Saturday Sanity Break, 27 July 2019 – Productivity policy Australia’s greatest need

Happy 80 st birthday, John Howard. Here’s to a long and enjoyable life in the twilight zone that you are now entering.

The Australian yesterday reminded us all that increasing Australia’s productivity is vital if we are not to slip down the global league tables for the wealth of nations and reputation as one of the world’s great places of opportunity and a fair go. Many good Australian economists have given voice on this subject, and here is my go.

Monetary policy

Henry has argued that the mighty RBA has stuffed up Australian monetary policy. It failed to return cash interest rates to normal levels while the economic sun was shining and now at the first snowfall it has slashed rates by 50 basis points and seems almost certain to make further cuts. By failing to raise rates while the sun shone the RBA failed to cool the market for housing.

Even more poor performance is coming now, meaning severe inability of rate cuts when deep winter arrives. Judith Sloan came out kicking in the OZ yesterday, meaning no more invitations to the board room of the once mighty Aussie central bank. Read her diatribe here.

The RBA’s poor judgment is reflected in many other countries. Only the US Fed raised cash interest rates while America’s economic sun was shining. The ECB has cut most but everywhere cash interest rates are dangerously low. With low goods and services and soft monetary policy, the immediate risk is a continued boom in asset prices because excess money has to go somewhere.

Every asset boom is followed by an asset bust, and when the boom is large the bust can be gigantic. Refer the 1920s boom in America, and the great depression that followed.

My 1990 article on inflation reform is available here. While its recommendations were adopted by the Howard government, the paper missed effects of asset inflation, and policies to control it. I am now working to overcome this weakness.

Read my 1990 paper here.

As with current economic policy, control of asset inflation is a global issue not yet solved. I fear the mighty RBA remains in a state of ignorance. A former RBA board member recently told me that when he asked two former governors how to deal with asset inflation the answer was ‘We have no framework for handling this’, or words to that effect.

Boris Johnson’s ascension

The ascension of Boris Johnson to the British PMsership was expected but exciting. He succeeded dramatically as Mayor of London and all his life has been seen as very bright but a bit of a clown. Today we bring our readers a nice word portrait from Toby Young, an associate editor of a weekly e-journal called Quillette. Read on here.

Kulture

Fiona Prior tunes in to Elena Kats-Chernin Whiteley. More here.

Sporting life

It is hard to explain. Caaaarlton!. a great club in the depths of despair, fires a coach and have now won five games out of 7, three in a row, two of those wins against final contenders. Cap’n Cripps starring, along with veterans Murphy, Simpson and Thomas, and first year player Sam Walsh and various other young scrappers. Casboult, Phillips, Jones, all starring. Wow!

Forgive this paean, folks, but it’s been a long and dusty road and now there are signs of a good team emerging.

It's time to get serious, folks. This weekend's round, except for Caaaarlton's superb win, already covered, included:

* Tigers vrs Magpies, Tiges by 32

* Lions over Hawkes, Lions by 27, same as Caaaarlton! vrs Crows

* Eagles flogged Kangaroos by 69

* Saints vrs Demons by 19

* Giants slipped past the Power by 1 point

* Bullies cruised over Dockers by 47

And at time of writing

* Cats edging Swans during Q2 by 5 points

* Bombers sure to Flog Suns, starting very soon

The live ladder at 4 PM approx, devised by Norwich Union, shows the following final eight, close to being IT

* Geelong

* West Coast

* Brisbane

* Richmond

* GWS

* Collingwood

* Essendon

* Adelaide, clinging on

Other sport

Horrible drug stuff at some crappy swimming meet not on Aussie TV

Manly beat Melbourne Storm by a golden point

Australia minus (Falou) beat Argentina in Rugby - 3rd win out of 17 if I heard right.

Aussie Sheilas belted England in cricket World Cup.

Enough, but we shall give our guesses as to footy grand final occasionally from now on.

After round 19. West Coast, Richmond (unless beaten by Caaarlton! next weekend) GWS in current approx. order of merit.