Congratulations NT, the only state where more SUVS are now sold than passenger vehicles.
The Toyota Hilux, Mistubishi Triton, Ford Ranger and Hyundai i35 are among the top selling SUVs.
SUVs are great. They’re safer for drivers, they give you a better view, they can mount any terrain, and they have lots of boot space. But they come with costs. More vulnerable road users get hurt. And we can see those costs across the whole country.
The results for non-drivers are substantially more mixed than the results for drivers, which show clear falls. Some of the states with the biggest proportional increase in SUVs (especially Tasmania) show the worst results for pedestrians and motorcylists..
For comparison, here’s the rate of change in driver deaths. It’s worth noting that Tasmania’s population has been pretty stable in this time while WA has grown.
Which is sending global markets into a bit of a panic.
Source: AFR
But is this really the moment where the Australian economy comes crashing down?
Lower petrol prices are already a reality, which has the same effect for many households as a reduction in interest rates – more money in their pocket.
This is a real boost to the Australian economy at a time when it really needs it.
And our major trading partner, China, is in the same boat. It is an oil importer and it is apparently stockpiling fast during this period of low prices. Like Australia, China is trying to get growth to continue without causing a surge in inflation. The oil price drop just made this a lot easier.
If lower oil prices perk up the Australian consumer just as a lower dollar makes life easier for Australian business, and China is able to continue to grow strongly, that represents just about a best-case scenario for the Australian economy.
But it’s worth remembering: What goes down can go back up.
If consumers in China and Australia re-set their oil price expectations, and then the price of oil goes back up, it will feel like an interest rate hike – at the worst possible time. In that scenario, with Australian consumer confidence falling as China suffers a blow to growth, anything could happen.
Next year’s budget offers the Government a horrible array of choices.
The government was badly burned by this year’s budget. Ideas like the GP co-payment saw their popularity plunge in May, and they’ve been in an election-losing position since.
They burned their fingers badly, and what’s worse, didn’t even grab substantial fiscal gain from it. The Treasurer’s office is staring down the barrel of a budget with another big deficit next year.
If they try to push the budget back to surplus, the public will have their worst fears confirmed – these guys really are mean!
So the Treasurer can’t cut too hard.
The alternative – running a deficit and being proud of it – looks unpalatable. But there are ways to change one’s tastes …
Australia’s growth in the last quarter was poor, falling to 0.3 per cent.
Source: ABS National Accounts
There is a big school of thought in economics that says when growth is poor, governments should spend to prop it up. This is broadly known as Keynesianism, named for John Maynard Keynes, who was a major theorist of the great depression. The more contemporary theorists are known as New Keynesians
Spending to support growth is common. That’s what Kevin Rudd and Wayne Swan did in the GFC, giving us school halls, insulation and $900 cheques. The Rudd stimulus left Australia with a medium-sized amount of debt, and arguably prevented Australia from falling into recession alongside the rest of the western world.
But by 2015, might their rigidities soften? The political needs of the current government may demand it. The only way to not commit political hara-kiri while setting a framework for the 2015-16 Budget will be to adopt a far more generous way of thinking.
Torn between two forms of cognitive dissonance, “I am setting the national Budget in a wholly political way” and “I am a late convert to the need to support aggregate demand,” I suspect Mr Hockey may be tempted by the latter.
This summer, as he lies on his towel, listening to the Pacific Ocean waves crash on the beach, Joe Hockey may well be turning the pages on a biography of Keynes. Perhaps the same one Mr Rudd read in 2009. It might be the thing that saves him.
Next May, Tony Abbott and Joe Hockey are going to feel very uncomfortable indeed. They’ll be bringing down a Budget that is completely the opposite of what they hoped for.
The 2014-15 Budget was full of spending cut plans and forecasts of rising tax revenues. The spending cuts are mainly in shreds on the floor of the Senate, and the rising tax revenue projections got vapourised by weak growth and falling iron ore prices. The few measures they did pass, like a temporary tax hike on high income earners, aren’t likely to be enough.
But revenue fell hard in the most recent quarter as growth fell to 0.3 per cent.
I expect the government will be forced to admit the deficit this year is very much like the last Labor year (around $50 billion), and that the 2015-16 one will be at least twice the size they expected.
What’s worse for them is this – the more they try to correct this scenario, the worse their reputations become.
I wouldn’t want to face the dilemma Hockey faces – try to put the budget on track and cement once and for all the impression of having a heart of stone, or try to salvage a bit of popularity while letting the nation’s finances spiral away. Perhaps he will happily give up his job to Mr Turnbull.
So, from a fiscal perspective, Opposition leader Bill Shorten has been given a free kick in the goal square. This is political gold!
But should he go hard on this topic? Should he try to drive a fiscal stake through this government’s heart?
I see three reasons he should not.
1.Don’t perpetuate Deficit-phobia.
The fear of deficits is extremely corrosive to our national debate. Governments are absolutely petrified of borrowing, for fear of being accused of running a deficit.
The cost of borrowing, right now, is exceedingly low, and the benefits of borrowing could be very high. Almost everyone thinks Australia could use a big whack of infrastructure to set it up for the next century. Obsessing about spending only what you earn is for people who can’t get credit, or for people whose expenses are smooth and predictable. A mid-size first world nation can get credit cheaply, and might want to occasionally build a huge project. In those cases a deficit should be celebrated.
If Shorten accusing Abbott of incompetence because of the existence of a deficit, then he further limits the policy options of all governments of all stripes.
2.Focus on something important.
Budget day I argued in April that Labor should have made equality a big budget figure. You could hoard all the relevant data on equality until Budget day, brief the right people that an important measure was coming out that day, and then boom, get some cut through on a topic that wasn’t so meaningless.
If Mr Shorten goes after Mr Abbott on the defict, he adds his imprimatur to the idea that managing a deficit is the most important job a government can have. Assuredly, it’s part of the government’s role. But to place it at the centre of responsibilities is to show a distinct lack of imagination. Find something important and make Budget day about that instead.
3. Tying your own noose.
If Mr Shorten wins government in late 2016 and the deficit is all he’s talked about for the preceding three years, he’ll be forced to fix it, fast. That could prove uncomfortable for him.
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Mr Shorten’s approach will depend to some extent on what Mr Hockey has planned. We will know a but more about that once the mid-year economic update (MYEFO) comes out.
“What is the last “cut” that is heralded as a major political reform? Howard strangled the dole payment down below some estimates of the poverty line, but that’s oddly omitted in his hagiography. Even right-wing economist Judith Sloan has argued the dole should now be raised.
When we list the economic reforms that have made Australia great we include microeconomic reform, floating the dollar, an inflation-targeting central bank and the GST. Not cuts.
If the Abbott government’s first term economic reforms can mainly be labelled “cuts”, what will be its legacy?”
It will be very interesting to see what themes we can read into this year’s MYEFO (perhaps coming out next week, and required by law before the end of January).
A lot of jobs are at risk – half a million, according to the article – and they’re not “bad” jobs.
“The challenges presented by more automation are not limited to low-skilled positions, as robots are increasingly replicating the tasks of medium and high-skilled workers.”
I’ve written before about what will eventually happen to employment after the Robot Revolution. I think new skill-sets will rise to the top: people-skills and creative skills. The inspiration angle and the emotion angle will be our edge when robots are doing the physical and routine thinking work.
In the mean time, automation will make things cheaper. More and more goods will be like water.
Water is cheap. So cheap we don’t even think about it. Water is plentiful. You can easily get more than you could ever use.
Its abundance makes it easy to forget that it is incredibly important. And many other goods and services are much like water. Energy, definitely. You no longer need to pay a fortune for firewood and paraffin. Electricity comes into the house at far less than our willingness to pay.
You could argue clothing and food have already gone that way too. At certain very popular stores, you could buy a complete outfit, including shoes, for under $40. You can meet your daily energy needs for a couple of dollars.
We don’t talk much about how awesome this is. But it is incredible. It’s why absolute poverty doesn’t exist in the same way any more. Being poor is still a huge disadvantage, but has more to do with access to other needs like healthcare and housing and opportunity and with the challenges that poses to decision making, than simple starvation.
When people complain, saying things becoming cheap strips them of their value, they don’t realise the alternative.
Indulge me for a moment longer, let’s imagine prices going the other way – from free to expensive – and instead of using water as our example, let’s use air.
Air is abundant and cheap, and we barely think about it. Should we charge for it? Would that make people value it? Charging for air would be great for GDP. The whole population would be customers of the various air providers. Maybe they’d pre-pay, maybe they’d be on a plan (don’t go over your cap!). The government would set up a means-tested scheme to provide free air for certain groups. Still, it would be a big bump to the economy, and there’d be a lot of jobs in it. Jobs! Given how politicians love to promise jobs, I’m surprised charging for air isn’t on their radar.
So I hope I’ve convinced you, via these examples, that cheaper goods and fewer jobs is not necessarily bad. It can be good, in part.
But it will not be uniformly good for social outcomes. Here’s how the Department of Industry sees it.
“The comparative advantages of being human — the ability to solve problems intuitively, improvise spontaneously and act creatively — as well as the unlimited needs and wants of humans suggest that the displacement of jobs due to automation is unlikely to be long term.”
Note their use of the words “long term.”
The advance of the robots will not be uniform, and there will be times when lots of people get put out of work all at once. At these times, the returns to capital will be higher, and the returns to labour will be lower. In these times, panic will rise. Even though a future where humans are all out of work is laughably implausible, it might not seem that way if you and everyone you know just got the sack.
We will need policy settings that will help at these times.
The policies could try to prevent the robots from taking the jobs, but that means forfeiting the benefits in terms of cheaper goods. It would also be incredibly hard to implement.
So what is the best way to make sure we’re ready for a bump in unemployment? What’s the best way to make sure people are ready to get back into the workforce?
I’d argue there are two big things we should do:
1. Invest in education now. Education protects against long-term unemployment according to the data, probably by making people ready to re-learn. This is not the time to be making university educations more expensive. Quite the reverse. It’s also the time to be investing in making sure nobody falls through the cracks. Proper implementation of needs-based school funding, in the manner suggested by David Gonksi, would be a good way to make sure that people are adaptable when the time comes.
2. Stop starving the beast. The federal deficit is growing, and since the government has failed to implement a range of spending cuts, and is opposed to tax hikes, it will probably keep growing. In the future, we may need to exploit the federal government’s ability to provide Keynesian stimulus via the “automatic stabilisers” that are welfare payments. Bulking up the budget is necessary, and we probably need to push up the tax-to-gdp ratio. It may seem like an economically sensitive time to be lifting taxes, but that’s not the case if you put land tax on the agenda. Unlike taxes on income and companies, land taxes are not a tax on productive activity, plus they tend to be progressive (rich pay more, poor pay less).
With these policies in place, we should be much better placed to welcome the robots as our servants, not our rivals.
The best part of university was always the tutes. You could skip the lectures if necessary, but you missed the tutorials at your own peril.
I remember vividly stepping up the wide staircases of the John Medley building at 2.10pm on a Tuesday, burdened with a big folder of academic articles. You’d sit in a quiet room stuffed with too many chairs, talking about that week’s readings. These were golden hours. To speak during the tute meant you had to have done the reading. You’d hear if other people got something totally different from the assigned articles, say your piece, have people disagree with you.
The shouts from South Lawn would filter through the leaves of the plane trees, but the debate at hand was always more enticing. This is where you saw what points held together, what ideas got torn apart, and worked out what topics you would write your big essay on.
If the point of doing a liberal arts degree is to develop critical thinking skills, the tute was the nexus of the whole affair. The selection of smart people put in a room with an interest in understanding the topic was unparalleled. The tute was to a political science student as the weights room is to a body builder. Where you break down to get built back up.
But now, I think you can build up the skills you need for university – at least somewhat – online.
The best online debates remind me a lot of those tutorials. I do not mean Twitter. Twitter is more like flicking the channels on TV while yelling things nobody will hear. Not Facebook either. Facebook is synonymous with shallow debate.
It’s a place where you write something, and it gets marked. You can get a big fat zero (or a negative score) if you write something stupid, wrong, unhelpful, or irrelevant. You’ll get called out on your spelling and grammar, too. But if you write beautifully, logically and use references, you’ll get upvoted. The culture there (in some places at least) is quite academic. If you’re clearly spouting off your mouth without having done the reading, someone will normally slap you down.
What we see here are people kicking around important ideas, learning things, being respectful to each other. It may not seem like much, but it’s damn nice to see that happening on the internet.
There’s also a lot of bona fide experts on Reddit that are only too happy to answer people’s questions clearly:
Sometimes, you can see people being presented with evidence and changing their minds, in real time. At it’s best, it is quite amazing.
Caveat: I do not in any way imply Reddit substitutes for university. University is comprehensive, while Reddit is merely a subset of things that are fun to talk about. And furthermore, university is not just about engaging with ideas. It’s about engaging with people. It is is also about showing up and doing the work, even when you don’t want to, while Reddit offers no points for diligent attendance.
Reddit also fails where the sorting process for confirmation bias is complete, and people end up in subreddits that reflect their own points of view back at them. For example, the subreddit about the holocaust has ended up as a place for deniers.
Still, using Reddit to develop your reading, writing, persuasive argument, critical analysis and grammar, plus skills in giving and receiving feedback will put you in damn good stead to make the most of a proper liberal arts education.
Online debates are probably one reason we can hope this internet *is* making us smarter. If there are other websites you love that you think also support good debate, mention them in the comments below.
This, to me, is not a crisis. It’s not good news, but just as you don’t judge a game of football on a 2 minute period, you don’t judge a fiscal situation on a quarter (or even a year, or even a group of years). You ned to judge the fiscal position in the long run.
I’m interested in this high-level measure, the tax-to-gdp ratio. And that’s an interesting thing, with a few moving parts.
Treasury has relatively recently begun spruiking it. (This began in the Rudd era, I believe, when he wanted to seem fiscally prudent while spending a lot.) It can be affected by deliberate actions of government, or by shifts in GDP and prices of key exports.
That spike in the red line at the end is now at risk, due to factors beyond the government’s control. In the 2014 Budget, the government announced it would increase revenue as a percentage of GDP, from 23 per cent to 24.9 per cent.
Given the way everything economic and budgetary has come up turds since, the MYEFO is likely to replace this optimistic assumption when it comes out (soon).
“Given the deficit prospect, the government faces three choices: (1) Run a bigger deficit, (2) raise taxes, or (3) cut government spending… What the government should consider is raising taxes.”
Cutting spending is important where programs are ineffective, or where you’re trimming fat. That is crucial. But it won’t be enough. The Australian people want the government to do more, not less – we want important things like the NDIS and funding childcare and kindergarten.
I’d support raising taxes, slowly and in a clever way, to try to right the structural budget deficit.
This might seem like an impossible PR job for the government. But with the help of one man, it may not be.
The name John Howard is like a magic charm in contemporary politics. A man who wins four elections (96, 99, 2001, 2004) gets a lot of kudos in retrospect, even if he had a seriously easy incumbency, bountiful in threats to national security and bumps to government revenue.
The man is viewed (wrongly) as a fiscal genius.If I were Joe Hockey, and I was facing up to the fact I needed to to try to sell tax hikes, I’d stick his name on it.
“Reverting to a John Howard era tax-to-GDP ratio” sounds a lot more palatable than simply “hiking taxes.”
The lowest paid MPs are certain members of the ACT legislative assembly, who get $132,800.On the other side of Canberra, federal parliament is even more lucrative. The lowliest federal backbencher* makes $195,130. The highest paid is the Prime Minister, who makes $507,000.
State MPs seem to get about 70 per cent of the federal pay. The Premier of NSW gets $358,853 .
Politician pay is a fraught issue. The annual pay rises create a furore in the media, especially during times of budget stringency. It got me wondering if there might be a better way.
What if politician pay were anchored to something that we can all believe in? What if politician pay was somehow linked to how well the rest of us are going?
This could be an effective way to not only manage the PR aspect of politician pay rises, but to properly align their incentives with our own.
Here are some anchors we could use, for starters.
Average annual full time earnings (for the employed) is $78,821, GDP per capita is $67,218. The median wage is $60,112, and the minimum wage is $33,327.
Pay packets
There is a case to be made for paying politicians well, in order that they are not swayed in their duties by fat brown envelopes, or promises of lucrative employment after their retirement from public life. Generosity also prevents the other problem you get when you pay peanuts – you get the homo but not the sapiens.
So while it is tempting to say that politicians should be on the median wage, it may not be practicable.
Instead, a bundle of all of the above might make a sensible balance. If you add the four categories together, and multiply by 0.8, you get $191,580 – a number that roughly approximates current politician pay.
You could easily argue, at this point, that this pay structure is entirely mis-focused and materialistic, and if we’re going to have performance pay for MPs it should be linked to a far broader basket of KPIs, including a rating of the health of the great barrier reef, carbon emissions per capita, spotted numbat populations, ambulance waiting times, NAPLAN testing results in western Sydney, etc, etc. I’d totally support all of that.
At this point, it’s worth mentioning that I really do not think any sort of MP pay reform is worthwhile without sorting out entitlements, which are absolutely arcane and create a culture where MPs are disproportionately focused on getting the public to pay for bookshelves and travel allowances.
Is this a good idea? What would you suggest putting in the mix to align politicians’ incentives with our own? Leave a comment below!
* Please feel free to use the comments section to nominate precisely who you believe is Australia’s lowliest federal backbencher.
A skyline is one of the most iconic things a city can offer.
Great skylines are rare – New York and Paris have terrific, unique skylines. But most cities are just a cluster of square towers.
Melbourne’s skyline, from many angles, is a classic example. Nice in the right light, but far from distinctive.
Melbourne’s more iconic features (Arts Centre Spire, Wheel, Bolte Bridge) are hard to get in frame with the CBD.
The Eureka Tower – Melbourne’s tallest building – isn’t a great building to my eye, but it is so prominent that it is now a feature in tourist mementoes.
Skylines are a classic economic problem. The benefit of the skyline accrues not the to building’s owner, but to the people who gaze upon it. These are externalities, and so the market for a city skyline is clearly subject to market failure.
Worth mentioning – these external benefits are more than just warm fuzzy feelings. There is a reason houses on top of hills sell for a lot more. “City views” is a magic word in real estate.
When a building owner decides to make another 25-storey square grey tower, they’re not thinking about the city at large. What is most profitable for them is not necessarily what’s best for the skyline.
The Eiffel Tower was not a result of market forces. Neither was the Statue of Liberty. The Empire State Building was privately built, but that was in the 1920s, when market failures were left free to thrive and vast fortunes were sloshing around New York. Then, a handful of wealthy new Yorkers could afford to put up a signature building that would lose money for its first 20 years.
Will the sharpness of modern market forces deliver us only the drabbest lumps to adorn our horizons? If so, that’s truly a shame.
Talk about killing negative gearing is like elevator music in our national debate. It is ever-present and we’ve tuned it out.
But there will never be a better time than now to rip negative gearing from the tax code. That’s because right now investor activity in the housing market is a major macroeconomic problem.
If the strength of the housing market was more in line with the rest of the economy, rates would fall like a tonne of bricks. Reducing investor demand for housing could give the RBA the freedom it needs to cut rates to the point where the economy picks up.
Traditionally, if the red line is rising while inflation is controlled, the RBA will make the blue line fall. But house prices are impeding them. (Data: RBA. ABS Labour Force)
If there was ever a time where scrapping negative gearing (on existing homes at least) was going to fly, it would be when the topic is macro-economically important.
Negative gearing has haunted the Australian policy landscape since 1985, doing much to enrich property investors while having an altogether ambiguous effect on the social outcome it was designed to address – housing affordability
A brave treasurer would reach back to the Henry Review and say, ‘ in order to reduce the policy bind the rba finds itself in, it’s high time we looked at this recommendation.’
The Treasurer would find plenty of backing in the Henry Review. It did not argue that cutting negative gearing would cause an immediate reversal in house prices. But it did point out that the policy represented a big fat subsidy, and recommended something a lot more modest.
“When negatively geared, asymmetries in the treatment of expenses and receipts give rise to a more favourable treatment (see Chart A1–20). This asymmetry ranks amongst the greatest tax induced biases to the savings choices of households. “
The state government of Victoria lost power this weekend. The election saw their narrow majority reversed, and by losing government after just one term in office, they set a record. No other government has done that since 1955.
Since Jeff Kennett’s reign as premier from 1992 to 1999, the Coalition’s appeal to the electorate has been slight. They’ve lost elections in 1999, 2002, 2006 and 2014, some by big margins. They won in 2010 by just two seats.
The state is lurching away from the Coalition. (The Coalition is an alliance between the large city-based Liberal Party and the smaller, country-based National Party).
The Liberals can console themselves with a decent-looking result in first-preference terms (766,000 votes to Labor’s 820,000 on the count so far). But there are plenty of voters that do not put Labor first whose vote ends up with them thanks to the magic of preferential voting.
Faced with this remarkable recent record of underperformance, The Liberal party can either follow the population or fade into irrelevance. They need to tack to the centre to become believable on key issues for voters at state elections, like schools, transport and hospitals.
The choice of a new leader will be essential in remaking the party. In some ways, the selections on offer look good: An man in his 30s of Ukrainian descent or a prize-winning lawyer known for his pro bono work . But Matthew Guy is a former staffer to Jeff Kennett and an unpopular planning minister while Michael O’Brien is a former adviser to Peter Costello.
These two are the front-runners for Liberal leadership. If you keep building a new house out of the same bricks, there’s a limit to how much better you can make it. And when you can narrow down your field to two senior cabinet ministers so soon after a crushing defeat, it indicates a “steady as she goes” attitude. Perhaps the Liberal party is unable to reform itself, and the voters will have to do it for them.
Thomas the Think Engine 