Pearls and Irritations

Michael Keating

  • How good is Scott Morrison?

    By any standard, Scott Morrison’s Government has a very threadbare policy agenda. Furthermore, the Government seems resistant to new ideas, whether they are from its backbench or the public service. According to Scott Morrison the role of the public service is limited to implementing government policy, which may help explain the thinness of his Government’s policy agenda. (more…)

  • MICHAEL KEATING. Can we trust Scott Morrison?

     

    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…)

  • MICHAEL KEATING Why the Stage 3 tax cuts will need to be revisited.

    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…)

  • MICHAEL KEATING. Urban and Regional Policy

    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.

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  • MICHAEL KEATING. Australian National Outlook

     

    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…)

  • MICHAEL KEATING. Lies, Damned Lies and [tax] statistics.

    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…)

  • MICHAEL KEATING Budget Deficits: Good or Bad

     

    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…)

  • MICHAEL KEATING Why Labor should oppose Morrison’s tax cuts

    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…)

  • MICHAEL KEATING Labor and the economy: Future policy choices?

     

    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…)

  • MICHAEL KEATING. The Morrison Government’s Economic Policy

    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…)

  • MICHAEL KEATING. This election offers a very real choice. Part 2

    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…)

  • MICHAEL KEATING. This election offers a very real choice. Part I

    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…)

  • MICHAEL KEATING. The Budget: Part 2

    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…)

  • MICHAEL KEATING. The Budget: Part 1

     

    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…)

  • MICHAEL KEATING. The True State of the Economy

    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…)

  • MICHAEL KEATING. Why is our economic growth rate less than half its potential, and what to do about it?

    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…)

  • MICHAEL KEATING. Labor’s policy of disallowing franking credit rebates: who will be affected, and by how much?

    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…)

  • 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…)