Comments on Peter Drysdale "The problems for Asia’s growth", 17/08/2015
China's slowing economic growth is probably greater than the Chinese leadership team expected and adds to the potential that it may fall into the so called middle income trap. There are a number of factors that combined to result in the excessively slowing of the Chinese economy. Surely the prolonged weakening in economic growth in major international economies including the US, and particularly in Europe has been one of the external factors.
The appreciation of the Chinese Renminbi, the yuan, against many currencies as it pegged to and rose together with the US dollar is another headwind as far as external factors are concerned. It has rendered the Chinese exports as a whole uncompetitive. The Chinese authorities were probably too concerned about the pressure from the US to call currency manipulator and didn't act early enough to mitigate its appreciating currency. The recent move by the Chinese authorities to allow greater movement/depreciation against the US dollar indicates how strong the downward pressure of its economic growth rate.
The third factor is the rapid rises in wages in China that contributed to both external and internal problems. Externally it further reduced its international competitiveness so added to the slowing export growth. Internally it may added to the tightening of the labour market due to population growth and demographic change and reduced the employment growth than otherwise.
More importantly from policy point of view, the Chinese authorities were probably too relaxed in its economic management and didn't use enough expansionary policies, in the hope that its consumption may pick up the economic slacks to drive the economy. That policy stance was a combination of the result of the previous huge stimulus in the wake of the GFC and the desire to deleverage. Of course that policy stance became problematic in the context of both external and other internal problems as mentioned.
That policy stance, in the hope of the market would come to rescue, even would not work well in well functioned markets such as the industrialised countries, not to mention in China where the market is not as perfect as those in advanced economies.
The Chinese authorities have probably realised the country's economic problems and have taken actions to stimulate its economy, although it may have been too late and too little. Nevertheless, it is a useful lesson and if they have learned that lesson well, it should be conducive to getting future policies right. That in turn is likely for China to avoid the middle income trap and graduate as early as possible to high income ranks. Hope that is a price paid with a dividend.
Showing posts with label economic policies. Show all posts
Showing posts with label economic policies. Show all posts
2015-07-23
China can beat deflation if it really wants to
Comments on Yu Yongding "Can China beat deflation?" 23/07/2015
As this post suggested China may face an extended period of deflation with a negative impact on economic growth, amid its structural reforms.
It seems sensible to have expansionary of both monetary and fiscal policies to head off potentially very serious deflation and excessively slowing in the economic growth, as the author has called for, that "China must do whatever it takes to avoid falling into the debt-deflation trap".
Structural reforms should, in the short term, be done in the context of stimulating economic growth and combating deflation. There should be enough room in China for it to invest, given that China's capital stocks are still low in not only infrastructure in many locations with the need of continued urbanisation, but also in the short components of its structural imbalance. Understandably, China is still far from a high income country and it will take many years and decades to catch up with the levels of high income industrialised countries. Capital labour ratio in China is arguably still equally low as its per capita income. That indicates the needs for increasing its capital stocks not only in aggregate sense, nut particularly in the under balanced areas of its economy.
It is, however, important to channel the monetary and fiscal expansions into the right areas of the real economy and prevent any excessive flow to its stock market for speculative activities.
Although the housing market in China has seen very high property prices and the authorities have tried to dampen its further growth, the housing construction sector still have room to expand.
Furthermore, its services sector has plenty of room to expand and its growth can be combined with the Chinese leadership's push for innovation and promoting enterprenourship.
In summary, China needs expantionary fiscal and monetary policies to stimulate the growth of the economy and address deflationary pressures. Structural reforms and adjustments, in the short to medium terms, need to be done in that overarching context. In both the short and long terms, China should not loose sight that its income is low, so is its capital labour ratio. The main focus of structural adjustments, particularly in the short term, should be on expanding infrastructure (including housing in cities and towns where further urbanisation will see a rapid increase in resident population and the capacities of the services sector.
As this post suggested China may face an extended period of deflation with a negative impact on economic growth, amid its structural reforms.
It seems sensible to have expansionary of both monetary and fiscal policies to head off potentially very serious deflation and excessively slowing in the economic growth, as the author has called for, that "China must do whatever it takes to avoid falling into the debt-deflation trap".
Structural reforms should, in the short term, be done in the context of stimulating economic growth and combating deflation. There should be enough room in China for it to invest, given that China's capital stocks are still low in not only infrastructure in many locations with the need of continued urbanisation, but also in the short components of its structural imbalance. Understandably, China is still far from a high income country and it will take many years and decades to catch up with the levels of high income industrialised countries. Capital labour ratio in China is arguably still equally low as its per capita income. That indicates the needs for increasing its capital stocks not only in aggregate sense, nut particularly in the under balanced areas of its economy.
It is, however, important to channel the monetary and fiscal expansions into the right areas of the real economy and prevent any excessive flow to its stock market for speculative activities.
Although the housing market in China has seen very high property prices and the authorities have tried to dampen its further growth, the housing construction sector still have room to expand.
Furthermore, its services sector has plenty of room to expand and its growth can be combined with the Chinese leadership's push for innovation and promoting enterprenourship.
In summary, China needs expantionary fiscal and monetary policies to stimulate the growth of the economy and address deflationary pressures. Structural reforms and adjustments, in the short to medium terms, need to be done in that overarching context. In both the short and long terms, China should not loose sight that its income is low, so is its capital labour ratio. The main focus of structural adjustments, particularly in the short term, should be on expanding infrastructure (including housing in cities and towns where further urbanisation will see a rapid increase in resident population and the capacities of the services sector.
2015-06-21
A better regime for foreign investment and macroeconomic policies
Comments on John Denton and Peter Drysdale "Time to re-position Australia’s foreign investment regime", 14/06/2015
There are clear benefits to integrate policies toward and implementation of foreign investment into a seamless regime, such as a ministerial-level Foreign Investment Council as the author nicely proposed. Another approach may be a national economic management council which integrate economic policies and implementation at the national level and the tasks proposed for the foreign investment council forms a part of it.
At macro level, economic textbooks say there should be optimal combination of fiscal and monetary policies to achieve most desirable outcomes. But in reality, it does not seem such coordination of those two classical Macroeconomic policies really exists in many countries. So there is a gap between theory and practice there.
Now if we treat foreign investment as something similar to government spending but differing in degrees of the host country’s direct control in the GDP equation (as part of the investment - I component), the council proposed by this article’s authors may naturally fall into the macroeconomic policies area. As a result, a national economic council would be handy to include foreign investment coordination in its tasks.
2013-04-02
IP protection and Optimality
Comments on Shiro Armstrong "Intellectual property and wealth transfers in the Trans-Pacific Partnership", 31/03/2013, http://www.eastasiaforum.org/2013/03/31/intellectual-property-and-wealth-transfers-in-the-trans-pacific-partnership/
It may be the case that both theories and empirical studies can show pervasive and/or inconclusive results that would make the policy issue difficult to follow.
It is understandable that there needs some protection for IP because with no protection, there is little or no incentive for commercial research, innovation and invention which involves costs.
However, how much protection is needed to be optimal is anther issue.
It seems a time period is one of the ingredients of IP protection. But there should be other dimensions, such as a total amount although this is likely to be a case dependent, given the costs of each case are different.
The total amount or maximum amount should be linked to costs to allow a objectively set reasonable rents be extracted to maintain enough incentives but also allow other benefits to be realised.
It may be the case that both theories and empirical studies can show pervasive and/or inconclusive results that would make the policy issue difficult to follow.
It is understandable that there needs some protection for IP because with no protection, there is little or no incentive for commercial research, innovation and invention which involves costs.
However, how much protection is needed to be optimal is anther issue.
It seems a time period is one of the ingredients of IP protection. But there should be other dimensions, such as a total amount although this is likely to be a case dependent, given the costs of each case are different.
The total amount or maximum amount should be linked to costs to allow a objectively set reasonable rents be extracted to maintain enough incentives but also allow other benefits to be realised.
2012-07-16
No cause for pessimism for the Australian economy
Comments on Henry Ergas “Policies
standing in the way of management can do great damage”, 16/07/2012,
http://www.theaustralian.com.au/news/opinion/policies-standing-in-the-way-of-management-can-do-great-damage/story-fn7078da-1226426636726
Ergas has made an important
contribution to the current debates on the multi-speed economy
associated with the mining boom and on productivity.
The latter first. I have made a comment
on the shortcomings of the viewpoint by Gruen et al that poor manager
performance was the main reasons for the latest productivity slow
down, by referring the charts consisting of one cross section
international data with a time seires of Australia's productivity.
That mix is problematic, because it says little how the international
comparison has changed over time. Further, it is doubtful that
international productivity would have performed better in recent
years over the pre-GFC period.
For Henry's viewpoint on the Dutch
Disease in the Australian economy, although it is correct to say that
adjustments are inevitable when mining booms as a result of increases
in international demand for mineral and a consequential rise of the
Australian dollar, the view that no policies can offset or lessen the
adverse impact of the mining boom on other trade exposed sectors is
likely to be false.
For one thing, his mining tax design
was one of policies that could just do that if the policy was
designed and implemented properly.
Further, monetary policies could be
designed in such a way that lowers both the demand of Australia for
international capitals and the Australian dollar.
A fine combination of fiscal and
monetary policies together would make the adjustments much less
painful than they have been.
2011-08-24
Many of Government's problems are largely Swan's
Comments on Paul Kelly “Labor turns the boom into a crisis”, 24/08/2011, http://www.theaustralian.com.au/news/opinion/labor-turns-the-boom-into-a-crisis/story-e6frg6zo-1226120742007
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.
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.
2011-08-16
Rethink and redesign economic policies
Comments on Stephen Grenville “Curing the US policy paralysis”, 16/08201, http://www.businessspectator.com.au/bs.nsf/Article/US-debt-ceiling-economic-policy-politics-deficit-f-pd20110815-KR8BT?OpenDocument&src=rot
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.
2011-05-17
Reforming macroeconomic institutions
Comments on Michael Stutchbury “Swan hides budget risk”, 17/05/2011, http://www.theaustralian.com.au/national-affairs/budgets/swan-hides-budget-risk/story-fn8gf1nz-1226057027131
There is indeed a need for reforming macroeconomic management institutions, including not only fiscal policies and management, but also the integration of fiscal and monetary policies.
similar to the independence of the Reserve Bank, there should be an independent fiscal authority that sets important parameters within which the government and Treasury should operate and set its actual fiscal policies.
Further, there should be a joint body of that independent fiscal authority and the RBA to coordinate broad fiscal and monetary policies, operating in a similar line as macroeconomics would suggest, to have optimal combination of fiscal and monetary policies to achieve full employment/economic growth and price stability.
There is indeed a need for reforming macroeconomic management institutions, including not only fiscal policies and management, but also the integration of fiscal and monetary policies.
similar to the independence of the Reserve Bank, there should be an independent fiscal authority that sets important parameters within which the government and Treasury should operate and set its actual fiscal policies.
Further, there should be a joint body of that independent fiscal authority and the RBA to coordinate broad fiscal and monetary policies, operating in a similar line as macroeconomics would suggest, to have optimal combination of fiscal and monetary policies to achieve full employment/economic growth and price stability.
2011-02-11
Garnaut and Ergas on the economics of climate actions
Comments on Henry Ergas “Climate adviser misses the point”, 11/02/2011, http://www.theaustralian.com.au/news/opinion/climate-adviser-misses-the-point/story-e6frg6zo-1226003951163
While the logic that Henry Ergas has used is apparently and seemingly appealing, especially the discount approach for costs and benefits of climate actions, there is deep hole somewhere in his article that may heavily discount the powerfulness and persuasiveness of his whole thesis.
To start with, he didn’t not assess the likely scenario that although an international agreement for all international players to act may not be reached as he suggests, many countries may still take actions to have a measurable effect on climate change.
The second point is that he didn’t examine or analyse the possibility that Australia could take ‘unilateral’ actions that is trade neutral and therefore will not change too much Australia’s international competitiveness, especially when trade is concerned.
Third, he didn’t examine and analyse the likely advances in alternative energy technologies in the future and the impact on the costs of emissions mitigations, and the continued long term benefits of climate change actions – they are not just one year but will continue forever. Both can change the result of cost and benefit analysis of climate change actions.
Fourth, he didn’t examine and analyse the real costs of the likely depletion of fossil fuels. It is highly likely that market mechanism alone may significantly underprice the current use of fossil fuels.
PS: However, the above does not necessarily mean automatic endorsement of the Garnaut recommendations.
There are issues with trade neutrality and revenue neutrality, as well as carbon tax versus ETS that the Garnaut report or updates may have been rather unsatisfactory and disappointing.
While the logic that Henry Ergas has used is apparently and seemingly appealing, especially the discount approach for costs and benefits of climate actions, there is deep hole somewhere in his article that may heavily discount the powerfulness and persuasiveness of his whole thesis.
To start with, he didn’t not assess the likely scenario that although an international agreement for all international players to act may not be reached as he suggests, many countries may still take actions to have a measurable effect on climate change.
The second point is that he didn’t examine or analyse the possibility that Australia could take ‘unilateral’ actions that is trade neutral and therefore will not change too much Australia’s international competitiveness, especially when trade is concerned.
Third, he didn’t examine and analyse the likely advances in alternative energy technologies in the future and the impact on the costs of emissions mitigations, and the continued long term benefits of climate change actions – they are not just one year but will continue forever. Both can change the result of cost and benefit analysis of climate change actions.
Fourth, he didn’t examine and analyse the real costs of the likely depletion of fossil fuels. It is highly likely that market mechanism alone may significantly underprice the current use of fossil fuels.
PS: However, the above does not necessarily mean automatic endorsement of the Garnaut recommendations.
There are issues with trade neutrality and revenue neutrality, as well as carbon tax versus ETS that the Garnaut report or updates may have been rather unsatisfactory and disappointing.
2011-02-07
Bernake will have more international opponents to its policy
Comments on Karen Maley “Bernanke's inflated rhetoric”, 7/02/2011, http://www.businessspectator.com.au/bs.nsf/Article/Bernankes-inflated-rhetoric-pd20110207-DTS77?OpenDocument&src=rot
I think international monetary game is not played just between the two largest economies, namely the US and China.
The US can use loose monetary policy as a tool to try to export its domestic economic problems.
China can use nearly fixed exchange rate to counter or neutralise this effectively competitive devaluation.
For China, while inflation can pose a serious problem, its effects can be partially offset by rapid wage increases, albeit it will be a double edged sword for even higher or persistent inflation in the future.
So the end result in terms of the relative competitiveness between the two countries does not change much.
But the effects will be felt by the US and China in terms longer term inflation in both countries.
Further, any countries with flexible exchange rates can feel the effects of low $US and the rmb on their economic growth, even though they may have a problem with deflation as opposed to inflation.
Rising commodity price is inevitable, as a means of international adjustment to income realignment as a result of the rise of large emerging economies and their rise demand for almost everything.
How that income realignment will affect the international economic structure and employment is yet to be seen.
It may be that the unemployment will be persistently high in the US for some time to come. That, through its impact of its fiscal affairs, can further erode the international competitiveness of its other industries.
I think international monetary game is not played just between the two largest economies, namely the US and China.
The US can use loose monetary policy as a tool to try to export its domestic economic problems.
China can use nearly fixed exchange rate to counter or neutralise this effectively competitive devaluation.
For China, while inflation can pose a serious problem, its effects can be partially offset by rapid wage increases, albeit it will be a double edged sword for even higher or persistent inflation in the future.
So the end result in terms of the relative competitiveness between the two countries does not change much.
But the effects will be felt by the US and China in terms longer term inflation in both countries.
Further, any countries with flexible exchange rates can feel the effects of low $US and the rmb on their economic growth, even though they may have a problem with deflation as opposed to inflation.
Rising commodity price is inevitable, as a means of international adjustment to income realignment as a result of the rise of large emerging economies and their rise demand for almost everything.
How that income realignment will affect the international economic structure and employment is yet to be seen.
It may be that the unemployment will be persistently high in the US for some time to come. That, through its impact of its fiscal affairs, can further erode the international competitiveness of its other industries.
2011-02-04
Gillard needs a change of soul
Comments on Dennis Shanahan “Back to work junking two-speed economy”, 4/02/2011, http://www.theaustralian.com.au/news/opinion/back-to-work-junking-two-speed-economy/story-e6frg6zo-1225999763767
The key to achieving those policy objectives is to have a flexible and efficient workforce that is appropriately incentivised and rewarded through a low and flat tax, together with some regional and sectoral reorganization.
Government should create the most conducive environment for people to learn, re-skill, work in and move to most reward sectors and locations.
To complement that, if there is a real labour shortage, with temporary working visa with no permanent residency attached.
If the record is a guide, the current government is not well positioned for achieving those goals. It has the class warfare mentality - to tax the rich (high and middle incomes) and to provide high welfare to others. That mentality and approach to governance is unlikely to be compatible with Gillard’s recent apparent policy shift.
The flood levy, for example, clearly and unambiguously demonstrates this point.
Unfortunately, Gillard is captive to this outdated Labor ideology.
The key to achieving those policy objectives is to have a flexible and efficient workforce that is appropriately incentivised and rewarded through a low and flat tax, together with some regional and sectoral reorganization.
Government should create the most conducive environment for people to learn, re-skill, work in and move to most reward sectors and locations.
To complement that, if there is a real labour shortage, with temporary working visa with no permanent residency attached.
If the record is a guide, the current government is not well positioned for achieving those goals. It has the class warfare mentality - to tax the rich (high and middle incomes) and to provide high welfare to others. That mentality and approach to governance is unlikely to be compatible with Gillard’s recent apparent policy shift.
The flood levy, for example, clearly and unambiguously demonstrates this point.
Unfortunately, Gillard is captive to this outdated Labor ideology.
2011-01-25
Why Swan needs to warn about price hike?
Comments on James Massola "Inflation figures are good news for rates, but Wayne Swan warns of looming food price spike", 25/01/2011, http://www.theaustralian.com.au/national-affairs/treasury/inflation-figures-are-good-news-for-rates-but-wayne-swan-warns-of-looming-food-price-spike/story-fn59nsif-1225994289457
Wayne Swan said the impact of the floods, in economic terms, was the worst the nation had seen.
That is unlikely to be true.
We have very large scale droughts running for years that affected agriculture in Australia and affected other industries as well, such as the gardening industry with water restrictions in many places. Some people even didn't have water to shower.
So what was Swan talking about!
Some politicians are used to scare people and conceal their own deficiencies.
This is a good example.
From his role in the RSPT fiasco, it is not too difficult to know how good his economic management skills are!
We shouldn't expect too much from him. Otherwise we would be bitterly disappointed.
AS the Treasurer, his warning of price spike next quarter is neither warranted, nor helpful to expectations, see the following from the report.
TREASURER Wayne Swan has warned of a looming spike in inflation as the impact of the floods is felt in food prices at the checkout.
He welcomed soft inflation figures released today, which make an interest rate rise less likely next week.
But the March quarter consumer price index won't hold such good news.
“Despite the fact that these figures are lower than anticipated, we do know the next quarter figure - the March quarter - will see a spike, particularly on vegetable and fruit prices and that will have an impact on the March quarter,” Mr Swan said in Canberra.
Wayne Swan said the impact of the floods, in economic terms, was the worst the nation had seen.
That is unlikely to be true.
We have very large scale droughts running for years that affected agriculture in Australia and affected other industries as well, such as the gardening industry with water restrictions in many places. Some people even didn't have water to shower.
So what was Swan talking about!
Some politicians are used to scare people and conceal their own deficiencies.
This is a good example.
From his role in the RSPT fiasco, it is not too difficult to know how good his economic management skills are!
We shouldn't expect too much from him. Otherwise we would be bitterly disappointed.
AS the Treasurer, his warning of price spike next quarter is neither warranted, nor helpful to expectations, see the following from the report.
TREASURER Wayne Swan has warned of a looming spike in inflation as the impact of the floods is felt in food prices at the checkout.
He welcomed soft inflation figures released today, which make an interest rate rise less likely next week.
But the March quarter consumer price index won't hold such good news.
“Despite the fact that these figures are lower than anticipated, we do know the next quarter figure - the March quarter - will see a spike, particularly on vegetable and fruit prices and that will have an impact on the March quarter,” Mr Swan said in Canberra.
Tasmania will be just fine
Comments on Tony McCall “Old enmities cloud Apple Isle's future”, 25/01/2011, http://www.theaustralian.com.au/news/opinion/old-enmities-cloud-apple-isles-future/story-e6frg6zo-1225993845801
The following statement is half correct at best"
"Tasmania faces significant employment losses in the forestry sector and in GST revenue at a juncture when the federal government, squeezed by flood reconstruction priorities, will be reluctant to hand out yet more funds to compensate forestry companies, employers and employees exiting the sector."
Tasmania's GST revenue will not decrease. How could it decrease?
Tasmania now has a very strong leverage on the Gillard minority federal government because of the Independent MP from Tasmania. So how will it not use that advantage is beyond belief and common sense, just as it did during Senator Harradine’s time.
There is little immediate and excessive budgetary pressure for Tasmania now. No point now to frighten the first time female and new premier.
As for the intermediate and longer terms, Tasmania needs to take advantages of its natural environment and natural resources, and relatively lower costs of living.
It needs to deepen value-adding to resource uses. it should increase the efficiency of transport within the island. It needs to lower travel costs between it and the mainland Australia to attract more and younger people, including international immigration, to Tasmania.
The following statement is half correct at best"
"Tasmania faces significant employment losses in the forestry sector and in GST revenue at a juncture when the federal government, squeezed by flood reconstruction priorities, will be reluctant to hand out yet more funds to compensate forestry companies, employers and employees exiting the sector."
Tasmania's GST revenue will not decrease. How could it decrease?
Tasmania now has a very strong leverage on the Gillard minority federal government because of the Independent MP from Tasmania. So how will it not use that advantage is beyond belief and common sense, just as it did during Senator Harradine’s time.
There is little immediate and excessive budgetary pressure for Tasmania now. No point now to frighten the first time female and new premier.
As for the intermediate and longer terms, Tasmania needs to take advantages of its natural environment and natural resources, and relatively lower costs of living.
It needs to deepen value-adding to resource uses. it should increase the efficiency of transport within the island. It needs to lower travel costs between it and the mainland Australia to attract more and younger people, including international immigration, to Tasmania.
2011-01-03
Swan - what can we say about him?
Comments on Wayne Swan “Conservatives are the new nabobs of negativity”, 3/01/2011, http://www.theaustralian.com.au/news/opinion/conservatives-are-the-new-nabobs-of-negativity/story-e6frg6zo-1225980655211
Swan says: "Almost alone in the world, we now have the luxury of setting ourselves up for the big economic opportunities by investing in the things that will give us an edge: knowledge and skills, environmental sustainability, and the digital economy."
Let's look at the 3 areas he included here: education, environment and digital one by one. For education, Labor government undoubtedly had the BER. But unfortunately the BER has had so many wastes that greatly reduced its effectiveness.
For the environment, the Labor government has had the home insulation program that it had to stop it due to rots through abuse the program and the safety problems that program generated.
For the digital issue, the government has got the NBN going now. The difference between this and the other two is the very long time of the NBN project and the huge investment. Further there is no business case study and cost benefit analysis.
Swan in this post argues the negativity by others. Looking at what the Labor government has done the above so far, how can people not feel negative? How much more wastes will Swan oversee as the Treasurer?
Swan should look at himself to find where the problems lie.
PS: due to length limit, the original comments could not include more. But when I read more of that post, the more I felt Swan's hypocrisy. On resource taxation, they had to scrap their RSPT and replace it with their MRRT. They had done it not because of pressure from the opposition, but from the mining sector. Further they brought down their own first term prime minister, due to problems with their RSPT.
On the NBN, the government tried to prevent the release of relevant information to the parliament and delayed and delayed releasing the limited information they promised to do it.
So whose problems are they? Who are more negative?
He should be ashamed what he has done to the nation in terms of wastes, his role in them and his role in replacing Rudd and being promoted.
Swan says: "Almost alone in the world, we now have the luxury of setting ourselves up for the big economic opportunities by investing in the things that will give us an edge: knowledge and skills, environmental sustainability, and the digital economy."
Let's look at the 3 areas he included here: education, environment and digital one by one. For education, Labor government undoubtedly had the BER. But unfortunately the BER has had so many wastes that greatly reduced its effectiveness.
For the environment, the Labor government has had the home insulation program that it had to stop it due to rots through abuse the program and the safety problems that program generated.
For the digital issue, the government has got the NBN going now. The difference between this and the other two is the very long time of the NBN project and the huge investment. Further there is no business case study and cost benefit analysis.
Swan in this post argues the negativity by others. Looking at what the Labor government has done the above so far, how can people not feel negative? How much more wastes will Swan oversee as the Treasurer?
Swan should look at himself to find where the problems lie.
PS: due to length limit, the original comments could not include more. But when I read more of that post, the more I felt Swan's hypocrisy. On resource taxation, they had to scrap their RSPT and replace it with their MRRT. They had done it not because of pressure from the opposition, but from the mining sector. Further they brought down their own first term prime minister, due to problems with their RSPT.
On the NBN, the government tried to prevent the release of relevant information to the parliament and delayed and delayed releasing the limited information they promised to do it.
So whose problems are they? Who are more negative?
He should be ashamed what he has done to the nation in terms of wastes, his role in them and his role in replacing Rudd and being promoted.
2010-12-30
Bernanke's QE effort applaudable
Commnets on Karen Maley “Primed to pop in the US”, 30/12/2010, http://www.businessspectator.com.au/bs.nsf/Article/Primed-to-pop-in-America-pd20101230-CLT7U?OpenDocument&src=sph&src=rot
Ben Bernanke's idea of creating an asset effect is a good one, though it requires a concerted effort by all relevant US authorities to put the best effort for it to work. The condition can be very difficult to be met.
Should the Fed's single minded effort not work, then the consequences would be more serious than without such effort.
But when the economy is in a crisis situation, and there is no other conventional means to get it out of that predicament, then one is attempted to do something novel.
Another way to achieve that goal is for the authorities to purchase foreclosed houses with a predetermined rule that can stimulate the house market by putting a floor under.
It may be difficult to implement it, but should be more effective.
There might be a middle way to combine QE and house purchasing to stimulate both equity and house markets.
In this sense, the different authorities must work together cooperatively while still not to undermine the independence of the Fed or monetary authority in terms of monetary policy.
They are all possible new macroeconomic ways to deal with the balance sheet recession or possibly more serious depression. The US is now in a similar situation to Japan's in the 1990s.
This crisis or more enduring economic recession requires new policy prescriptions. Bernanke has been trying to do that from the monetary policy point of view.
I wish him good luck on his innovative endeavour.
Ben Bernanke's idea of creating an asset effect is a good one, though it requires a concerted effort by all relevant US authorities to put the best effort for it to work. The condition can be very difficult to be met.
Should the Fed's single minded effort not work, then the consequences would be more serious than without such effort.
But when the economy is in a crisis situation, and there is no other conventional means to get it out of that predicament, then one is attempted to do something novel.
Another way to achieve that goal is for the authorities to purchase foreclosed houses with a predetermined rule that can stimulate the house market by putting a floor under.
It may be difficult to implement it, but should be more effective.
There might be a middle way to combine QE and house purchasing to stimulate both equity and house markets.
In this sense, the different authorities must work together cooperatively while still not to undermine the independence of the Fed or monetary authority in terms of monetary policy.
They are all possible new macroeconomic ways to deal with the balance sheet recession or possibly more serious depression. The US is now in a similar situation to Japan's in the 1990s.
This crisis or more enduring economic recession requires new policy prescriptions. Bernanke has been trying to do that from the monetary policy point of view.
I wish him good luck on his innovative endeavour.
2010-12-22
The appointment of Treasury new chief
Comments on Michael Stutchbury “New chief can fill huge shoes”, 22/12/2010, http://www.theaustralian.com.au/business/opinion/new-chief-can-fill-huge-shoes/story-e6frg9p6-1225974683241
I note that you state the following: "He's a good choice if Labor is serious about putting a price on carbon next year. As head of the Department of Climate Change, Parkinson led the development of Labor's shelved emissions trading scheme."
One can almost find some contradictory in those two sentences: does it mean he's done well with the "shelved emissions trading scheme"? Was it because of his contribution to the outcome or the original scheme? Or was the shelf good or bad or indifferent? One has to wonder or struggle to answer those questions.
Further, without commenting on or implying Dr Parkinson's ability in relation to the his appointment to the Treasury post, Treasury's policy brief is much wider than just carbon pricing, albeit the latter is very important.
The latter could also be handled by a competent climate change department head, for example. That would be an alternative.
I note that you state the following: "He's a good choice if Labor is serious about putting a price on carbon next year. As head of the Department of Climate Change, Parkinson led the development of Labor's shelved emissions trading scheme."
One can almost find some contradictory in those two sentences: does it mean he's done well with the "shelved emissions trading scheme"? Was it because of his contribution to the outcome or the original scheme? Or was the shelf good or bad or indifferent? One has to wonder or struggle to answer those questions.
Further, without commenting on or implying Dr Parkinson's ability in relation to the his appointment to the Treasury post, Treasury's policy brief is much wider than just carbon pricing, albeit the latter is very important.
The latter could also be handled by a competent climate change department head, for example. That would be an alternative.
2010-12-21
Henry's legacy
Comments on Stefanie Balogh, Joe Kelly “Ken Henry's Treasury replacement to be climate department head Martin Parkinson”, 21/12/2010, http://www.theaustralian.com.au/national-affairs/treasury/ken-henry-expected-to-be-replaced-at-treasury-by-climate-department-chief-martin-parkinson/story-fn59nsif-1225974318985
Dr Henry is obviously a very talented and capable top public servant.
Had the combination of the trio, namely Swan, Rudd and Henry, was different, his departure might reflect much strongly on his excellent personal attributes, as opposed to being marred by the spectacular failure of RSPT and the demise of Rudd Prime Ministership, as well as the mysterious number changes associated with the RSPT and MRRT projections of revenue from the proposed mining taxes. (Swan, though promoted in spite of his role in the RSPT as Treasurer and his inability and inflexibility to get it over politically, did not only cause the dumping of Rudd, but clouded the Henry Tax review report.)
This is not too different from many politicians who are unable to determine their own best departure time, such as John Howard’s loss his own seat at the last election as the sitting PM.
Nevertheless, Henry should be able to remember his enormous contributions to the nation and public policy as a public servant. And that what he will be remembered, in spite of the RSPT drama.
Dr Henry is obviously a very talented and capable top public servant.
Had the combination of the trio, namely Swan, Rudd and Henry, was different, his departure might reflect much strongly on his excellent personal attributes, as opposed to being marred by the spectacular failure of RSPT and the demise of Rudd Prime Ministership, as well as the mysterious number changes associated with the RSPT and MRRT projections of revenue from the proposed mining taxes. (Swan, though promoted in spite of his role in the RSPT as Treasurer and his inability and inflexibility to get it over politically, did not only cause the dumping of Rudd, but clouded the Henry Tax review report.)
This is not too different from many politicians who are unable to determine their own best departure time, such as John Howard’s loss his own seat at the last election as the sitting PM.
Nevertheless, Henry should be able to remember his enormous contributions to the nation and public policy as a public servant. And that what he will be remembered, in spite of the RSPT drama.
2010-12-17
For your own sake, please give up Treasurer job, Swan
Comments on Peter van Onselen Swan's apprentice outshines the chef”, 17/12/2010, http://www.theaustralian.com.au/news/opinion/swans-apprentice-outshines-the-chef/story-e6frg6zo-1225972364861
It will be in the interests of Swan himself, Gillard, the government and Labor (and the nation dare I say) for Swan to swap to another portfolio that he is capable to handle while keeping the deputy PM role.
His role in many of the policy blunders such as the failed RSPT up to now and in disposing Rudd as PM shows he is not up to the job.
The nation hah not seen a so incompetent Treasurer for a long time until he came to the post.
If he continues the Treasurer job for long, it will be really unfortunate for many and many people including himself.
He should have the knowledge and wisdom of self aware and take the best step for himself.
What job best suits him? That is anyone’s guess.
It will be in the interests of Swan himself, Gillard, the government and Labor (and the nation dare I say) for Swan to swap to another portfolio that he is capable to handle while keeping the deputy PM role.
His role in many of the policy blunders such as the failed RSPT up to now and in disposing Rudd as PM shows he is not up to the job.
The nation hah not seen a so incompetent Treasurer for a long time until he came to the post.
If he continues the Treasurer job for long, it will be really unfortunate for many and many people including himself.
He should have the knowledge and wisdom of self aware and take the best step for himself.
What job best suits him? That is anyone’s guess.
2010-11-24
Managing prosperity requires new thinking and a new approach
Comments on Paul Kelly “Mission is to manage politics of prosperity”, 24/11/2010, http://www.theaustralian.com.au/news/opinion/mission-is-to-manage-politics-of-prosperity/story-e6frg6zo-1225959731099
How should the government of any political persuasions manage the resources boom?
Well, it is both hard and easy.
It will be hard if government and bureaucrats continue to engage in conventional thinking and approaches.
It will be easy if the sources of the resources boom benefits more, but the rest also share some of the benefits in an acceptable way to both the booming states and the rest along the way.
This will have to involve a new approach to federation and to taxation reforms that is not necessarily benefiting every state uniformly.
It also means having the most appropriate monetary and fiscal policy settings that aim at neutralising the differential impacts of the resources boom on different sectors as much as possible without undue distortions in the long run or from the long term perspective for the nation and the economy.
The key is appropriate balance between the booming states and the rest, as well as long term design of policies and optimisation of the nation's wellbeing.
By this standard, Henry's approach and recommendations might be half right at best! He also needs to reconsider what will be best policies.
How should the government of any political persuasions manage the resources boom?
Well, it is both hard and easy.
It will be hard if government and bureaucrats continue to engage in conventional thinking and approaches.
It will be easy if the sources of the resources boom benefits more, but the rest also share some of the benefits in an acceptable way to both the booming states and the rest along the way.
This will have to involve a new approach to federation and to taxation reforms that is not necessarily benefiting every state uniformly.
It also means having the most appropriate monetary and fiscal policy settings that aim at neutralising the differential impacts of the resources boom on different sectors as much as possible without undue distortions in the long run or from the long term perspective for the nation and the economy.
The key is appropriate balance between the booming states and the rest, as well as long term design of policies and optimisation of the nation's wellbeing.
By this standard, Henry's approach and recommendations might be half right at best! He also needs to reconsider what will be best policies.
2010-11-21
Japan's lost decades and those of economists'
Comments on Hugh Patrick “The Japanese economy’s recovery”, http://www.eastasiaforum.org/2010/11/20/the-japanese-economys-recovery/
With the recent serious in major industrialised economies and the difficulties in putting it behind in terms of constraints from macro economic policies, it is much clearer that Japan's lost decade of the 1990s should have been a serious area of economists to provide a good answer several years since it first occurred in the early 1990s.
But mainstream economists were not in Japan and Japan's problems and concerns were no their focuses.
Now many economists in the world should probably be awaken and attempt to find a good solution world wide but maybe first focused on the US and Europe with their own different economic issues.
For the US, one of the main questions is how to overcome monetary ineffectiveness and the difficulties in rationalising further increases of budget deficits politically.
For the EU, one of the main questions is how to resolve the common currency euro and more or less independent and sovereign fiscal policy and their implications for some weak economies within the euro zone.
In a sense, Japan's lost decades may be regarded as economists' lost decades in terms of missed opportunities.
The question the US is facing is akin to Koo's so called balance sheet recession.
It may be the case that the authorities need to manage the processes of both bubble formation and bursting, so irrespective what the bubbles are, they should not be let to burst in such a speed and process to affect the balance sheets so severely.
When a severe bursting did occur, the question is how to improve the balance sheets simultaneously without serious further distortion.
With the recent serious in major industrialised economies and the difficulties in putting it behind in terms of constraints from macro economic policies, it is much clearer that Japan's lost decade of the 1990s should have been a serious area of economists to provide a good answer several years since it first occurred in the early 1990s.
But mainstream economists were not in Japan and Japan's problems and concerns were no their focuses.
Now many economists in the world should probably be awaken and attempt to find a good solution world wide but maybe first focused on the US and Europe with their own different economic issues.
For the US, one of the main questions is how to overcome monetary ineffectiveness and the difficulties in rationalising further increases of budget deficits politically.
For the EU, one of the main questions is how to resolve the common currency euro and more or less independent and sovereign fiscal policy and their implications for some weak economies within the euro zone.
In a sense, Japan's lost decades may be regarded as economists' lost decades in terms of missed opportunities.
The question the US is facing is akin to Koo's so called balance sheet recession.
It may be the case that the authorities need to manage the processes of both bubble formation and bursting, so irrespective what the bubbles are, they should not be let to burst in such a speed and process to affect the balance sheets so severely.
When a severe bursting did occur, the question is how to improve the balance sheets simultaneously without serious further distortion.
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