The ACCC is taking action to try to close down a website where petrol retailers share information about pump prices.
It would seem that the site, which is a private members site, goes as far as to share information about proposed price changes.
The ACCC believes that this is collusion and against the public interest. It prevents proper competition and so means petrol prices are higher than they would otherwise be.
It should not be a surprise that an oligopoly market structure like petrol retailing leads to some sort of interdependency. But is this collusion? The counter claim is that the information shared is available in large, neon, signs outside petrol stations. Also the nature of the market means that firms charge similar prices and those prices move together.
It is very hard to see if this is collusion or just normal oligopoly behaviour (tacit price leadership). The case will depend on if price changes are discussed in advance. Then it is collusion and there is plenty of case law to support this as the sharing of the information clearly jointly benefits firms interests and works against consumer interests.
Great example if required for the upcoming exam.
Wednesday, 20 August 2014
Tuesday, 19 August 2014
RET, forgotten for a long time, but not gone yet.
The RET is the Renewable Energy Target. It states that Australia should source 20% of its energy generation from renewable sources by 2020.
For Australia the most obvious renewable sources are wind and solar. Wind because huge wind farms can be built in the empty spaces of Australia with minimal environmental impact. Solar because parts of Australia get plenty of sunshine, although actually solar works on cloudy days too.
The point of the RET is to reduce carbon emissions. If renewable sources are used then less coal needs to be burned. Australian coal, especially Victorian coal (brown coal) is really quite 'dirty' with high CO2 emissions.
The government does not like renewable energy. They don't really think action on climate change is important and many suspect they are just pro-mining as they receive strong financial support from that sector.
The government now have a report on what to do with the RET. Written by a climate change sceptic it's likely to add to Australia's disgraceful reputation as a nation of environmental terrorists too poorly educated to grasp the nature of scientific probability.
The Guardian discusses the likely impact of cutting back or abolishing the RET below.
For Australia the most obvious renewable sources are wind and solar. Wind because huge wind farms can be built in the empty spaces of Australia with minimal environmental impact. Solar because parts of Australia get plenty of sunshine, although actually solar works on cloudy days too.
The point of the RET is to reduce carbon emissions. If renewable sources are used then less coal needs to be burned. Australian coal, especially Victorian coal (brown coal) is really quite 'dirty' with high CO2 emissions.
The government does not like renewable energy. They don't really think action on climate change is important and many suspect they are just pro-mining as they receive strong financial support from that sector.
The government now have a report on what to do with the RET. Written by a climate change sceptic it's likely to add to Australia's disgraceful reputation as a nation of environmental terrorists too poorly educated to grasp the nature of scientific probability.
The Guardian discusses the likely impact of cutting back or abolishing the RET below.
Sunday, 10 August 2014
Education cuts - short term gain for long term disadvantage?
The government can't get over its preoccupation with the Budget deficit. Despite the fact that the deficit is both tiny and completely manageable they insist on cutting government spending.
In one way their determination is admirable if they truly believe that the accumulated debt will harm Australia in the long run. However their decision to cut education funding can do nothing but harm Australia in the long run.
The Guardian article below has most of the details. The essence of it is that the price of going to university in Australia will go up if the measures ever pass the Senate and so fewer Australian people will go to university.
The real problem is that the people who won't be able to afford to go are exactly the ones that need to. They will come from lower and middle socio-economic groups who have traditionally gone into low tech and manufacturing employment.
Australia's future prosperity depends on building a better educated workforce able to compete in the global 'knowledge based' economy. For that it needs well educated graduates and a key feature will be getting more people through degree courses. This will help shift the Long Run Aggregate Supply curve to the right that much faster than otherwise and will assist in maintaining non-inflationary growth.
Of course raising the low standard of Australian degrees is out of the question under this scheme. All students must do honours to compete globally. To cut education funding as proposed makes no sense at all.
In one way their determination is admirable if they truly believe that the accumulated debt will harm Australia in the long run. However their decision to cut education funding can do nothing but harm Australia in the long run.
The Guardian article below has most of the details. The essence of it is that the price of going to university in Australia will go up if the measures ever pass the Senate and so fewer Australian people will go to university.
The real problem is that the people who won't be able to afford to go are exactly the ones that need to. They will come from lower and middle socio-economic groups who have traditionally gone into low tech and manufacturing employment.
Australia's future prosperity depends on building a better educated workforce able to compete in the global 'knowledge based' economy. For that it needs well educated graduates and a key feature will be getting more people through degree courses. This will help shift the Long Run Aggregate Supply curve to the right that much faster than otherwise and will assist in maintaining non-inflationary growth.
Of course raising the low standard of Australian degrees is out of the question under this scheme. All students must do honours to compete globally. To cut education funding as proposed makes no sense at all.
Friday, 8 August 2014
RBA less optimisitc on economy
The Quarterly Statement of the RBA has painted a gloomy picture of the economy. Unemployment is forecast to stay high for two years and the rate of growth will be just below trend. Inflation is forecast to be just 2% rather than the 2.75% previously predicted, mainly due to the repeal of the Carbon Tax.
Note that the repeal of the carbon tax does not reduce core (underlying) inflation, only headline inflation as it won't be repeated and will drop out of the index after a year.
The overall implication is that interest rates won't be rising any time soon and this might help bring the exchange rate down. Such a downward movement will be welcomes to exporters.
The Guardian article outlines the main points and contains essential figures to remember!
Note that the repeal of the carbon tax does not reduce core (underlying) inflation, only headline inflation as it won't be repeated and will drop out of the index after a year.
The overall implication is that interest rates won't be rising any time soon and this might help bring the exchange rate down. Such a downward movement will be welcomes to exporters.
The Guardian article outlines the main points and contains essential figures to remember!
Sunday, 3 August 2014
Politics vs Economics - it's about the facts.
The government want to reduce welfare spending and appointed a multi-millionaire to look at Indigenous welfare and employment to advise them on how to do it. You might think that's an odd choice.
Even odder is that Andrew Forrest decided to report on all welfare spending, not just Indigenous welfare.
He reported that basically welfare is wasted and it should be cut. The trouble is there is not really any evidence to back up his claims that 'welfare spending is out of control'. Nor is Australia's welfare spending large by international comparison, its actually quite similar as a proportion of total government spending.
The argument put forward by government is a supply-side one. If welfare is cut people will be more inclined to work.
However I don't need to bang on about this because below is an article which explains it very clearly.
Even odder is that Andrew Forrest decided to report on all welfare spending, not just Indigenous welfare.
He reported that basically welfare is wasted and it should be cut. The trouble is there is not really any evidence to back up his claims that 'welfare spending is out of control'. Nor is Australia's welfare spending large by international comparison, its actually quite similar as a proportion of total government spending.
The argument put forward by government is a supply-side one. If welfare is cut people will be more inclined to work.
However I don't need to bang on about this because below is an article which explains it very clearly.
The goal of equity. Gone but not forgotten?
Understanding the impact of the budget on output, employment, growth and the Current Account is very important. But what about the other goals? Equity for example.
The Budget seemed regressive in nature when it was announced. The poorer quintiles/deciles appeared to be loosing most and paying more too. Now research (technically modelling by the Treasury) has confirmed this.
Unfortunately the original story in Fairfax media is behind a pay wall, so I have linked to the Guardians shorter story.
Notice the defence by the Fat Controller, that the tax system is progressive so the rich pay more. He misses the point, the report is about the change in equity, not the overall effect. Poor Joe.
The Budget seemed regressive in nature when it was announced. The poorer quintiles/deciles appeared to be loosing most and paying more too. Now research (technically modelling by the Treasury) has confirmed this.
Unfortunately the original story in Fairfax media is behind a pay wall, so I have linked to the Guardians shorter story.
Notice the defence by the Fat Controller, that the tax system is progressive so the rich pay more. He misses the point, the report is about the change in equity, not the overall effect. Poor Joe.
Friday, 1 August 2014
Work for the dole. Will it work?
The government wish to introduce a 'Work for the dole' scheme that will see all unemployed people under 60 being required to do community based work at some point. Details can be found in news reports.
The policy is a supply-side measure. There are several arguments for it.
* There is an increased incentive to the unemployed people to take a job, any job, as they no longer get as much leisure time while out of work.
* The unemployed maintain a 'working routine' and therefore their skills and habits don't decline as quickly making them more attractive to employers despite their period of inactivity.
* The cost to the state of unemployment is not as great as something of value is recovered in return for benefits.
The argument really revolves around the idea that the unemployed are voluntarily unemployed to some extent. Some don't want jobs and others are waiting for the 'right job'. By making unemployment more costly (this includes falls in the value of benefits announced in the budget) by demanding more effort then those out of work are more likely to accept a job offered to them. This effectively shortens the period of unemployment and helps match people to vacancies more willingly.
The problem is that the economic research on this issue says that it does not work. The Saturday Paper reviews this topic below.
The policy is a supply-side measure. There are several arguments for it.
* There is an increased incentive to the unemployed people to take a job, any job, as they no longer get as much leisure time while out of work.
* The unemployed maintain a 'working routine' and therefore their skills and habits don't decline as quickly making them more attractive to employers despite their period of inactivity.
* The cost to the state of unemployment is not as great as something of value is recovered in return for benefits.
The argument really revolves around the idea that the unemployed are voluntarily unemployed to some extent. Some don't want jobs and others are waiting for the 'right job'. By making unemployment more costly (this includes falls in the value of benefits announced in the budget) by demanding more effort then those out of work are more likely to accept a job offered to them. This effectively shortens the period of unemployment and helps match people to vacancies more willingly.
The problem is that the economic research on this issue says that it does not work. The Saturday Paper reviews this topic below.
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