Costello and his legacy

July 19, 2007 ~ Andrew Norton ~ 19 Comments

When Howard biographer Peter van Onselen interviewed Peter Costello last year, the Treasurer was doing more than just going over old issues like the 1994 leadership agreement or the 2001 Shane Stone memo leak reported in this morning’s papers. He also had an eye to how his term as Treasurer would be seen, in light of criticisms of the Howard government’s spending record:

Mr Costello, frustrated at being overruled by the free-spending Mr Howard in expenditure review committee meetings before the 2001 election, would throw his hands in the air and exclaim: “What is the point of these meetings?”

This is a theme he returned to at a speech to a Liberal student function a couple of weeks ago, when he wryly noted that very few Ministers ever bring proposals for exepnditure reductions to the Budget process. Ministers get blamed for results their Departments announce, and so the Treasurer has received flak for a lack of spending discipline by the Commonwealth government.

His sensitivity on this point was such that he replied to my Policy article on ‘big government conservatism’, with his article in the current issue of Policy arguing for the government’s record on spending as a proportion of GDP (see also my reply and Robert Carling’s response).

Though I disagree that the government’s spending record is good (though as with economic conditions generally, it is important to acknowledge that it could have been a lot worse), I haven’t been allocating blame to Costello personally. I avoided even mentioning him in my big government conservatism piece. It is very unlikely that he dreamt up many if any of the government’s big-spending programmes, and FTB in particular has the Prime Minister’s fingerprints all over it. Unfortunately for the Treasurer, though, he is the one who has to go out and impose taxes, and he is the one who may well be seen, at least in the right-of-centre version of history, as the man who did not, or could not, take advantage of very favourable economic conditions to reduce taxes futher.

Are people taking economic growth for granted?

July 16, 2007 ~ Andrew Norton ~ 63 Comments

As commenter Richard notes, Oznomics author Andrew Charlton has an op-ed in today’s SMH arguing that:

The most popular misconception in economics and politics is that if the economy is humming along, the government must be doing a good job – it must be a capable economic manager and its policies must be working. … The truth, however, is that politicians have much less control over the economy than they would have us believe.

But what does the public actually believe? Increasingly, it seems, they have become sceptical of claims that the government deserves credit for a strong economy. At each of the last six elections, the Australian Election Survey has asked:

[compared with 12 months ago], what effect do you think they [the government] have had on the general economic situation in Australia as a whole?

At each election, the proportion saying ‘not much difference’ has increased, starting at 39% in 1990 and reaching 57% in 2004. In the same time, Continue reading “Are people taking economic growth for granted?” →

Oznomics

July 15, 2007 ~ Andrew Norton ~ 8 Comments

If publisher Random House’s poorly-maintained website is a guide, Andrew Charlton‘s book Oznomics: Inside the myth of Australia’s economic superheroes, was going to be more humorously titled Does My Boom Look Big In This?: The truth behind Oznomics. But with the precedent of the best-selling Freakonomics and the local Gittinomics Random House must have thought another nomics neologism was more likely to sell books.

Oznomics is a textbook-polemic hybrid. It’s part of a welcome trend of books trying to simplify and popularise economics, taking us through some fairly orthodox micro and macro-economic ideas in the Australian context. But it mixes this with more partisan goals and and a more aggressive tone than the other pop economics books of the last few years.

So along with explanations of why protectionism is bad, we get the protectionists continually referred to as ‘sandbaggers’, because when the ‘tidal wave’ of competition arrives, their first instinct is to ‘stack sandbags on the beach to protect their territory’. The metaphor doesn’t really work as it relies too much on us remembering his original tidal wave metaphor (and how often do Australians sandbag beaches?), and ends up looking like a shot that is a cheap as the Chinese goods that the protectionists are trying to keep out. I’m as against protectionism as Charlton, but the insult was irritating me, and I expect it would be more off-putting for others less used to free trade ideas than I am. People need to be taken gently through counter-intuitive ideas.

And anyone who has ever dreamt of voting Liberal – and there are plenty of protectionists among that group who need to hear Charlton’s message – Continue reading “Oznomics” →

Ruddmania not spreading to bookstores

July 14, 2007 ~ Andrew Norton ~ 10 Comments

When I bought my copy of Nicholas Stuart’s Rudd: The Unauthorised Biography the day it came out the woman serving me in the bookshop said she was wondering how well it would sell. In Susan Wyndham’s Undercover column in the books section of this morning’s Sydney Morning Herald we have the answer: not very well.

In its first 10 days, according to Nielsen BookScan, it sold 572 copies. Its less critical rival biography by Robert Macklin had 504 sales. Once you take out friends and family of Rudd, friends and family of the biographers, people who think they might have been mentioned, Liberal politicians and staffers looking for dirt, and discount for those in the aforementioned groups who bought both books the number of members of the general public curious to know more about our likely next PM may be down into double figures, in the first week-and-a-half anyway.

Having read the Stuart book the book-buying public has probably made a sound judgment. Reading it cover to cover won’t change any perceptions a newspaper reader might have formed about Rudd over the last few years (indeed, it reads like a long newspaper article) and will add only slightly more detail. He is intelligent, hard-working, emotionally stable, politically moderate and very ambitious. He drives his staff hard, he loves his family.

Anyone running for PM is by definition somewhat unusual, but Rudd is on this account not a complex man – the pieces of his personality fit neatly together, without strong tensions between them. That may be something in his favour as the alternative Prime Minister, but it doesn’t help biographers craft an interesting story.

What is ‘unmet demand’ for university?

July 13, 2007 ~ Andrew Norton ~ 7 Comments

As well as taking issue with my analysis of the graduate labour market, Bob Birrell and his colleagues take issue, in their People and Place article, with the Universities Australia (formerly known as the AVCC) statistics on unmet demand.

The universities themselves, and the government, argue that unmet demand for university places is now minor – 13,200 was the estimate for 2007, a little more than a third of what it was three years ago. Birrell and his colleagues say that this seriously understates the true figure, because Universities Australia (UA) discounts aggregate unmet demand – the number of people who applied for a place but did not get one.

I don’t fully agree with the Birrell et al critique, but it raises important issues about how ‘unmet demand’ should be calculated. The UA methodology takes out those applicants who applied for only one or two courses, presumably on the argument that many of them could have secured a place had they been more flexible in what courses they were prepared to take. Of the remaining unsuccessful applicants, the UA then discounts the number again by the ‘state rejection factor’, ie given that a certain percentage of people who are offered a place turn it down, it is reasonable to assume that a similar percentage of unsucessful applicants would also have declined their offer had they received one. As Birrell et al point out, one likely reason for rejections is that applicants were not offered the place they wanted.

From the government/Universities Australia perspective, this discounting make sense – their object is to fill the places allocated by the government, not to meet student demand. Continue reading “What is ‘unmet demand’ for university?” →

How ’stressed’ are households with mortgages?

July 12, 2007 ~ Andrew Norton ~ 23 Comments

The Age this morning led with a story about record mortgage and rental ‘stress’:

THE number of Australians under financial stress from housing costs has soared to a historic high, with more than a million households now spending at least 30 per cent of their income on loan repayments or rent.

Adding fuel to a potentially explosive election issue, census figures show that the number of households officially declared under “mortgage stress” has almost doubled in five years — to 547,054. At the same time, the number of households above the “rental stress” threshold — spending more than 30 per cent of their income in rent — has climbed to 520,598. (emphasis added)

According to an ALP press release (seemingly the source of this story) that’s equivalent to 27% of households with mortgages.

It is of course unsuprising that high property prices are flowing through to people spending more of their income on housing. But ‘stress’ in this context is a subjective rather than objective indicator, so it is not clear that we can really say that spending 30% of income on mortgage or rent payments is an ‘official’ indicator of financial stress.

Other measures of financial stress, for example, come up with lower estimates of financial problems among households with mortgages. The 2006 General Social Survey found that 16.5% of households with mortgages had experienced a cash flow problem in the previous 12 months (defined as not being able to pay a bill on time), which was slightly lower than the national average.

So where does the 30% of income figure come from? Continue reading “How ’stressed’ are households with mortgages?” →

Are there too few university students? (Again)

July 11, 2007 ~ Andrew Norton ~ 10 Comments

In the latest issue of People and Place, as reported in this morning’s papers, Monash University academic Bob Birrell and his colleagues Daniel Edwards and Ian Dobson argue that there is a widening gap between the demand for and supply of university graduates.

In doing so, they disagree in part with the analysis in my paper (pdf) on graduate mismatch. One explanation they offer for the number of graduates in non-graduate jobs I explored and decided was probably not major – the possibility that it is driven by women framing work around family. Female overqualification (20%) is only slightly higher than male (18%), and there are other possible explanations such as the over-representation of women in Arts courses.

They do however raise one point that I should have explored more, which is what role migration of graduates has played in boosting numbers of university-qualified people in jobs that don’t require degrees. There is, as they say, a history of migrants having trouble finding jobs matching their formal education.

Nevertheless, I don’t think they deal with central argument: that there is no evidence anywhere in the labour market data of an aggregate shortage of graduates. In 2006, there were more than 500,000 graduates in jobs that don’t require degrees or unemployed. Continue reading “Are there too few university students? (Again)” →

Does capitalism make us happy?

July 10, 2007 ~ Andrew Norton ~ 10 Comments

‘. . . Somewhere between Plato and Prozac, happiness stopped being a lofty achievement and became an entitlement.’
Richard Schoch, The Secret of Happiness: Three thousand years of searching for the good life.

Has 200 years of liberal capitalism made us any happier?

That’s the question being asked in the 2007 Ross Parish Essay competition, open to people under 30. The deadline for entries is 17 September, with prize money and publication in Policy for the first and second prize winners.

Judging is so impartial that the joint winners a couple of years ago were members of the Greens and Opus Dei respectively.

The familist redistribution of time

July 9, 2007 ~ Andrew Norton ~ 114 Comments

Australia’s leading left-familist academics are at it again today, with a 39 point list of more taxes and regulations, which they call ‘Benchmarks: Work and Family Poilcies in Election 2007’, to enforce their view on family life on the rest of us.

I have criticised much of the underlying analysis in previous posts (eg here, here, and here).

While I have objected to the way familists want to redistribute money to people with children (or to people with children on behalf of children, as backroom girl would insist), I have not emphasised they way they propose to redistribute time.

Given that most taxpayers earn their income via personal labour, some redistribution of time is implicit in the tax system. To get a given amount of after-tax income, the higher the taxes levied to support families the more pre-tax income a worker has to earn, and that means longer hours. Most men prefer to work full-time anyway, so while familist policies appropriate the results of their labour, they probably don’t actually significantly increase male hours. Women, however, are often more sensistive to the financial rewards from working (hence the complaints in ‘Benchmarks’ about high EMTRs) and their part-time work is used to bring household income up to a desired level.

But also important is the redistribution of hours within the workplace. Continue reading “The familist redistribution of time” →