From the 1980s right through to the global financial crisis, the standard response in Australia and elsewhere to too weak or too strong an economy has been monetary policy — the manipulation of interest rates by a central bank, in our case the Reserve Bank. (more…)
Michael Keating
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Can macroeconomic policy ensure the inflation target?
If Australian wages do not increase sufficiently in line with economic capacity, it risks a shortfall in aggregate demand that will make the achievement of an inflation target very difficult, or even impossible. (more…)
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How can we best ensure that retirement incomes are adequate?
The present superannuation contribution (SG) rate of 9.5 percent can finance an adequate retirement income for most middle-income people, provided they fully draw down their savings. Logically, therefore, any action to stop further increases in the SG rate should be contingent on accompanying policies to remove the present impediments to using retirement savings efficiently. (more…)
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Morrison’s faulty logic in opposing a net zero carbon emissions target.
Contrary to Scott Morrison’s contention, we can usefully set a target date to achieve net zero carbon emissions without exact knowledge of the cost and how the target will be delivered. (more…)
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Interest rates: why a further cut is not a good idea
Interest rates are already at record lows. Any further cut will not help the economy but will add to the inequality of wealth in this country. (more…)
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Why Labor should scrap the Stage 3 tax cuts
The Government’s stage 3 tax cuts due to come into operation in 2024-25 should be scrapped. They are too costly and too biased in favour of the highest incomes. Instead, there are other better ways to support economic growth using the money, such as Labor’s recently announced policy of increased subsidies for childcare.
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How does the 2020-21 Budget stack up?
The budget deserves a “pass”, but the government is favouring tax cuts which may not all be spent. Also much of the assistance appears to be poorly targeted to the areas which have most suffered a loss of jobs.
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Scotty from marketing: A fact check
Trump is notorious for his lies, but it is time that a fact check was applied to Scotty from Marketing, too. Without it I doubt we can elevate the political debate from its present populism. (more…)
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Deregulation or better regulation?
Too often the public debate is around whether there should be less regulation, but typically regulation exists for a reason, and the issue should be how to regulate more effectively.
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The Budget – possible additional measures
Yesterday I considered the economic outlook and concluded that on present policies the pace of the recovery post-Covid is likely to be too slow. Today’s article discusses what extra stimulus should be incorporated in the Budget in two weeks, and what form that stimulus should take.
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The economic outlook and the Budget
In two weeks the Government will bring down its delayed 2020 Budget. This article discusses the economic outlook and concludes that further stimulus measures will be necessary in the forthcoming Budget. The desirable size of that additional fiscal stimulus and the possible new measures to accelerate economic recovery will then be discussed in a subsequent article tomorrow. (more…)
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Infrastructure Stimulus: there are smart projects out there, if we care to look
Infrastructure spending is touted as the path to economic recovery, but our leaders can no longer afford to throw billions at programs with little economic merit or policy logic.
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Superannuation: how much do we need to save?
A hot political issue is whether to proceed with the legislated increase in superannuation contributions from 9.5 to 10 per cent next July. There are pros and cons but if the superannuation increase is further postponed, there should be an offsetting increase in the minimum wage. (more…)
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The economic outlook and taxation. Part 2
Yesterday Part 1 of this article argued that bringing forward the second and third stages of the Government’s legislated tax cuts would achieve very little economic stimulus and would damage the longer-term fiscal position. Part 2 today considers the future demands for government spending, and therefore how much revenue will be necessary after economic recovery.
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The economic outlook and taxation Part 1
The Covid-induced recession has turned out to be worse than we initially hoped writes Michael Keating. Part 1 of this article discusses the additional fiscal stimulus that will be necessary and why it should not include bringing forward the Government’s legislated tax cuts. Part 2, tomorrow, will discuss the key requirements for revenue raising.
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We still need to provide adequate retirement income.
The current early drawdowns of superannuation balances will reduce those workers’ retirement incomes. It would therefore be desirable to allow and encourage them to restore their superannuation balances as and when they can. (more…)
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The Reagan and Thatcher legacies: sorting truth from fantasy.
Neo-Conservatives want to believe that Reagan and Thatcher achieved smaller government, lower taxes, and a booming economy. The reality, however, is very different. (more…)
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The Government’s economic response to Covid-19.
The Government’s long-awaited update of the fiscal and economic outlook contains no real surprises. But what we still need to know is what the Government intends to do next when the present economic support measures run out. (more…)
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The Prime Minister’s reform agenda for skills
Although it is good that the Prime Minister has recognised the importance of skills, missing from his reform agenda are two of the most important issues: the nature of skills and how they are taught, and the use of skills in the workplace. (more…)
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The Grattan Institute’s Fiscal Recovery Plan
The economy is presently receiving an unprecedented, but time-limited, level of fiscal support. The report just released by the Grattan Institute provides a very good analysis of what is now needed to sustain the economic recovery. (more…)
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Universities and jobs – the Government’s changes are neither fair nor sensible
The Government’s proposed changes to the fee structures for university degrees are not fair, and contrary to the Government’s assertion, nor do these changes respond to the needs of the labour market. (more…)
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National Cabinet to replace COAG: Part 2 of 2.
Part 1 of this article yesterday discussed the reasons why National Cabinet has been successful so far. Today, Part 2 will discuss how replacing COAG seek to define the future mandate of the National Cabinet and its revamped ministerial committees, and what are the chances of these new arrangement being any more successful than the previous Council of Australian Governments (COAG). (more…)
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MICHAEL KEATING. National Cabinet to replace COAG: Part 1 of 2.
Scott Morrison has decreed that “COAG is no more” and will be replaced by his new National Cabinet. Part 1 of this article below, discusses the reasons for the initial success of both the National Cabinet and COAG. (more…)
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MICHAEL KEATING.. What should we do with the $60 bn left over from JobKeeper?
The discovery of an error of $60 bn in the costing of JobKeeper raises the issue of what should be done with this money? However, as JobKeeper was always incomplete these deficiencies should be the first call on this extra money. (more…)
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MICHAEL KEATING. Why the coronavirus shouldn’t stand in the way of the next wage increase (The Conversation 26.5.20)
Wage increases are widely believed to pose a threat to employment. But this ignores their role in supporting demand growth. Instead, wage increases consistent with maintaining an equilibrium distribution of income are necessary to sustain economic growth and employment. (more…)
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MICHAEL KEATING. When should the budget deficit be unwound?
Australia’s present budget deficit is unprecedented, but it represents an appropriate response to the recession. The resulting debt does not present a future problem, and the deficit should only be unwound as private demand recovers. (more…)
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MICHAEL KEATING. Covid-19: What we need to know.
An international inquiry into the origins of the Covid-19 virus misses the main point: what the world really needs is an inquiry into the effectiveness of the response.
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Update on the economic outlook
The government and its advisers expect this recession to be relatively short-lived, but the recovery may well be less complete than they anticipate and are planning for. (more…)
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MICHAEL KEATING. Covid-19 and inter-generational equity
The increase in public debt in response to Covid-19 will not result in an unacceptable debt burden on young people. Instead, anyone seriously concerned about inter-generational equity would support action to reduce climate change and to improve the availability of housing. (more…)
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MICHAEL KEATING. Economic Policy post Covid-19. Part 2.
Today I address (i) how best to support aggregate demand, and (ii) how quickly to restore budget balance. In Part 1 of this article yesterday I concluded that these are the two key issues for future economic policy. (more…)