Treasurer needs to act on jobless rate

Comments on Mark Kenny “Joe Hockey feels sting of shock rise in jobless figures”, 13/02/2014, http://www.canberratimes.com.au/federal-politics/political-news/joe-hockey-feels-sting-of-shock-rise-in-jobless-figures-20140213-32ndm.html

While his rhetoric is understandable, Joe Hockey needs to recalibrate his approach to the coming budget in the wake of significant deterioration in the jobless rate.

Government has a duty in keeping unemployment low and fiscal policy is a major tool in achieving that. Monetary policy is another major macroeconomic tool in managing jobless rate and economic growth and it has done its fair share in regard. Now it is fiscal policy that must do its fair share which requires Hockey to act sensibly.
Six per cent unemployment rate is not too bad in international comparison, but it is not good at all when compared historically within Australia, if the report that it is a 10 year high is correct.
It is understandable that it would not look good for him to suddenly change what he has been arguing in terms of repairing the budget. But it is the real action in the making a good budget that counts.
On that it is hoped that Joe Hockey will not disappoint as the Treasurer.

A sensible approach to Qantas by Hockey

Comments on Mark Kenny “The storm facing Qantas was one Joe Hockey couldn't ignore”, 13/02/2014, http://www.canberratimes.com.au/federal-politics/political-opinion/the-storm-facing-qantas-was-one-joe-hockey-couldnt-ignore-20140213-32lkr.html

While it is sensible to provide a sovereign debt facility to Qantas in the short term, it would be better to revoke the Qantas sales legislation, particularly the restrictions of foreign ownership, so Qantas can compete with other similar airliners on an equal footing.

Providing such a debt facility can be justified due to the restrictions of the Qantas Sales Act. In that sense, Joe Hockey is not inconsistent at all in his approach to corporate welfares.

It has been a long while since the privatisation of Qantas and many arguments, such as the needs for a national carrier in case of emergence for it to be used in transport Australian worldwide, or excuses underpinning that legislation no longer hold. Irrespective what ownership of Qantas, it can be reasonably expected that it will meet the needs whenever they arise. Further, commercial charted flights can also be used to meet government obligations to its citizens in case of emergencies.
It is time to re-examine that legislation and the federal parliament needs to act and the sooner it does the better for Qantas and the nation. For Qantas it needs to compete on the same footing as other carriers. For the nation it would avoid unnecessary government subsidies to private businesses.
Qantas has been and still is a very good air carrier even in the face of extremely strong competitions particularly in the wake of the GFC. A strengthened position will enable it to perform better.

Closing the gaps needs to be realistic and practical

Comments on Michelle Grattan “Failure to make progress closing the Indigenous employment gap”, 12/02/2014, https://theconversation.com/failure-to-make-progress-closing-the-indigenous-employment-gap-23099

While we all like to see the close of the gap between Indigenous Australians and the rest, it will be very challenging to achieve all targets, particularly those like life expectancy within the set period.

Further, while I have very high respect to Deloitte Access Economics, the headline number of 1.15% economic benefit of closing the gap appears to be very optimistic, perhaps too optimistic.

What is the share of Australia's Indigenous population? How much can one realistically assume closing the gaps can achieve?

One must bear in mind that there are various gaps in a society such as Australia. For example, there is a perceived or observed pay gap between male and female in workplace in Australia that may take very long time to achieve to close that pay gap.

A point on capital account liberalisation in China

Comments on Daili Wang “Taking the middle road to capital account liberalisation in China”, 12/02/2014, http://www.eastasiaforum.org/2014/02/06/taking-the-middle-road-to-capital-account-liberalisation-in-china/

I share some agreement with the following argument by Daili Wang: "Capital account reforms should be accompanied by the introduction and the enforcement of an adequate degree of regulation and supervision. Inflows of foreign direct investment are broadly considered to result in net benefits. Nevertheless, this investment has potential negative effects, such as inhibiting local entrepreneurship and causing irreversible environmental damage. Authorities must create regulation and supervision about the type of inward investment that will maintain China’s competitiveness and guard its national interests."
The same spirit may also apply to outward capital flows.
However, it is important to balance the daily efficiency of capital markets and the prevention of potentially large destabilisation and/or destruction of speculative forces and in the case of panic. This is no different to banking where government may need to step in at times of crisis, say for deposit guarantee, but it may take a quite different form.
Such a balance requires well designed provisions in capital account regulation that has some built in mechanisms to prevent crises but does not affect daily operation of the capital account.

AIID is a positive initiative

Comments on Andrew Elek “The potential role of the Asian Infrastructure Investment Bank”, 12/02/2014, http://www.eastasiaforum.org/2014/02/11/the-potential-role-of-the-asian-infrastructure-investment-bank/

From reading this article by Andrew Elek, the AIIB is largely if not exclusively an initiative by China. It is understandable that China has made such an initiative, given China's economic size, huge savings including foreign exchange reserves and its experience in economic development and infrastructure investment/building, as well as the needs from the region.

It is a positive step from China to contribute to a better Asia and APEC.

It also appears that such an initiative may also reflect China's desire for reforms to existing international institutions and the difficulties that it has faced in that direction.

It is not very clear from the article, whether AIIB will be a Chinese state bank, a private bank with some support from the Chinese government, an international institution or other types of institution/organisation, even though the articles seems to imply the form of AIIB is likely to be dependent on consultation and negotiation China has and will have with APEC members and other interested or potentially interested parties.

The broader the shareholders or stakeholders of the AIIB, the better its influence is likely to have. On the other hand, decentralisation of the governing structure may have implications for decision making.

An appropriate balance is needed to make the AIIB most useful to and beneficial for the region.