Digital disruption is slowing growth – but it will make for better economies

Tue, 08 Dec 2015  |  

This article first appeared in The Guardian at this link: https://www.theguardian.com/business/2015/dec/08/digital-disruption-is-slowing-growth-but-it-will-make-for-better-economies 

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Digital disruption is slowing growth – but it will make for better economies

There is universal consternation about the inability of most industrialised countries to return to strong economic growth, despite zero or negative interest rates and varying degrees of fiscal stimulus. The common perception is that growth remains sluggish because monetary policy is impotent and fiscal policy ineffectual as a result of the continuing hangover from the global financial crisis.

That may be partly true, but there may also be bigger issues driving the current economic stagnation. One is the unrelenting expansion in technology and its ability to uncut and undermine old ways of doing business. While such progress will increase efficiency and productivity, the transition period can hold back the economy in what is for many industries a zero-sum game.

The poster children of this so-called digital disruption, Uber and Airbnb, show how transport and accommodation services can be provided just as efficiently by new entrants tapping into privately held idle capacity as by existing providers (some would argue more so) and at a lower price.

These firms can enter these markets with only minor investment in capital equipment – Uber does not need to buy cars and Airbnb does not need to build hotels or apartments.

And this is the nub of digital disruption and slower economic growth. Clearly there was spare capacity in privately owned cars, which sat unused for many hours each day. So too with apartments that were empty and unable to be let out by the owners when they were not there. Uber and Airbnb have tapped this idle capacity without adding to investment, and as they take business away from taxi companies and hoteliers, the rate of economic growth is held back.

These new entrants have forced taxi and hotel businesses to cut prices in reaction to declining market share. That brings weaker formal employment and, perhaps most critically, lower wages. After all, why would drivers pay the owner of the taxi licence a high fee to drive the taxi if they can join Uber, use their own car and work whenever they want?

These huge structural changes are generally beneficial to an economy in the long run. An efficient, highly competitive and more productive economy is one in which markets deliver lower costs and a better service for consumers. They also mean strong profits for the most efficient provider of those goods and services. The old businesses must adapt or cease to exist.

In the interim, though, there are legitimate issues about regulation. If an Uber car crashes and the passenger is hurt, is the Uber driver insured? Does the Airbnb owner pay goods and services tax on the rent they receive, and income tax on their earnings? What about capital gains tax if the apartment is for income-generating purposes?

For workers, the idea of a job for life is becoming even more remote. Why not buy a snazzy little apartment and Airbnb it, and, in your spare time, drive for Uber? For people who do this, there is less need to work in a hotel for a safe and regular wage. The new style of work means people will increasingly choose their own hours. Provided the income flow is sufficient, there will be flexibility and freedom.

That is the good side.

The bad side is that you have no certainty of work. What if there is a glut of Airbnb properties and you only let yours out for a third of the year? What about your sick leave risks? Superannuation? Insurance needs? Holidays? In the old economy, with a steady job working for a reliable employer, these were taken for granted.

Already there has been a casualisation of the labour force, but digital disruption means working conditions are continuing to move from a regular job with well-defined benefits, to one where there is great flexibility but greater uncertainty. While these changes take place, economic growth is likely to be dampened, even with very stimulatory policy settings in place.

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Covid19 has opened a door for Australians to positively accept significant changes that will lead to a shared good. This rare opportunity enables us to achieve sustainable economic and social goals that create a new ‘normal’ as our way of life.

These Ten Steps are presented as non-partisan recommendations to the Australian Parliament in the firm belief that, if they embrace them, the Australian economy and society will be greatly enhanced after the Covid19 pandemic has passed.

*A job for you if you want one.
A significant increase in part time and casual employment can be created that will enable you to enjoy a more creative and peaceful lifestyle and to live longer and better. The traditional age at which you would have been expected to retire will become obsolete as a result. An access age for pension and superannuation will become your choice. This will enable you to remain in paid work for as long as you want to, on a basis that you choose, while boosting the productivity and growth of Australia.

*You will get wage increases that will be greater than your cost of living.
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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   

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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced.