Margaret McKenzie

Poll 66

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

Weaker US economic growth; Stronger Chinese economic growth; Stronger Australian economic growth; Higher US inflation; Higher US interest rates; Lower company tax rates worldwide; Slower progress towards global net zero emissions

Raising US tariffs, especially on China is one of the most likely policies to be implemented. For a mature economy like the US, this will damage US trade and promote US inflation, especially given the level of Chinese ownership of capital and infrastructure in the US. The Australian economy is likely to benefit through increased markets for its trade including China and Europe, and also through higher prices for its exports, insofar as US tariffs change the world price. Hopefully, Australia will increase its links with China and the Asian and European regions and move away from its obsequious and damaging relationship with the US.

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 biggest problem is the slow growth of wages. We need tighter regulation of the quality and duration of rentals in line with the way many European countries and states regulate rents. This includes green requirements for residential construction and rentals with government funding towards the improvements. We need to get rid of the tax advantages for property investors including capital gains tax discounts and negative gearing, gift and inheritance tax exemptions. This will also assist with putting property on the market and bringing prices down. Above all, we need public housing provision across socioeconomic areas and profiles including construction and purchase to bring it back to at least previous levels and de ghettoise it. We need expansion of public training in all trades, for construction. All of this is doable. So far the political will is the issue. Immigration helps encourage both supply and demand.

Home affordability

Provide more public housing, Fast-track training of home builders, Tighten the negative gearing and capital gains tax concessions

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/

YES I think inflation will continue to fall in accordance with its current trend.

D

This is a disappointingly timid budget given that the same party is in office federally and in almost all states and territories. It offers small measures including increased pay for childcare workers and a minor adjustment to student debt. But it has left out many measures that are standard in other countries, among them free childcare, school, higher education and health care, and half-decent welfare payments. The $27 billion over several years devoted to Future Made in Australia is also piecemeal, worth a couple of new freeway sections. What is needed is a big push that integrates research and development, innovation and application in a context where the risk and reward are publicly borne. This can be done by fully funding the CSIRO and universities for research, and integrating what they do into the industry transition as is done in other countries, including the electric car industry. Why worry about budget deficits and surpluses that are worth such a small proportion of the budget and are evidently challenging to forecast? The large deficit after COVID failed to eventuate. It is a mystery that deficits are even forecast over the next few years, tax cuts notwithstanding. Inflation is actually pretty low in the scheme of things and is an outcome of trade and supply chain issues, affecting those on lower incomes the most. The central issue of housing affordability also needs vision and was at least given its own section in the budget.

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?"

NO - The distribution arrangements set up by the Howard government with the introduction of the GST are yet another aspect of a dysfunctional tax system that appears to be politically intractable in Australia, even with Labor governments in almost every jurisdiction. Centrally-collected GST revenue should be distributed to states according to their spending responsibilities under social needs and priorities established at the national level. Deals such as the deal with WA destabilise this. Underlying the current tax issues including GST is the cosy arrangement whereby the mining companies pay less in tax and royalties than in comparable resource-extracting countries. This leaves the burden of taxation disproportionately on PAYG workers and GST instead of big resource companies and other wealth owners paying their way in tax. States are being forced to find more ways to fund their own spending including iniquitous fund-matching programs with the Commonwealth.

Scrapped

Full equalisation is better than nothing. But it is a second best in Australia's deeply flawed and inequitable tax system. The distribution of GST revenue amongst states should not be dependent on resource price fluctuations in which the extractive states can bargain at the expense of poorer people. Australia is a low taxing country overall and it's probably time for another Henry-type tax review. The slight change to Stage 3 tax cuts is a bandaid. The absence of climate in the tax system since the removal of the carbon tax will worsen the distributional issues in the long run. The withdrawal of the state from public provision generally has made it harder to implement decent reform on both sides of the budget.

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)"

To support homegrown emerging green technologies

Subsidise firms in the same industries that are receiving support in the US, such as battery manufac

Australia has a comparative advantage in developing and providing renewables and energy saving across the economy which is not being sufficiently exploited. The government actually needs to recognise this and participate directly in those industries to ensure the benefits go to Australian industry and the Australian public. The government needs to play a role in every stage of renewables supply chain. An additional benefit would be the limiting of rentseeking and a cheaper or even costless supply of renewables that will also reduce inflation. It will also support employment.

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 investment in large battery storage | Phase out non-electric vehicles
Introduce an economy-wide cap and trade carbon price

We need to take advantage at last of Australia?s comparative advantage. The government should undertake a massive green energy and industry push. This should include full support for substitution into renewable energy and a green car industry to replace the old one which never should have been closed down. Get out of coal and gas. That renewables are cheaper will be revealed. This is urgent.

Poll 60

Australia’s leading economists believe Australia can sustain an unemployment rate as low as 3.75% – much lower than the latest Reserve Bank estimate of 4.25% and the Treasury’s latest estimate of 4.5%.

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

2

I do not necessarily regard the NAIRU as an approach to setting policy. The trade off between inflation and unemployment is by no means supported by the evidence, including times of zero interest rates when inflation kept falling. They cannot just keep saying the position or slope of the NAIRU keeps shifting. It is a paradigm that I suspect will be superseded fairly abruptly as has happened in the past. Many of the options above are likely to increase unemployment and possibly do nothing for or worsen inflation. A provision of public services including education and childcare at no charge would be the best strategy for reducing inflation, as when free childcare reduced cpi by half during the pandemic.

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: B

C

OVERALL COMMENTS: A timid budget for a government which has support in almost all states. Little relief on some very obvious fronts including for the bottom quintile, with little for those on JobSeeker, and so called mutual obligations still in place. Small CRA increases. It remains to be seen what happens to taper rates for marginal tax rates with the increased welfare payments. Nothing toward reform of university funding, although they are in complete crisis, or for student fees and debt. Not getting rid of activity test for childcare, although this might be potentially done off budget. Almost nothing on large subsidies for private sector services in health and education. Teensy resource sector tax increases which are shown up by the support from that sector for the RRT measures. At the same time I recognise that some budget measures are targeted at existing opportunities for rorting set up by the previous government. When these habe become so entrenched they become quite difficult to dislodge, especially those concerning outsourcing. The NDIS is a case in point and I think they're trying. 'Repair' is unnecessary with the current surplus, and anyway, built-in stabilisers should continue to operate as they have in COVID. Even though the Stage 3 tax cuts might hopefully be abandoned, they show up in the future deficits forecast. While the repair measures are not nothing, the budget could have done more. INFLATION COMMENTS: It is hard for me to rate in inflationary terms, as I don't think the budget necessarily drives inflation which is coming from overseas through supply chains, wars and trade policy impacting on resource prices etc, and the impact of climate change. The budget could have been much more assertive in promoting productivity and improving spending in the bottom two quintiles,which would also counter inflation.

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

.

Regulate retail prices of electricity

?? The regulation of domestic energy prices is proposed as an initial strategy. At the moment the higher international energy prices from the boycott of Russia have benefitted Australia's exports but made Australia's domestic consumers suffer in a Dutch disease scenario. A return to public ownership is needed as is shown in the rent-seeking available in the energy almost natural monopolies over decades. The option to reinvent the wheel should not be ignored. This would promote a coherent and climate-sensitive innovation and investment strategy which has been missing over the last few decades. It will support the transition to what are being shown to be cheaper renewable sources and their utilization. It would allow something like the far superior public accumulation model of Norway, with social priorities first and foremost.

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

Rebuilding domestic manufacturing capability Care jobs Industrial relations

Care jobs Outsourced jobs including care jobs must be brought back into the public sector, and into direct employment. There is no real reason for outsourcing except suppression of wages and conditions. It results in clear declines in quality of service which are exacerbated in areas of market failure, and which regulation cannot really address. This will also stop the haemorrhage of tax revenue into excess private profits which are not even being reinvested in productive capital. The disastrous ?experiment? of outsourcing which has seen higher rates of job insecurity and casual work than in comparable countries and falls in real wages, needs to be ended. Industrial relations reforms to assist this are vital, as is an innovative climate sensitive industry policy supported by publicly funded universities and the CSIRO.

Poll 55

Australia’s top economists are divided about how to tackle ballooning inflation of 6.1% that’s forecast to climb to a three-decade high of 7.75% by the end of the year.

Wes Mountain/The Conversation, CC BY-ND

Increase income taxes with revenue used to reduce cost of services Boost childcare subsidies Super profits tax on fossil fuel producers with revenue used to reduce cost of services Investigate supply chain shortages including those in international trade and offer diplomatic and industry support to reduce themupport to move to renewables as rapidly as possible

10%

Keeping wages down and suppressing demand should not be the solution as they were not the cause of inflation, which is supply side induced mainly through supply chain shortages and energy price increases. Therefore inflation should be addressed through fixing those, including trade bottlenecks especially with China, and support for local production. We know from the 1970s that people suffer more from increased unemployment than they do from increased inflation, when they occur at the same time. Making public health, childcare and education and other public services free would assist with that. Some fixes are only longer term ones.

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 not enough

We need an open and nondiscriminatory migrant and refugee intake. The government needs to plan in detail all the aspects of policy which are needed to support that intake which will serve to enrich the Australian economy and society.

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

Paid vaccination leave for all workers, especially for casual workers is an essential measure, because worry about losing pay is a major barrier to getting vaccinated. Unions have won this right in workplaces covering 1.6 million workers, but we now need to include it in the National Employment Standards to cover all workers. A dramatically scaled-up national education campaign and other forms of employer support such as onsite vaccinations are also important.

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"

.

Maintaining high government spending in order to boost aggregate demand;Reforming industrial relatio

There is plenty of evidence that tax cuts don't work to raise wages or stimulate activity particularly in an equitable way. We need to remove the overly prescriptive rules associated with bargaining and provide access to industry bargaining so that workers have some real and not hypothetical capacity to negotiate wage increases.