How much does the public know about interest rates?

Much election-year political point-scoring assumes that public knowledge of economics is minimal. In 2004, the Coalition encouraged us to believe that the double-digit interest rates experienced during the last Labor government might return with a new Labor government. This year, Labor is suggesting, with all the fine-print qualifications the Coalition attached to interest rates last time, that it might be able to do something about grocery and petrol prices.

How easily fooled is the public on these things? On interest rates, answers to questions in the 2005 Australian Survey of Social Attitudes suggested a public without the level of policy understanding needed to evaluate the government’s claims. Respondents were asked how much knowledge they had of the role of the Reserve Bank. 6.5% said they had ‘a lot’ of knowledge, and another 31% said that they had ‘some’ knowledge. The rest admitted little or no knowledge.

Yet even these numbers may be overstating the public’s formal understanding. Another question asked how much knowledge the respondent had of how monetary policy is determined. Given that the Reserve Bank determines monetary policy all 37.5% with some or a lot of knowledge of its role ought to have also been knowledgeable about monetary policy. But instead 5% claimed ‘a lot’ of knowledge of how monetary policy is determined and 25% ‘some’ knowledge’. Some of those who think they know about the RBA need to visit its website.
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Menzies exhumed again

When will poor old Robert Menzies be left to rest in peace? Time and time and time again this crusty old conservative is brought back to life as a more liberal Liberal than John Howard. Former Victorian Liberal politician Robert Dean gives the argument yet another run in (where else?) The Age this morning.

As with previous such accounts, there are some strange views of what happened in the past:

His passion for equality of opportunity was nowhere more evident than his belief in free education. He called for a 10-fold increase in university entrants.

While the Menzies government did provide scholarships to some university students, it did not introduce free university education, which came with Whitlam’s government in 1974. I’m not sure that he called for a 10-fold increase in university students, but it certainly didn’t happen during his term. Numbers actually fell in the early Menzies years, and eventually peaked at about 20% of current numbers.

And in criticising the government over Iraq, Dean says: Continue reading “Menzies exhumed again”

The dog whistle that wasn’t

The most interesting finding in the Newspoll reported in today’s Australian was the question on Kevin Andrews’ handling of the Haneef case. At least until he released part of the transcript of Haneef’s discussion with his brother about leaving Australia Andrews was being punished by the media like no other Minister in recent times.

Yet even with the public seemingly willing to believe the worst about the Coalition, Newspoll finds more people in favour of the way Andrews handled the case than against, with 49% approving and 36% disapproving (with a fairly large 15% uncommitted).

I suspect this fits with a pattern of views on migration. The public supports migration when it is seen to be in the interests of Australia. The key change under the Howard government has been that the migration system meets this criterion. Even though migration has increased considerably opposition to it has halved since 1996. Murray Goot and Ian Watson report that between 1996 and 2003 the proportion of people thinking immigrants are good for the economy increased from 49% to 69%, the proportion thinking immigrants take jobs from people born in Australia has dropped from 40% to 25%, and the people thinking immigrants increase crime rates has dropped from 45% to 34%.
Continue reading “The dog whistle that wasn’t”

Affluence grows, poverty shrinks

The Age‘s take on yesterday’s ABS Household Income and Income Distribution 2005-06 was predictable: ‘Rich are richer, while the have-less struggle’ read its headline. Yet what was more interesting was how little impact on overall inequality the growing number of high-income households is having.

Since 1994-95 the number of households in Australia has increased by 21%. But the number of those households with gross household incomes exceeding $3,000 a week, after adjusting for inflation, is up by 172%. The proportion of households in this group has gone from 2.6% to 5.9% (though the earlier figure will be understated somewhat, as salary sacrifices are now included).

Yet the Gini coefficient is not changing much. It is a measure of inequality, where 0 would indicate every household has the same income and 1 would indicate a single household has all the income. Over the 1994-95 to 2005-06 time period the Gini coefficient has only gone from 0.302 to 0.307.

One reason is that the number of poor households, with weekly incomes below $400, is dropping. Continue reading “Affluence grows, poverty shrinks”