Michael Keating

  • MICHAEL KEATING. National Security: How Professional is the Advice?

    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…)

  • Housing affordability and Labor’s tax proposals (Revised)

    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…)

  • MICHAEL KEATING. The Prime Minister’s Economic Plan

    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…)

  • MICHAEL KEATING. Equality: What is it and Why is it important?

    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…)

  • MICHAEL KEATING. The Future of Democracy: Part 2

    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.

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  • MICHAEL KEATING. The Future of Democracy: Part 1

    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.

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  • MICHAEL KEATING. The Best of 2018: Trickle down economics and the Emma Alberici article.

    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…)

  • MICHAEL KEATING. The Government’s Mid-Year Economic and Fiscal Outlook Statement

    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…)

  • MICHAEL KEATING. Slow Wage Growth and Its Implications for the Government’s Economic and Fiscal Forecasts

    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…)

  • MICHAEL KEATING. The Future Agenda for Economic Reform

    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…)

  • MICHAEL KEATING. Economic Strategy for the 21st Century

    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…)

  • MICHAEL KEATING. The US Economic Outlook

    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…)

  • MICHAEL KEATING. Privatisation: When does it work, and when doesn’t it work?

    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…)

  • MICHAEL KEATING. The Future Demands for Government Revenue

    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…)

  • MICHAEL KEATING. The Change from Turnbull to Morrison: What Difference has It Made?

    Now that Scott Morrison has passed the fifty-day landmark as Prime Minister, this article considers what has changed since the demise of Malcolm Turnbull and what difference Scott Morrison will make in resolving the major policy challenges that Australia is facing.   (more…)

  • MICHAEL KEATING. The Medium-Term Economic Outlook

    The last decade has been characterised by economic stagnation in almost all the advanced economies. But President Trump and Prime Minister Scott Morrison are now promising a rosy future, with the US and Australian economies supposedly returning to past rates of growth. If the two leaders are right that will make an enormous difference, affecting many issues ranging from the mood of their electorate to the future capacity of their governments. But personally I remain sceptical that a return to a sustained higher rate of economic growth is likely, for the reasons given below. (more…)

  • MICHAEL KEATING. This is what policymakers can and can’t do about low wage growth (The Conversation, 17.08.18)

    The crisis really is in real wage growth. – Reserve Bank Governor Philip Lowe, 2017

    Increased inequality and low wage growth are constraining economic growth. But why is wage growth so low? And how should policymakers respond? (more…)

  • MICHAEL KEATING. Why Trump’s economic policies are doomed to fail.

    President Trump’s protectionist policies have been widely criticised and rightly so. What is more surprising is the lack of analysis as to why America has a long-standing trade deficit, and the contradictory and self-defeating nature of President Trump’s overall economic strategy. (more…)

  • MICHAEL KEATING. The Future Budget Outlook – a comment on the Parliamentary Budget Office Report on Trends affecting the sustainability of Commonwealth taxes

    Last week the independent Parliamentary Budget Office (PBO) released a new report on Trends affecting the sustainability of Commonwealth taxes. The key conclusion is that taxation receipts are likely to trend down in future relative to GDP, ‘given current policy settings and recent consumption and structural trends’. On the basis of its detailed analysis of past revenue trends, the PBO finds that ‘there is a likelihood that taxes on consumption will continue to trend downwards, taxes on capital will be flat or trend downwards and an increasing proportion of labour income will be taxed concessionally through the superannuation system’. The PBO then concludes that ‘If these risks to tax receipts eventuate, and in the absence of other taxation reforms, maintaining Commonwealth Government revenue at recent levels as a share of GDP will lead to an increasing reliance on taxes on labour income through the personal income tax system’. (more…)

  • MICHAEL KEATING. Tax Cuts, the Economy and the Next Election

    Last week the Government got its personal income tax package through the Parliament. The Government estimates that these tax cuts will cost the Budget $144 billion over the next decade. The Government has not, however, provided us with convincing evidence that the nation can afford this generosity and how it proposes to pay for these cuts while still returning the Budget to a sustainable surplus. (more…)

  • MICHAEL KEATING. What country seeks to go to war with its banker? (Repost from 30/1/2018)

    This article supports Hugh White’s conclusion that the US is unlikely to succeed in fighting China for primacy in Asia. The US has been living beyond its means for a long time, and has depended on foreign finance, and especially Chinese finance, to sustain its living standards. Challenging China would require sacrifices from the American public that they are ill-prepared to make. Accordingly, it is very risky for Australia to continue to base its foreign and defence policies on the presumption that the US can be counted on to maintain its position in Asia without substantial change. What country seeks to go to war with its banker? (more…)

  • MICHAEL KEATING. How Useful and Reliable are the Budget Projections?

    The Treasurer wants us to believe that the Government has a credible plan to restore the Budget to a surplus and cut taxes at the same time. This conclusion is based on the projections for revenue, expenditures and the budget balance incorporated in this year’s budget. However, both Ross Gittins and I have separately criticised the credibility of these budget projections. I also agree with Gittins’ conclusion that the ‘Treasurer’s unworthy intention is to leave non-economists with the impression that everything is under control and on the improve’, and even economists and econocrats can be left ‘with a false sense of comfort’ (Sydney Morning Herald, 21 May). In this article I now want to go further than Gittins and show why the Treasurer’s claim that the Government has a credible plan to restore the Budget to a surplus, while also cutting taxes, is demonstrably false.   (more…)

  • MICHAEL LAMBERT. Review of Fair Share by Stephen Bell and Michael Keating , Part 1

     The topic of economic inequality has become an area of strong research and academic interest , and Fair Share: Competing Claims and Australia’s Economic Future, by Stephen Bell and Michael Keating, published by Melbourne University Press,  adds to an illustrious group of authors who have tackled this complex subject from a range of perspectives. (These include but are not limited to British economist Anthony Atkinson; French academic Thomas Piketty;  Austrian historian Walter Scheidel;  American economist, Branko Milanovic; and Nobel prize winner, American economist  Joseph Stiglitz). (more…)

  • MICHAEL KEATING. 2018 Budget comment; Part 3: The Turnbull Government’s Priorities as revealed in the Budget

    In this final Part 3 of my comments on the 2018 Budget I discuss what this Budget reveals about the Government’s values and priorities, and its performance compared to those targets. (more…)

  • MICHAEL KEATING. Budget commentary, Part 2: Sustainable tax cuts for low-income households

    Part 1 of this series of Budget comments criticised the credibility of the Government’s projected return to a budget surplus and argued that the proposed tax cuts were therefore not in fact sustainable. In this second part I will argue that nevertheless some tax relief targeted at low-income households should be supported, and other alternative sources of revenue should be found to return the budget to surplus and make those tax cuts sustainable. (more…)

  • MICHAEL KEATING. 2018 Budget Comment (Part 1)

    This year’s comment on the Government 2018 Budget is in three parts. Today, I comment on the proposed tax cuts, which are the signature feature of this year’s Budget. I conclude that there are real doubts about whether those tax cuts are sustainable in the longer-run. The second part of this series discusses why tax relief focussed on low-income earners is desirable and then considers the change in policies required to make that tax relief sustainable. The final Part 3 of the series will consider the government’s overall priorities as revealed in the Budget. (more…)

  • MICHAEL KEATING AND JON STANFORD. Australia’s strategic risks and future defence policy; Part 2: Future defence strategy, capability and submarines

    In this second article we discuss the need to develop a defence strategy that involves shifting from a force structure designed for coalition warfare to one optimised for the independent defence of Australia. We focus on the requirement for new submarines, given that these are the assets best suited for the prosecution of asymmetric warfare against a stronger power. (more…)

  • MICHAEL KEATING and JON STANFORD. Australia’s strategic risks and future defence policy (Part 1 of 2)

    Part 1: Australia’s strategic environment and the US alliance

    Two years ago the government selected the French company Naval Group to design Australia’s future submarine (FSM). We were highly critical of the decision at the time for a number of reasons, including the excessive cost. In particular, we are concerned by the lengthy delivery schedule for the submarines, a decade or more after the present Collins class submarines are due to be retired, resulting in a dangerous capability gap. In this series of two articles we explore how Australia’s strategic environment has evolved since the decision on the FSM was taken and what this implies for Australia’s future defence strategy and the ADF’s force structure.   (more…)

  • MICHAEL KEATING. Why Australia Needs A Stronger Revenue Base

    Earlier this week the Australia Institute released an open letter signed by 48 eminent Australians calling for an increase in taxation. As we might have expected, the Treasurer, Scott Morrison, without any reflection, dismissed this call for higher taxes as “a numpty of an idea”, adding that “The idea that you increase taxes to grow the economy is stupid”. This article argues that instead it is the Treasurer who is wrong, and that full budget repair will not be possible over the medium term unless deliberate action is taken to increase government revenue.   (more…)

  • MICHAEL KEATING- Wages, Profits and Economic Growth.

    This article summarises the analysis in a new book, Fair Share: Competing Claims and Australia’s Economic Future, which examines the interrelationship between the stagnant economic growth experienced by most developed countries over the last decade and the increasing inequality in the distribution of income. (more…)