Blog

Tue, 18 Feb 2014  |  

The $882 million tax 'refund' to News Corporation is a lot on money.

Browsing through the budget papers puts some context on what $882 million can buy.

Mon, 17 Feb 2014  |  

In 2012-13, average earnings for a worker in paid employment in Australia were approximately $57,000 for the year.

On those earnings, the income tax plus the Medicare levy was approximately $10,925.

The tax refund to News Corporation reported in today's AFR, as it won a legal battle "from a series of paper shuffles between subsidiaries", as the AFR's Neil Chenoweth put it, was $882 million.

This $882 million from "paper shuffles" is equal to the income tax paid, including the Medicare levy, for around 80,700 workers on average incomes.

Just sayin'.

Mon, 17 Feb 2014  |  

There are lots of people who spend $2,000 each year and more going to concerts, plays, movies and the opera. But is the cost of these tickets dead money or money well spent?

That few thousand dollars no doubt provides a good dose of inspiration and entertainment in the delights of Carmen, One Direction, Mary Poppins, The Summer of the Seventeenth Doll, Hamlet and a mix of the Hollywood blockbusters and fringe movies that are always a bit quirky.

Most who spend a chunk of their hard earned cash on any such array of cultural fulfillment will no doubt think it money well spent.

But is it?

Fri, 14 Feb 2014  |  

The Abbott government borrowed a further $800 million today. This brings the amount of gross government debt issued since the election in September 2013 to $47.25 billion.

Allowing for the fact that some of this borrowing is in the form of short term T-Notes and covers bond maturities which means there is some double counting in the new borrowing total, the amount of total gross government debt has increased by $26.1 billion to $299.2 billion since the election.

Thu, 13 Feb 2014  |  

I was wrong.

The RBA is not going to hike interest rates in March after all, simply because of the persistent degree of slack in the labour market.

In my judgment, the stellar lift in dwelling construction, exports and consumer demand, all event from around the middle of 2013, would have been sufficient to kick in to solid employment growth by now.

Tue, 10 Dec 2013  |  

This article was first published on 25 June 2012 on marketeconomics.com.au 

Australia's net Government debt was $96 billion in June 1996. By June 2007, Australia had net financial assets (negative debt) of $29 billion. The Howard Government and the current Liberal Party point to this turn in the finances of the Government with pride and say it is a sign of good economic management.

To be sure, this is a significant turnaround but there are some interesting facts behind the issue of Government debt in the past 30 or so years.

Wed, 12 Feb 2014  |  

The Westpac measure of consumer sentiment dipped 3 points in February, to be back, more or less, to neutral. That is to say, consumers are neither optimistic nor pessimistic about the future.

While it is never possible to pin-point why consumers are happy or sad, the timing of the survey coincided with fires, SPC Ardmona, heat, an emerging market inspired drop in stocks and of course, some talk that the next move in interest rates might be up. The government also took the odd step of talking down the economy, inflaming the budget 'crisis' again and the need for spending cuts which, no doubt, is dampening sentiment.

Wed, 18 Dec 2013  |  

As is normal at this time of the year, economists are pretty much compelled to outline their main themes for the economy and markets in the year ahead.

I am not different so here we go.

Mon, 03 Feb 2014  |  

It is staggering that some who should know better reckon that the building approvals data for December were weak.

OK, the number of building approvals fell 2.9% in December in seasonally adjusted terms, but this must be viewed in the context of earlier readings.

Those readings show that the number of building approvals in the December quarter as a whole was the highest since 1994 and the second highest quarterly result ever recorded. Sound weak to you?

The ABS measure of the trend series has increased every month, including December, for two years to be at the highest level since 1994.

Dwelling construction is in a boom.

Making the outlook for the construction sector all the more positive is that non-residential building is explosive with quite phenomenal double digit growth over the second half of 2013.

Fri, 07 Feb 2014  |  

OPENING REMARKS TO THE SENATE SELECT COMMITTEE INTO THE ABBOTT GOVERNMENT’S COMMISSION OF AUDIT

Australia does not have a government debt or deficit problem.

According to Treasury numbers published by Treasurer Mr Hockey in the Mid-Year Economic and Fiscal Outlook in December, over the last 43 years of budget outcomes (the full data set), there have been 19 budget surpluses and 24 budget deficits.

Up until 2007-08, just prior to the collapse of the global financial system and the onset of the deepest recession in the industrialised world since the 1930s Great Depression, surpluses were a little ahead of deficits, 19 to 18. This suggests that the recent move to budget deficit is almost certainly nothing more than the long-run business cycle impacting on government finances.

THE LATEST FROM THE KOUK

“Bitterly disappointing”: We are seeing a once in a generation policy failure

Thu, 12 Sep 2019

This article first appeared on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/rba-interest-rates-government-can-stimulate-economy-but-wont-210050650.html 

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“Bitterly disappointing”: We are seeing a once in a generation policy failure

Imagine having the power to promote economic growth, lower the unemployment rate and set in train the conditions to boost real wages growth and inflation?

It would be immensely satisfying to change policies to improve the living standards and quality of life for every day, hard-working Australians and their families.

Wouldn’t it?

Next imagine a harsh reality where economic growth is weak and slowing, the unemployment rate is rising and wages growth and inflation well below a satisfactory level, and you choose not to wield the power reverse these uncomfortable circumstances?

Doing nothing, unwilling to pump some much needed cash into the economy because of a political dogma wedded to a notion that budget surpluses are good and that holding interest rates unnecessarily high so you might dampen demand for houses – which is seen as a problem - and household debt overwhelms your power to make things better.

The RBA admits it stuffed things up – sort of

Mon, 22 Jul 2019

This article first appeared on the Yahoo website at this link: https://au.finance.yahoo.com/news/did-the-rb-as-monetary-policy-put-our-economy-at-risk-033940907.html

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The RBA admits it stuffed things up – sort of

The Reserve Bank of Australia needs to be congratulated for publishing research which implicitly confirms that it made a mistake when setting monetary policy in the period mid-2017 to early 2019.

Not that the research explicitly says that, but the RBA Discussion Paper, Cost-benefit Analysis of Leaning Against the Wind, written by Trent Saunders and Peter Tulip, makes the powerful conclusion that by keeping monetary policy tighter in order to “lean against” the risk of a financial crisis, there was a cost to the economy that is three to eight times larger than the benefit of minimising the risk of such a crisis eventuating.

The costs to the economy includes lower GDP growth and higher unemployment, that lasts for at least for several years.

A few terms first.

According to the Saunders/Tulip research, “leaning against the wind”, a term widely used in central banking, is “the policy of setting interest rates higher than a narrow interpretation of a central bank’s macroeconomic objectives would warrant due to concerns about financial instability”. In the RBA’s case, the “narrow interpretation” of the RBA’s objectives are the 2 to 3 per cent inflation target and full employment.

In the context of the period since 2017 and despite the RBA consistently undershooting its inflation target and with labour underutilisation significantly above the level consistent with full employment, the RBA steadfastly refused to ease monetary policy (cut official interest rates) because it considered higher interest rate settings were appropriate to “lean against” house price growth and elevated levels of household debt.