Gas reservation is not a progressive option despite scandalous profits

In the September-quarter 2016, Australia recorded negative GDP growth (-0.5 per cent). Over the last two years, employment growth has been flat and over the last 12 months, full-time employment has dived. Underemployment has risen sharply while unemployment remains at elevated levels and participation at depressed levels (meaning hidden unemployment has risen). And over the last four quarters, wages growth in Australia has been at record lows. Sounds bad. Well for some – make that most of us. But yesterday, the ABS shone a light on one cohort of income recipients – capital – profits rose in the December-quarter by 20.1 per cent. What? And wages fell by 0.5 per cent. Phew, I thought there might be some sharing of the spoils going on – you know, the top-end-of-town letting the workers in on the action a bit. This data comes as Australian workers are being shafted by rises in energy prices as a consequence of large companies, many foreign-owned, being given carte blanche to our national energy resources. A major union’s response today has been to call for a gas reservation policy to guarantee domestic supply (which is waning as we export our heads off). Unfortunately, while the call appears to be based on reason – lower prices, guarantees to local industry etc – any move to a domestic reservation policy would slow down the shift to renewables and just shift profits from export to import operations. It is not the sort of regulation that a progressive should support.

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Disgraceful cut in wages for more than a million low-wage workers in Australia

In case you thought that neo-liberalism had gone and buried its head in shame after all the disasters that it has wrought after several decades of privatisation, outsourcing, pernicious welfare changes, fiscal austerity, out of control banksters, dramatic increases in income and wealth inequality, then Australia’s most recent effort will remind that it is still alive and well and morphing into something more nasty than we have previously seen (in this country). On Thursday (February 23, 2017), the Fair Work Commission, which is the judicial body empowered by the Federal Government to set minimum wages and conditions in all sectors (so-called ‘awards’) determined that the lowest-paid workers in Australia – more than a million of them (in an employed Labour Force of just over 12 million) – were getting too higher wages and incomes. Accordingly, they decided to cut wages – not just the real equivalent but the actual wage rates that these workers earn. The judges (who I guess do not work as a matter of course on Sunday) have fallen prey of this 24/7 greed for more profits and determined that Sunday work no longer justifies the existing penalty rates. Their decision to savagely cut them just means the bosses pocket more profits and workers move closer or into poverty with rising bankrupcties, mortgage and credit card defaults and the rest of it. The decision is a disaster for the lowest-paid (hospitality, retail and cafe) workers in this country and it will feed through to other sectors before long. The Federal government could easily legislate to stop the cuts. It won’t. The trade unions could rebel. They won’t. So it is really left to us – the citizens to do everything we can including boycotts of firms who exploit the decision to proctect the wages of the poor.

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The Weekend Quiz – February 26-26, 2017 – 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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Australia’s wage outcomes – a race to the bottom and nowhere

Yesterday (February 22, 2017), the Australian Bureau of Statistics released its latest – Wage Price Index, Australia – for the December-quarter 2016. For the fourth consecutive quarter, annual growth in wages has recorded its lowest level since the data series began in the December-quarter 1997. Real wages are barely growing and trailing productivity growth by a long way. The flat wages trend is intensifying the pre-crisis dynamics, which saw private sector credit rather than real wages drive growth in consumption spending. The Australian government, which should be showing leadership, is obsessing about who it can rope into a free trade deal now the US have scuttled the TPP. The lessons have clearly not been learned.

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Australia’s household debt problem is not new – it is a neo-liberal product

One of the defining features of the neo-liberal era has been the buildup of private debt, particularly household debt. The banks and policy makers all assured us that this was fine because wealth was being built with the debt until, of course, it came tumbling down for many as a result of the GFC. Recent commentary on Australia’s record household debt problem and the increasing number of Australian households that are now on the brink of insolvency and cannot pay their bills seems to think this is a new outcome – the result of record low interest rates as thew central bank (RBA) tries to curb the descent into recession. The fact is that the problem emerged in the 1980s as neo-liberalism took hold of the policy process. We have to understand that period to fully appreciate the household debt problem now.

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The ECB should not become a fiscal agent

On November 29, 2016, Mario Draghi, the President of the ECB wrote to Mr Jonás Fernández, a Spanish European Parliament member in reply to a request for clarification from the Chairman of the EP’s Committee on Economic and Monetary Affairs (ECON). The Letter discussed whether it would be legal under the Lisbon Treaty for the ECB to engage in direct monetary transfers to citizens bypassing the Member States and whether such a policy would be beneficial for economic growth. Several commentators have seized on the response from the ECB as saying that such a policy innovation would be both legal and beneficial. My view is that, in forming this conclusion, they have not fully understood the difference between a monetary and a fiscal operation. While I think the policy would produce positive results, in the sense that it would stimulate growth and employment and reduce unemployment, I also believe it would be illegal under the Treaty. Further, I don’t think it is a progressive position to argue that a group of unelected and unaccountable technocrats in the central bank should be in charge of economic policy. That should be the responsibility of the democratically-elected members of the government who are fully accountable every electoral cycle. The ECB should not become a fiscal agent. Rather, if the Eurozone elites cannot implement (which they cannot) a full federal treasury function then it should disband the monetary union in an orderly way.

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Mainstream macroeconomics – exudes denial while purporting to be progressive

The Federal Reserve Bank of Minneapolis recently published an Economic Policy Paper (February 7, 2017) – The Great Recession: A Macroeconomic Earthquake – by Lawrence J. Christiano (who is both at Northwestern University in Chicago and the Federal Reserve), which shows us that the mainstream profession has learned very little from their failures that were exposed by the GFC. This is a paper that exudes denial while purporting to advocated awareness and progression. There is a long way to go before economics turns the corner I am afraid.

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The Weekend Quiz – February 18-19, 2017 – 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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