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The Weekend Quiz – May 28-29, 2022 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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    The Weekend Quiz – May 28-29, 2022

    Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

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      Australia – business capital expenditure declines in March-quarter but outlook remains positive

      The Australian Bureau of Statistics released the latest version of – Private New Capital Expenditure and Expected Expenditure, Australia – today (May 26, 2022), which is part of several releases leading up to the publication of the March-quarter National Accounts next Wednesday. Today’s business investment data shouws that private new capital expenditure in Australia fell by 0.3 per cent in the March quarter but was up by 4.5 per cent on the year. With the uncertainty continuing about the extent and duration of the current supply-side disruptions, the decline in business investment was, in fact, modest. And the expected investment plans signal that there is still no sense of crisis among those responsible for capital expenditure. One of the challenges facing the new Federal government is to maintain optimism in the economy in order to avoid the current-quarter decline in business investment becoming consolidated. If the new Treasurer keeps harping on about the $A1 trillion debt and the need to cut the fiscal deficit, they will fail that challenge and business will get spooked and we will head towards recession with on-going inflationary pressures.

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        Presentation to Economic Society of Australia

        It’s Wednesday and I just finished a ‘Conversation’ with the Economics Society of Australia, where I talked about Modern Monetary Theory (MMT) and its application to current policy issues. Some of the questions were excellent and challenging to answer, which is the best way. You can view an edited version of the discussion below and then enjoy The Meters.

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          We have a new federal government – finally some decency will hopefully return

          Australia has a new federal government. We have finally rid ourselves of the worst government in my lifetime. An indecent, lying, corrupt government. A government that messed up so many important things yet never took responsibility. During the pandemic, it was the state governments that saved the day, while being hectored by the federal government to abandon restrictions. Thankfully the state premiers held firm. The outgoing federal government has attacked minorities and the poor. It has gutted the higher education system and the public broadcaster. It has installed its cronies throughout the public sector and other important regulative bodies. It has been a vehicle for the coal lobby. It has failed to support the growing needs of women against domestic violence. It has now received its marching orders. I had a glass of champagne on Saturday evening to celebrate the passing of this awful gang. I hope we have a ‘night of the long knives’ and the new government cleans out all the cronies and appoints progressives to these important positions. In general, the policy direction will improve. But all is not well given the predominance of neoliberals in senior economics positions in the new government. I hope they broaden the advice they receive. But for now – we have rid ourselves of this awful government.

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            The Weekend Quiz – May 21-22, 2022 – answers and discussion

            Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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              The Weekend Quiz – May 21-22, 2022

              Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

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                Australian labour market – deteriorates in April – employment growth zero and rising hidden unemployment

                I saw an Australian Broadcasting Commission (ABC) economics commentator today headlining “The unemployment rate has fallen to 3.9%”. That implied something good had happened. In fact, not only did the Australian Bureau of Statistics (ABS) say the rate was unchanged (rounded) but the participation also fell, which means the underlying unemployment situation deteriorated. Two days out from a federal election, the ABC should be doing better than that. His Tweet was pure misrepresentation. All this followed the ABS release of the latest labour force data today (May 19, 2022) – Labour Force, Australia – for April 2022. The labour market deteriorated somewhat in April as employment growth was virtually zero and the participation rate fell by 0.1 points. While the official unemployment rate was unchanged when rounding to one decimal place on 3.9 per cent, it would have been higher (4 per cent) had the participation rate remained constant. In other words, hidden unemployment rose by 19.9 thousand. There are still 1.389 million Australian workers without work in one way or another (officially unemployed or underemployed). The only reason the unemployment rate is so low is because the underlying population growth remains low after the border closures over the last two years. My underlying (‘What-if’) unemployment rate is closer to 6.4 per cent rather than the official rate of 3.9 per cent. Finally, with real wages falling so sharply and employment growth virtually zero, one realises that the mainstream claim that lower real wages are good for employment is bunk!

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                  Australian wages growth remains flat despite RBA claims that a breakout is about to occur

                  On May 4, 2022, the RBA increased interest rates claiming they had evidence of accelerating wages growth. For the last few years, the RBA had been signalling that they would not move on interest rates until there was a concerted increase in wages growth, which has been at record low levels for some years now. Well, today, we found out the RBA was poorly informed because the latest wages data shows that wages growth has been flat in each of the last three quarters. The is no acceleration. Wages growth is not driving the inflation trajectory. Workers are enduring massive real wage cuts and the RBA has made that worse by pushing up mortgage rates for those exposed. Today (May 18, 2022), the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the March-quarter 2021. The WPI data shows that nominal wages growth was 2.4 over the 12 months. Private sector wages growth has remained at low levels. The last time wages growth was higher was in the December-quarter 2014. While the conservatives are railing about inflation now and looking to target workers’ wages (further cuts), the evidence is that the wages side is not driving any inflationary pressures – the opposite is the case. The business sector, as a whole, thinks it is clever to always oppose wages growth and the banks love that because they can foist more debt onto households to maintain their consumption expenditure. But the reality is clear – there can be no sustained recovery for the economy post Covid without significant increases in the current rate of wages growth.

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