Yesterday Clive Palmer said he discovered things about the dangers of climate change from Al Gore that he had not known about. Leaving aside the obvious point that no politician who wishes to talk at length about the Carbon Tax should do so without knowing the facts, I also found out something about Australian policy yesterday.
Australia has no vehicle emission standards for cars and light goods vehicles. I knew Australia lagged behind the rest of the world on carbon pricing, emissions targets and CO2 per capita. However not to have rules on how much vehicles emit was a shock.
The good news is that it might happen soon. The Guardian tells the story and has the details of how effective it can be. Such regulation is one of the few examples of where a rule is better than a price to deal with market failure.
Remember when the idiot Abbott falsely claims the Carbon tax is 'the highest in the world' that the rest of the world has multiple climate change measures.
Wednesday 25 June 2014
Saturday 21 June 2014
Australian policy on climate change remains confused
The Abbott government's climate change policy seems to be driven by two motives. They know that voters will reward them for lowering prices or taxes, regardless of the merits of the case. They also seem to want to reward big business, their principle financial supporters.
Prior to the Carbon Tax the Renewable Energy Target (RET's) was the principle climate change policy of Australia. The RET policy is 20% of electricity is to be generated from renewable sources by 2020. This policy requires subsidy from government as renewable energy currently costs more than energy from fossil fuel.
The Abbott government will almost certainly reduce the renewable energy requirement. However they have little support from the public for this as The Guardian reports below.
RET's are an important environmental policy and should be understood at VCE. It is a legitimate alternative policy to talk about in the exam and can be easier to describe than carbon pricing.
A useful statistic for those interested in climate change. Australia produces FIVE times as much carbon per person as their fair share (i.e. divide world CO2 emissions by 7 billion and multiply by 23.5 million to get the 'fair share' for Australia).
Prior to the Carbon Tax the Renewable Energy Target (RET's) was the principle climate change policy of Australia. The RET policy is 20% of electricity is to be generated from renewable sources by 2020. This policy requires subsidy from government as renewable energy currently costs more than energy from fossil fuel.
The Abbott government will almost certainly reduce the renewable energy requirement. However they have little support from the public for this as The Guardian reports below.
RET's are an important environmental policy and should be understood at VCE. It is a legitimate alternative policy to talk about in the exam and can be easier to describe than carbon pricing.
A useful statistic for those interested in climate change. Australia produces FIVE times as much carbon per person as their fair share (i.e. divide world CO2 emissions by 7 billion and multiply by 23.5 million to get the 'fair share' for Australia).
Thursday 19 June 2014
Unfair practice? ACCC takes action against Jetstar and Virgin
When a market is an oligopoly the chances of tacit collusion is high. There are only a few airlines operating in the Australian domestic market and the ACCC believes they are operating unfairly.
The issue is the way the airlines advertise a price and then add fees as the booking progresses. The particular issue is how there is a charge for using normal methods of paying.
The ACCC is taking legal action because they feel that it is the low level of competition which is the cause of the problem.
The ACCC argument might be this. The airlines are deliberately hiding the fees to make them look more attractive to customers. Because the airlines know that they will both make more money by doing this they don't try to compete the fees away. If there was true competition then these high fees would be reduced as an airline started to advertise 'no hidden charges'.
It is the role of the ACCC to look for market failures due to monopoly power. In this case they may have a point. Customers are being mislead. However if the practise was stopped would the 'headline' airfare rise by the same amount?
The issue is the way the airlines advertise a price and then add fees as the booking progresses. The particular issue is how there is a charge for using normal methods of paying.
The ACCC is taking legal action because they feel that it is the low level of competition which is the cause of the problem.
The ACCC argument might be this. The airlines are deliberately hiding the fees to make them look more attractive to customers. Because the airlines know that they will both make more money by doing this they don't try to compete the fees away. If there was true competition then these high fees would be reduced as an airline started to advertise 'no hidden charges'.
It is the role of the ACCC to look for market failures due to monopoly power. In this case they may have a point. Customers are being mislead. However if the practise was stopped would the 'headline' airfare rise by the same amount?
Wednesday 18 June 2014
Business Confidence threatens growth
As we all know by now Business Confidence is a key determinant of Investment spending.
If Business Confidence falls, then Investment will likely fall and as this is a component of aggregate demand we can expect a fall in real GDP, or at least a slowing of economic growth.
The latest data suggests that Business Confidence is declining as there is greater uncertainty following the Federal Budget.
Note this fall in confidence is largely to do with uncertainty. It's not that the business community disliked all the Budget measures, rather they are unsure if those measures will get through the Senate. Predictably firms are also worried that the Carbon Tax will not be repealed as its abolition represents a boost to company profits.
If Business Confidence falls, then Investment will likely fall and as this is a component of aggregate demand we can expect a fall in real GDP, or at least a slowing of economic growth.
The latest data suggests that Business Confidence is declining as there is greater uncertainty following the Federal Budget.
Note this fall in confidence is largely to do with uncertainty. It's not that the business community disliked all the Budget measures, rather they are unsure if those measures will get through the Senate. Predictably firms are also worried that the Carbon Tax will not be repealed as its abolition represents a boost to company profits.
Thursday 12 June 2014
Unemployment steady but the figure hides weakness
The latest unemployment figure shows that Australian unemployment stayed at 5.8% for a third month.
This can be seen as good and bad news depending on how you look at it.
The Fat Controller claimed the government had turned the economy around because unemployment was forecast to be 6.25% by now.(This seems unlikely in the timescale.)
Others see a problem. The continued fall in the participation rate means that there could be disguised unemployment. "If the participation rate had remained at its 2011 average level the unemployment rate would now be seven per cent,"
One explanation for the fall in the participation rate is the aging population. However the fall in this rate seems to be too rapid for that to be the only reason.
The economy is growing, but not creating many jobs. This is not unknown when an economy is recovering as those employed take up the slack. Hopefully this means that jobs will start to come soon.
This can be seen as good and bad news depending on how you look at it.
The Fat Controller claimed the government had turned the economy around because unemployment was forecast to be 6.25% by now.(This seems unlikely in the timescale.)
Others see a problem. The continued fall in the participation rate means that there could be disguised unemployment. "If the participation rate had remained at its 2011 average level the unemployment rate would now be seven per cent,"
One explanation for the fall in the participation rate is the aging population. However the fall in this rate seems to be too rapid for that to be the only reason.
The economy is growing, but not creating many jobs. This is not unknown when an economy is recovering as those employed take up the slack. Hopefully this means that jobs will start to come soon.
Sunday 8 June 2014
Budget reflections
While we will look in detail at the Federal Budget in Unit 4 there is a continuing stream of comment that raises points to note.
Below is a link to Ross Gittins latest effort. (You need to remember he is a journalist not a trained economist and sometimes gets the wrong end of the stick.)
In this article he points out the extent of the measures in cutting expenditure, the reliance on bracket creep (fiscal drag) to raise revenue and the redistribution effect from poor to rich (goal of equity).
Perhaps his most important point is that the implications of this Budget is that in the not to distant future the measures would have to be reversed because the implications are so grave. Note his point on ideology are not for repeating in the exam.
Below is a link to Ross Gittins latest effort. (You need to remember he is a journalist not a trained economist and sometimes gets the wrong end of the stick.)
In this article he points out the extent of the measures in cutting expenditure, the reliance on bracket creep (fiscal drag) to raise revenue and the redistribution effect from poor to rich (goal of equity).
Perhaps his most important point is that the implications of this Budget is that in the not to distant future the measures would have to be reversed because the implications are so grave. Note his point on ideology are not for repeating in the exam.
The Gittins article is here
As an add on there is an excellent article in The Guardian that explains what the true level of Australia's national debt is. The article also explains the importance of using real figures as opposed to gross figures and using figures as a percentage of GDP when trying to properly understand the debt position.
There are some neat interactive graphs to play with too!
Wednesday 4 June 2014
Economic news
There are several pieces of news to follow.
The RBA kept interest rates on hold at 2.5% on Tuesday. The RBA commented that the exchange rate remained high by historical standards implying they thought it would fall.
Consumer confidence moved up, just a little, but is still at 1990 recession levels.
The ABS reported that GDP rose 1.1% in the first three months of the year, and annual growth was at 3.5%. This is higher than expected but the government still expect the rate of growth this year to be 2.5% which suggests a torrid nine months ahead.
The Fair Work Commission has agreed a 3% rise in the minimum wage. This will add $18.70 to the weekly wage of a full-time worker.
Below are two articles that cover some of these items. Please read them for details.
Note that the rise in the minimum wage is a supply side factor and will influence the Aggregate Supply curve by moving it to the left. Also take careful not of the Fair Work Commission's view on equity in terms of income distribution in Australia.
The RBA kept interest rates on hold at 2.5% on Tuesday. The RBA commented that the exchange rate remained high by historical standards implying they thought it would fall.
Consumer confidence moved up, just a little, but is still at 1990 recession levels.
The ABS reported that GDP rose 1.1% in the first three months of the year, and annual growth was at 3.5%. This is higher than expected but the government still expect the rate of growth this year to be 2.5% which suggests a torrid nine months ahead.
The Fair Work Commission has agreed a 3% rise in the minimum wage. This will add $18.70 to the weekly wage of a full-time worker.
Below are two articles that cover some of these items. Please read them for details.
Note that the rise in the minimum wage is a supply side factor and will influence the Aggregate Supply curve by moving it to the left. Also take careful not of the Fair Work Commission's view on equity in terms of income distribution in Australia.
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