Scott Morrison is on record as saying that no programs or services will be cut to pay for the tax cuts. The evidence, however, suggests that real government outlays will decline on a per capita basis, which would seem to mean that services will contract. (more…)
In previous articles I argued that Stage 3 of the Government’s proposed tax cuts should be opposed (see Pearls & Irritations, 30 May and 24 June). However, the Government appears to have the numbers to pass its proposed tax cuts as one package, with or without the support of the Labor Party. Nevertheless, the Grattan Institute in a report released on 30 June provide additional evidence as to why “the Stage 3 tax cuts should wait”. Grattan’s and my concern is that Australia will eventually find that these tax cuts cannot be afforded, and that the best alternative will be to reverse them at a later date. (more…)
Spatial inequality has risen dramatically over Australia in the last forty years, and our cities are in many ways becoming less liveable. This article draws on the recent CSIRO report on the Australian National Outlook to summarise the major policy shift that is required affecting urban development to enable well-connected, affordable cities that offer more equal access to jobs, lifestyle amenities, education and other services.
A very significant new report was released last week on the Australian National Outlook. In this article, I summarise the report’s discussion of the key challenges and policy choices that Australia faces, which will affect our future over the next fifty years. (more…)
Last Saturday the Sydney Morning Herald (SMH) published an article, which purported to show that “Middle and high-income earners will face some of the highest tax rates in the English-speaking developed world unless the Morrison government’s $158 billion tax plan is passed in full when the Parliament returns next month”. Unfortunately, I consider this article to be so misleading that it reminds me of the Mark Twain quote: “There are lies, damned lies and statistics”. (more…)
Returning the Budget to surplus has been an article of faith in most Australian political dialogue for the last decade. However, with stagnant economic growth and the Government’s proposed tax cuts, there is a real risk that Budget surpluses cannot be sustained. On the other hand, some people who are concerned that more public spending is needed to maintain services, have argued that these can be deficit funded. Instead this article argues that in the long run Australia will need to augment its taxation revenue if it wants to maintain the public expenditure required to achieve reasonable economic growth and welfare. (more…)
Labor should oppose the second and third round of the Government’s proposed tax cuts which only take effect after the next election. The future is too uncertain to lock-in these tax cuts now. Furthermore, reasonable projections raise strong doubts whether they can be afforded, and they do not represent the best way to increase economic growth. (more…)
Labor went into the recent election with a comprehensive economic plan. Many commentators have blamed Labor’s election loss on this plan, and its support for modest redistribution, thus raising the question of where does Labor go from here?…Labor needs to sell the message that redistribution is essential to sustain economic growth. (more…)
The Morrison Government has been returned – and it is the Morrison Government – which has been returned without the semblance of an economic policy. And this lack of a credible economic policy did not stop Morrison winning an election in which the economy appears to have been the deciding issue. (more…)
In a previous article (posted yesterday) I compared the Coalition and Labor fiscal plans. The credibility of these plans, as well as their value, depends significantly on whether the underlying economic parameters upon which the plans are based are sound, and equally how those plans will impact on economic activity and growth. These issues are discussed further below in the second part of this series comparing the two Parties fiscal plans. (more…)
The two major issues in this election are climate change and the economy and cost of living pressures. In both cases the two major parties are offering very different strategies.
In these two articles I will focus on the economic choice being offered to voters. In this article, I will compare the two Parties’ fiscal plans, and in a second part to be posted tomorrow I will comment on the likely economic impacts of these respective plans. (more…)
The Budget is the most comprehensive statement of a government’s priorities. It is the Budget that tells us specifically where the government intends to spend and how it intends to pay for that expenditure.
In this article, I will seek to compare the Government and the Oppositions policies for taxing and spending, relying principally on last week’s Budget and the Opposition’s reply. (more…)
The Budget provides the opportunity for the Government and the Opposition to outline their respective economic strategies and their relative priorities. Interestingly, while there are significant differences between the two major political parties, there are also important similarities; probably reflecting the economic constraints which both parties have had to work within. (more…)
As usual the state of the economy and its management are likely to play a central role in the forthcoming election. With the election now only six weeks away and the Budget tomorrow, it is timely to consider the true state of the economy and its management. (more…)
The poor performance of the Australian economy, as further revealed in last week’s release of the National Accounts, raises questions about the longer-term economic outlook and whether the conventional diagnosis of our major economic challenges is correct. Notwithstanding resistance from the Government and some business interests, most economists believe that increased wage growth is essential. However, there is much less agreement about how and when that might occur. (more…)
This article examines the claims that people with relatively modest incomes will be hard hit by Labor’s proposal to stop cash rebates of dividend franking credits to people whose taxable income is insufficient to make full use of those franking credits. Instead, this examination of the evidence shows that these claims are almost totally exaggerated. (more…)
Prime Minister Morrison and Minister Dutton have launched a scare campaign over the Medivac Bill, alleging that 1000 refugees will arrive in Australia from Manus and Nauru in a matter of weeks, which will in turn start the boats coming again. In an effort to gain some credibility for this claim, the Government has cited the Security Agencies in support.
In this article I consider the capacity of the Security Agencies to make such judgements, and their professionalism in allowing themselves to be used in this way. (more…)
Home ownership has become much less affordable. It is a major source of inequality both between generations and within generations. Housing cannot become more affordable without bringing down house prices relative to incomes. Labor’s tax proposals are intended to do just this. But is this the right time? House prices are allegedly falling already, and will further price reductions undermine the economy? (more…)
This week the Prime Minister promised to return the Budget to surplus, massively reduce net government debt, and create 1.25 million jobs over the next five years. However, there was no attempt to substantiate these promises, nor to argue that the promises were a logical outcome of his so-called Economic Plan. Indeed, apart from alleging he had a Plan, no further detail was provided. Accordingly, in this article I consider whether we can we believe the Government’s promises for jobs and future budget surpluses. (more…)
Inequality has risen in most of the advanced economies, including Australia. It is damaging both the fabric of our society and economic growth. The Government appears to acknowledge that it should pursue equality of opportunity, but not outcomes. However, the Government has done little that would improve the equality of opportunity, especially relative to the magnitude of this challenge today and in the future. (more…)
Yesterday in Part 1 of this article I discussed some of the possible explanations for the apparent loss of government capacity in most advanced democracies. Today in this second Part I will discuss some of the solutions that have been proposed to restore government capacity. This discussion has been influenced in part by Laura Tingle’s excellent Quarterly Essay, “Follow the Leader: Democracy and the Rise of the Strongman”, and by some of the responses to that Essay.
At the start of a New Year, a year when Australia will have to elect a new government, it seems a good time to consider the future outlook for our system of democratic government. Overall there is a sense that citizens in many of the advanced democracies have lost confidence in the capacity of their governments to deliver.
Many explanations for this loss of government capacity have been offered, and in this article, I will discuss what I consider to be the most important explanations as a contribution to the continuing debate about what is wrong with our system of government. In a second follow-up article, tomorrow, I will discuss some of the proposed options to improve our system of government, even if returning to the alleged glory days of the past might be a bit of a stretch.
The ABC says that their decision to withdraw Emma Alberici’s article was because it represented an opinion for which there is allegedly no evidence. In fact there is plenty of evidence that increasing corporate profits will not lead to any increase in investment or employment and wages if aggregate demand continues to remain weak. Furthermore this evidence has been endorsed by the IMF, the OECD and others. Can the ABC cite anyone or provide evidence to the contrary, other than the ramblings of Scott Morrison and the Business Council? (more…)
As widely heralded by the Government in advance, the mid-year update of the economic and fiscal outlook shows an improvement in the budget balance. A larger surplus is forecast, starting in the next financial year and increasing thereafter. Whether this reflects good management, as the Government would have us believe, is a moot point. Equally, if the Government wants to maintain that forecast surplus, it is doubtful that there is much, if any, scope for new policy initiatives in the run-up to the election that would lower taxes or increase expenditure. (more…)
On Monday the Government will release the mid-year update of its economic and fiscal outlook. The Government hopes that the announcement of a return to budget surplus in 2019 will underpin its claims as an economic manager in the run-up to the May election. Clearly, however, that projected surplus will depend upon the assumptions employed, and it is contended here, and in advance, that we should be very suspicious of the most critical element in the government forecasts – the wage forecast. (more…)
Given the lack of agreement about what are our key problems we shouldn’t be surprised that ‘economic reform’ is presently in the doldrums. But progress would be easier if the business community recognised that the old agenda to improve the flexibility and competitiveness of markets is now largely complete. Instead I argue that the new agenda should focus on reducing inequality by increasing education and skills. Furthermore, this will also help foster innovation by increasing the ability of the workforce to adopt and adapt to technological change. (more…)
Traditionally economists have tended to ignore distributional issues. These issues were considered to rest on value judgements, and to therefore be outside the purview of orthodox neo-classical economics. To the extent that distribution did enter the economist’s model, it was often presumed that there was a trade-off between equity and efficiency. However, it is argued here that the economic stagnation experienced over the last decade or more, is reason to reconsider the present economic strategy, which assumes that economic growth is largely driven by supply-side factors. Instead, the stagnation seems to be mainly a result of inadequate demand, and the economic strategy for the future should therefore focus equally on how best to sustain the growth of aggregate demand and how that has been impacted by increasing inequality. (more…)
One of President Trump’s proudest claims is how successful he has been in creating jobs and growth. Indeed, with typical restraint, Trump has boasted that the US economy, thanks to him, is now in the best shape of all time.
But exactly how strong is the US economy, can it last, and what is most likely to be the US economic situation in two years, at the time of the next Presidential election? (more…)
Opponents of privatisation accuse it of being a key part of neo-liberal ideology. But blanket opposition to privatisation seems to me to be equally ideological. Instead, privatisation should be considered on a case-by-case basis. Accordingly, this article discusses the criteria against which the possible privatisation of a government service and its implementation should be considered. (more…)
At The Australia Institute’s Revenue Summit on Wednesday I presented a paper that showed that the Federal Government’s future economic and budget forecasts are most likely wrong. Instead, I showed why a modest increase in the ratio of revenue to GDP will be necessary over the next couple of decades, if we want to maintain economic growth and a socially inclusive society. Below I summarise that paper. (more…)