). She has also served on numerous advisory bodies including the Committee for the Economic Development of Australia (CEDA), consulted for various industry bodies and held visiting appointments at the ILO in Geneva.
Responses (18)
Trump's impact on the Australian Economy
Poll 66
Top economists say Trump’s policies will hit Australian economic growth and push up inflation and interest rates in the US.
.
Commentary suggests that a Trump presidency may, over the next four years, see stronger US economic growth and higher US inflation underpinned by numerous changes that, if enacted, will boost aggregate demand. Inflationary pressures may also arise stem from likely skills shortages, particularly related to the termination of work permits for illegal migrants and policies designed to send women back into the home. The Trump reforms can be expected to have a chilling and harmful effect?on diversity, equity, inclusion and economic growth. Trump?s misogyny and disrespect for women will see the clock wound back on women?s rights and violence against women can be expected to increase. The setback will be immense and will have considerable flow-on effects, affecting decisions from fertility through to education and work. Women are a significant part of the labour market and women?s empowerment is important for economic development. The concerning part is that the changes that will eventuate in the USA will not be confined to the USA. Initiatives designed to hurt China will hurt Australia. Initiatives that hurt American women will hurt women globally. The Andrew Tates and Joe Rogans will feel empowered and their extremist, homophobic, misogynist and racist views will spread to more and more young men. Trump?s backward policies should be a concern for us all. It is hard to say what the economic cost of the retrograde policies concerning women will be, but it is safe to assume that they will be in the billions.
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”.
The crisis is being driven by problems on the supply side. Interventions that affect the demand side (such as allowing the early withdrawal of super) are not going to assist and may exacerbate the situation. Given the large share of the population that is now priced out of the market (possibly forever) the focus has to be on public housing – not just for the sake of affordable rent but also long-term family stability (which is, in turn, important for social networks, children schooling etc.).
Rental Affordability
Provide more public housing, Fast-track immigration of home-builders, Ease planning restrictions
Budget 2024
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 The RBA has a 2%-3% target band for the annual consumer price inflation. In 2022-23 the consumer price index to the June quarter climbed 6.0% The 2023-24 forecast is for 3.5%, falling to 2.75% by June 2025. The Government is banking on its energy bill relief and Commonwealth Rent Assistance and a softening labour market to achieve these forecasts. There are, however, a number of inflationary dimensions to this budget including the tax cuts and it is not clear that inflation expectations are yet anchored in the 2-3% band. My prediction is inflation will continue to ease, but not as quickly as predicted.
B
The budget has received a mixed reception. It includes support for low-income families as well as funding to improve women?s health and safety, funding to pay superannuation on publicly funded paid parental leave, and funding to support higher wages for aged care and childcare workers. Other welcomed announcements are the ?prac payments? payments for students doing mandatory placements in fields such as teaching and nursing and a decision to reduce the indexation of student debts ? although some may argue that the latter does not go far enough. The budget is also big on vision with $22.7bn to be invested over the next decade to create a ?Future Made in Australia? with the bulk of the funding earmarked for the manufacturing of clean energy technologies, renewable hydrogen, refining, and the processing of critical minerals. On the downside, the budget initiatives in concert with tax cuts risk stoking inflation and also point to structural deficits going forward. Future governments will have to deal with this fiscal imbalance ? meaning some hard policy decisions will be required. Wealth tax? Inheritance tax? Higher GST?
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%.
better targeting immigration, creating more incentives for business R&D, improving the quality of primary and secondary education
3
I've suggested 3% - but who really knows. The NAIRU (non-accelerating inflation rate of unemployment) can't be calculated and the relationship between unemployment and wage growth (and thus inflation) has changed in recent years. The majority of workers no longer have the power to bargain for higher wages, even in a tight labour market. This brings into question the relevance of the NAIRU when the RBA is making its determinations.
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: A - Keeping inflationary pressures in check: C
A
OVERALL COMMENTS: The treasurer, understandably, is required to consider both the economic context as well as the political context. I?ve rated it as an A based on this consideration (?A-? actually). ??It is, arguably, an inflationary budget but predictions are that the economy may soon be heading into a recession. The concern is that we don?t end up with stagflation. Overall it was a good budget for women ? but it could have been better. I think the losers in this budget were young people and young women in particular. Ballooning student debt in the Higher Education Loan Program (HELP) is a ticking time-bomb. Just over 60% of all those with an outstanding debt are women. The debt is indexed to inflation. In June 2023 it will be indexed by 7.1%, taking the overall debt from around $74.4 billion to around $80 billion. We are presently in the midst of a skills shortage (especially in female-dominated areas such as teaching and nursing) and are actively recruiting from overseas ? often from countries where education is free (such as Scotland). Meanwhile we have a system that is increasingly going to deter investments in tertiary study ?especially postgraduate study. This will be a drag on future productivity growth. Future budgets need to have young people in their sights.
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: Increase resource taxes Introduce inheritance taxes Wind back superannuation tax concessions Equity picks: Increase resource taxes Wind back superannuation tax concessions Introduce inheritance taxes
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 Equal opportunities and pay for women Care jobs
Care jobs The last few decades has seen considerable change in the composition of the labour market. Since 2000 there has been a marked decline in manufacturing and a market increase in employment within the Health Care and Social Assistance sector. The latter is now the largest in terms of employment numbers. Women account for nearly 80% of the Health Care and Social Assistance workforce. Their employment conditions (job quality, working hour arrangements and wages) require urgent attention if labour is to be attracted and retained in this sector. The Work + Family Policy Roundtable (W+FPR) proposes numerous measures that would materially deliver better outcomes for Australians. Examples include . improving working time security . improving wages . minimising the need for multiple jobholding . extending the current parental leave scheme to 26 weeks with incentives for partners to share in caring, properly fund quality care . setting, monitoring and regulating employment standards of service providers . ensuring decent wages and career pathways . progressing equal pay and ensuring women?s contributions in care jobs are properly valued . eschewing any requirement of comparisons of feminised and masculinised work
'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 Increase income taxes with revenue used to reduce cost of services Increase immigration Reserve a portion of gas and other commodities for domestic use Super profits tax on fossil fuel producers with revenue used to reduce cost of services
2.5%
Within macroeconomics there is some debate as to whether inflation targeting should be pursued or not. Rightly or wrongly Australia has pursued an inflation target (underlying inflation target of 2%-3% over the longer-term). The importance of the inflation target is that it helps anchor price expectations and anchoring price or inflation expectations is key to managing inflation. Temporary (short-term) changes in inflation expectations can be managed. The problem arises when the expectations become unanchored with the risk of wage-price spirals. We are told that the current inflationary pressures are largely being driven by factors such as breaks in the supply chains in some sectors and energy and food prices as a result of the Ukraine war. The expectation is that these price pressures may peter out over the next year. For the meantime there is therefore a strong argument to try to hold to present long-term underlying inflation anchor or expectation band of 2-3%. There is no question that the current situation is complex. The government needs to also step up and do its part in helping address the inflation problem. This means not overly relying on monetary policy. It means recognising that fiscal policy also has a part to play in stabilising the economy and inflation. As part of this they should reverse the planned income tax cuts as they will only add fuel to the fire. Money saved needs to be invested in social programs and priority needs to be given to reducing the rising inequality in Australia.
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
.
Rising inequality is already a serious problem in Australia and without interventions to address slow wage growth at bottom end of the labour market, the growth of insecure and precarious jobs and the gender wage gap inequality will continue to be a problem. Inequality hurts the economy, undermines skills development and economic opportunity and contributes to other problems presently observed in Australia (e.g. housing affordability, inadequate resources in the care sector etc.)
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
There is an established literature showing that migration has a positive effect on economic growth. The risks of not returning the target to 190,000 per year is constrained economic growth as a result of skill shortages and shortages of workers in key areas such as nursing; the risks of more than190,000 year are further pressure on housing costs and on existing infrastructure.
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"
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"
.
10
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
7
There are concerns that inflation may be running high but a commonly held view (e.g. IMF) is that it is temporary and that it is under control. What is unclear in Australia is how the Stage 3 tax cuts (due to kick in July 2024) will affect demand and inflationary pressures and what might happen to prices in response to climate policy. That said, I still have confidence in the Reserve Bank?s ability to keep inflation under control. Do I think there is a need for an independent review of the RBA? Based on the commentary of some former RBA Board members (such as Prof. Warwick McKibbin) it would seem that there is a case for an independent review of the structure and the role of the RBA Board. McKibbin, for example, advocates that the Secretary of the Treasury should not have a voting role on the RBA Board to avoid conflicts of interest.
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);National advertising campaigns
Not in favour of cash / prize incentives. The majority will 'do the right thing' and get vaccinated and, as we keep hearing, the likelihood is we will need boosters which, if we go down the cash incentive path may see this turn out to be a costly and unnecessary policy. I do favour mandatory vaccination for 'higher risk' occupations, although, of course, it will come down to what we mean by 'higher risk'.
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;Reforming industrial relations to increase the use of enterpri
Slow wage growth in recent decades fundamentally relates to changes in bargaining arrangements, insecure employment arrangements and to reforms that have circumscribed the bargaining power of trade unions. State and federal industrial relations commission currently have the capacity to make higher minimum wage determinations should they wish. A policy option not in the list presented would be for governments (federal and state) to agree to faster wage growth for public sector employees.
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, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks
6
The auto industry recognises that its future is in electric and has begun the transition to meet emission standards in Europe, China etc. Demand for electric vehicles (EVs) in Australia is low, hampered by taxes, cost, charging infrastructure, range anxiety, a lack of understanding as to what EVs offer and concerns about the environmental costs associated with batteries, scrapping etc. Meanwhile demand for new petrol/diesel cars grows, driven by generous government subsidies in the last budget. If we wish to see more EVs on the road and less conventional cars then policy settings will need to change and a specific vision/strategy enunciated.
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 2021 Commonwealth budget is low on vision and does little to nothing to address current and future concerns such as climate change and social infrastructure. Increased financial support for the care-economy is an important start but ?building for the future? requires government also pay attention to the needs of the care workforce (wages, hours, employment security). The care economy is highly feminised and is struggling to attract and retain workers. Why? Working arrangements which are unappealing and relatively low pay. The government missed an opportunity to provide important leadership in this area (eg. funding to help raise wages).