Macro Economics Articles
Revealed: the true cost of our stimulus spending
Spectator 7/5/20: Relative to GDP Australian government spending to address COVID-19 has been among the highest in the world. The Morrison government seems pleased to have been a world leader in mortgaging the future to combat the crisis. Its package, totalling $320 billion, comprises five elements: • The PM’s initially announced health spending $2.4 billion • JobKeeper and JobSeeker business support $168.78 billion • Credit support $125 billion • Access to superannuation $0.876 billion • Inco
The Lockdown Strategy Called to Account
Quadrant 7/5/20: Writing in The Australian, Janet Albrechtsen has pointed out that the statistical value of life used in regulatory assessment is $4.9 million for someone expected to live another 40 years — $213,000 per year Such measures are income-dependent; in the US the value was put at $9 million and a 2012 study for Turkey put it at five and a half years per capita income or $59,000. Such measurements offend self-righteous claims that “every life is priceless” but such notions, if follow
The COVID lockdown and spendathon – was it worth it and what is to be done?
Catallaxy Files , 7/5/20: I have a piece in Quadrant where I estimate the person-years lives saved in Australia at 80,000. Each person-year is worth, on the government’s data, $219,000, hence saving is quantified at $17 billion. The cost in outlays and lost production I estimate at $235 billion, fourteen fold the benefits in lives saved. If however the initial health experts estimates of likely deaths without a lockdown had proved accurate the value of the lives saved would have been $526 bil
Does the Morrison government have the skills to lead us out of the recession it has created?
The $320 billion in costs the Australian government has incurred to sustain and stimulate the economy in light of the COVID-19 crisis is money spent for consumption without it attracting any corresponding production. It is a permanent loss that can only be retrieved by increased production. Two areas where reform could compensate for this loss of revenue are the cessation of wasteful spending and regulations in water and energy, where total savings of $50 billion are available. But in addition
ScoMo’s gone as crazy as Kev, but we can still save the economy
When the Prime Minister and Treasurer appointed Stephen Kennedy as the Treasury Secretary, they opted for a bureaucrat who had been the architect of Turnbull’s potentially disastrous carbon tax. They would also have known him to have been a senior adviser on Kevin Rudd’s exorbitant spendathon following the 2008 global financial crisis. Unsurprisingly, the Secretary of the Treasury recommended that the government implement a “Full Rudd” coronavirus program, suggesting the British approach was ins
Emergency Measures in Need of an Exit Strategy
Quadrant, 25 March 2020: It started with Mirko Bagaric in The Australian — “Release super to boost economy” — who, while justifiably railing against the superannuation funds’ fees, argued that allowing people to access 10 per cent of their super could inject up to $300 million into the economy. Mirko has separately suggested that the actual amount might be $150 billion. Treasurer Josh Frydenberg has accepted a watered-down version of this, which he thinks might inject $27 billion into the econ
Coronavirus: Pump-priming is economic folly
The Australian, 17 March 2020: In normal times we have a healthy disdain for the insights and capabilities of our political leaders. In Australia, the commentariat has just emerged from agendas that blamed them for not acting fast enough to combat the bushfire crisis — even having contributed to it — and from looting taxpayer funds to curry favour with voters in the sports rorts saga. In the US, half the population thinks their President is so corrupt that he should be placed on trial.
How to Make Things a Whole Lot Worse
Quadrant Online, 17 March 2020: Deaths from coronavirus were up yesterday (March 16) on the previous day. Although death rates lower than one per cent are being quoted, the macro data (deaths/deaths-plus-recoveries) is 8 per cent, and 15 per cent in Australia (see the chart below). Hopefully that will improve. Otherwise, if Angela Merkel is correct in estimating that 60 per cent of humankind will eventually contract the disease, we can expect over 300 million deaths. Tomas Pueyo’s brilliant an
The flagging economy, its causes and remedies
Catallaxy Files, 22 November 2019 - Keynesian policy lever pullers at the RBA and Treasury, as well as the Opposition, have been urging the government to inflate the economy. Some are calling for deficit spending, others are urging tbhe authorities to force interest rates even lower than the current barely positive levels. Even if ignorant of the impossibility of pump priming economies, it’s almost as if they have never seen the evidence of failures of such moves that are observable from curren