The CofFEE Employment Vulnerability Index V2.0

Today our research centre – Centre of Full Employment and Equity – which is known as CofFEE, released the second version of our – Employment Vulnerability Index – which is an indicator that identifies the localities (medium-sized areas) in Australia that are most vulnerable to job losses when economic activity declines. The Australian labour market has not recovered the ground it lost in the downturn associated with the Global Financial Crisis. After showing signs of recovery as a result of the fiscal stimulus in 2009-10, the fiscal austerity that the Federal government imposed as it obsessively pursued a budget surplus has caused us to lose all the gains that were made. The Government failed in its quest because it overestimated the strength of private spending (which is still very flat) and its deficit was too low anyway when it started its austerity push. The new Federal government is finding out that all its tough talk before the September election about delivering bigger surpluses than its predecessors is just hot air and the slowing economy is pushing the deficit higher not lower. In this environment, the labour market is precariously balanced and likely to continue to deteriorate. The EVI provides a guide to where the on-going job losses are likely to be across the urban and regional space.

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Saturday Quiz – November 16, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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Saturday Quiz – November 9, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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External economy considerations – Part 7

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to publish the text sometime in 2013. Our (very incomplete) textbook homepage – Modern Monetary Theory and Practice – has draft chapters and contents etc in varying states of completion. Comments are always welcome. Note also that the text I post here is not intended to be a blog-style narrative but constitutes the drafting work I am doing – that is, the material posted will not represent the complete text. Further it will change as the drafting process evolves.

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How to discuss Modern Monetary Theory

I have been travelling a lot today (nearly 6 hours starting early) and so haven’t much time for blog writing. I am working on a paper at present on the use of metaphors in economics and how Modern Monetary Theory (MMT) might usefully frame its offering to overcome some of the obvious prejudices that prevent, what are basic concepts, penetrating the public psyche. Here are some notes on that theme. The blog is just a rough sketch and will be refined over the coming weeks. There is a section at the end that encourages reader feedback – lets see what you think.

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Saturday Quiz – November 2, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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Australian government policy failing our youth

The Council of Australian Governments (COAG) Reform Council, which is part of the federal-state government machinery released a report this week – Education in Australia 2012: Five years of performance (2 mgbs) – under the terms specified in the National Education Agreement that was signed in January 2009. The agreement was a major piece of policy in the term of the previous Labor government and aimed to ensure that “all Australian school students acquire the knowledge and skills to participate effectively in society and employment in a globalised economy”. The Report considers the progress of the policy frameworks to see “whether these outcomes have improved over the five years since the agreement was developed”. Some of the key findings are very disturbing and demand immediate policy action.

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Australian inflation outlook – spikey but benign

The Australian Bureau of Statistics released the Consumer Price Index, Australia data for the September-2013 quarter today. The quarterly inflation rate was 1.2 per cent and this translated into an annual rate of 2.2 per cent, down on 2.4 per cent in the June-quarter 2013. The Reserve Bank of Australia’s preferred core inflation measures – the Weighted Median and Trimmed Mean – are now well within the inflation targetting range and are probably trending down. The RBA measure of inflationary expectations is also falling. This suggests that the RBA will probably consider the inflation outlook to be benign or “too low” and if the labour market continues to deteriorate (data for October out early November) then they will probably cut interest rates once before the holiday period. The evidence is suggesting that the economy is slowing under the weight of the previous federal government’s obsessive pursuit of a budget surplus and subdued private spending (particularly non-mining investment). The benign inflation outlook provides plenty of room for further fiscal stimulus.

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Saturday Quiz – October 19, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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How to fail a simple macroeconomics examination

In the opening sequence of the HBO series, Newsroom, the anchor is participating in a public forum at an East coast US university (in Boston). During the Q&A, he is asked by a student (“a sorority girl”) in the audience, who is suitably bright-eyed and full of American blather, “Is America the greatest country in the world?” He initially blusters but the convener of the forum pushes him for a “human moment” and what follows is 3 classic minutes of TV, starting with “its not the greatest country in the World, Professor, that’s my answer” and concluding with “So when you ask what makes us the greatest country in the World, I don’t know what the fuck you are talking about. Yosemite?”. He then said among other things that “We used to be …”, “we stood up for what was right”, “we waged wars on poverty, not poor people”, “we aspired to intelligence, we didn’t belittle it” and more. The latest shenanigans in the US Congress where the GOP representatives have become a mindless rabble is certainly testimony to the sort of things the mythical Newsroom anchor was talking about in the series. The Sydney Morning Herald article (October 16, 2013) – US shutdown stalemate enters realm of the absurd – reports on how the GOP reps do not “agree either on tactics or strategy” and Boehner announced to the press that there had been “no decisions about what exactly we will do”. This is one day before the lunatic right-fringe of their party is intent on causing mayhem. My prediction – some ridiculous deal will be done and the US government will not default. We will see. But today I am providing a little glimpse into examination processes by using what might have been a first-year answer to an examination question to highlight some important points. I hope you enjoy the little window into life at a university.

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Careful before you leap!

The triumphalism of British Chancellor George Osborne in recent weeks, as a modicum of positive economic news seeps out of the – Old Dart – or should I say Britain (given the Old Dart strictly refers to England), is almost too much to bear. Moreover, stand ready for a phalanx of I-told-you-so-mainstream-economists coming out in force lecturing all and sundry about the benefits of fiscal austerity. These characters have been hanging tough for any sign of growth (they have been waiting some years) so they could all chime in that austerity has created the conditions for the growth. They choose to misunderstand any evidence that might cast doubt on that (spurious) correlation. The reality is very different. Austerity has undermined growth and retarded the economies where it has been imposed. All economies eventually resume growth. But the legacy of the policy failure will remain for years to come. All I can say to these triumphal ones is – Careful before you leap!

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Saturday Quiz – October 5, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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Is Labor to blame for the rise in the Australian unemployment rate? – Of-course it is!

There was an article in the UK Guardian (Australian) edition last week (September 27, 2013) which carried the title – Can Labor be blamed for rising unemployment?. The Labor government, which was tossed out of office in Australia on September 14, had been in power since late 2007. They inherited an unemployment rate of 4.4 per cent (which dropped 3 months later to 4 per cent on the tail end of the growth phase), an underemployment rate of 6.2 per cent (total labour underutilisation rate of 10.7 per cent), a participation rate of 65.6 per cent and an employment-population rate of 62.7 per cent. By the time we got sick of them, the unemployment rate was 5.8 per cent and rising, the underemployment rate was 7.8 per cent and rising (total wastage was 13.7 per cent and rising), the participation rate had dropped to 65 per cent (some 114 thousand workers exiting the labour force because of the lack of jobs), and the employment-population ratio had dropped to 61.2 per cent (a loss of 285 thousand relative jobs). The labour force increased by 1147 thousand over this time but employment only rose by 934 thousand, which meant that unemployment rose by 161 thousand more than if the relative scales had been maintained from November 2007. So is Labor to blame for this? Of-course it is – it was the currency-issuing government for 6 years or so. Any rise in the unemployment rate is the fault of the national government because it alone as the complete capacity to offset any reductions in employment arising from other sources such as global financial crisis, the slowdown in the Chinese economy, an appreciated Australian dollar and whatever else. The author of the Guardian article, while mounting a reasonable fight against the conservative view of the changing labour market, feels unable to admit that basic truth. So the Labor Party is obviously to blame because it was in government and could have prevented the rise in the unemployment rate.

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Saturday Quiz – September 28, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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More public infrastructure means higher taxes – False, go to bottom of the class

Metaphors! They are more than a fancy way of emphasising some point – that is, their power goes beyond meagre linguistic construction. The research suggests they are part of our deep mental or neural capacity, which we draw on to sort out facts and ideas. They are conceptual devices intrinsically linked to the way we think abstractly. Metaphorical language reinforces our ideology (worldview) and so it is no surprise that political parties have become very interested in framing their messages using simple and common metaphors which resonate with the way we feel about things. George Lakoff, a cognitive linguist, considers we do not make our political choices on the basis of rational dissection of competing facts and arguments but rather respond to central (or grand) metaphors with reinforce our worldview. We thus consider facts or argument within that framework of thought. I am doing a bit of work in this area as a way of understanding why central Modern Monetary Theory (MMT) propositions (which are so patently obvious and have strong explanatory capacity) evade acceptance among people, even those who express liberal perspectives (in this context meaning – are open to new ideas).

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Ageing, Social Security, and the Intergenerational Debate – Part 3

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to publish the text sometime early in 2014. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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The Labor government under Rudd-Gillard failed the most basic test

On September 7, 2013, the federal election in Australia saw the incumbent Labor Party deposed in fairly categorical terms and replaced by the “born-to-rule” conservative coalition (Liberal and Nationals). The Labor Party had been in power for two terms since 2007 after defeating the conservatives even more categorically, who had, in turn, been in power for 11 years. The Labor Party stormed to office in the 2007 federal election, taking 22 seats of coalition (and a further 1 from an independent) to hold 83 seats (primary vote 43.38 per cent, and two-party preferred 52.70 per cent). The conservative coalition was reduced to 65 seats (in the 150 seat lower house). The conservative Prime Minister lost his own seat so great was the rout. Between 2007 and 2013, the Australian Labor Party squandered that lead and in the process we had three Prime Ministers (2 different) as the Party factions conducted an internecene war. After last Saturday’s defeat, one of the Labor Prime Ministers (who had been deposed in June 2013 as a result of her total failure to win electoral appeal) wrote her assessment of the state of Labor as a result of the electoral defeat. The article – Julia Gillard writes on power, purpose and Labor’s future – is an extraordinary exercise in self-denial, despite much of it providing an assessment that I would agree with. But in the big issue – of economic credibility, Ms Gillard demonstrates why her Party was unfit to govern and why the conservatives are back in power and beginning yet another period where the rights and outcomes of workers will be attacked and dragged down. But this has only happened because of the monumental failure of the Labor Party to present a progressive alternative at a time when they had the Australian voters eating out of their hands.

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Saturday Quiz – September 14, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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Ageing, Social Security, and the Intergenerational Debate – Part 2

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to publish the text sometime early in 2014. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Australian Labour Force – bad and getting worse

Today’s release of the – Labour Force data – for August 2013 by the Australian Bureau of Statistics tells me two things. First, it presents the case for why we had to change our federal government last weekend. The Labor Party had abandoned their responsibility for keeping unemployment low. Their obsession with achieving a budget surplus (they failed) deliberately undermined employment growth and has led to tens of thousands of Australians losing their jobs. Second, the new conservative government is going to have to shed its own ideological obsession with cutting deficits if it is to create an environment of robust employment growth and reduce unemployment. Its deregulation mantras will just make matters worse. I am not confident. We had the three evils in August – contracting employment, rising unemployment and a contracting labour force (via a further fall in the participation rate). Employment growth has negative now been negative for the last three months (a recession!) and in August both full-time employment and part-time employment contracting. Total employment is now lower than it was 6 months ago. Unemployment is rising towards 6 per cent as the weak employment growth fails to keep pace with the underlying population growth. Hidden unemployment also rose as more people gave up looking for work in an environment where job opportunities are shrinking rapidly. The broad labour underutilisation data from the ABS for the August quarter (released today) show sharp rises in both unemployment and underemployment. The broad rate of labour wastage is now 13.7 per cent. Add to this the impacts of the falling participation rate and the figure would be above 15 per cent. This data signals an urgent need for fiscal stimulus to reverse the negative trend. Unfortunately, with both sides of politics are locked into an austerity mindset the situation is likely to deteriorate further.

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