News + Views, Jan-Feb 2017
When robots take our jobs, 17 January
Adam Creighton is on loan from The Oz to the Wall Street Journal. Today he writes about the long mooted subject of what happens when many current jobs are replaced by machines. This was written about at least from the time of the Luddites, and most engagingly by Keynes when he discussed the economic issues for his contemporaries' grandchildren.
Creighton mentions make-work jobs in government and large corporations. But his main point is about paying everyone a basic amount, presumably set at levels that allow a decent life to be lived. This is a solution Mrs Thornton has been keen for Australia to adopt due to its success in New Zealand, an example that young Adam fails to mention. Other nations that Adams says are thinking about such a plan, or trialling it include Finland, the Eurozone nations and the mighty USA.
'Studies suggest, conservatively, more than a quarter of jobs, mainly lower skill, will be obsolete within a generation.' Read on here.
Adam Creighton's fiscal arithmetic suggest that such a plan would be far too expensive for Australia's budget to accommodate. He suggests that income taxes would need to be hiked, and appears not to consider a 15 % GST. With a really thorough reform of welfare payments meaning every citizen received a basic living amount, think of the saving of government workers. (The current hoopla of welfare recipients allegedly owing the government money for being overpaid would no longer be at the mercy of Robots or overworked bureaucrats.)
A higher, more encompassing, GST would encourage less spending - a wonderful reform for an overconsuming nation - and any residual shortfall of funds could be filled if necessary (and I do not think this would be required) by a higher rate of income tax.
One can only hope that John Fraser's Treasury will take up this idea and run hard with it.
Mr Trump sworn in, 22 January
Donald Trump is now sworn in and delivered what I assume is the greatest list of achievements his 'most IQ ever' cabinet is tasked to help him achieve. 'Make America Great again', create meaningful jobs for rustbelt workers, provide healthcare for all, better schools with less money, and restoring America's decaying infrastructure. If the Donald pulls off any part of this he will be hailed. Over half and his face joins the gang at Mt Rushmore.
And in foreign policy, smacking down China through tariffs and forcing them to give up the islands they have built on reefs in the South China Sea. How this can be done is not explained, but one doubts that the Chinese will agree without some serious discussion and with two mighty military machines playing chicken, what are the chances of accidental war?
Why are posties so expensive, 11 February
Australia's Postie-in-Chief, Ahmed Fahour, is in more trouble than Ned Kelly.
Mr Fahour apparently requires $5.6 pa to come to work each day. Australia used to believe in fair remuneration, based on importance of the job. On this basis, does Mr Fahour really require a salary over 10 times that of the Prime minister or over 5 times RBA Gov'nor Phil Lowe?
It's not as if the Post Office is handling the internet age with great skill. Henry wishes to report on the state of the postal service in leafy Kew. Every now and then he receives in the post a solicitor's demand for the value of an unpaid bill, or the threat of this. Clearly the original demand for payment, and the first reminder, somehow went astray.
When a parcel is too large to be delivered, it remains at the relevant Post Office. This week we received in our letterbox a notice to pick up the parcel dated a week earlier. The Indian couple that run that Post office are always helpful and I judge very honest.
Why should the Post Office system be so clunky?
Ordinary mail now costs $1 per envelope. This price has been rising about as fast as Mr Fahour's salary and no doubt there is a direct relationship. I'd urge the board to find a traditional postie-in-chief willing to do the job for $500 pa, or at most no more than a mill.
On 24 Feb, Mr Fahour announced his retirement, effective 1 July. 'I'll be back, he said, 'in 2018'.
Malcolm Turnbull has discovered his inner mongrel and greatly cheered his fellow LNP government.
Such fun of course is no substitute for a coherent and convincing economic narrative. The previous mongrel-in-chief stumbled onto such a narrative when he warned us of the risks of Australia becoming a Banana Republic. The latest 'reform' provides more winners and losers and a few billions benefit to the budget bottom line. Despite the respite from unexpected commodity price increases, the budget outlook is so bad that even the International Monetary Fund economists are warning about the strong risks to the economy of continually growing debt.
And it's not just international debt or government debt we should be concerned about. The more immediate debt is household debt where Australia is the global silver medallist. Heard a financial expert discussing this problem on ABC radio whilst on a long drive. 'At present 20 % of households are just coping', said expert opined. 'I am discussing middle class folk who have borrowed a lot of money to buy their house. When interest rates go up, financial stress will rapidly increase, and Australia's banks will be in trouble'.
The various debt problems mentioned here are called 'headwinds in other places. Henry recommends a wonderful book by Robert Gordon of Northwestern U in the USA. The book is called The Rise and Fall of American Growth. A key point is that the great inventions that so boosted American productivity growth from 1920 to 1970 are unlikely to be repeated. 'Additional sources of slowing growth [are] a group of headwinds - inequality, education, demography and fiscal [related to high and rising debt levels] - that are in the process of reducing growth in median real disposable income well below the [lower] growth rate of productivity. (p xi.)
The optimists of the RBA need to ask whether Australia can do better in productivity growth that the USA and whether our headwinds are greater than or smaller than those facing the mighty USA.
I wish it were possible, but believe it is most unlikely. And if President Trump leads the world into another protectionist world, we shall do distinctly worse.
Eurozone snafu, 20 February
Angela Merkel has admitted what every competent economist has said, that the Eurozone has embedded a vital design flaw, a single currency for countries that represent very different levels of competitiveness. If Germany had retained the Deutchmark, Germany's exchange rate would be higher and its current account surplus would be lower. Vice versa for Greece, Italy and Spain.
How could such a basic mistake have become a vital part of a now crumbling Eurozone? Read on here.
Australian housing markets, 20 February
Sydney and Melbourne, whose house prices are still soaring, experienced large auction clearances at the weekend. Why the government cannot see that negative gearing, combined with discounted capital gains tax, is one vital reason for bullish house prices entirely escapes this humble scribe.
Perhaps it relates to the fact the cabinet ministers are up to their fetlocks in ownership of negatively geared property? Give us the numbers Malcolm.