Peter Morici, while recognising some
roles of the trade, has failed fundamentally and miserably to grasps
some of the most important fundamental implications of trade, that
is, income/wage equalisation.
Until he properly takes that into
account, he will not be able to come up with useful and practical
He has always tended to blame the
emerging economies, their governments for Americans' problems.
Unfortunately that only shows his
failures in intellectual, even though he is a professor and was the
chief economist of US trade commission some times ago.
That is also a fundamental problem with
most US elites that has been at the root of the problems US has been
faced, even though the $US and the largest economy status have
afforded it with unparalleled advantages over other countries.
One of them is copied below, public debts and budget deficits:
I provided the following comment:
Alan, do you also have data for household' wealth?
From that and the chart for household debt, a chart for net debt could be built.
Then combined with household income data, a chart of net debt and income ratio of household could be constructed.
Both charts may be informational too.
While it is ideally good that governments run balanced budgets, is there a point of process optimisation that may give rise to budget deficits and surplus in some years?
While monetary policy has been argued by many economists to be used as the macroeconomic policy tool to regulate the economy, haven't we already seen that monetary policy has its limitation as well, especially during the GFC 1, where interest rates were at or near 0 and economies were still struggling even with strong fiscal stimulus in the US and Europe?
Why do some economists only think along a particular line of thought with little regard to the reality and to whether it is working or not?
Besides, how can the traditional monetary policy along to deal with the two speed or patch work economy as Australia has witnessed with mining booms?
I think this is a very important piece of analysis with objectivity as opposed to ideology and Professor Breslin should be highly commended for that.
I am particularly and deeply impressed by the argument that the process of the Chinese economic development in the last 3 decades has been experimental as opposed to a grand design, a gradual reformist process as opposed to big bang theoretical approach, a process of seeking what works as opposed to following blindly textbook economics.
In that respect, the criticism of its relying too heavily on exports and investment could perhaps be put into a proper perspective and an appropriate place. That is, it worked at that time/stage, as opposed to a theoretically well balanced model that could be applied all stages of economic development.
That point of view is in essence no difference to an argument that most industrialised economies are post industry/manufacturing and they had a imbalanced economy in their industrialisation stage that they should not have had!
Isn't that a nonsense?
PS: the link of the Chinese economic development of the past 3 decades to the East Asian developmental models is very useful, especially in light of the experimental nature of the Chinese development process and the history of rapid growth of some East Asian economies prior to the Chinese process.
Comments on Amritha Thiyagarajan “Global climate financing must face greater scrutiny”, 13/12/2011,http://www.eastasiaforum.org/2011/12/13/global-climate-financing-must-face-greater-scrutiny/#more-23391 While the issue is obviously an important one, does Australia offer transparency in its criteria used in determining which countries and which areas should the funding be used, or should Australia hand over the funding to an UN agency to determine more fairly according to international standard, so there is accountability on both sides?
Comments on Scott Prasser “Private schools a public good“ 22/12/2011,http://www.theaustralian.com.au/national-affairs/opinion/private-schools-a-public-good/story-e6frgd0x-1226227945644 While Prasser made a god point in terms of the differences in the share of public/non-public students when criticising the AEU's claim that the share of public school funding in Australia is lower than the OECD average, he, however, has not made a more comparable comparison along the line of the AEU's argument and that is a bit of pity in terms of information and the debate of education funding in Australia. Presumably, it is possible to get a figure of government funding per student for public schools versus government funding per student for non-public schools. By using that ratio one can compare the relative funding of government for public school versus non-public schools with other countries. One has to wonder why didn’t the professor present such figures? Prasser argues that “The Gonski review is a lost opportunity to shift the school funding debate into an informed discussion of policies.” Hasn’t he lost a good opportunity to inform the debate?
PS: a compromise deal could be that a garranteed fixed proportion of funding per government student for non-government school student. If there is a need to make a difference between Catholic and private schools, then a higher proportion for the former could be more appropriate.
In the short to media term, the stability in the relation cross the Taiwan strait will be good for every party involved, including both sides of the strait, the US, as well as the DPP.
In the long term, it would be conceivable to establish a new special structure for the eventual political unification of the two sides of the strait.
Deng Xioping was said to have stated that a structure more loose than the "one country, two systems" structure that has been applied to both Honk Kong and Macao, including Taiwan has its own military system etc.
I personally think that a special political name for reference to Taiwan, such as Taiwan特州(洲)(special state), to differentiate from the “Special Administration Region” used for both Honk Kong and Macao.
In China's long history, there were periods when 州 was used as a region within China, so the use of this Chinese character may be acceptable to the Chinese, especially as a compromise between the two sides of the Taiwan Strait. 洲 could also be used, given that Taiwan is an big island, surrounded by water, hence the left part of the character.
If such a political structure or system were to be adopted, China would have several different special regions, including Taiwan as the most special one, then Hong Kong and Macao, then minority ethnic autonomous regions, special directly administered municipalities, beside the many provinces.
As long as Taiwan is unified with the mainland and both work for win-win outcome to benefit both, then Taiwan can be expected to have much broader international space.
Comments on Philip Stephens “A clean sweep of political disillusion”, 17/12/2011, http://www.businessspectator.com.au/bs.nsf/Article/Arab-Spring-Middle-East-democracy-euro-debt-crisis-pd20111216-PL2EU?OpenDocument&src=sph&src=rot
I think the point is clear, that no political system is perfect.
There is, however, a strong advantage in democratic political system to have the choice to mask its failures while dictatorship and authoritarian systems can't if the people have the ability to part with their systems.
In a democratic system, if a government fails then it may be voted out of office and replaced with a different government whether the new government is better or not is another question.
That is the way and a success way to mask failures of the system if it doesn't work.
In a dictatorship system, people may think a change of the system will solve all problems, so they can bring revolutions to overthrow the system. Again, whether the new system will be better in solving those problems or not is a totally different question.
While Rudd had his shortcomings during his prime ministership, Gillard has shown a remarkable lack of strategic leadership skills and sound judgement.
At the time when Gillard got the prime ministership from Rudd, many were hoping that she would continue her good standing that had been observed before that time.
And there were enormous good wishes from many people for the first female prime minister good and well.
So far, those people have been hugely disappointed by her dismal performance.
Gillard has let so many good wishing people down.
The tribunal has performed some of the worst acts in recent times, first was the statuary appointees, high level bureaucrats and now is the politicians, with increases in their pay by as much as 63% in the above case and possibly more.
One has to wonder whether its doing affect the pay of the top persons at the tribunal or not, presumably they are part of the beneficiaries of these deals.
Does the tribunal work with any budgetary constraints in its mind when they give so large pay rises to those people, as the government asks for 4% efficiency dividend from the Australian public services?
Presumably there is no budgetary constraints at all to the tribunal.
This is a highly unsatisfactory situation and it mus be changed or stopped!
Although what you said is true, there is, however, a clear and big difference between the visible part and the less visible part of emissions.
What you said is probably and largely the visible part of population like air quality and what quality. Those problems have largely been resolved in most developed countries.
The current issue that both Kyoto and ever since has been more focused on the less visible part of carbon dioxide that is said to cause global warming.
So, for China and many developing countries there are "double" tasks, one is to deal with the visible and local part, as sometimes shown on TV reports even by developed world such as in Australia about the air population in China, and the other is for the carbon dioxide.
Arguably, the first task has more rapid and localised effect on their people and countries.
It is not a bad idea to seek a legal framework to resolve the South China Sea dispute, although some may fear that whether the existing international legal system or parts of it is biased or influenced by some unfairly.
If the States involved agree it is the best way to move forward, perhaps they should set themselves a sunset clause or deadline, by that time they will move to an agreed international legal framework should the disputes still not resolved through the current precesses.
PS: there are maybe a need for a new international legal frame work to balance the existing ones and legitimate issues of fairness, should any of such issues exist.
Grenville has made excellent suggestions on this vital issue at the core of international and world economic and financial stability or instability/crisis.
The close inherent economic integration of the Asian region and the recent experience of its "parity maintenance" and the experience of the euro do provide essential lessons for a better future ahead, should the relevant/related countries decide to take active steps to strengthen or establish a mechanism to prevent or mitigate future financial crisis from the region point of view.
It may further provide a direction for a whole international structure or system to achieve the same objective for the world as a whole.
I think it would be beneficial to have another cut in rates.
In a world full of uncertainties including possible an another financial/banking crisis, and with inflation not out of control, as well as relatively low activities everywhere except mining, Australia can afford to lower its official interest rates to benefit consumers as well as most businesses.
A good monetary policy is to balance the benefits and costs of inflation control, so the national welfare can be maximised.
I am not sure the current policy setting meets that criterion.
Leaving the real motivations of China's push for internationalisation of the RMB aside, there are alternatives to internationalisation of the RMB for avoiding or at least mitigating the potential huge losses for China associated with a rapid currency appreciation.
Beside considerations and argument based on the effects of RMB appreciation on both China's and indeed regional economies in terms of jobs and production of manufacturing, China could and should mount an argument to those parties that argue for a rapid appreciation that those countries must allow any assets China holds in any other currencies against which the RMB would appreciate to be denominated in dual currencies, that is, both their and China's currencies.
If any of them refuses to do that, it would be hypocrite of them by asking China to make a huge loss in terms of its assets holding in those other currencies.
However, one may suspect that internationalisation of the RMB might have other more important effects as the Chinese economy becomes even larger and transaction costs of international trade and FDI become more significant.
I have no idea about the reality and more Importantly the prospect of the renminbi’s internationalisation, but one may be totally surprised or even shocked if the pace accelerates rapidly to an unprecedented speed.
Just as the rapid rise of the Chinese economy along with its international trade, it is entirely possible that the renminbi’s internationalisation may be even fast once China realise its benefits greatly outweigh its costs.
In theory, internationalise a currency should be easier than rapidly increase a country's share in international trade, given the fact currency similar to monetary adjustment can be instantaneous, while trade or the real economy would move rather slowly, as demonstrated by the famous exchange rate overshooting and the simple IS-LM curve macroeconomic framework.
As I have pointed out somewhere else, an orderly exit from the euro of some troubled members and allow them to have their own currencies and set fixed exchange rates to the euro, so they can have effective depreciations instead of deflation and so much painful adjustments.
Fixed exchange rates with the euro are to prevent what the Asia financial crisis from happening in the euro zone.
European leaders should realise that to keep the vanity of existing euro is costly, and more creative thinking is required to minimise the costs of adjustments.
The sooner they let this happen the better off they and the world will.
Comments on Christopher Findlay "European debt crisis: European fragmentation?" 6/11/2011, http://www.eastasiaforum.org/2011/11/06/european-debt-crisis-european-fragmentation/
Most mainstream economists and politicians tend to think in a flexible exchange rate regime as the best and that can sometimes become a barrier to creative thinking.
In the current situation, for example, Greece could exit the euro and start using a new national currency withou destined to dwonward currency spiral if it pegs to the euro with a certain and appropriate own currency real depreciation.
I don’t see it would be inevitable for what occurred in the Asian financial crisis in 1997 to repeat if Greece, or any small number of existing eurozone countries exit the euro.
A dual and pegged currency in the current eurozone would present a sensible adjustment from the current effectively fixed exchange rate equivalent from 1 to 1 to a x to 1. Essentially it would create a much more flexible adjustment mechanism without necessarily introducing increased risks.
Even from the mainstream economics point of view, it is not a retreat from its current state of euro to a worse regime!
Why don’t economists think in this way?
It is interesting that both official and market interest rates in Australia are much much higher than in most advanced economies.
While one might argue that our economy is also much better than theirs, simply doing it masks a difficult policy questions. That question is: how can monetary and fiscal policies be more closely coordinated, as generally implied in economics textbooks, to achieve better and most desirable results.
I think fiscal policy should do much more to encourage people to work in regions and areas where labour shortage are the most severe, such as the fast lane areas of the so called 2 speed economy.
Taxation policy should be adjusted to do the job to give people more incentives to work in those region and areas.
Fiscal policy can be more flexible to target regions and industries sectors, while leaving the monetary policy to accommodate the whole economy.
I think there is a need to establish a national economic policy commission, so it can recommend to the government and the RBA on the best mix of the monetary and fiscal policies to achieve the best national outcomes and to benefit the consumers more, such as lower interest burdens on mortgages and other borrowings.
China is in a much better position to weather another downturn in many of the world's advanced economies.
There are a number of reasons for such optimism about the Chinese economy. Firstly, its central government debt is much more manageable compared to many of the advanced economies.
Secondly, the Chinese government has a higher degree of control of its economy, largely as a legacy of its incomplete transition from its past planned economy.
Thirdly, it's domestic demand is large and there is considerable room to invest in infrastructure and housing due to its urbanisation process.
Fourthly, while another downturn in the advanced economies would reduce their aggregate external demand for each of them, it does not necessarily mean China's exports to them as a whole will be reduced to the same degree. To the contrary, China's exports may replace some of the trade between those economies including some of their domestic outputs.
So if one really understands the Chinese economy and its dynamics including its experience from the last GFC, one will certainly be optimistic about its growth over the next decade or so.
However, a good growth may not necessarily mean more growth in demand for raw materials over the next decade at the same speed as in the past decade or so.
The "material intensity" of the Chinese economy is likely to fall gradually at first and then more rapidly in a few years' time.
That is determined simply by its stage of economic development.
I think a better solution for Europe is that certain countries leave the euro but still remain in EU and receive some help from EU with the flexibility of own currency and monetary policy.
The claim of EU disintegration is overdone, although it is better for some euro members to leave to make their adjustments less painful and more effective and efficient.
In terms of the sustainability of the Chinese economy, one needs to understand stages of economic development and changes in economic structure along the path of development, especially rapid catching up.
It is just like a person grows in weight and height before maturity.
In that analogue, it is correct to say that growth in weight and height is not sustainable in the long term, but very few people would say it and would feel it laughable if someone says
If one understands that analogue, one would not be too fixated on using the sustainability argument, especially when it is combined with in the long term!
I think Qantas and its CEO Joyce may be prudent to be a little more tactical in its dealing with its employees and the unions.
While many people probably don't the exact details of the disputes and the negotiations between the two sides, but on TV at least the unions have shown some flexibility in deferring their industrial actions, but each time it seemed that Qantas spokeswoman showed a very hardline attitude that hardly has been tactical, or win the sympathy of the public.
While it may be ideal to have a good social welfare system, China cannot afford moving away from high economic growth any time soon.
There will be a stage for China to move from the current state of low, unequal and incomplete of welfare to a state of comparable social welfare to most other countries, but it relies heavily on its high economic growth to address many of its urgent tasks.
Clearly there are some who would feel as victims of increasing inequality, a slower growth may generate its own problems.
If a tax reform in Australia would require government revenue available to compensate the losers, China's high economic growth has a similar role to address many social problems. Without adequate growth prematurely before its income becomes largely comparable to middle to high income countries, the Chinese government would face the issue of the legitimacy of its one party rule.
This issue will be especially important when the Chinese society has increasingly lost historical and cultural heritages and in need of seeking a new national culture.
The Chinese government needs to lead in this endeavour, otherwise people would move ahead of it.
Paul, you have really missed the most important point when you say the following: "These events reveal a failure of Australia's system of government. One of the cardinal responsibilities of any Australian government is to protect the borders, and every PM since
Federation has been a border protectionist.
That responsibility has now been compromised, and the consequences will be severe. Gillard can be rightly accused of poor tactics, but her offshore policy has been destroyed by forces beyond her control -- the High Court, Abbott and the Greens."
And that is, the prime minister has lacked the political leadership skills required to lead on difficult issues and in difficult times.
If she can boast the pass of the carbon tax legislations, she should have the courage to confront her own shortcomings and work on it.
That is the key to her problems.
The piece by Niki Savva yesterday on the prime minister, though a bit harsh, had nevertheless some excellent points.
PS: Whichever political persuade is in government it is its duty and responsibility to govern and to protect the border.
If it can't do it beyond its own ability, it should seek a fresh mandate from the voters.
That is the simplest way of the current Australian government system.
If and when Attott is the leader of government, if and when he can't get its own border protection policy, he clear should call a double resolution of parliament and get a fresh mandate. He should be expected to do so if and when it becomes necessary.
Rudd has the experience to defeat the most skilful political opponent in the last decade and a half, that is the former prime minister John Howard, and rally the public, no matter it was
false appearance or not.
Abbott, while often underestimated by many for his powerful political leadership skills, may not be as effective as he has been to undermine Gillard's prime ministerial leadership, even though Rudd was deposed shortly after Abbott became the opposition leader. Rudd's demise from the previous prime ministership was his own unfortunate political skills towards his own caucus colleagues, and nothing more than that.
He should have learnt enough from the last political episodes, including the key shortcomings and failures such as overpitch of the climate change issues and his back away from the ETS after those kitchen cabinet colleagues advised him to do so, as well as his unfortunate role in the RSPT and his ill treatment of his colleagues.
He may be still revengeful, but he will be much more skilful next time.
And that is the hope the federal ALP can get if they act to ensure the leadership change is seen as natural and smooth and not as treacherous and bloody.
They will realise that and take necessary actions, no matter how painful they may be for some of them, especially those who played key roles in the removal of Rudd the last time. Self interest will dictate their actions, or rather inaction to oppose such a change in
leadership from the current one to Rudd.
I’d bet that is more likely than not to happen.
It would be interesting to see if the coalition will also need to change should Rudd become the prime minister again.
The proceeds from the carbon tax should not simply be taken as a government revenue source as such, instead, it should be ideally completely neutral to the government. The main reason is that the purpose of a carbon tax is not to raise revenue per se, but to use it as a price signal to reduce carbon emissions. Treating the carbon tax as a revenue source just simply confuses the end with means and loses the public support for a carbon tax even further and makes it politically less feasible.
The proceeds from any carbon tax should be returned to the Australian residents who have the rights to a good and/or better climate. Only when it is done exclusively, explicitly and completely transparently for the purpose of emission mitigation that it will be most efficiently and effectively with the support of the majority of the Australian public.
Further, whether rescuing the manufacturing is the right course or not, needs a careful study and objective debate to be resolved. It is another matter entirely.
While there are complaints of China's export restrictions on rare earth minerals, most do not show the impact on prices of those minerals. It would be useful to include price information in such discussions.
I am not familiar with the situation of rare earth mineral deposits, production and supplies in both China and in the world. I think if China produces 97% of world supplies, a fair rule for China to play should be index the prices of rare earth minerals with other international minerals and metal prices and imposes some sort of royalties based on such indexation.
Australia is an introducing mineral resources rent tax on some minerals, following the failure of an earlier attempt by the Rudd government to introduce a mining super profit tax.
Arguably, there are some differences between China and Australia in terms of the ownership of minerals (more broadly the land). Private ownership of land is not as significant in China as in Australia. The Chinese government arguably has stronger legal authority to impose a mineral rent tax based on the ownership status.
Once the mineral rent issue is resolved, China should not impose export quotas, so both Chinese and non-Chinese customers of rare earth will face the same price.
Of course, China can take additional measures based on environmental concerns, but that should be done on the non-discriminatory basis, that is, not targeting trade.
No matter how much cynicism, it is well justified.
When the 2020 summit was held, the Rudd government was very strong and popular. But how many of the ideas from that summit have been actioned?
Back to now, the Gillard government was a minority government and deeply unpopular. Besides, there is the Henry taxation review report with the government for nearly two years. So, what can one really and seriously expect from this taxation forum?
Now back to your argument about lower tax rate to raise more tax revenue. It is not too dissimilar to the already tried and failed Reagan experiment in the US based on the Laffer curve idea. Hoping it will work in the Australian context is more likely to be akin to wishful thinking.
One of your proposals is to blame the states for the green energy measures they have introduced, without mentioning federal failures in this area,such as the pink batts program. That also means your argument that the GST is not raised by the states and hence they don't have incentives to contain their expenditures is empty.
Your suggestion of increasing the efficiency dividend from the APS is more like an insult to many APS employees who work very hard but their pay increase cannot even match the inflation. It is so easy for you gays to say to increase the efficiency dividend! Why don't you say to increase tax on business profit to provide revenue for services?
The problem for Labor is that the longer Gillard hangs on the more unpopular it gets and the bigger its electoral loss in the next election.
Gillard should swallow her personal ego and be wise enough to accept and acknowledge her problem is unsolvable and pass the leadership to another person, presumably the one who has the best chance to win the next election. She would serve the ALP and herself a big favour if she did just that, the sooner the better.
An voluntary and orderly change in the ALP leadership would be the best for ALP, certainly much better than another leadership change forced by its parliamentary caucus.
Now it appears that that person may be Rudd or Smith. Neither of them may guarantee an election victory, but either of them is infinitely more electable than the current one, if the polls are a rough guide.
There are two potential problems for Rudd should he be returned to the Prime Ministership.
Firstly, whether he has changed enough to get the ALP federal caucus on his side and united in governing. He may have learnt his lessons from his lost of that leadership, but it is unclear whether his own character has afforded him enough self reflection.
Secondly, the three problems Gillard said would be hers priority to fix, namely mining tax, border protection/boat arrivals and climate change, are likely to continue to hunt Rudd, even though he may choose new strategies by saying that he would seek mandate on them from an election.
Yes, the gambling/poker machine issue may not be a serious one for him.
However, when an election is on, voters may get serious on Rudd and change attitude from a honey moon period one towards Rudd. The question is whether the sympathy toward him for his treatment by the ALP federal caucus would be enough to warrant them to vote him back into prime minister.
There is a need for both shorter and longer term plans. A short term plan could be a euro bond that has differential costs to different countries when they use it. The costs should be lower than a higher risk country's own bond implies but higher or lower than the costs of the euro bond. How much higher or lower should be determined by the member countries collectively.
A differential design imposes a real cost to those countries that have taken too much risks or ill disciplined fiscally that contributed to their current fiscal predicaments.
It will provide a solution to those countries risking of default with lower cost of financing.
It will also lower the costs of those other countries that bail out those high risk countries.
Politically it would be beneficial for both debt and credit countries within the euro zone.
A longer term plan could be further strengthening the original requirement by the euro constitution/agreement.
A really long term or permanent plan is fiscal integration. But it will take time for the conditions to be right.
A major weakness of and indeed a serious problem with this analysis and the reforms is that most of European economies are in deep troubles too at the moment.
Secondly, what do some of the proposals mean for the two government owned lenders in terms of their profitability and solvency?
Further, while it is true that investment in aged infrastructure can be profitable and productive, the US government does not have the capacity to do it because of its very high levels of debts. It has to rely on the private sector to invest and that would require privatisation that would take time and whether it is now politically viable or not remains an open question, although in the medium and long run it is inevitably required to do so.
While the core point Paul Kelly has made that the ALP needs to reflect and change is obviously correct, his argument that a change in leadership does not do the job may not be so correct.
A change in leadership, say back to Rudd, can work if the new leader is determined to change and can bring about that change. Otherwise, a mere change in leadership will not work, as Paul has put it elegantly.
Rudd, if he has learnt the lessons why and how he lost the leadership, is the best person to do just that. He has the quality to bring the public with him and be popular with the voters, although what he would really also need to do is to add real substance to policy and achieve hard results.
With that quality, he would be in a position to push changes of the ALP culture. Of course he would need to work collegiately with the caucus colleagues to achieve it.
While Loosley's argument may apparently have some logic based on his own reasoning of logic, his logic is illogical overwhelmingly.
Some commentators already commented on some of his illogicality, one important point deserves more analysis - that is, why shouldn't Australia build its own nuclear power stations, given the need to deal with climate change and reduce carbon emissions, as well as the facts that Australia has large production and reserves of uranium and that Australia is geologically very stable and much more stable in most countries that already have nuclear power generations?
Loosley completely ignored this much more important issues related to Australia's uranium and instead focused on a secondary issue instead shows his distorted logic, not too different from the ALP antiquated nuclear policy re export of uranium to India he labelled and argued against.
Loosley could do ALP and the nation a positive service should he approach the nuclear issue rationally and logically, the same s his call for the ALP to be logical and catching up with time.
comments on Cao Xin "China: The question of income distribution", 28/08/2011, http://www.eastasiaforum.org/2011/08/27/the-question-of-income-distribution/
I need to state that I am not an expert on income distribution both on time series and on cross countries. I was wondering, however, whether economic/income growth should be taken into account to judge income distribution in terms of Gini coefficients.
When two economies are having very different growths, the same level or change in their Gini coefficients may have different implications for the disadvantaged in their respective nations/peoples.
This could be a very interesting empirical research topic to see if growth has an impact or not.
I think the article by Zhao Boying, China's Road, is revealing in terms of China's gradual evolutionary reforms and development, in many areas.
While there was a broad consensus for reforms in the early days of reforms, China did not have a big bang design of reforms. It was one step at a time and some times there were back and forth, reflecting the fundamental guiding line of "touching stones to cross the river".
Inevitably, there were many unexpected results and outcomes that needed fixing. Government finance and services have not been exceptions.
Also, to get the whole system reformed/changed, the idea of allowing some to get rich first, seemed to also have a regional dimension as well as people dimension
China's reforming process is far from over and will be a long one. The gradual evolutionary approach has had its shortcomings, but has also achieved huge successes, especially compared to the former USSR and many eastern European countries.
If China can continue this evolutionary approach, but at the same time recognise the fact that as reforms proceed further and further, more experiences are accumulated and also where and how to get to the end point is becoming clearer and clearer, more systematic designs may be possible and could be implemented.
An election is due for good reasons. It will end an incompetent government that is further compromised by its alliance with the Greens and also heavily influenced by the independents so one person can have hugely disproportionate influence to make the system very poorly governed.
While the opposition has not outlined a comprehensive policy setting, the current government has shown its wasteful character and poor policy making and governing.
So, one is known to be poor and the other is potentially unknown poor but also potentially better.
In such circumstances, I think the majority of voters are likely to see a change of government.
There might be some tears in the minority of voters, but it will be good for the nation should an election be had sooner rather than later.
It is not a perfect world and it is unreasonable to expect the opposition be perfect.
One has to choose the lesser between two devils. On balance, the opposition seems a better bet.
Yes, it is the government's misjudgement and mismanagement that exacerbate the current manufacturing problems. However, I would attribute the bulk of the government's problems to the Treasurer Mr Swan.
Many of the government's problems are economic problems that are inherently Treasurer's main responsibility.
Rudd's mining tax problem, and the corporate tax relief problem and Gillard's carbon tax problem, they can all be related to Swan's poor judgements and poor management of economic policies.
Needless to say, Swan played a very poor role in Rudd's disposal.
John Deeble, though architect of Medicare, is using arguments that are out of date and out of appropriate context.
The argument of the "capacity to pay principle" is misleading at best. One should not ignore the fact that the private health insurance has been forced to many people by government and is not their own voluntary choices.
Even taking the point of Deeble's equity argument, there should be at most a ceiling of subsidy to a family, adjusted by the number of people in a household covered by the insurance.
On the contrary, Deeble simply spreads and propagates the government' point of view and argument that is neither equitable nor fair by any reasonable standard.
His thinking of Medicare principle should have moved on to beyond simple equity measurement and realise and acknowledge the fact that higher income people contribute to a higher share of Medicare contribution per person and in return to receive the same medical services from public hospitals.
The proposed reform by the government masks its out of date ideology and targets many people unfairly just like the payments related to its proposed carbon tax that ignores the fundamental rights of everyone equally to a better environment and is used by the government for income redistribution purpose that is appalling and should not be passed to law.
Well, there should be some risk premium to be paid by higher risk members to lower risk members to reflect different levels of sovereign risks among the euro members, and as a measure of discipline for any careless and or imprudent policies by certain members.
It would also alleviate the concerns of lower risk and more prudent members, and as a reward or as a guarantee to them so that they will not completely sacrifice themselves for any imprudent members.
Of course, the premium paid by any member should be smaller than what it could get from capital markets for the mechanism to work effectively and in every member's interests.
What Gillard said might work in the very long run, but she and her government have not demonstrated how to make up for short to medium runs of their strategy to work.
The problem is that the short to medium runs are crucial for the nation and for a government, particularly so when it has been struggling enormously already.
Inevitably Gillard and her government are going to fail in designing a workable strategy and a set of policies to survive long enough of the short to medium runs.
Her alliance with the Greens means it is impossible for her to be flexible enough on the carbon tax to make it work effectively and to the best of our national interests.
Gillard has also swung the IR system too much into the area of inflexibility.
The political need for her government to show it is able to produce a budget surplus means there will not enough investment in productivity and critical infrastructure, especially in the context of the huge investment used for the NBN.
Low productivity growth will make impossible to deal with the adverse impact of the mining boom on most other sectors effectively.
Unfortunately for her, Australians on longer have any patience with Gillard and her government. And that will be fatal for her government.
It is political impossibility. What she is saying is likely to be perceived as stubbornness and silly political rhetoric of a person out of touch and with ignorance.
While the argument that size matters is reasonable enough, the use of the US and Japan as example needs some caution, because each has its own advantages that are not just limited to their sizes.
Japan first. How much of the Japanese government bonds is has been bought and held by funds and people outside Japan? My answer is likely to be: not much and its share is small. If that answer is correct, then it shows the Japanese are different in some key aspects in terms of their portfolio investments in Japan and abroad, as opposed to most other people in the west. It is the Japanese they themselves buy their low yield government bonds.
Now the US. It is true that it has been the largest economy and also a very large government bonds market - that is, its size is large. However, its political influences and its role as the leader of the west world also have a significant effect beyond the size of its government bonds market.
Ignoring these characteristics of Japan and the US is likely to make the argument and conclusion questionable.
Of course, another consideration is whether the individual states of the USA need to issue their own bonds or can they use the federal government bonds to finance their own debts.
One needs also recognise the further difficulty that the euro zone or EU have a looser structure than the USA. Would the key members that are in a better state be willing to subsidise other members so explicitly?
While what Johns argues may seem reasonable, the same line of argument could/would put the costs of no action on carbon equally large, or they might be even higher.
There are many variables, factors and scenarios that are very difficult to model, as most modellers or people close to modelling works are aware. This may be a double edged sword, and could be used either in favour of the Treasury modelling or against it.
The real issues are whether actions should be taken to mitigate emissions of carbon dioxide, and if the answer is positive, how actions should be taken.
The government would sound more credible if it hasn't used the carbon tax as a way for wealth/income redistribution as it has proposed in its carbon tax package, and it got a border carbon adjustment to not distort and reduce Australians' comparative advantage in trade of goods and services with other nations.
These fatal shortcomings of the government's carbon tax bill are related to ALP Robin Hood ideology and its cowardice to confront other powerful nations in terms of equal treatment.
Of course, the compensations for businesses should not be as generous to recognise that businesses can pass the higher costs due to carbon tax either fully or at least partially as they are proposed in the bill, and more compensations should be for households on an equal per capita basis to remove the income distribution effects.
Further, it is hard to understand why it will be necessary to move from a carbon tax system to an ETS, given that the former is more efficient and involves fewer transaction costs. Of course, some financial market participants would like to have an ETS for the addition financial opportunities created by that to benefit from it. Further, bureaucrats would like it to create more government jobs and powers for them.
Taken together, it shows the government is incompetent, out of date and out of touch. This is another reason that it would be better for the government to seek a mandate for its carbon tax and ETS at an election. I should say I am not politically biased and is not pro or against any of the major political parties and I just would like to see fairness in politics and in governance.
It is an interesting article and useful information.
However, could the auther do some further anlaysis, removing some of the changing factors like the increase in 'empoyment' per household, and possibly a scenario of adjusting for interest rate change to see a case if interest rate moves higher?
Doing those would provide a more comparable comparison and is likely to singificantly qualify the conclusion the author derived. It would also provide some sensitivity analysis for affordaility when interest rate moves unexpectedly.
While the suggestions in the post are obviously rational economic thinking, they may encounter stiff political headwind at the current political and government deficits and debt environment.
I think any rational economic arguments must take into account the current environment and constraints to be feasible and practical.
The US obviously needs to increase tax, or reduce expenditure to be fiscally sustainable. But at the same time, fiscal policy should have a real expansionary effect to stimulate the economy and get it back to normal growth and to reduce unemployment.
The two may apparently appear to be contradictory ad unreconcilable. However, the right fiscal policy can still be designed and implemented.
What the US, and indeed many other west economies which are having similar problems, need is to shift from the pure quantitative fiscal thinking in economics to designing the a better structural fiscal policy to increase the real effectiveness of fiscal policy.
For example, the practice of work for the dole program that has been seen in Australia could be supplemented by directing the "workers" to work for government public work, or for private enterprises to have a win-win-win situation for both the government, private enterprises and the unemployed.
In fact, many policies could be redesigned to make the same quantity of fiscal expenditure to have a much greater effect, so to increase the effectiveness or productivity of fiscal spendings.
In terms of increasing taxes or ending the tax cuts, a more politically feasible option is to end or reduce the tax cuts for all, both rich and poor, by the same proportion, at the same time, the US government could make those reductions a low or no interest 'loan' available to the same people. In that way, the fiscal sustainability can be achieved while the impact on real consumption is minimised.
So, if economists and government policy makers are innovative and creative enough, the current economic problems can be resolved.
Comments on Dennis Shanahan "erils for PM in hanging on to surplus", 12/08/2011, http://www.theaustralian.com.au/national-affairs/commentary/perils-for-pm-in-hanging-on-to-surplus/story-e6frgd0x-1226113362948
Gillard and Swan and their government has been particularly stubbon in promoting the budget surplus line of argument, so much so that they have greatly damaged their images and lost touch with the public. the flood levy, for example, was completely unnecessary, especially in the context that they had also pledged a carbon tax to come and the public were uncertain and concerned about the impact of the carbon tax in the coming years. Consumer confidence as well as business confidence have further eroded by the persistence of the surplus pledge at the expense of prudent economic and budget management.
Of course, Gillard and her coleagues have been aware of their broken promises, particularly the one on carbon tax, and the potential damage of further broken promises. But one has to weigh the benefits and costs of each policy and the totality of all policies and make the best choices and choose the lesser evils.
Unfortunately, Gillard and her colleagues have been scared and have not been able to show they are able to do the best and right things. they have tended to make policy on the run and rush to announcements without fully consider ttheir effects, for the nation and for themselves.
What all these show that Gillard and her colleagues in government have been unable to show true leadership. And that is not good particuarly for Gillard.
Although the differential growth between the two markets in real terms is small, they are always small as opposed to large anyway in reality. However, the whole period actually shows a really remarkable differential of 2 percentge points.
In another word, the US growth during the period is only about 1/5 of that of Australian's. Looking from this point of view, one would not find it difficult to conclude that either the US is significantly undervalued, or the Australians' is overvalued. Alternatively, the starting points might be not comparable. But this can be checked from the current house income ratio.
To conclude, Australians' housing market is likely to be highly over valued, if the data presented by Joye is reliable and comparable.
Are the Americans unrealistically defying historical trends in hoping that it will be able to continue to dominant in the world economically and militarily?
Simple math suggests that Asia's giants, like China and India with more than a billion population each and faster economic growth, will take over the US as world top economic powers and with it military powers too.
The speed of China's economic growth in the past three decades suggests it is likely to take over the US in between 1 and 2 decades.
With such a background, the pure dominance mentality or intention of the US, if maintained and continued, will not be conducive to world peace. To the contrary, it would be more likely to lead to instability and conflicts.
It is time for the US to be more sober and recognise the inevitable historical changes. Its power is not declining, but the powers of others are growing faster.
Australia should influence the Americans to make the right decisions. It is in the interests of both, as well as world peace.
While it is true that "the Labor-Greens carbon tax model does not allow business to buy international permits for up to the next five years", it is because no hard thinking has been done on how to linking a carbon tax with an international ETS, partly as a result of no international ETS available yet.
It is possible to have a carbon tax model in Australia and use the tax revenue to buy international carbon emission reductions. In this scenario, the nation as a whole is a buyer of emission permits, as opposed to individual companies to do it to allow them to emit above their domestic quotas that would be the case under a domestic ETS.
As long as the combined reduction in emissions under a domestic carbon tax and the purchased emissions reduction meets whatever targets set as the country's requirement, the country would have fulfilled its reduction obligation.
So, carbon tax models and international ETS can coexist with no difficulty.
It is interesting that for so long few people have focused on this most efficient system to achieve emissions reduction. A carbon tax is arguably more efficient means than ETS in administration.
It is time for domestic ETS proponents to discontinue their myth on ETS and recognise the more efficient carbon tax approach.
PS: of course, no matter it is the traditional ETS and my proposed system of carbon tax and ETS, they will all involve international transfer of payments for emissions entitlements. It would mean high emissions countries will need to pay for low emissions countries for above their average emissions. This can be politically difficult for any individual country at present without a well functioning international market.
Bold reforms are needed and leadership to reforms is essential.
If the federal government is serious in reforms, it should start from reforming the governance of the government as the first step, or at least in conjunction with other reforms.
In terms of reforming government governance, maybe a national commission on economic policy should be established. Such a commission should have a component in budget integrity, as well as other economic policies, such as the desirable macroeconomic setting for both fiscal and monetary policies.
In terms of other bold reforms, while the Henry review report could be used as the starting point, its shortcomings should be recognised, such as the exclusion of GST in the review, as well as the lessons learnt from the RSPT/MRRT processes.
The tax forum should also include the carbon tax and related compensation measures, or ETS in its agenda.
Further, there should be a body to make sure the forum produce good outcomes and be implemented, as opposed to the 2020 summit.
To meet the challenges from population aging, there must be enough incentives provided for people to work longer, save more and optimise spending on healthcare and other consumptions.
Comments on John Lee “Japan's economic demons dog China”, 25/05/2011, http://www.businessspectator.com.au/bs.nsf/Article/Why-Japans-past-haunts-China-pd20110524-H6AP4?OpenDocument&src=sph&src=rot
John Lee's article is interesting, although it may be a bit simplistic to extrapolate the implications of the Japanese case to China.
The Japanese suffered not only from lack of innovation in policy approaches to its bubble burst in the late 1980s and the early 1990s, but also the lack of successful experience and precedence in dealing with that.
Further, it was a victim of its earlier success in rapid catch up with the US and in many areas exceeding the latter.
Another point is that lacked the political strength to do what it should have done in standing up against the US and other, re the Plaza Accord that forced its currency too much too rapidly.
The US fed response to the GFC has been different to that of the Japan’s, though its ultimate success still remains to be seen. If it’s successful, it will be an innovative approach and a precedence for policy approaches.
While China’s story may have some limited similarity to that of Japan’s, the two cases are vastly different.
It is inevitable to have large share of investments in the economy if it starts with very low infrastructure, low physical capitals and low housing stocks, as a low income developing economy has.
They are two countries with very different social, cultural and economic affairs and structures.
By the way, the income level and the level of infrastructure are still low now and have a long way to go to catch up with industrialised countries.
PS: while China may not fall into the same trap that troubled Japan, it does not necessarily mean that it will not encounter problems of its own.
Comments on Julie Bishop “Swan conjures up a Black Swan from the West”, 25/05/2011, http://www.smh.com.au/opinion/blogs/the-bishops-gambit/swan-conjures-up-a-black-swan-from-the-west-20110525-1f2y4.html
Maybe, the reactions by Swan, Gillard and Ferguson could be explained by the review of GST distribution commissioned by Gillard and Swan and announced in Perth by Gillard on 30 March 2011.
There might have been some understanding/misunderstanding or expectations (or false hopes) that that review would have WA to rethink about its scheduled increase in royalties of its fines iron ore.
The timing for that review is a draft report by February 2012 and the final report by August/September 2012 for consideration for 2013.
It is interesting to note that the final report is expected to be available after the introduction of the MRRT and the carbon tax, assuming both legislations will pass the parliament.
WA may think it will be too uncertain to rely on that review to secure a better funding for it.
Of course, the WA government is a liberal/coalition government and on the opposite political side of the Gillard ALP government.
PS: this fascinating discord involves politics, economics and taxation, as well as federal financial relations. Arguably, it is a very difficult issue even at the best of times of federal politics, not to mention the fact it is at a time the federal government has been experiencing serious difficulties.