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Challenges of the rapid rise of big developing economies

Comments on Michael Stutchbury “Up against a great wall”, 24/11/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/up_against_a_great_wall/

The Americans (and also most other industrialised countries included unfortunately) will have to adjust to the new world economic reality with the rise of big developing economies to increase the supply of goods and services globally.

It is reflected in cheaper labour, but can also make capital cheaper if those fast industrialising countries have high savings rates.

But the real catch is a realignment of the prices of goods and services internationally, with most prices of manufacturing goods and services that had been the main outputs of the industrialised countries to fall.

That means a reduction in the real wages of labour in the industrialised countries. This is just the results of standard trade theories.

Unfortunately, the Americans had misjudged the challenges to them and took only the good side of the cheaper capital and finances of the rise of big developing economies.

That caused their bubbles and the global financial crisis and with it the great global economic recession.

In this regard, Bergsten has been one of the very few who have a clearer mind.

All people should now rethink about the challenges and opportunities associated with the rapid rise of big developing economies.

The Americans need to live within their means, or trade assets or accumulated wealth for current consumptions, which means they can still run current account deficits, but only with greater lower future consumptions.

Resources from public services should be fully utilised for the goog of the public

Comments on Bill Shorten “Something better than a patchwork of services for the disabled”, 24/11/2009, http://www.theaustralian.com.au/news/opinion/something-better-than-a-patchwork-of-services-for-the-disabled/story-e6frg6zo-1225802514927
Shorten says:
“IF you spend a minute talking to people with disability or their families and carers, you will soon realise that the millions of Australians affected by disability are not getting the best our society could offer.
Despite the efforts of this government, the strong commitment to improvement by state governments and the quiet work of many good-hearted and capable people, the system we have is a crisis-driven patchwork of state and federal services.
It is failing to deliver for people struggling to find the aids and equipment they need to have a chance of a job, or for ageing carers who have sainthood forced on them, whether they like it or not.
I believe we are at a tipping point when it comes to disability. It's a time when the old systems are struggling to cope and when we need to look at new ways of funding the growing costs associated with disability.
The announcement made by Prime Minister Kevin Rudd last night that the Productivity Commission will carry out an inquiry into funding and delivering long-term disability care and support is a fantastic chance to rethink how we approach disability as a society.”

To best use the capacity of existing public services for better public policies is a good way of governance, a much better way than spending millions and millions on consultancies.

Public services should be given the opportunities to do so and the government irrespective which side of political persuasion should trust and respect them, as opposed to using own trusted private consultancies.

There are some unease suspicions/speculations that politicians use consultancies to reward some own mates.

The Productivity Commission has been very forthright on a number of public policies and should be commended, though sometimes it tends to be too pure in dry economics and may lack of a practical sense.


Let economic reforms and evolution do the job in China

Comments on Dan Ryan “Hu Jintao, tear down that Mao”, 17/11/2009, http://www.theaustralian.com.au/news/world/hu-jintao-tear-down-that-mao/story-e6frg6ux-1225798347631

In most cases, evolution is better than revolution. That also applies to East Europe.

Besides the China way and the East Europe way, there should be other ways that are likely better.

But it may be true that the evolution in China is slow.

However, one should not forget that China suffered a long period both domestic chaos and wars, and invasions by others before the Chinese Communists came to power in 1949. It is by no means sure that tearing down Mao too quickly would or will be good for China.

An orderly transition, starting from the economy and then gradually to other areas, may not be a bad thing for China after all. Given its size, it is not bad for the region either.

What China has been pursuing is pragmatic not ideological in that sense. One should not lose the context.


It's contradictary and it's Peter Morici again

Comments on Peter Morici “Choked by China”, 16/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/US-dollar-Australian-dollar-yuan-China-pd20091116-XU56V?OpenDocument&src=sph

Peter Morici is blaming everyone else but the US itself for the its economic problems.

US had maintained the strong dollar policy for so long, now Peter Morici is saying the following:

"China amasses huge trade surpluses that power its impressive growth, and the rest of the world suffers slower growth to compensate. An economic miracle sold to the world as policy genius but really built on currency mercantilism and beggar-thy-neighbor protectionism.

Japan has propped up its economy by purchasing dollars and permitting private investors to borrow yen at near zero interest rates and trade those for dollars-denominated Treasury securities. Now, Tokyo signals it will not let the yen drop much below 90 per dollar when a market equilibrium value would be closer to 80.

Other Asian export powerhouses have practised variants of the Chinese and Japanese currency model too. It is no wonder the dollar was so strong for so long."

Can't you have the courage to look at yourselves for your problems?

Professor Peter Morici needs to be mature enough to be logical and rational in his argument.

No wonder that US has had trade deficit problems for so long, since it had so incompetent people, such as Professor Peter Morici as its chief economist in its International Trade Commission.

US needs to rein in its deficits

Comments on Clive Crook "America's radical centre", 16/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/US-deficit-Obama-taxes-fiscal-policy-pd20091116-XTS5C?OpenDocument&src=sph

Once the economic emergency is over in the US, both the US households and government will have to start saving more.

That means higher taxes and lower consumption, and will not be easy.

But the US has to do that to be sustainable.


High consumption share not prerequisite for high growth

Comments on Alan Kohler “Why China won't save the world”, 13/11/2009, http://www.businessspectator.com.au//bs.nsf/Article/China-economy-government-democracy-pd20091113-XQRKS?OpenDocument

Alan, you should ask Arthur Kroeber to learn a bit more about economic growth. It appears that he needs that badly.

It is interesting that Arthur Kroeber is based in Beijing but does not know much about Beijing, not to mention China.

He may be a westerner to pay $US70 for a haircut, but if I go to China I could get a cut for less than $US3.

It is appalling he got it so wrong on PPP.

Second, many economists, Arthur Kroeber probably included, don't seem to have a grasp of a simple mathematics and economic growth model, especially in a developing economy where the capital stocks are much lower and need to increase many times to catch up with the developed world.

There is no economic law that requires a high share of consumption as the only model of growth.

That is a pity of economics and a pity for so many economists.

They are likely to be surprised by what can really happen in China with a low share of consumption for possibly another two decades.


Is Rudd serious about education revolution?

Comments on Michael Stutchbury “Decision betrays a lack of spine”, 12/11/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/decision_betrays_a_lack_of_spine/

Yes, where is Rudd's education revolution?

If he was serious about that revolution, he would have adopted reforms to make books cheaper.

If you want to assist local cultures including writers etc, then you can provide explicit subsidies of award for their products, while have people access to international cheap products.

This decision demonstrates yet again that the Rudd government does not have a good brain in terms of public policy.

That is a pity for them and a huge cost to the Australian public.


Gorbachev's call for leaders' action

Comments on Mikhail Gorbachev “Tear down wall blocking our future”, 9/11/2009, http://www.theaustralian.com.au/news/opinion/tear-down-wall-blocking-our-future/story-e6frg6zo-1225795880053

Mr Gorbachev is a man to be remembered as accidentally contributed to the fall of the Berlin Wall, the former USSR and the East Bloc.

He did not set out to do those, but what he did, or in another word – his remarkable failures in reforming the former USSR, was the key major factor that finally resulted those to occur.

Did that represent his poor judgment back then? The answer is most likely yes.

Now he is calling for world leaders to act on climate change.

Is his judgment right now? No one knows, for now.

But actions taken to reduce the use of fossil fuels will be good in the long run, irrespective whether emissions contribute to global warming or not, because fossil fuels are limited resources.

Why government spend and waste so much on consultancies?

Comments on TOM DUSEVIC “Labor losing war on bureaucratic waste as consultants' bill hits $450m”, 10/11/2009, http://www.theaustralian.com.au/news/labor-losing-war-on-bureaucratic-waste-as-consultants-bill-hits-450m/story-e6frg6n6-1225795930232

The spending on consultancies should be considered together with spending on public servants to have the correct context, if what Mr Moran said was to be believed, that is "Some of the growth (in spending on consultants) would be represented by the strategic use of consultants to provide particular, scarce expertise for a number of high-priority projects," and "This is a consequence of new initiatives, which require a set of skills that haven't been required by the public service in the past."

The public services have so many people, why do they have those so called "new skills"?

What is the PS for, if they can't do what the government's new initiatives require of them?

There are so many excuses for doing any silly things using taxpayers' money!


Danger of carry trade in the US

I personally know little about carry trade, but am interested in understanding it. The following article is about the potential danger of carry trade in the US as the current low interest rate there and depreciating $US. The article also mentions

See Stephen Bartholomeusz "Greed and the greenback", 5/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/US-dollar-Federal-Reserve-interest-rates-financial-pd20091105-XHA33?OpenDocument&src=sph

The following is a copy of the article:

Overnight the US Federal Reserve Board’s open market committee restated its commitment to keeping official rates at "exceptionally low levels" for an extended period, with a target range for the federal funds rate of 0 to 0.25 per cent. That promise would have been greeted with great enthusiasm by the traders in investment banks and hedge funds.
As discussed previously (
Risky business as usual, October 16) effectively the Fed is paying banks to borrow from it by keeping rates negative in real terms. That has helped swell the profits of the investment banks by enabling them to undertake relatively low-risk carry trades, borrowing from the Fed to buy government-guaranteed securities.
However, it may have done something rather more dangerous than that.
Writing in the Financial Times earlier this week, Nouriel Roubini referred to the dramatic rallies in equities, oil, energy and commodity prices since the markets bottomed in March. A combination of the Fed’s policy of a zero federal funds rate, quantitative easing and massive purchases of long-term debt instruments, he argued, was seemingly making the world safer today but creating the "mother of all carry trades and mother of all highly-leveraged global asset bubbles".
Roubini says that while the recovery in risky assets is partly driven by better economic fundamentals, and partly by the huge injections of liquidity from monetary and fiscal policies, the more important factor has been the weakness of the US dollar.
Investors were, he said, shorting the dollar to buy higher-yielding assets using lots of leverage and effectively borrowing at very negative rates – negative 10 to 20 per cent annualised – as the declining US dollar generated massive capital gains.
The problem with too-good-too-ignore carry trades is that everyone piles into them. Initially that exaggerates the gains but in the process it increases the risk of a bubble forming and of damaging and destabilising fallout when it eventually bursts.
The longer these so-called momentum trades – where the weight of money creates or amplifies trends in asset prices and attracts more money to the trade – continue, the bigger the bubble and the more potentially destructive its bursting.
At the moment borrowing in US dollars at zero or negative interest rates to invest in almost anything would appear a relatively safe play. There are good reasons for US official rates to be low and the dollar weak – the US economy itself remains weak and fragile and the legacies of the crisis should keep a lid on growth and weigh on the dollar for a very long time to come.
However, dollar-funded carry trades would be exceptionally vulnerable to any stabilisation or even modest appreciation of the dollar. That would spark an instant rush for the exit gates as traders scrambled to cover their short positions – which would in turn cause the dollar to bounce and exacerbate the squeeze on their positions.
Any material improvement in the US economy or any event that triggered the usual flight to the traditional safe haven of US treasuries could be a catalyst for massive losses and another meltdown of the financial system.
For the moment it is easy to rationalise the Fed’s position. It has, with the extraordinary measures taken to support the US financial system, helped avert an implosion in the global financial system. However, the still-parlous state of the system and the US economy says that it is too early and too risky to start unwinding those emergency settings just yet.
However, the longer they remain in place the more risk and instability is again being built up within the system and the more difficult it will be to unwind the trades without causing massive dislocations.

No case for Swan to be praised

Comments on George Megalogenis “Wayne’s tax adventure”, 6/11/2009, http://blogs.theaustralian.news.com.au/meganomics/index.php/theaustralian/comments/waynes_tax_adventure/

George, I think it is premature to praise Swan for his 10-year frame of tax reform plan.

First, we don't know whether it is a 10-year plan or not until he becomes serious after examining the final Henry Review report and decided what to do.

Second, we don't know what is in the plan or frame yet. It may be the case that there are not many real reforms in the plan.

Third, is he going to introduce a better tax reform plan? For example, both he and you mentioned tax the rich harder. Is that a good tax reform? Does that satisfy either fairness or competitiveness, two of his three principles?

So, unless you are singing praises for whatever the government does, there is no point to praise Swan at this stage.

What we do know now is that he is a disappointing Treasurer in terms of managing the budget to allow so much waste, as those identified and reported by The Australian in building the school projects, the $43 billion NBN project without a business case study.

Is he competent to deserve any praise? The answer now is not.

Is he the most incompetent federal Treasurer over the past decades? The answer now is yes.

That is why it is strange that you are singing praises for him.

Poor man.

Back to the future - manage prosperity

Comments on Glenn Stevens “Prosperity isn’t easy”, 6/11/2009, http://www.theaustralian.com.au/news/opinion/prosperity-isnt-easy/story-e6frg6zo-1225794833992

Glenn Stevens is the governor of the Reserve Bank of Australia. He starts with:
“THE issue before us is not how to get on to the road to recovery; we are already on it. The question, rather, is how to make sure that the road to recovery will connect to the road to prosperity.
Unless we are prepared to accept it has all been an incredible coincidence, we have to ask why things turned out that way.
It wasn't just that China returned quickly to growth. Equally important were other factors, including the relative strength of the financial sector, the economy's flexibility and the willingness and scope to change macro-economic policy.
Those things were not accidents. Financial resilience resulted from sensible management by financial institutions and careful regulation on the part of the prudential supervisor.”

This is by far the most objective and balanced economic analysis that I have seen in Australian "officials" and economic advisors.

I agree totally with Stevens' analysis.

The only thing that I would like to add is that beyond the normal macroeconomic policies needed to manage the next boom in our prosperity, Australia needs to pay attention to how to channel the proceeds from the prosperity to further enhance productivity and economic returns in other sectors beyond mining as well.

Only in that way, the boom in prosperity associated with mining will be long lasting and sustainable into the future.

By the way, what Stevens' first paragraph says just makes a mockery of the organisers of the meeting in Melbourne called "The road to recovery" where Stevens delivered his speech.

It is silly to think in terms of the road to recovery now in Australia. It simply ignores the reality.

Guess what? The Federal Treasurer also gave a speech at that meeting!

What a contrast!

Another high profile speaker is the chairman of the Productivity Commission. I might read his speech and might provide some comments on that too.


No doubt that the Henry tax review will be disappointing

Comments on APP report "Swan says tax review likely to be '10-year plan'", 5/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/Tax-review-likely-to-be-10-year-plan-XH55U?OpenDocument

The biggest disappointment is the limitation of the review not to touch the GST.
Politically, it may be a not too bad strategy, given the sensitivity around it.

But strategically it was not good to limit it to achieve efficiency and simplicity and fairness.

So one small restriction has a big effect to affect all three areas of the review's objective.
It means that the review is incomplete at the best. and misleading at the worst.

The restriction indicates that the Rudd government was timid and was not serious in economic and tax reforms beyond its normal spins that generally typifies the Rudd government's policy approach.

Now Swan admits that it is a ten year plan. What that means is that the Rudd government will not implement many of the recommendations.

It may have something to do with the effect of current economic crisis on government revenue and budget, but one cannot avoid the impression that the Rudd government is avoiding hard decisions, as it always does.

The main problem with the Rudd government is that it does not have the capability to deliver what the best government requires.

However, Rudd has been good at maanging public perceptions politically, until recently with the asylum seekers on board of Australian's custom ship the Oceanic Viking.

The asylum issue exposes the weakness of the Rudd government and the government fared very badly in the weekend's poll.

Would that be a turning point for the political fortune of the Rudd government? It remains to be seen,

A fair deal is more important than just a deal at Copenhagen

Comments on AAP report “Copenhagen a first step, says Garnaut”, 5/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/Copenhagen-a-first-step-says-Garnaut-XGRPF?OpenDocument

“Presenting the annual Hawke lecture in Adelaide on Wednesday, Prof Garnaut described climate change as a diabolical policy problem.”

It is disappointing to see that experts are talking about the need for all countries of substantial size to make major contributions to the solution without mentioning what is a fair deal for all countries.

It is just a strategy for rich countries to take no actions and blame developing countries for rich countries' failures.

Just think that even experts are doing this, what politicians will do?

I am aware that Garnaut has said at sometime in the future there should be a case for equal per capita entitlement of emissions. Maybe he talked about this in this lecture and the media is not interested in reporting that part.

If that is the case, Garnaut is at least thinking about a fair deal, though not for now but for the future.

Sheridan asks the impossible of the Rudd government

Comments on Greg Sheridan “Let Jakarta take the odium”, 5/11/2009, http://www.theaustralian.news.com.au/story/0,25197,26305879-5013460,00.html

Sheridan, are you saying the Indonesia solution is not the problem but the Rudd and his government's spin is the source of the current Rudd government's predicament?

But the problem for Rudd is: what else are his and his government’s strengths except spinning?

So you are asking the Rudd government to do what it is incapable to do! That is an impossible task, isn’t it?

Why do you do this, Sheridan, to just torture Rudd and his ministers?

That is even worse and more inhumane to the Rudd government than the Indonesia solution, isn't it?

Is Tanner kidding on reform?

Comments on Lindsay Tanner “Reforms are micro more than macro”, 5/11/2009, http://www.theaustralian.news.com.au/story/0,25197,26305877-5015664,00.html

Mr Tanner, you say:
"The most far-reaching and challenging micro-economic reform process that's under way is of course in telecommunications. The government's national broadband network project is half of a wider reform agenda in telecommunications. The other half is regulatory reform.
The Rudd government inherited a terrible stalemate in telecommunications: a private company that completely dominates the sector through its control of monopoly infrastructure; a complex regulatory regime that encourages gaming and discourages innovation and investment; and broadband outcomes well behind most comparable nations.
Regulatory reform and infrastructure investment are inextricably connected. The government is committed to ensuring Australia has world-class infrastructure that is accessible to all market participants on equal terms. Under the Howard government private monopoly model, this couldn't happen. In the modern economy, telecommunications services are of similar importance to financial services. The notion that we should tolerate third-rate arrangements is unacceptable. Most of the critics of the government's proposals would regard themselves as supporters of the free market, but they are somehow unable to address the need for genuine competition in telecommunications."

Either you have got the fact wrong or the Rudd government has been seriously and deliberately misleading the Australian public.

Hasn't the Rudd government say the NBN Co will be privatised after the net work is built sometime in the future? If it is a private company, isn't it still a monopoly in communication infrastructure in Australia?

Further, you say the current reform is about productivity, skills, education, deregulations etc. Will any reform by government involving a $43 billion infrastructure project without a prior business study and cost benefit analysis necessarily conducive to productivity? Is any investment in education involving asking schools to almost compulsorily guild school halls and libraries with or without the need, or with other more needy and worthy areas left unattended good for enhancing skills or improving the quality of education?

Is what you say "micro" micro-managing?

I beg you to answer these questions before he and the government spin around the country every day.


Is climate change another misunderstanding or hoax like the Y2K?

I personally don't have any scientific knowledge to judge whether climate change is happening and will follow those who claim that it would.

The overwhelming view is that it is happening and the consequences can be extremely serious and catastrophic.

But there are a very small minority who re saying otherwise.

Janet Albrechtsen's article presents one professor's view and evidence on sea levels for the last 2000 years that shows no rise in the sea levels over the past decades.

Is that true? I don't know. But if it is, then there are questions that have to be answered for climate change theories.

I would like to keep this article for reference. Here it is:

Janet Albrechtsen "Seeing through hoax of the century", 4/11/2009, http://blogs.theaustralian.news.com.au/janetalbrechtsen/index.php/theaustralian/comments/seeing_through_hoax_of_the_century/

Housing costs and home ownership in Australia - what is the main reason?

Comments on Robert Gottliebsen “End of the Australian dream”, 4/11/2009, http://www.businessspectator.com.au//bs.nsf/Article/house-prices-RBA-interest-rates-hike-pd20091104-XFQY5?OpenDocument

While there is some truth to the story that the housing price may go up as both the costs of construction and the number of investors may rise, it is a far too one-sided story.

Any builders cannot expect that the interest rate will stay as low as they are now. So the rise of interest rate may increase construction costs, builders should be able to absorb higher interest costs.

The argument by some builders or their representatives are nothing less than a self-interested lobby by a special interest group.

Further, how much of the high prices or costs of housing are due to interest costs in construction in Australia?

Why don't builders put pressure on government, both federal and state to lower the costs of their planning and administration that seem to be one of the main reason of higher housing price and short supply in Australia?

Any knee-jerking reaction by the federal government on the interest cost deductibility is short-sighted. That is policy on the run. It may have an effect to dampen price of housing, but will increase the rentals for many renters.

Government has to treat investment in a fair and equal manner in terms of cost deductibility and taxation. It is a wider issue than just the interest cost deductibility for investors in housing properties.

Zhang Wuchang versus Krugman - monetary policy and exchange rate

The following is a link to my comments on Zhang Wuchang's blog or article:


Zhang is a famous economist in Hong Kong and China. Krugman is a Nobel Prize laureate in economics.

But they differ dramatically in their policy approach, apart from their possibly “country biases”.

Divergence between the monetary and fiscal policies in Australia

Comments on Michael Stutchbury “Swan remains a pessimist”, 4/11/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/swan_remains_a_pessimist/

Stutchbury starts with the following:
“AUSTRALIA is leading the Group of 20 nations in lifting interest rates because the Reserve Bank is more optimistic on the economy than Wayne Swan and his Treasury bureaucrats are.
Swan and the Treasury won’t wind back their budget stimulus quicker than scheduled because they are more pessimistic about the economy than the Reserve Bank is.
Reserve Bank governor Glenn Stevens says the risk of a serious economic contraction has passed. The Treasurer and Treasury secretary Ken Henry maintain the economy remains vulnerable to significant setbacks. ”

Bearing in mind the different role in macroeconomic policies Henry and Stevens play, I would tend to agree with the more independent governor Stevens for RBA's estimate of the economy than the much less independent Treasury secretary Henry and its Treasury estimate, even without applying any of my own judgement.

Henry is also at risk of being seen as part of “interest group”, given that the budget estimate was done by Treasury and him. This is beyond the perception that he and the Treasury have possibly become partisan and got too close to the government.


Phelps on economic opposites - Keynesian and neoclassical

Edmund Phelps is a outstanding economist and has contributed to the expectations theories. His analysis of intertemporal tradeoffs in macroeconomic policy is the prime reason for his Nobel Prize in economics.

He has a comments on what he calls the economic opposites: Keynesian economics and the neoclassical equilibrium theory.

He says: "In the theory wars, which are as much wars over policy choices, two very bad kinds of theories are driving out good theories."

One very interesting point Phelps makes is about the cause of the great financial crisis:

"The most profound fallacy is the newfangled idea that misalignment of incentives in banks caused the housing bubble – a bubble that, when it burst, shook the economy to its foundations. All can agree that increased lending and building ran into the awkward fact that costs increase when production is stepped up. On that account, prices sought a higher level. But that analysis does not capture the steep four-year climb in housing prices, which rose by more than 60 per cent.
To account for so large an increase, we have to recognise that expectations played a role. Speculators appear to have expected that housing prices would go sky-high, so prices took off and then went on climbing in anticipation that those high prices were getting closer. The banks, seeing the houses offered as collateral were worth more and more, responded by supplying an increasing flow of mortgage loans.
From this viewpoint, speculation drove the crisis. Misaligned incentives were not sufficient to do it – and not necessary either. Bubbles long predate bonuses. The crisis could have happened with a 1950s financial sector. The lesson the crisis teaches, though it is not yet grasped, is that there is no magic in the market: the expectations underlying asset prices cannot be “rational” relative to some known and agreed model since there is no such model."

See Edmund Phelps "A fruitless clash of economic opposites", 2/11/2009, http://www.ft.com/cms/s/0/f71cfc6a-c7e6-11de-8ba8-00144feab49a.html


Opposition voices are important for stronger democracy

Comments on Alan Kohler “Treading the boards”, 2/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/Treading-the-boards-pd20091102-XDR5A?OpenDocument&src=sph

Alan, maybe it should be like this in politics for useful democracy and having the government of the day accountable.

The voice of opposition is important. It presents a different perspective.

Just think for a moment that how much the Rudd government relies on spin, then it is not difficult for anyone to come to the point that without effective opposition to hold the government accountable will lead to extremely bad government.

The past two years have seen billions of taxpayers’ money being wasted and the opposition has been ineffective.

That is the price Australians have paid for inefficient government and ineffectual opposition.

We need stronger democracy. We need stronger opposition to make the government more efficient.

As for the life of politicians after politics, it is a matter for them and those who have the power to make decisions.

RBA is not responsible for housing undersupply

Comments on Robert Gottliebsen “Rate rises may backfire”, 2/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/Cup-Day-deliberations-pd20091102-XDRU7?OpenDocument&src=sph

Robert, both you and Triguboff have got it wrong on this issue. The RBA is charged with price stability and now also has to take asset prices into account in fulfilling their duties.

Yes, faster rate rises will dampen construction and have a n negative effect on supply of housing in the media term. But that does not mean that the RBA should not act to combat price rises.

The undersupply of housing in the past decades has had its multiple reasons, and interest rate has been the least of them.

To overcome undersupply, those prime reasons, like government bottlenecks in planning and land release, red-tapes and etc have to be tackled. That is a fundamental principle of economics and public policy.

Restricting the RBA's hand is no solution to housing shortage and is a wrong approach to fixing it.