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Author's Name: Michael Keane
Date: Tue 04 May 2021

Michael Keane

Professor Michael Keane

Michael Keane is a Professor of Economics and ARC Laureate Fellow at the University of New South Wales. He previously held positions as Nuffield Professor of Economics at Oxford, and as Professor of Economics at Minnesota, NYU, Yale, ASU and UTS. His areas of research include labour economics, econometrics, consumer choice behaviour and health economics. He is a Fellow of the Econometric Society, a winner of both the Australian Federation and Laureate Fellowships, and a Fellow of the Academy of Social Sciences in Australia. He is a recipient of the John Little, Kenneth Arrow and Dennis Aigner Awards, a Fellow of the Journal of Econometrics, and a Fellow of the Society of Labor Economists. He is also the Australasian representative on the governing Council of the Econometric Society.
Keane has published over 100 articles in leading journals in economics and marketing. He is best known for: (i) the development of simulation methods that helped make it feasible to estimate discrete choice models with many alternatives, (ii) contributions to the theory and application of dynamic life-cycle models of labour supply, especially work that extended such models to incorporate education choices, occupational choices, and other important life-cycle decisions, and (iii) the development of dynamic learning models of consumer behavior that help to explain brand equity.


Responses (11)


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 not enough


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"

 

Disagree


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

5


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"

 

.

5

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

5

If it ain't broke, don't fix it.


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"

 

Government support to develop and roll out emissions-reducing technologies

Agree

A carbon price or tax is the most efficient way to encourage emissions-reducing technologies, as it would encourage development of such technologies by the free market. This is preferable to letting the government decide which technologies to invest in, or which emission reduction projects to support via "direct action" policies. It seems odd that a liberal government that claims to be market oriented prefers the "direct action" subsidy scheme over simply setting a carbon price and letting the market work, but that decision is based on politics rather than economics.


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"

 

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

Labour has called for a $300 cash payment to everyone who gets vaccinated by December 1st. Lotteries that only the vaccinated can participate in are another type of cash incentive. It seems a bit premature to conclude that lack of take-up of vaccination is a major problem when in fact the lack of supply has been (and remains) the real problem. The idea that we need to offer incentives to achieve a high vaccination rate is based on the unknown hypothetical that once adequate supply is available a substantial number of people will resist getting vaccinated. If it is true that a substantial number of people do not want vaccination, I am not aware of any empirical evidence showing that cash incentives would induce them. Perhaps most of those people have very strong feelings on the matter, so that a cash incentive would have minimal effect. There is no way to know this a priori (and economists certainly have no special insight into this question). Obviously we ought to run a simple discrete choice experiment to test how effective cash incentives might be before implementing any such policy.


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 increase the use of enterprise bargaining;Reforming industrial rel

Wages have lagged behind productivity growth for a decade in Australia, and in some OECD countries (like the US) they have lagged behind productivity growth for several decades. So policies to enhance productivity growth will not address the core issue. The key problem appears to be a declining labour share of national income (and an increasing capital or corporate share). This is most plausibly attributable to declining labour bargaining power. That is why reforms to increase the bargaining power of labour are the only policies amongst the listed options that might help wages keep pace with productivity growth. Other policies might help as well. The flip side of policies to enhance bargaining power of labour are policies to reduce the bargaining power and tax avoidance scope of corporations. And of course productivity growth is a prerequisite for wage growth (and the most effective thing the government can do on that front is to work on improving the education system). Also, sophisticated modeling by researchers at the ARC Centre of Excellence in Population Ageing Research (CEPAR) predicts that the increase in the superannuation guarantee will lead to higher effective wage rates for labour (in contrast to the overly simplistic Econ 101-style analysis we heard from many economists during the debate on this issue). Finally, the idea that population growth and increased labour supply are what is constraining wage growth is so naive as to not really be worthy of comment. For instance, wage growth was robust in the post-WWII era despite a booming population and a high rate of immigration.


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 public charging points for electric cars

8

As a general rule, the government shouldn't be in the business of subsidising particular final products. The proper role for government is to help provide the necessary infrastructure to support electric vehicles. At the same time, there ought to be higher taxes on greenhouse gas emissions (carbon, nitrous oxide, methane), as well as on air pollutants (carbon monoxide, nitrogen oxides, particulate matter, etc.). Such taxes would increase the cost of operating traditional vehicles. They would also raise government revenue, which could be used to fund other useful projects or to reduce income taxes.


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 is pretty good as far as it goes. It is nice to see the government is not obsessed with deficits in the current climate. And the significant additional resources for Aged Care, the NDIS and mental health are welcome. But the level of additional resources devoted to infrastructure is very disappointing: $15 billion over 10 years is not at all commensurate with current needs. And the vast bulk of the money goes to traditional road and rail projects, with very little allocated to such urgent needs as renewable energy, climate change adaptation, environmental sustainability, water resources, etc. This shows a real lack of ambition, which is why I give it a C (although I wish I had the option of B- or C+).