It was an interesting experience to be part of the budget lock-up last week, but as I warned in my article, I could make mistakes under that time pressure — and I did. I’ll correct them below, but I want to open with a declaration that I never expected to make: that the best sense I heard spoken about the budget was uttered by neither Liberal nor Labor nor Green, but by Clive Palmer.
NOTE: I made an error in my arithmetic in this post which I’m fixing up after too little sleep last night thanks to the post-Budget lockup drinks: the basic logic is OK but the numbers are wrong. I’ll link nonetheless and amend the numbers tomorrow.
If the US economy was performing as well as the US stockmarket, even Walmart workers would be breaking out the champagne.
Since 2009, the S&P has risen over 250 per cent in nominal terms, and almost 230 per cent in inflation adjusted terms. In nominal figures, it is at its highest value ever, though when you adjust for inflation, it is still 10 per cent below its peak in 2000 (see Figure 1).
I have just accepted an offer to become Head of the School of Economics, History and Politics at Kingston University in London. I will take up the appointment in time for the Autumn term, which starts on September 23rd.
And good on them for it! Academic economists are ignoring or minimizing the need for change, just as they did 40 years ago when I was one of the revolting students. So students are taking their demands to hear other stories read from other than the Neoclassical songbook to the streets–and the web and newspapers.
Last week I showed that Australia’s net government debt to GDP ratio is nothing to panic about when compared to the rest of the world. We’re currently at under 12 per cent, whereas most OECD nations have ratios of 50 per cent and above.
But maybe that’s one reason Australia’s economy is relatively strong.
This is a talk about what the economic consequences could be of Australia’s ambition to achieve a permanent government surplus of 1% of GDP. I present a very simple Minsky model in which banks lend money to the private sector, and the government both spends and taxes the private sector. I then explore 4 scenarios: a balanced budget; a permanent surplus of 1% of GDP with no change in bank behavior; a permanent surplus of 1% of GDP with a significant increase in bank lending; and a permanent deficit of 1% of GDP. The results are not what proponents of government surpluses expect.
Ask any politician if governments should run surpluses and the answer is likely to be a resounding yes, with the rationale being that governments should “live within their means”.
Precisely this reason was given by the Australian National Commission of Audit, which has been charged by the Abbott government with the task of suggesting ways to rein in government spending. Its first report gave as the very first of its “Principles of good government” the mantra that governments should:
I’m speaking at two events this weekend:
Northside Forum: “THE AGE OF ENTITLEMENT IS OVER” So claims our Treasurer, but for whom?:
Saturday May 3rd, 12-2pm, Function Room at the Union Hotel, North Sydney, 271 Pacific Hwy, North Sydney 2060
The launch of Geoff Davies’ book Sack the Economists:
In his latest blog, Paul Krugman slings off at non-mainstream economists — and the students at Manchester University campaigning for change to the economics curriculum — for wanting fundamental change in economics. paraphrasing his argument, it is: